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It's A Gray Area: Federal pensions no longer make any sense

October 04, 2013|By James P. Gray

There is a lot of misinformation and mystery about the compensation Congress receives.

So I did some research at http://www.About.com and called the Office of the Clerk of the House of Representatives at (202) 225-7000.

Senators and representatives receive an annual salary of $174,000, with the exception of the speaker, who is paid $223,500, and the Senate majority and minority leaders, who each receive $193,400. But those amounts are also subject to a cost-of-living increase each year, unless Congress votes to forgo that benefit.

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Before 1984, neither members of Congress nor any other federal employees were required to pay into Social Security. And they couldn't receive payments either. But that changed with the passage of the Federal Employees Retirement System, which requires all federal employees to pay 6.2% of their salary into Social Security. In addition, members are required to contribute 1.3% of their salary to their own federal pension account.

For all federal employees, pensions vest after five years of service, and the maximum pension is capped at 80% of the average of their highest three years of salary.

Previous federal civilian and military service is tacked on to calculate how long a Congress member has served. To collect pension benefits, a member of Congress must be 62 — or 50 with 20 years of service, or any age with 25 years of service.

In 2006, 290 former members were receiving pension payments under the Civil Service Retirement System, the program used before the 1984 changes. Their average compensation was $60,972 per year. As best as I could determine, the formula for those members with 22 years of service entitled them to receive 55% of the average of their top three wage-earning years.

The average for the 123 former members who joined the program after the 1984 changes was $35,952 per year, and, as best as I could determine, 22 years of service entitled them to 36% of that same salary average.

Members may also receive outside income of up to $26,550 per year, but there are no limits for income from investments. However, members are not allowed to receive an honorarium for any speaking appearances. They may also make contributions to a 401(k) program, but there is no matching contribution by the government.

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