Federal Employee Retirement System is unfair to all who joined after 2013?

Why the Federal Employee Retirement System Feels Unfair for Newer Employees

Many will ask is FERS unfair for post-2013 employees? .If you joined the federal government after 2013, you might have already heard that the retirement benefits aren’t the same as they used to be. Many federal employees are now finding out that what they expected might not be what they’re actually getting—and it all comes down to a few changes that took place back in 2013. Let’s break down what’s going on, why some employees feel it’s unfair, and what you can do to make the most of your benefits.

What is the Federal Employee Retirement System (FERS)?

The Federal Employee Retirement System, or FERS, is the main retirement plan for federal workers. It’s a pension system that gives federal employees three key sources of retirement income:

1. Social Security – This is the same Social Security that most American workers get.
2. Thrift Savings Plan (TSP) – A retirement savings plan similar to a 401(k) that many private companies offer.
3. FERS Pension – A basic pension that pays out a monthly amount based on your years of service and your salary.

Together, these three parts are supposed to provide a secure retirement for federal workers. But for those who joined after 2013, some changes have made things harder—and more expensive.

What Changed in 2013?

In 2013, Congress made adjustments to the contributions that new federal employees had to make toward their FERS pension. Despite being a new is  FERS unfair for post-2013 employees? Before 2013, employees contributed a smaller percentage of their salary to the FERS pension, and the government covered the rest. But with the Bipartisan Budget Act of 2013, things changed:

• Higher Contributions: New hires after 2013 now contribute more of their own salary toward their FERS pension—over double the amount compared to employees who were hired before.
• Same Benefits, Higher Costs: Even though post-2013 employees pay more, they aren’t receiving any extra benefits. The payout formula remains the same, even with higher contributions.

For many new federal employees, this feels like an unfair deal. They’re paying more out of their paychecks every month for the same benefits that earlier hires are receiving for much less.

How Much More Are You Paying?

The difference in contributions is significant. Here’s a simple breakdown:

• Employees Hired Before 2013: Contribute around 0.8% of their salary toward the FERS pension.
• Employees Hired After 2013: Contribute around 3.1% of their salary toward the FERS pension.
• FERS-Further Revised Annuity Employees (FERS-FRAE): If you were hired after 2014, your contribution rate may be even higher, around 4.4%.

Imagine someone making $50,000 a year. An employee hired before 2013 might contribute about $400 each year, while someone hired after 2013 could be contributing over $1,500 each year! This adds up over time and reduces the take-home pay for newer employees.

Why Did This Change Happen?

Congress made these changes as a cost-saving measure. By asking newer employees to contribute more, the government could save money on its budget. However, this doesn’t feel fair to the people affected. Many employees argue that they’re paying more for the same level of benefit, which hardly seems like an improvement for those who entered federal service in recent years.

How Does This Impact Your Retirement?

The increase in contributions means you’re taking home less money now. While the idea is to build up a secure retirement, you might feel the pinch of lower take-home pay every month. Additionally, some employees worry that by the time they retire, even more changes could happen to FERS, which might impact their future retirement benefits.

Because of these issues, many newer federal employees are looking for ways to make up the difference and secure their financial future. Here are a few steps you can consider:

Steps to Make the Most of Your Retirement Benefits

If you’re feeling shortchanged by the new FERS structure, here are a few strategies that could help you maximize your retirement:

1. Max Out Your Thrift Savings Plan (TSP): The TSP is a powerful tool for building retirement savings. It’s similar to a 401(k) and has low fees, which helps your money grow faster. Try to contribute as much as you can, especially to get the government’s matching contributions.
2. Take Advantage of Catch-Up Contributions: If you’re over 50, you can contribute extra to your TSP. This is a great way to boost your retirement savings in the years before retirement.
3. Consider Supplemental Retirement Accounts: Look into other retirement savings options, such as IRAs (Individual Retirement Accounts). These can help you build additional retirement savings outside of FERS and TSP.
4. Understand Your Social Security Benefits: Social Security will be a part of your retirement income. Knowing how it works and when to claim benefits can make a big difference in your retirement.
5. Explore Long-Term Financial Planning: Meeting with a financial planner can help you create a comprehensive retirement strategy that considers all your benefits and savings options.

Is There a Way to Change FERS?

Many employees are calling for changes to make FERS fairer, especially for those who joined after 2013. While some groups advocate for reduced contribution rates or increased benefits, any changes to FERS would require action by Congress. As of now, there are no signs that Congress will adjust FERS, so it’s important to focus on making the most of the system as it is.

Final Thoughts

Is FERS unfair for post-2013 employees remains to be seen. For federal employees who joined after 2013, the changes to FERS contributions can feel discouraging. While you’re paying more out of each paycheck, the benefit you’ll receive at retirement is the same as it was for previous employees who paid much less. However, by understanding your benefits, maximizing your TSP, and exploring other retirement options, you can still build a solid financial future.

Retirement planning is more important than ever, especially with the current structure of FERS. Taking steps now to supplement your FERS benefits can help you secure a comfortable retirement, no matter when you joined the federal workforce. If you’re unsure about the best steps, don’t hesitate to reach out to a benefits coordinator or financial advisor who understands the unique needs of federal employees.

Key Takeaways

• Increased FERS Contributions: Employees hired after 2013 pay higher contributions without added benefits.
• Maximize TSP Contributions: This can help offset lower take-home pay.
• Consider Supplemental Accounts: Other retirement savings options, like IRAs, can help bridge the gap.
• Get Professional Advice: The Benefit Coordinators can help you develop the income needed for a comfortable retirement.