High cost estimates from the Congressional Budget Office could derail next week's effort to protect the Social Security benefits of federal and postal workers from major reductions when they retire.
The House Ways and Means Committee is due to vote on a proposal that would exempt civil servants who join the new Federal Employees Retirement System (FERS) from a law aimed at reducing so-called windfall benefits for public retirees. But data collected by the CBO indicate that the exemption would cost the Social Security fund millions of dollars.
Under current law Social Security benefits earned by public employes can be sharply reduced by the amount of their government pension.
Congress enacted the legislation (it affects any public employe eligible to retire after 1985) because it felt it provided overly large Social Security benefits to U.S. workers at the expense of nonfederal employes who spent their entire working career covered by, and paying into, the system.
About 60 percent of all federal workers qualify for Social Security benefits, generally based on time worked in the private sector in Social Security jobs. Some U.S. workers take relatively low-paying jobs after they retire to get the minimum time necessary to qualify for a Social Security benefit.
The problem, as Congress saw it, is that Social Security provides a tilt toward low wage earners. They get a bigger percentage of their preretirement income (in the form of a Social Security benefit) when they retire than do individuals who have middle or higher incomes. That tilt worked to the advantage of civil servants who spent most of their careers with the federal government paying into the more generous federal retirement fund who still collected Social Security benefits aimed at lower income private sector employes. Hence the windfall benefit law.
Two weeks ago the Ways and Means Committee's Social Security subcommittee cleared a proposal, sponsored by Rep. Hal Daub (R-Neb.) that would exempt federal workers from the Social Security benefit reduction if they joined the FERS program and spent five years in it. Employes under the FERS system pay the full Social Security tax. Workers under the old Civil Service Retirement System pay only the Medicare portion of Social Security.
Federal and postal union leaders support the Daub amendment, but worry that CBO's cost estimates will hurt their case when the full committee considers the plan.Survivor Benefits
When U.S. workers retire, they can provide a survivor benefit for their spouse by taking a smaller pension. That gives the survivor a guaranteed lifetime benefit pegged to rise with the inflation rate.
Pension experts say it's a good deal that provides almost unmatched financial protection for spouses. Most federal retirees take advantage of the survivor option. But many private financial planners say that U.S. workers can buy better protection for their survivor at less cost. Tomorrow at 1 p.m. on WNTR (1050 AM), an advocate of that approach will talk about its advantages and disadvantages, and answer questions from listeners. People
Bob Honig will leave the Federal Government Service Task Force this month to be a filmmaker and consultant and to write a book. He has directed the staff of the highly regarded congressional civil service caucus since it was founded in 1981. He's considered one of Capitol Hill's best. He will be succeeded by task force veteran Sandy Fiske, whose most recent assignments have been motherhood and a stint with the House District Committee.