EVER SINCE Congress decided in 1983 that federal workers ought to contribute to Social Security like almost everyone else, people joining the civil service haven't known what pension to expect if they decided to make a career out of it. That's not a healthy situation, and now, with no elections pending, Congress needs to get down to business in designing a new federal pension system.
Designing that system will be especially difficult because of the strident -- and exaggerated -- claims of the most interested parties. Federal workers' representatives have long claimed that no alteration in their pensions was justified because their own contributions covered a substantial part of pension costs. At the other end of the spectrum, critics of federal workers, including the current leadership at the Office of Management and Budget, have been propagating the idea that wildly generous federal pensions are generating unsupportable claims against future budgets.
To put an end to both sorts of palaver -- and to build a solid base for evaluating alternative pensions -- the House Post Office and Civil Service Committee asked the Congressional Research Service to develop ways to compare the alternative federal pension systems with the current system and with other public and private pensions. That report has just been released.
CRS found that, measured by the most sensible yardstick (expected future costs of the pension of a newly hired worker as a percent of his expected pay), the current federal pension is, in fact, relatively generous. After accounting for workers' contributions, the cost to government as the employer is almost 25 percent of pay -- not more than the most generous private or state pensions, but considerably above the average cost of private plans including Social Security. Most of that extra cost is accounted for by early-retirement provisions and the full indexing of benefits for inflation.
The report doesn't recommend any particular plan, but it lays out options that might suggest certain conclusions. For example, the report shows the advantages of encouraging workers to save more of their own money in employer-matched "capital accumulation plans." But it also points out that, since only better-paid workers can usually afford to take full advantage of such plans, too much reliance on this feature may result in very low benefits for lower-paid workers. Another striking finding is that much better pensions could be afforded for later-retiring workers if benefits were reduced for those retiring before age 62.
Pension choices are very complicated, and Congress will still have a tough time deciding what mix of features is best for federal workers. But the CRS report should keep members from wasting time sorting out conflicting claims and help them focus on the real choices for constructing a generous but affordable system.