Reader responses to Ned on Feds - Risky investments

DAILY BRIEFING

Reader responses to Ned on Feds - Risky investments

Here are the responses we have received to the June 5 Ned on Feds column, "Risky investments ."

As a federal civil service annuitant under the Civil Service Retirement System (CSRS), I find it disheartening to read of the "precarious situation" Ned Lynch envisions for the Civil Service Retirement & Disability Fund (CSR&DF). This is a trust fund with a rate of net growth of nearly $30 billion every year, holding, as of the end of FY 1998, a balance of over $457 billion, according to the Office of Personnel Management (OPM). This would seem to belie its "precariousness". Granted, these funds are by statute maintained in non-negotiable interest-bearing government securities (much like U.S.Savings bonds). However, a good indication of their viability was their use to keep the government running during the government "shutdown" a few years ago.

The CSR&DF receives funds in the form of cash from active employee contributions and cash transfers from the U.S. Postal Service and other receipts which include, among others, intra-governmental transfers to represent "matching" contributions from employing government agencies (a valid employer expense) and interest from the aforementioned government securities. These funding sources more than cover the annual disbursements for the well-over 2.3 million federal employee and survivor annuitants.

The CSRS is, of course, a finite thing. In time, it will disappear. (Actuaries estimate that CSRS beneficiaries will have died out by 2070.) All federal employees hired since the beginning of 1984 are under the Federal Employees' Retirement System (FERS), which provides retirement benefits made up primarily by social security and thrift savings plans, with barely a small part drawing from the CSR&DF, to which FERS employees will continue to make contributions. At present, FERS retirees make up only around 5% of current annuitants, but this percentage will grow substantially in future years.

Notwithstanding Mr. Lynch's dire predictions, we CSRS annuitants have no reason to doubt the ability of our government to continue to meet its obligations as an employer to pay our annuities as long we are around to collect them.

-Donald V. Geoffrion
Retired Federal Annuitant

I read with interest the article that CSRDF is paying out more than it takes in for 20 years. The main problem lies with the fact that the "matching" federal funds never got credited to this account. Remember that CSRS members have paid in for years and if they choose to leave early they get no "matching" funds or interest (often called the golden handcuffs). Without matching funds or interest (and with the draw-down in federal workers) and with the fact that for over 10 years new workers are paying into FERS naturally there will be more going out than in. For many years the federal government has been using this money interest free. Now there is great moaning that the system is paying out more than taking in.

I also find it interesting to see our (CSRS) retirement system continually compared to Social Security. People seem to have lost track that Social Security was NEVER meant to be a retirement system. It was designed to keep people from being totally destitute and to SUPPLEMENT a person's own retirement savings or other plan. CSRS is a retirement system.

Through a total mismanagement of the funds, i.e., not accounting for the matching federal contribution and compounding of interest, it now appears that CSRDF is in trouble when in fact it probably is not. This is just another attempt to increase the "tax" (contribution to the retirement fund) to solve this problem.

It is interesting to note that CSRS employees are not allowed to contribute more than 5% to the Thrift Savings Plan even though IRS regulations permit anyone else to contribute up to $9,600 (I do not know the exact figure). When congress considers this restriction they say the tax revenue loss would be to great to permit this. Anyway they say it would only benefit the very rich federal employees and not help the "poorer" ones. This is just another case of federal workers being treated as second class citizens. When we qualify for Social; Security and federal retirement we a called double dippers. Someone who works for GM and gets a retirement and then qualifies for social security is not a double dipper. Perhaps this is because he paid into Social Security where CSRS people did not. But a state teacher is in the same situation as the federal employee and is not a double dipper.

At some point federal workers should get fair and equal treatment as other people in this country and not be second class citizens.

- Dale E. Nelson

More exaggerations from Ned.

-Name Withheld

Most people(and businesses) put IOUs in cookie jars as a part of everyday life when they buy on credit things like homes and cars. This is nothing new nor a reason to create a "sky is falling" scenario. If we can handle the S&L bailout we can handle the retirement situations without a doom and gloom outcome.

-Bill Federhofer
District Director
Small Business Administration
Kentucky District Office

I am with the USDA AMS agency and i think your writing is great and truthful. The congress has been using the SSI fund for their stop gaps for years and if the workers are allowed more freedom to invest their money what will they do for a stop gap for their programs. I say let the people choose what to do with their money they have saved and let it grow for them and not the government programs.

-Helen Ann Otte

Thanks for the story about Social Security. That was a good comparison it makes understanding the system easier.

-Jack Watts