We’re repeatedly told defined benefit plans are going away, victims of longevity and unbelievably lucrative promises made by management and politicians of generations past.
They’ve bankrupted companies and bloated state governments, but no matter, there are elections to win and core constituencies to consider.
It’s one reason a priority of the new Congress will be the Equal COLA Act, an effort to ensure “fairness” (hold onto your wallet) in cost-of-living adjustments made to two retirement systems for federal workers.
The first, the Civil Service Retirement System (CSRS), provides ample benefits for those who make a career of government work.
A throwback to the Wilson Administration, it’s nicknamed “golden handcuffs” for its effectiveness in attracting and retaining talent.
Sensing actuarial issues just over the horizon, the Reagan Administration introduced the far less generous Federal Employees Retirement System (FERS) in 1986.
New workers were not grandfathered into CSRS and forced to FERS instead, hence the current income inequality irritant in the ranks.
Call us crazy, but we’re not sure tax dollars for defined benefit retirement plans are warranted (or prudent, or smart). It’s all part of the cosmic con that is unionized federal employees, the very definition of rent-seeking that even Democrat demigod Roosevelt railed against, a cash for votes loophole that lingers to this day.
Congressman Gerry Connolly, D-Virginia, of the House Oversight and Government Reform Committee introduced the bill to remedy “this unfair treatment in retirement benefits.”
“Over time, we now realize that this two-tiered system fails to protect FERS retirees who are living on a fixed income,” Connolly said in a statement. “This legislation will rectify this unfair system and ensure these dedicated public servants are protected throughout their retirement.”
He added that the legislation would amend U.S. Code “so that COLAs for retirees under the FERS system will be calculated the same way as COLAs for retirees under CSRS going forward.”
In other words, undo the very reason for FERS in the first place.
Too often, President Trump’s Twitter salvos give Democrats license to go all-out in opposition activity, making it that much harder to argue for responsible government. But it’d be nice if they at least tried.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
