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Federal Compensation Exceeds Private Sector

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"RetirementReadiness: Strengthening the Federal Pension System”, a hearing held by theSubcommittee on Federal Workforce, U.S. Postal Service and Labor Policy, helpedshed light on the current flaws of the federal pension system. Thedisparity between federal and private-sector workers’ compensation discussed atthis hearing is something the National Taxpayers Union has long drawn attentionto. NTU’s Pete Sepp testified on behalf of the organization’s 362,000members at the hearing last Wednesday.

As a panel participant at the hearing, Sepppointed out that “the large majority of federal retirees are at least notunder-compensated.” The Congressional Budget Office (CBO) reported thatfederal employees receive an average 16 percent more compensation thanprivate-sector workers. The issue of fairness comes upagain when considering the amount federal employees contribute to their ownfund compared to what is required of private sector workers. The combinedindividual and agency contribution rate offederal workers is 12.7 percent, with the employeecontributing at a fixed rate of 0.8 percent. Meanwhile, the combinedcontribution for private-sector workers is, on average, only 2.2 percent.

Rep. Sean Duffy (R-Wis.) sponsored a bill, to be votedon this week, which would extend the two-year pay freeze for federal civilianworkers through 2013. NTU believes ending the defined benefit pensionsection of the system (for new entrants) and focusing on the Thrift SavingsPlan would be a step in the right direction. The topic is likely to fueltensions between Republicans and Democrats but both private sector and federalworkers would benefit from a sound solution to the pension issue. There is noquick fix, but the sooner steps are taken the better. In 2010, theCongressional Research Service study reported that US government pensionprograms already had a shortfall of $674.2 billion.