There are now three tiers under the Federal Employees Retirement System (FERS).
Tier One is for those who entered the system from its inception in 1986 through 2012. They pay 0.8% of salary for their pension, along with 6.2% of salary for Social Security. This totals 7% of salary, the same amount federal employees paid for the Civil Service Retirement that FERS replaced.
Tier Two is for those who entered the system in calendar year 2013. They pay 3.1% of salary for their pension, along with 6.2% of salary for Social Security. Why do they pay 2.3% more than the generation that preceded them? Congress decided to force them to pay $15 billion for the extension of unemployment insurance benefits. Although this was a temporary expense, it was a permanent cut to these employees’ compensation.
Tier Three is for those who enter the system beginning in January, 2014. They will pay 4.4% of salary for their pension, along with 6.2% of salary for Social Security. Why do they pay 3.6 percentage points more than Tier One and 1.3 percentage points more than Tier Two? This gratuitous kick in the teeth to these not-yet-hired employees was unjustifiable, a convenient way to offset sequestration on to the next generation.
President Obama’s FY13 budget proposed forcing all federal employees, current and future, to pay an additional 1.2% of salary for both CSRS and FERS. The alleged rationale was to drive federal retirement benefits down to the level that more closely resembled the practices of the worst private sector employers, many of whom provide no retirement benefit at all.
This race to the bottom on retirement benefits must end now. The cuts to those hired in 2013, 2014 and beyond must be repealed. The federal government should neither follow nor accelerate declining living standards for this generation or the next.