One reason the government made a major change in its retirement benefits when creating the FERS system in the 1980s—behind the potential cost savings to the government, to be sure—was the perception that the CSRS system created a “golden handcuffs” effect.
The notion was that both employees and agencies would benefit, if rather than making a full career of the federal government, employees broadened their careers with working experience in the private sector, nonprofits, academia or wherever.
However, the CSRS program discouraged that because of the way annuities accumulated, the argument went. Staying in government builds up both elements—the high-3 salary base and the multiplier of 2 percent per year of service after the first 10—which would be frozen in place if they left. Meanwhile, the Social Security benefits they would accumulate working outside of CSRS would not be nearly as valuable.
The “solution” was to create FERS, which incorporated Social Security so that benefits under it would accumulate in the same way either inside or outside the government. To that was added a civil service annuity worth about half that of CSRS and government contributions into the Thrift Savings Plan.
That broke the “golden handcuffs” and spurred more cross-pollination between government and other entities. Right? Well . . . let’s just say it would be hard to make that case, based on a recent study of turnover among federal employees.
The Partnership for Public Service broke down attrition according to a number of demographic factors, including age and years of federal service, within what it found to be a government-wide total of 6.1 percent in 2021, including both retirements and departures for other reasons.
Not surprisingly, turnover was higher at both the youngest end—8.5 percent for those under 30—and the oldest end—16.7 percent for those over 60. All of the turnover for the former group was “quits,” such as leaving for employment elsewhere at an age where people are still defining their careers, or getting more education. Retirements accounted for more than nine-tenths of turnover among the latter group.
The lowest turnover rate, 2.8 percent, was among the age 40-49 group. That rose to 4.9 percent among those 50-59, when people generally start becoming eligible for retirement—which in that group outpaced quits by two to one.
Turnover by years of service presents a similar picture. It’s above average at 7.1 percent for those with less than five years, then falls off to 3.9 percent for those with 10-19 years before rising to 7.4 for those with 20-29 years—again, when eligibility to retire starts kicking in—and 15.3 percent for those with 30 or more.
Similarly, on the low end quits dominate, while among the latter two age groups, quits make up only low single-digit percentages.
What we have here is a picture of some people testing out the government at younger ages and for a relatively short time and deciding it’s not for them. But many of those who stay beyond about age 40 and about 10 years in become lifers.
There certainly are reasons beyond benefits that people stay in a job or move on. But surveys have shown that benefits—especially retirement and the associated eligibility to continue FEHB in retirement with the government still paying the same share it does for employees—are a strong motivation.
The handcuffs aspect hasn’t changed much. What’s changed is that they are less golden than they used to be.
Calculator: See your time to retire under FERS ticking away