Some GS-15 Workers Feel Pinch of Pay Cap

In these crazy financial times -- with the stock market diving and retirement savings eroding -- the last thing you want is stagnant wages when almost everyone around you is getting raises.

But that's the unfortunate position a growing number of the government's most valued civil servants find themselves in, because a combination of laws works to cap their pay. And because of the cap, some workers could end up losing well over $100,000 in retirement, according to a Congressional Research Service report updated yesterday.

Currently, only about 7,100 workers are affected by the pay cap. But that number jumped by about 6,000 in January when the cap hit D.C. area workers for the first time, CRS reports. When the next pay raise takes effect in three months, more employees here and around the country will get hit.

Those at the top of the main federal pay system, employees with the grade of GS-15, are paid very well: $149,000 this year. But they will not get the 3.9 percent increase Congress approved for their colleagues next year. They will not make more because they live in expensive areas.

They are stuck.

But because so much else costs more -- including federal health insurance premiums that in many cases will jump 13 percent next year -- the current system, means that "in effect, we take a pay cut each year that we stay in the civil service system," complains Phil Cogan, a GS-15 at the Export-Import Bank.

It's not just his paycheck that is trapped. The cap (actually a slowly increasing maximum based on a formula that rises more gradually than other salaries in the General Schedule) eventually limits what Cogan and other workers get in retirement, because pensions are based on the three highest years of a worker's pay.

That can amount to a big chunk of change.

Consider a GS-15, step 10, employee in San Francisco, where the cap hit early because of locality pay based on the cost of labor. Since 2002, she would have lost $49,000 in pay, according to calculations in the Congressional Research Service report. Her annual pension would be $7,068 less. That amounts to missing $141,360 in retirement income over a 20-year period.

Because they can't boost their retirement income much by getting raises if they work longer, some employees "may be more likely to retire as soon as they reach retirement eligibility -- possibly exacerbating the 'retirement tsunami' or 'brain drain' that has been viewed as a concern for the federal workforce," says the CRS report, prepared by Curtis W. Copeland.

Stephen Gurwitz, a GS-15 with the Federal Trade Commission, says many of his colleagues like public service and don't stay with Uncle Sam for the money. Nonetheless, he added, "I think it is affecting peoples' morale, when they realize their pay is not keeping pace."

It's not just Cogan and Gurwitz who are upset. Upper-level civil servants throughout the government are grumbling about the pay cap. But grumbling is about all that's being done about it.