Retirement programs private and public are being hustled to achieve better results, both for bottom lines and for retirees.
The most recent attempt is Obama's new plan to trim the deficit, which takes aim at the federal retirement system. Over the next 10 years, the president wants to salvage $21 billion by having the employee contribution increase by 1.2 percent (0.4 percent a year over three years beginning in 2013). On top of that, he's proposing to eliminate the FERS Annuity Supplement for new employees.
It's an attempt to muster funds to pay for a huge jobs plan and to repel arguments that federal benefits are way too generous. Just look at the amount that private versus public workers contribute to retirement costs, for example. The average contribution split for the Federal Employees Retirement System is 67 percent to 33 percent for federal employers and employees respectively.
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The split in the private sector is a little more even; it comes out to 55 percent paid by employers and 45 percent paid by employees.
But the American Federation of Government Employees says enough is enough. Though Obama hopes to appease critics of public sector benefits by aligning civilian and military retirement programs with the private sector, the AFGE argues federal agencies have been just as tight on pay and hiring as any other employer. Angered by the proposed pay-cuts, the group released a statement Monday, noting federal employees already sacrificed by having their wages frozen this year and next, and, as a result of $1 trillion in budget cuts, hiring has been reduced and many employers have to plan furloughs and reductions-in-force.
Yet defined benefit options these days are tough to find, and even more difficult to reform. There's a hint across municipalities to merge defined contribution plans into the mix (see Rhode Island's pension debate),and, according to a poll published in the Wall Street Journal, that's likely to run into voter support.
States face a collective gap of $1.26 trillion in funding for pensions. When a problem that big gets to the federal level, you can't blame a president for trying to fix a lopsided retirement system by getting agencies to decrease contributions for accruing pension costs and instead make bigger payments toward unfunded liabilities. Someone has to ante up.
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