By targeting federal pensions as a culprit in the growing national debt, White House officials and congressional leaders are taking aim at a benefit lost long ago by many workers at private companies — a guaranteed retirement check paid largely by the boss.
These traditional pensions, called defined-benefit plans, have long been an attractive feature of government work. But President Obama’s bipartisan fiscal commission has described them as “out of line” with private-sector retirement packages, which rely increasingly on 401(k)-style accounts that require employees to contribute more and carry more risk.
Now, as part of a compromise to limit federal borrowing, many Democrats and Republicans want federal civil servants to do the same: Pay more into their pensions.
“The comparison is really one of, ‘Well, private-sector employees have been cutting and cutting retirement income security, and government employers haven’t,’ ’’ said Dallas L. Salisbury, president of the nonpartisan Employee Benefit Research Institute.
It’s the same argument public workers have confronted for months from critics who compare their job security and salaries with millions of private-sector workers who have lost jobs or faced pay cuts.
Today, half of private companies offer any kind of retirement plan at all. And the majority of those offer employees 401(k)-style plans, which have taken big hits in the stock market in recent years. Less than 1 in 5 workers at private companies have traditional pensions, down from half in the early 1980s, according to the Employee Benefit Research Institute.
By contrast, when they leave federal jobs, most U.S. government workers will draw from a hybrid retirement plan, a combination of a pension and 401(k)-style account. But whether they will be better off in retirement than their private-sector counterparts depends on how long they stayed in government and the salary they might have received in private industry.
“In some cases the pension may be more generous, but the pay is a lot less generous,” said Rep. Gerry E. Connolly (D-Va.), who has about 120,000 federal workers and retirees in his district and opposes the pension proposal.
With stock options and profit-sharing still offered at some companies, pensions “are one of the few incentives we have to bring people into government,” Connolly said.
The deficit commission predicts that the government could save $51 billion through 2020 by asking federal civil servants to kick in more to fund their pension plans.
A Republican plan would effectively impose a 5 percent pay cut by boosting federal employees’ contribution to 6 percent of their salary from the current 0.8 percent. Administration officials are pushing a smaller contribution hike that would be phased in gradually and exempt some workers.
“For us it’s not about the size of [government] pensions,” said David Kendall, a senior fellow at Third Way, a centrist Democratic think tank also promoting a change. “Pensions in general need to go up. The problem is the government contribution.”
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