Federal and postal workers who wonder what happens to their union dues will get some good news starting this week when 2 million confused civil servants begin the complex and sometimes painful process of picking a pension plan that will pay them and their spouses lifetime retirement benefits.
Between July 1 and Dec. 31, most federal workers hired before 1984 must make an important, irrevocable decision whether to stick with their current pension program, which is an excellent one, or risk going into a new private sector-type plan offering some attractive options to the old program. For most, regardless of age, sex, salary or time in government, the decision will be tough.
Federal employes who belong to unions or professional groups will get extra help -- often free or at reduced rates -- in deciding which pension road to follow.
Most organizations have spent a lot of time and money -- and plan to spend more -- setting up self-help seminars and providing videotapes and computer assistance programs to advise members of the pros and cons of the plans.
The two choices facing workers hired before 1984 are these: Stick with the current civil service retirement system. It offers excellent benefits that are based entirely on length of service and salary. The Civil Service Retirement System, which was closed to new membership as of Dec. 31, 1983, guarantees employes benefits that are indexed to inflation. Workers can look at a simple chart and, by estimating their final salary and length of service, tell within a few dollars how much their monthly retirement payments will be. CSRS is considered one of the best pension plans in the nation. Workers under it generally contribute 7 percent of salary and pay the Medicare portion of the Social Security tax. They are eligible to participate in the new thrift investment plan and, this year, can put in as much as 5 percent of salary on a tax-deferred basis into an investment package that is currently paying an 8 5/8 percent rate of return.
Move into the new Federal Employees Retirement System, which is mandatory for most workers hired since the start of 1984. FERS is modeled after some of the best private-sector plans and offers benefits from three sources: Social Security, a modified civil service pension and earnings from investments in the thrift plan. FERS participants can put in 10 percent of salary, up to $7,000 this year, and, if they contribute at least 5 percent, get a matching tax-deferred donation to their accounts from Uncle Sam.
The CSRS program is generally a better deal for employes who plan to spend their entire career with the government. FERS is designed for those people -- the two of every three employes who will retire from somewhere other than the federal government -- who think they may leave government or who are intrigued by the generous thrift investment program.
But each case is different.
Understanding the benefits promised by each plan is essential. Equally important in making a stick-or-switch decision is getting a computer projection that will show what workers would get under each plan. A number of companies in this area are providing the computer printout service for fees ranging from $11 to $32. A listing of those firms will appear in subsequent columns.
But most union members will be able to get the computer service, plus added information, from their unions. The federal government will provide information and training at the office, but union members --
thanks to the dues they have paid -- will get even more help.