Federal Employees’ Retirement System: Summary of Recent Trends

This report describes recent trends in the characteristics of annuitants and current employees covered by the Civil Service Retirement System (CSRS) and the Federal Employees’ Retirement System (FERS) as well as the financial status of the Civil Service Retirement and Disability Fund (CSRDF)

Retirement Benefits for Members of Congress

Prior to 1984, neither federal civil service employees nor Members of Congress paid Social Security taxes, nor were they eligible for Social Security benefits. Members of Congress and other federal employees were instead covered by a separate pension plan called the Civil Service Retirement System (CSRS). The 1983 amendments to the Social Security Act (P.L. 98-21) required federal employees first hired after 1983 to participate in Social Security. These amendments also required all Members of Congress to participate in Social Security as of January 1, 1984, regardless of when they first entered Congress. Because CSRS was not designed to coordinate with Social Security, Congress directed the development of a new retirement plan for federal workers. The result was the Federal Employees’ Retirement System Act of 1986 (P.L. 99- 335). Members of Congress first elected in 1984 or later are covered automatically under the Federal Employees’ Retirement System (FERS). All Senators and those Representatives serving as Members prior to September 30, 2003, may decline this coverage. Representatives entering office on or after September 30, 2003, cannot elect to be excluded from such coverage. Members who were already in Congress when Social Security coverage went into effect could either remain in CSRS or change their coverage to FERS. Members are now covered under one of four different retirement arrangements: CSRS and Social Security; The “CSRS Offset” plan, which includes both CSRS and Social Security, but with CSRS contributions and benefits reduced by Social Security contributions and benefits; FERS and Social Security; or Social Security alone. Congressional pensions, like those of other federal employees, are financed through a combination of employee and employer contributions. All Members pay Social Security payroll taxes equal to 6.2% of the Social Security taxable wage base ($117,000 in 2014). Members first covered by FERS prior to 2013 also pay 1.3$117,000 of salary, and 8.0% of salary above this amount, into the CSRDF. Under both CSRS and FERS, Members of Congress are eligible for a pension at the age of 62 if they have completed at least five years of service. Members are eligible for a pension at age 50 if they have completed 20 years of service, or at any age after completing 25 years of service. The amount of the pension depends on years of service and the average of the highest three years of salary. By law, the starting amount of a Member’s retirement annuity may not exceed 80% of his or her final salary. There were 527 retired Members of Congress receiving federal pensions based fully or in part on their congressional service as of October 1, 2012. Of this number, 312 had retired under CSRS and were receiving an average annual pension of $71,472. A total of 215 Members had retired with service under FERS and were receiving an average annual pension of$40,560 in 2012. with service under FERS and were receiving an average annual pension of $40,560 in 2012

Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws

[Excerpt] This report analyzes several types of recent changes to state Unemployment Compensation (UC) programs. Three categories of UC state law issues are considered: (1) changes in the duration of state UC unemployment benefits; (2) changes in the UC weekly benefit amount; and (3) the enactment into state law of two trigger options for the Extended Benefit (EB) program

Unemployment Insurance: Consequences of Changes in State Unemployment Compensation Laws

[Excerpt] This report analyzes recent changes to state Unemployment Compensation (UC) programs. Two categories of UC state law issues are considered: (1) changes in the duration of state UC unemployment benefits, and (2) changes in the UC weekly benefit amount

Federal Employees’ Retirement System: Budget and Trust Fund Issues

[Excerpt] Pensions for civilian federal employees are provided through two programs, the Civil Service Retirement System (CSRS) and the Federal Employees’ Retirement System (FERS). CSRS was authorized by the Civil Service Retirement Act of 1920 (P.L. 66-215) and FERS was established by the Federal Employees’ Retirement System Act of 1986 (P.L. 99-335). Under both CSRS and FERS, employees and their employing agencies make contributions to the Civil Service Retirement and Disability Fund (CSRDF), from which pension benefits are paid to retirees and their surviving dependents. Retirement and disability benefits under FERS are fully funded by employee and employer contributions and interest earned by the bonds in which the contributions are invested. The cost of the retirement and disability benefits earned by employees covered by CSRS, on the other hand, are not fully funded by agency and employee contributions and interest income. The federal government therefore makes supplemental payments each year into the civil service trust fund on behalf of employees covered by CSRS. Even with these additional payments into the trust fund, however, CSRS pensions are not fully pre-funded. Prior to 1984, federal employees did not pay Social Security payroll taxes and did not earn Social Security benefits. The Social Security Amendments of 1983 (P.L. 98-21) mandated Social Security coverage for civilian federal employees hired on or after January 1, 1984. This change was made in part because the Social Security system needed additional cash contributions to remain solvent. Enrolling federal workers in both CSRS and Social Security, however, would have resulted in duplication of some benefits and would have required employee contributions equal to more than 13% of workers’ salaries. Consequently, Congress directed the development of the FERS, with Social Security as the cornerstone. The FERS is composed of three elements: (1) Social Security, (2) the FERS basic retirement annuity and the FERS supplement, and (3) the Thrift Savings Plan (TSP). Most permanent federal employees initially hired on or after January 1, 1984, are enrolled in the FERS, as are employees who voluntarily switched from CSRS to FERS during “open seasons” held in 1987 and 1998

