GovernmentExecutive.com

In a recent piece in the Wall Street Journal, Dallas Salisbury of the Employee Benefit Research Institute detailed how private sector benefits have changed since World War II. That got me thinking about the changes that have occurred in the federal government in the years since the Civil Service Retirement System was established in 1920.

The biggest change was the creation of the Federal Employees Retirement System in the mid-1980s. With that move, the government system began the process of shifting from a single benefit retirement plan (CSRS) to one that is similar to the 401(k)-based plans that dominate in the private sector today (FERS).

In 1979, 62 percent of workers in a retirement plan had a company pension, which was based on salary and length of service. In 1984, Bank of America introduced the first hybrid-defined benefit plan, offering a combination of a pension and an employer-sponsored savings plan. By 2005, 63 percent of private sector employees had access only to a 401(k) plan (like the federal Thrift Savings Plan). This year, IBM moved its employees to enhanced 401(k) plans for all future service. IBM's new plan has no defined benefit and provides up to an 8 percent employer match on employee retirement savings in the 401(k).

The private sector hybrid plans combined Social Security, a defined benefit and an employer-sponsored savings option. With FERS, the federal government offered its employees a plan similar plan. But FERS does have some differences. Consider the following comparison:

The good news for FERS employees is that unlike many in the private sector, they have both a basic pension benefit as well as an employer-sponsored savings plan (the TSP). A federal employee who leaves government before retirement and moves to a job that does not offer a pension will have to save more to make up for this valuable lifetime benefit.

FERS employees are vested in the FERS basic benefit after five years of civilian service, so even without a full career in government, they'll have something to show for their years of work besides Social Security and their savings. But if they stay in government until retirement, they get another benefit -- lifetime health insurance coverage. As benefits of working for government go, the FERS basic benefit and the potential of lifetime coverage under the Federal Employees Health Benefits Program are more important than ever.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

COMMENTS

• Re: Andre Jordan below -- Vesting in TSP (i.e., right to retain matching funds upon separation) is at three years of service. Vesting in FERS is indeed at five years. New Fed Posted May 14, 2008 12:03 PM
• When I first started with the Federal Govt in 1992, an "old hand" at my office told me that benefits in the Federal Gov't were OK at best, but not nearly as good as most Fortune 500 companies, where many had more generous "free" medical plans, solid pensions and other perks. I was OK with this, since I enjoyed my work, and didn't spend too much time thinking about this issue until the last few years. It's with great dismay that I hear the horror stories from my friends who work in the private sector (which I also did 1988-1992) about their benefits getting stripped down so much that most everything is out of pocket for them. Things such as no matching contributions in the 401K (to go along with defined pension plans disappearing years ago), as well as some companies hiring all newbie’s to work around 30 hrs a week, to avoid being called "full-time", to offering bogus medical plans that have huge deductibles that basically do nothing more than insure your house in the event of catastrophic illness. The Wall St article linked to this one is a joke. It talks about how 95% of a companies healthcare costs apply to only 50% of their (US born) workers, as if it is somehow the US workers fault. Well duhh...it’s because the US is the only industrialized nation that relies on EMPLOYERS to provide basic health care, as opposed to Universal Care by their gov't. But the same Wall St types will then turn around and cry that Universal Health Care is "Socialized Medicine" and inherently evil. We live an a dark time my friends, where our gov't and it's economic infrastructure (health and retirement benefits included) are run by profit at all cost multi-national companies, whose execs love to stay in the US, but do all they can to tap other markets for employment, then lobby OUR congress to prevent giving us the same perks that citizens in other countries enjoy. That includes good educational systems, transportation, etc. My advice to anyone working in the Federal Gov't. DON'T go private, unless there is a total overhaul in our national economic model. Basil Posted May 13, 2008 5:45 PM
• Thanks Bill Smith for your encouraging words, because they definitely got me to thinking. I was deeply considering leaving the government for the private sector because I had capped out at my current GS level and see no opportunities to excel where I’m at now, but I guess the key word is patience. I just have to have the patience and perseverance to stick it out just as you have and I will see a light at the end of the tunnel soon. It’s just hard, because I’ve been here for 5 years now, started as a 3/1, currently a 7/3 and I’ll only go up in steps from here, and opportunities to excel don’t come often in my small office. I’m 30 and ready to settle down and buy a house, but with this rate of advancement, I won’t be able to do that for another 10 years. KC Posted May 12, 2008 1:31 PM