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Public Pensions Pensions

Types Of Plans For Federal Government Workers



Federal government workers hired before 1983 are covered by a different retirement income system than are those workers hired later. The Civil Service Retirement System (CSRS) (for workers hired before 1983) consists primarily of a generous defined benefit plan. Retirement benefits are available at age fifty-five for workers with thirty years of service. Under special circumstances, workers may retire at age fifty with twenty years of service, taking a reduction in benefits of 2 percent per year for every year they are younger than age fifty-five. The retirement benefits are fully indexed for inflation after retirement, which is also done by Social Security but which is rarely, if ever, done by private sector pension plans. The CSRS was started in 1920, and thus predates the Social Security system, which began in 1937. Before the federal pension reform in 1983, federal government employees were the largest group of employees not covered by Social Security.



These workers may also participate in the Thrift Savings Plan, which is a defined contribution plan. They may contribute up to 5 percent of their salary to this plan, but they receive no matching contribution from the federal government. The Thrift Savings Plan has grown rapidly, and, because of the large size of the federal workforce, is expected to eventually be the largest pension plan in the United States.

Employees hired after 1983 receive retirement benefits structured similarly to those for employees of large corporations in the private sector, through a system called the Federal Employees Retirement System (FERS). They are covered by Social Security and contribute to it just as do private sector workers. Because they participate in Social Security, they are covered by a considerably less generous defined benefit plan than are federal workers hired earlier. However, they may contribute a higher percentage of their salary to the Thrift Savings Plan, and they receive an employer match for their contributions. Several other systems cover particular groups of employees, such as diplomats (State Department), intelligence operatives and researchers (Central Intelligence Agency), and central bankers (Federal Reserve Board).

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