The 100,000-plus new people Uncle Sam will hire next year may have to fork over nearly 14 cents of every dollar they earn to help finance two very different retirement programs.
That giant-sized pension bite, which is likely to be scaled down later, is part of a bipartisan Social Security reform package that would put feds hired after Jan. 1, 1984, under that system, plus the federal retirement plan. Current federal employes would remain outside Social Security.
The House is expected to approve the reform bill this week and send it to the Senate.
Civil servants now have a retirement program that is independent of Social Security. Because it is a traditional plan that bases annuities on pay and service, the average benefit is nearly three times higher than the average benefit ($420 a month) under the welfare-oriented Social Security system that most Americans are required to pay into as long as they work.
Government employes now pay 7 percent of their gross salary to the retirement fund. Benefits are taxed.
Social Security contributions are 6.7 percent of salary on amounts up to $35,700. Social Security benefits are not now taxed, but Congress is considering taxing those of persons who have additional income of $25,000 or more a year.
If Social Security reform passes, new feds would--at least temporarily--be making full contributions for two retirement programs: 7 percent of salary to the civil service program, and 6.7 percent to Social Security.
The House Democratic leadership has pledged that retirement benefits of present and future workers will not be reduced, and that the civil service plan will not be allowed to dry up if new employes are put under Social Security.
They plan eventually to create a modified civil service retirement plan for new feds that dovetails benefits (as in the private sector) with Social Security. Contributions to the civil service retirement portion presumably would be reduced to conform with the lower level of benefits offered under the modified federal retirement plan.
But if Social Security comes, new employes would have to make full, dual contributions until a modified program could be worked out for them.