Between July 1 and Dec. 31, the nearly 2 million federal and postal workers covered by the Civil Service Retirement System (CSRS) must make a major career/financial decision: Do they stay in their current pension program -- one of the nation's best -- or switch to the new private sector-style Federal Employees Retirement System?
Once employes switch from CSRS to FERS they cannot go back. FERS is the new federal pension program that covers virtually everybody hired since the start of 1984.
The pension plans are very different.
The older CSRS program is a simple plan designed for people who intend to make the federal service a career. Its benefits are based on salary and service. The more you make, the longer you work, the more you get. Although employes contribute to the plan (about 7 percent of salary), they typically get back all their basic contributions within 18 months of retirement and continue to draw lifetime pensions indexed to inflation.
Workers who leave before they are eligible to retire (about 70 percent of all employes) are short-changed in that they get only a refund of their contributions. Their pension program is not portable.
For "lifers" the CSRS program is excellent, and it has long been the envy of private sector workers. But for people who don't plan to make government a career, FERS offers more incentives. People who must pick between the two need to look down the road 20 or 30 years to see where they plan to be, and where they want to be.
Next month, the Office of Personnel Management will begin distributing more than 2 million copies of a new FERS Transfer Handbook. It is free. The 124-page booklet explains benefits under the old and new retirement systems and provides work sheets for figuring benefits under each plan and information about how to switch, if that is the employe's choice.
It also explains the amounts that workers can contribute to the new tax-deferred savings plan if they remain in the old pension plan, and the higher amounts that employes can contribute if they are fully covered by the FERS plan.
The booklet says that, "in general, the CSRS is a good retirement plan for employes who know that they will stay with the federal government until they are eligible to retire. It is not very well suited to employes who may not spend their entire careers in federal service. Even with the addition of the Thrift Savings Plan, CSRS still has one major drawback: Most of the retirement benefits come from just one source. With inflation, that source gradually loses its value if you leave before retirement."
OPM has trained instructors who will help each federal agency set up its own training programs. Some agencies will provide videotapes, computer printouts and various counseling programs during the July-through-December open season.
To give you a head start this column will run down benefits available to you under the old and new pension plans. Tomorrow we will look at the old CSRS system. Tuesday's column will deal with benefits under the new FERS program.
In the end, obviously, the decision to stick or switch is up to you. Considerations include your career plans. (Are you a "lifer," or do you plan to leave government service? How much you would contribute to the thrift savings plan?)
Deciding won't be easy, but you will have help at the office and from private firms that, for a fee, provide computer printout information. Remember, you have until the end of December to decide, but it is not too early to begin studying your options.