The federal Civil Service retirement system received $15 billion in contributions from employes and government last year, but only $2.9 billion of it came from the employes, according to Sen. Gaylord Nelson (D.-Wis.).
"The rest is funded out of general revenues," Nelson said in a statement prepared for the Senate.
Nelson wants to correct what he said is a widespread misimpression on the part of the public - and even on the part of federal employes - that the 7 percent-salary contribution by federal employes pays for half the Civil Service retirement system, while an equal 7 percent contribution by the employing agencies pays for the rest.
That is not the case, Nelson said. He said the costs of Civil Service retirement benefits actually are far higher than most people believe, and the employe 7 percent contribution each year is only a quarter of what goes into the Civil Service fund. The government pays the rest.
Nelson said the Civil Service system's chief actually had provided him with the following figures:
Civil Service system costs in fiscal 1977 amounted to 29.3 cents for each dollar of salary paid out by the government. Employes contributed 7 cents and the government contributed the remaining 22.3 cents. By the year 2000 the cost will be 42 cents for each dollar of salary paid out, with employes paying the same 7 cents and government outlay rising to 35 cents.
The government share is go high because a 1969 law specifies that certain types of new and added benefits will be paid entirely out of general Treasury revenues and not from employe contributions at all. Moreover, the 1969 law simply failed to provide for raising contribution rates to finance the long-term costs of automatic cost-of-living benefits. As things stand, these will all come out of the Treasury.
At present, only $2.9 billion out of $15 billion received by the system comes from employe contributions. The rest comes from general revenues, agency contributions and interest payments on unfunded liabilities - which in effect are simply general Treasury outlays. By 1980, according to Civil Service Commission estimates, employe contributions under the 7 percent rule will rise slightly to $3.35 billion, but the Treasury will be paying about $17.2 billion. By the year 2000, employes will be paying $8 billion and the government $50 billion.
Nelson said the federal system is in sharp contrast to Social Security, when [WORD ILLEGIBLE] equally are split 50-50 [WORD ILLEGIBLE] employers and employes [WORD ILLEGIBLE] general (Treasury) revenues [WORD ILLEGIBLE] are now used to finance [WORD ILLEGIBLE] benefits. (Nelson [WORDS ILLEGIBLE] some general revenues into Social Security.)
Nelson said that while federal employe benefits are "more liberal" than Social Security - allowing retirement at 55, providing higher monthly payments - he considers federal retirement to be "less adequately funded."
He said that while Social Security has been put on a sound financial basis, the federal retirement system is simply failing to put aside enough money to pay off future unfunded liabilities and thus will have rely more and more on general revenues to pull it through. At present, unfunded future liabilities amount to $117 billion; by 2000 they are expected to amount to $361 billion.
Nelson said the average government employe pays such a small portion of the cost of his benefits that "each group of new retirees pays over their working years for less than two years of their retirement benefit."
Nelson is introducing legislation to put all persons who start working for the United States after the end of 1978 under Social Security. He also introduced a bill to force the Civil Service Commission to recommend ways to pay for benefits by some method that would be "fair and equitable" to "all American taxpayers."