Retirement Envy

Private sector workers cast a covetous eye on federal retirement benefits.

For decades, federal employees have enviously glanced over at their counterparts in the private sector: the salaries, the stock options, the perks. Life looked so much better on the capitalistic side of the fence.

Now, as baby boomers head into retirement-in droves, as we keep being reminded-some private sector employees are peeking over the fence themselves, and turning a distinct shade of green. What they're seeing is the benefits government workers receive when they decide to leave the working life behind.

USA Today waded into this issue in February with a huge cover story on how retirement packages for government workers are much more generous than those in the private sector-and the gap is growing. Some high points of the article:

  • At the federal level, the unfunded liability for military and civil servant retirement benefits is bigger, at $4.7 trillion, than the one for Social Security, which weighs in at $4.6 trillion.
  • With a supplemental annuity waiting for him, Johnnie Nichols, a civilian Defense Department employee, told the paper he's itching to get out. "The sweet spot for me is about age 56," he said. "When I run the numbers, the system almost forces me to retire" early, he added.
  • John Moorlach, an Orange County, Calif., supervisor who's trying to cut benefits for civil servants, says politicians "love to give generous retirement benefits because they don't cost anything today, and they'll be out of office when the payments come due."
The story magnified the distinctions between public and private benefits by lumping all levels of government-state, local and federal-together. Many of the most generous retirement packages in the public sector are now being offered at the state and local levels.

But federal retirement benefits still are attractive. In many private companies, pensions are becoming a thing of the past, in lieu of 401(k) retirement plans based on employee contributions. But pensions remain a staple of the civil service-even for workers in the newer Federal Employees Retirement System, who are expected to finance much of their own retirement through contributions to the 401(k)-style Thrift Savings Plan. And federal retirees also get another coveted benefit: lifetime health insurance coverage.

Many civil servants view such benefits as a reward for the salary sacrifices they made by dedicating their careers to public service. Besides, the real issue, they say, is not that federal retirement benefits are too rich, but that those in the private sector are increasingly miserly.

"One disturbing trend in the private sector, which will harm millions of Americans, is a move by some companies to cut back-or eliminate entirely-such critical forms of compensation as health insurance and pensions," says Colleen Kelley, president of the National Treasury Employees Union. "Let us hope the public sector never follows suit." It probably won't-at least not in the foreseeable future. And that means private sector envy is likely to increase, while sympathy for the plight of the beleaguered civil servant declines. Of course, support for bureaucrats hasn't been high for at least a couple of decades. But backers of the civil service have at least been able to drum up some support for the notion that federal workers are chronically underpaid.

Even that concern appears to be, at the very least, on the wane. For example: Late last year, Supreme Court Chief Justice John Roberts devoted his annual report on the state of the federal judicial system to a single issue: that the lingering problem of low pay for federal judges had "now reached the level of a constitutional crisis." But when Paul Volcker, a longtime advocate for pay comparability in the federal sector, wrote a piece in The Wall Street Journal about how federal judges' salaries pale in comparison to the compensation for first-year lawyers at many large firms, it prompted the following response from a reader: "It's a little hard to get singularly worked up about this one among many such disconnects in the American work economy, which often appears unsure whether occupational intangibles such as honor, prestige, fame, influence, intellectual challenge and public service justly call for remuneration, or are themselves forms of it."

Maybe so. But what is already getting many Americans "singularly worked up" is the kind of disconnect in the economy that provides federal employees with better retirement benefits than the average private sector worker receives.

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