Federal Employees’ Retirement System: Budget and Trust Fund Issues

[Excerpt] Pensions for civilian federal employees are provided through two programs, the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS). CSRS was authorized by the Civil Service Retirement Act of 1920 (P.L. 66-215) and FERS was established by the Federal Employees’ Retirement System Act of 1986 (P.L. 99-335). Under both CSRS and FERS, employees and their employing agencies make contributions to the Civil Service Retirement and Disability Fund (CSRDF), from which pension benefits are paid to retirees and their surviving dependents. Retirement and disability benefits under FERS are fully funded by employee and employer contributions and interest earned by the bonds in which the contributions are invested. The cost of the retirement and disability benefits earned by employees covered by CSRS, on the other hand, are not fully funded by agency and employee contributions and interest income. The federal government therefore makes supplemental payments each year into the civil service trust fund on behalf of employees covered by CSRS. Even with these additional payments into the trust fund, however, CSRS pensions are not fully pre-funded. Prior to 1984, federal employees did not pay Social Security payroll taxes and did not earn Social Security benefits. The Social Security Amendments of 1983 (P.L. 98-21) mandated Social Security coverage for civilian federal employees hired on or after January 1, 1984. This change was made in part because the Social Security system needed additional cash contributions to remain solvent. Enrolling federal workers in both CSRS and Social Security, however, would have resulted in duplication of some benefits and would have required employee contributions equal to more than 13% of workers’ salaries. Consequently, Congress directed the development of the FERS, with Social Security as the cornerstone. The FERS is composed of three elements: (1) Social Security, (2) the FERS basic retirement annuity and the FERS supplement, and (3) the Thrift Savings Plan (TSP). Most permanent federal employees initially hired on or after January 1, 1984, are enrolled in the FERS, as are employees who voluntarily switched from CSRS to FERS during “open seasons” held in 1987 and 1998

Retirement Benefits for Members of Congress

Prior to 1984, neither federal civil service employees nor Members of Congress paid Social Security taxes, nor were they eligible for Social Security benefits. Members of Congress and other federal employees were instead covered by a separate pension plan called the Civil Service Retirement System (CSRS). The 1983 amendments to the Social Security Act (P.L. 98-21) required federal employees first hired after 1983 to participate in Social Security. These amendments also required all Members of Congress to participate in Social Security as of January 1, 1984, regardless of when they first entered Congress. Because CSRS was not designed to coordinate with Social Security, Congress directed the development of a new retirement plan for federal workers. The result was the Federal Employees’ Retirement System Act of 1986 (P.L. 99-335). Members of Congress first elected in 1984 or later are covered automatically under the Federal Employees’ Retirement System (FERS). All Senators and those Representatives serving as Members prior to September 30, 2003, may decline this coverage. Representatives entering office on or after September 30, 2003, cannot elect to be excluded from such coverage. Members who were already in Congress when Social Security coverage went into effect could either remain in CSRS or change their coverage to FERS. Members are now covered under one of four different retirement arrangements: CSRS and Social Security; The “CSRS Offset” plan, which includes both CSRS and Social Security, but with CSRS contributions and benefits reduced by Social Security contributions and benefits; FERS; or Social Security alone

Federal Employees’ Retirement System: The Role of the Thrift Savings Plan

[Excerpt] The Thrift Savings Plan plays a pivotal role in helping federal workers achieve adequate retirement income. Employees enrolled in the FERS who do not make voluntary contributions to the TSP, and thus receive only the 1% agency automatic contribution, will be able to replace only 1% to 3% of final annual salary from the TSP at retirement. Most workers in the lower and middle ranges of the federal salary scale will be able to achieve the 70% salary replacement recommended by many pension analysts from the benefits paid by Social Security and the FERS basic retirement annuity, but this is not so for higher-wage federal workers. Federal employees at all income levels can significantly boost their retirement income by contributing to the TSP, and such contributions are essential in order for those in the upper third of the federal pay scale to achieve a level of income that will allow them to maintain their pre-retirement standard of living

Survivor Benefits for Families of Civilian Federal Employees and Retirees

Federal employees with permanent appointments are generally eligible for retirement and disability benefits under either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). Most federal employees initially hired into permanent federal employment on or after January 1, 1984, are covered by FERS. Employees hired before January 1, 1984, are covered by CSRS unless they chose to switch to FERS during open seasons held in 1987 and 1998. Both FERS and CSRS provide survivor benefits for spouses and dependent children of employees and retirees. Survivors who had been participating in the Federal Employees’ Health Benefits Program (FEHBP) can continue to do so. The federal government pays compensation to dependent survivors of federal civilian employees who are killed while performing their duties; however, a survivor eligible for both an annuity under CSRS or FERS and for survivor compensation cannot receive both

Federal Employees’ Retirement System: The Role of the Thrift Savings Plan

[Excerpt] Federal employees participate in one of two retirement systems. The Civil Service Retirement System (CSRS) was established in 1920 and covers only employees hired before 1984. Participants in the CSRS do not pay Social Security payroll taxes and they do not earn Social Security benefits. For a worker retiring after 30 years of federal service, a CSRS annuity will be equal to 56.25% of the average of his or her highest three consecutive years of basic pay. Because the Social Security trust funds needed additional cash contributions to remain solvent, the Social Security Amendments of 1983 (P.L. 98-21) required federal employees hired after 1983 to participate in Social Security. To coordinate federal pension benefits with Social Security, Congress directed the development of a new retirement system for federal employees hired after 1983. The result was the Federal Employees’ Retirement System (FERS) Act of 1986 (P.L. 99- 335). The FERS consists of three elements: • Social Security, • the FERS basic retirement annuity and the FERS supplement, and • the Thrift Savings Plan (TSP). All federal employees initially hired into federal employment on or after January 1, 1984, are enrolled in the FERS, as are employees who voluntarily switched from CSRS to FERS during “open seasons” held in 1987 and 1998. Of 2,751,000 federal civilian and Postal Service employees enrolled in these federal retirement plans as of September 30, 2013, 2,477,000 (90%) were participating in the FERS and 274,000 (10%) were under the CSRS