Active and retired federal employees would sacrifice to leave our children and grandchildren a better future. The time has come for federal employees to discuss how we can help and, at the same time, “save our pensions.”
Here are three reasons to start the discussion of increasing federal employees’ pension contributions:
The Civil Service Retirement and Disability Fund (CSRDF) — the government’s pension system for federal civilian employees and retirees — is not healthy.
The Civil Service Retirement System was established as a “pay-as-you-go” system, with equal pension contributions by agency employer and agency employee. However, during the last 12 fiscal years, the CSRDF required taxpayer subsidies of $300 billion to pay for pensions of retired federal civilian employees. This $300 billion was over and above the agency employer and agency employee pension contributions.
In addition, in fiscal 2012, a subsidy of $33 billion was appropriated by the U.S. Treasury and sent to the CSRDF. This subsidy helped to pay for the $73 billion of actual pensions paid out that year. (These amounts were audited and certified by KPMG LLP). Of the $73 billion paid out, only $4 billion was contributed by fiscal 2012 employee contributions.
These subsidies were needed because of the failure of federal civilian agencies’ employers and employees — over decades — to adequately fund future pensions. This failure caused a massive $800 billion unfunded liability.
In conclusion, the CSRDF has been battered by chronic underfunding. It now has only 53 percent of assets needed to meet future obligations. Federal policies and the Pew Center on the States consider pension systems healthy when they are 80 percent funded.
Solutions are needed to repair the CSRDF trust fund. A good start would be to establish a board of trustees to provide oversight. Also, agency employer and agency employee pension contributions may need to be increased — so that the underfunded trust fund can be made healthy and the taxpayer subsidies can be decreased.
— Tom McKinney,retired Army Audit Agency certified internal auditor, Atlanta