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Learning the Cost of Lois Lerner's Pension


Pete Sepp
September 30, 2013

Even before she retired last week, scandalized IRS official Lois Lerner’s compensation was already attracting attention.  While on administrative leave, federal rules allowed her to keep collecting a salary, one that reportedly totaled $177,000. So it was no surprise when speculation arose over how much Lerner could collect in federal pension benefits.

Unfortunately, that speculation, which initially projected a benefit of over $50,000, might be off by about half … and in the wrong direction. National Taxpayers Union calculations show that Lerner could qualify for a starting pension at the annual equivalent of as much as $102,600, and up to $3.96 million over her lifetime.

The individual retirement choices of federal employees are not a matter of public record. However, precisely because NTU has been denied this information in the past (specifically pertaining to Members of Congress), we’ve developed the most accurate method available to provide solid estimates of how much federal employees can collect.

And now, the caveats for Lerner. NTU assumed she:

1) Joined the Civil Service Retirement System (CSRS) from the very beginning of her federal employment, and left the IRS with 34 years of service in various posts;

2) Had a “high-three” average salary of $177,000;

3) Opted for a reduction in her current benefits so that her spouse could receive part of the pension after she died;

4) Receives annual Cost of Living Adjustments of 3 percent; this is the level that CSRS’s own actuaries have employed when projecting future liabilities for the system;

5) Lives to the age of 87 years, which is the average age of death for a female who is currently age 62 under standard mortality tables used by the life insurance industry.

Some may wish to quibble with these assumptions, but even under other scenarios, Lerner’s retirement benefit could be quite generous. Want to assume she joined CSRS after she left the judicial branch, and signed on with the Federal Election Commission in 1981? The annualized benefit would drop … to $96,200, and the lifetime total to $3.7 million. Want to be ghoulish, and project a lifespan of 80 years instead of 87? The lifetime amount would be less … but still a considerable $2.57 million. Or, suppose she decided to leave CSRS and transfer into the newer Federal Employees Retirement System (FERS) when offered the chance during one of the “open seasons.” The pension benefit would be significantly smaller, just under $60,000 annualized to start. However, with FERS, she would also participate in and be eligible for Social Security benefits, and could take advantage of a government salary match of up to 5 percent through the Federal Thrift Savings Plan, which works like a 401(K) defined contribution arrangement. In the end, her FERS package could still be quite lucrative.

But didn’t Lerner pay into to her pension plan out of her own salary? Yes, though the contribution rate during Lerner’s career was generally 7 percent. As we have noted with lawmakers’ pensions, taxpayers pick up the lion’s share of a typical lifetime CSRS retirement payout.

According to media reports, prior to her decision in favor of voluntarily retiring Lerner was in danger of being removed from her job due to findings from an IRS inquiry board citing “neglect of duties” and mismanagement. But to taxpayers, this latest sordid episode in the history of the tax agency has but one lesson: any way it’s sliced, they’re the ones left to bleed.


 

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