Kevin Carter replied to the topic Preventing a Flame War – 717 Comments & I Work for Uncle Sam in the forum Leadership, Management, Supervision 8 years, 1 month ago
The normal cost of FERS is the percentage of one’s current salary that must be put in the trust fund to pay for future pension benefits. The normal cost is currently 12.5% of salary for normal FERS employees. Employees pay 0.8% of salary and the employer currently pays 11.7% of salary. That is a 15-to-1 match if you consider the amount the employer pays vs. the amount the employee pays. Another way of looking at is to say that employees cover 6 percent of their future pension benefits.
The median for state and local government are: employee pays 5% of salary and the employer pays 9% – almost a 2-to-1 benefit.
Further, every time the normal cost increases, the employer covers the entire increase because the employee’s contribution is defined in statute at 0.8%. So, the employee used to only pay 10.7% of salary in 2004 and now pays 11.7% because the normal cost keeps increasing. So even though the amount future federal employees have to contribute is increasing to 3.1% of salary, as a percentage of the benefit received, it’s actually closer to what FERS employees originally paid in 1987 when the program first started.
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