Federal retirement benefits are not always better than private sector benefits, the General Accounting Office has concluded in a new report.
"There is no definitive answer to the question of whether federal retirement programs offer greater or smaller benefits than private sector programs," the report found.
The age at which federal employees retire often determines if they will receive a larger pension than they would have if they had worked in the private sector.
For example, an employee under the Civil Service Retirement System (CSRS) who retires at 55 with 30 years of service will get a bigger pension than the typical person with a similar career outside government. Most private sector companies provide reduced benefits for people who retire at 55, regardless of their length of service.
However, if CSRS employees retire at 62 instead of 55, their benefits are smaller than the average benefits for a private sector worker who retires at 62. Most federal employees do not have 30 years of service at 55 and many who do decide not to retire until they are older.
CSRS participants are different than most private sector workers in several respects. First, they do not contribute to Social Security. CSRS also does not have a defined contribution plan, like most private-sector plans and the Federal Employees Retirement System (FERS), in which employees can contribute extra money toward retirement and employers match a portion of the employees' contribution. These two factors are the primary reasons CSRS benefits are smaller than private-sector benefits for people who retire at 62.
FERS, which follows the private-sector retirement model more closely than CSRS, consists of three parts: Social Security, a small defined benefit plan and a defined contribution plan, the Thrift Savings Plan (TSP).
The amount withheld from FERS participants' paychecks for Social Security (6.2 percent) and the defined benefit plan (0.8 percent) is equal to the amount withheld from CSRS participants' paychecks (7 percent). FERS participants who also decide to contribute to the TSP have more money taken out of their paychecks, but because the government matches a percentage of the participants' contributions, employees who take advantage of the TSP can receive retirement benefits that are 10 times higher than those who don't participate in the TSP, GAO found.
Because FERS resembles many private sector retirement packages, FERS participants who retire at 62 receive benefits that are close to or higher than private sector benefits, GAO concluded.
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