Federal employees’ retirement is often likened to a three-legged stool: Social Security benefits, the 401(k)-style defined contribution that is the Thrift Savings Plan and the defined benefit pensions.
Rep. Chris Van Hollen (D-Md.) told The Federal Drive with Tom Temin that he and lawmakers who represent federal employees want to maintain this system for federal employees.
“It’s certainly our goal to maintain all three legs of that retirement stool,” Van Hollen said. However, for future federal employees, contributions for the defined benefit portion will increase as part of the payroll tax cut extension plan. Starting Jan. 1, 2013, new federal employees will have to pay a total of 3.1 percent of their salaries toward their pensions. Currently, feds pay 0.8 percent. Feds hired on this date or later and with less than five years of federal service also will pay the increased contribution.
Current feds will not be affected by the change, but Van Hollen said targeting future feds is a “short-sighted approach.” He said this provision could hurt federal recruitment.
“That’s the danger and it’s a real concern that was expressed by many of us who represent federal employees,” Van Hollen said. “We urged our colleagues to take the long view here, which is we need to be able to continue to attract bright, young people to federal service. And if the compensation they receive in the federal government is not competitive with what they get in the private sector, the federal government will lose out over time.”
Van Hollen added, “We do not want the result to be a federal government that can’t perform its essential and important duties.”