FEDERAL EMPLOYEES' unions and interest groups have launched an all-out assault on proposals to cover new government workers under Social Security and restrict federal pension benefits. These groups would do more to help the average federal worker if they injected more truth into their advertising.
On the opposite page, Sylvester Schieber examines the principal objections made by federal groups to the Social Security coverage proposals that are the subject of hearings this week in the House Ways and Means Committee. As Mr. Schieber points out, these allegations are simply untrue.
Covering new federal workers under Social Security will neither deny them any additional benefits nor "bankrupt" the federal pension system. Current workers will continue to contribute to the current system, and new workers will be covered by a supplemental pension system that will add to Social Security benefits just as private pension systems do. Neither system will go bankrupt because the federal Treasury will-- as it already does--pay the bulk of the pension costs out of general revenues.
Most future federal workers will be much better off under the new two-tiered plan because they will have the same "portable" pension rights that workers in the private sector have. Currently, three out of four federal workers get little or no benefit from their pension plan because they do not stay in government until retirement.
Nor will Social Security coverage end up costing taxpayers money. That's because most federal workers draw Social Security benefits anyway, either as spouses or from some years of work in the private sector. What is unfair is that these benefits are very high relative to their Social Security contributions. Integrating the federal pension and Social Security systems will eliminate these windfall benefits and save taxpayers billions of dollars--a fact that Social Security actuaries have always recognized.
Instead of attacking Social Security coverage, the federal groups should turn their attention to the administration's other plans for federal pensions. These proposals--which call for increasing civil servants' pension contributions and delaying the retirement age--do, in fact, represent substantial retrenchments in pension rights for current workers.
The proposals gain force from the fact that--setting aside any unfunded costs for past retirees-- federal pensions now cost almost 37 percent of payroll, of which workers pay only 7 percent. By contrast, pensions in Fortune 500 companies run in the range of 22 to 25 percent of payroll, including both worker and employer Social Security taxes.
Federal pensions cost so much because they have two features unmatched in the private sector--retirement at age 55 and full inflation protection. Federal workers deserve a good retirement plan. But--if they also want to be paid as workers in the private sector are--they don't necessarily deserve retirement benefits that are far better than those of workers in the very best-paid parts of the private sector.