Publisher's Perspective

The FERS 0.8 percenters are now, or will be soon, a minority in the workforce. And like the CSRS employees before them, they may come to look like the favored minority, paying less for the same benefits. Image: FAMILY STOCK/

Much has been studied, written and said about the difference between the two main federal retirement programs, the Civil Service Retirement System and the Federal Employees Retirement System.

Much of that has focused on the former being better than the latter, in terms of the benefits. Over time that has played out in not a little bragging/schadenfreude/envy among the federal employee and retiree population, depending on which system applied to them.

Much less has been said about another division just within FERS: the difference between the 0.8 percenters and everyone else. In that case, it’s not a difference between what’s paid out, but what’s paid in.

FERS of course was designed to replace CSRS as part of the Social Security reforms of the 1980s, in which one goal was to get more people paying into Social Security, which is not part of CSRS. Except for certain categories of employees who pay in higher amounts in exchange for enhanced benefits—law enforcement officers being the main one—the required employee contribution toward a CSRS annuity is 7 percent of salary.

A main goal of creating FERS was to reduce the value of the civil service annuity but to make the total value about the same, counting the value of Social Security and the employer contributions for FERS employees (but not CSRS employees) into the Thrift Savings Plan created at the same time.

The FERS civil service annuity benefit is worth only about half that of a CSRS benefit, given the same time of service and high-3 salary level, while the CSRS program has better inflation protection, as well.

How much should FERS employees pay for that benefit? Since the required Social Security contribution is 6.2 percent of salary (up to a cap) the logical solution was to set the FERS employee share at 0.8 percent, to square it up with the 7 percent under CSRS.

At the time there were warnings to CSRS people that, since everyone hired after 1983 would be put under FERS, eventually that would become the majority federal retirement program. The meant the CSRS population would come to look like a favored minority with their larger benefits and better inflation protection. It surprised many people that the crossover point came only after about 10 years.

Sure enough, since then there has been an annual parade of proposals to degrade the value of CSRS benefits, particularly its inflation protection feature. Those proposals have been largely unsuccessful, but the debate over them has revealed more than a little ill-feeling among FERS employees toward CSRS employees. And the latter group, to be fair, did not completely refrain from rubbing salt into that wound.

A decade or so ago several changes were imposed on the FERS system in the name of government deficit reduction, again only applying to those hired in the future. A law enacted in 2012 increased the FERS contribution to 3.1 percent of salary for those hired in 2013 and after. A law enacted in 2013 raised that to 4.4 percent for those hired in 2014 and after.

Neither of those laws changed the benefit formula—certainly not to make it more generous—so a FERS employee may be paying one of three amounts for the same eventual payout, again given a similar work history.

It had come as a surprise to many CSRS employees that the FERS population outstripped them so soon. The government has a well deserved reputation as a place where many people make a full career of it, for reasons including the value of the later retirement benefit. But there is turnover, and another important crossover point is at hand.

The most recently released workforce data from OPM, as of March of this year, showed that of just under 2.2 million federal employees (the Postal Service and intelligence agencies not included), 49 percent had nine or fewer years of service and are paying in 3.1 or 4.4 percent.

Since CSRS still covers about 1-2 percent of the workforce (all of whom have more than 10 years of service) the FERS 0.8 percenters are now, or will be soon, a minority in the workforce. And like the CSRS employees before them, they may come to look like the favored minority, paying less—in most cases less than a fifth—of what the majority pays for the same benefit.

What are the implications? If history is a guide, there will be continued proposals to set the required contribution for all FERS employees at the same amount—specifically, the 4.4 percent now being paid by everyone hired after 2013. The Congressional Budget Office has raised that as a possibility several times, as have many Republicans in Congress.

For the 0.8 percenters, that would be effectively a pay cut of 3.6 percent. But it would be only 1.3 percent for those hired in 2013, and nothing for those hired since then (who themselves will soon be the majority of FERS employees, even without the 2013 class). Some of them might, not unreasonably, see the increase for others as no skin off their nose, and maybe even as a matter of justice.

Despite the friction in the workplace that the CSRS/FERS split created, the federal population has managed to stay unified after FERS became the majority and the knives came out for CSRS. That unity now will be tested again in the FERS 0.8 percenters/“highers” split as the “highers” are the majority within the majority.

SECURE Act 2.0: Important changes that you need to know

2024 By the Numbers: Social Security and Full Retirement Age

Widespread Support Spurs Call to Advance Bill to Repeal ‘Windfall,’ ‘Offset’ Provisions

What TSP Millionaires Do That Others Don’t

Biggest Social Security Myths That Federal Employees Fall For

The 1st Year of Retirement Can be Rough; Do These 3 Things to Prepare

Federal Retirement Red Flags to Avoid

Best States to Retire for Federal Retirees

2024 Federal Employees Handbook