Congress’ Retirement Benefits: With Low Approval Ratings, Are They Worth It?

By Beverly DeVeny, IRA Technical Expert

Follow Me on Twitter: @BevIRAEdSlott

As I was looking for information on pension plans for our U.S. presidents, I came across information on pension plans for members of Congress, the group of individuals we elect to set tax and spending policies for our government. The same group of individuals who miss crucial deadlines for setting policies time after time after time. The same group that gives us phased-in provisions in legislation, temporary provisions that expire or are supposed to expire but get renewed over and over again. The same group that passes retroactive tax legislation because they cannot come to a timely agreement, which would allow the rest of us to do effective tax planning.

The approval rating for Congress as of January, 2013 is a whopping 14%. That’s right, as of last month, less than 1 in 7 Americans approved of Congress’ actions.

So what do we pay our esteemed Congressperson when they leave office? The short answer is – it’s complicated. In 1946, Congress voted to give its members the option to be covered by the Civil Service Retirement System (CSRS) with higher contributions and greater benefits than other federal employees. The purpose was to encourage those of retirement age or infirmities to retire and to bring in younger members with fresh ideas. I don’t know about you, but it doesn’t seem to me that things quite worked out that way.

In 1984, members of Congress, along with other federal employees, were required to participate in Social Security. However, participation in both CSRS and Social Security would have meant some benefits would be duplicated. That brought about the creation of the Federal Employees’ Retirement System (FERS), which went into effect in 1984.

So now this is what we have for Congressional retirement plans.

Elected Before 1984

  • Dual Coverage – Both CSRS and Social Security
  • CSRS Offset – CSRS offset by the amount of Social Security contributions and benefits
  • FERS – This includes FERS, Social Security and the Thrift Savings Plan (TSP)
  • Social Security Only

Elected in 1984 or Later

  • FERS
  • Social Security Only

Members of Congress are vested in their pension benefit for CSRS or FERS after five years of service. That is only one term for a Senator, while it is three terms for a Congressman. There are age and service requirements that determine when pension payments can start and if they will be full or partial payments. There are eight different options between CSRS and FERS.

CSRS members contribute 8% of salary to the plan with an 8% match paid by Congress (aka you and I, as taxpayers). Those covered by FERS, however, contribute only 1.3% and Congress (aka you and I) pays 16%. In addition, they pay the same 6.2% into Social Security as you and I pay.

The maximum payout under CSRS is 80% of the Congressman’s final salary. Under FERS, the payout is generally much smaller. It would take 66 years of service to reach an 80% payout. There are other calculations for those with both CSRS and FERS and for those with the CSRS offset plan. There are also contributions and payouts from the TSP plan. As I said earlier, it is complicated.

Are they worth it? Each of us will have an opinion on that. Maybe we should find some way to use the approval rating as part of the salary calculation and thus the retirement calculation. Maybe that would achieve something desperately needed by this Congress – the desire and the ability to work together!

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