While many Americans are struggling to save for retirement and employee pension programs, both public and private, are facing lots of uncomfortable realities, elected representatives and senators in the United States Congress still receive envious pension benefits for life. Retirement pay for Congress is not normally a big election-year issue, but it might serve as evidence of a disconnect between lawmakers and mainstream America.
The median net worth for a member of Congress surpassed $1 million in 2013, where it remained through 2018. This compares to the average American household median net worth of less than $60,000. As reported by the Center for Responsive Politics, "it would take the combined wealth of more than 18 American households to equal the value of a single federal lawmaker's household." Entering 2016, approximately 8% of U.S. households could be classified as millionaires, compared to more than 50% of the members of Congress.
Congressional members are eligible for their own unique pension plans under the Federal Employees Retirement System (FERS), though there are other retirement benefits available, ranging from Social Security and the Civil Service Retirement System (CSRS). Currently, members of Congress are eligible for a pension dependent on the member's age at retirement, length of service, and salary. The pension value can be up to 80% of the member's final salary. In 2016, Congressional pay was $174,000 per year, which, at an 80% rate, equates to a lifelong pension benefit of $139,200. All benefits are taxpayer-funded.
Additionally, members of Congress enjoy the same Thrift Savings Plan (TSP) as all other federal employees, which is similar to a 401(k). More taxpayer funds are used to match Congressional contributions up to 5% per year, in addition to an extra 1% giveaway regardless of how much the Congressman contributes, if anything. Because members of Congress earn far more than the average American citizen, their initial Social Security benefits average more than $30,000 per year compared to just $18,000 for a middle-class retiree.
Few private employees have the option to contribute to an employer-sponsored defined benefit pension plan. Most have the option to contribute to a 401(k) or 403(b), while others may contribute to an employee stock ownership plan (ESOP) or some other retirement option. The median benefit for private pensions and annuities was approximately $10,000 per year in 2015. For those receiving Social Security and a private pension, the median income was between $30,000 and $35,000 per year. As far as other retirement assets, research from the Federal Reserve in 2013 found that the median retirement account balance was $59,000 and the mean balance was $201,300.
How Benefits Have Changed Over Time
Participation in defined benefit pension plans peaked in the private sector in 1985, when about 40% of U.S. workers participated. Greater than 80% of American employees who worked for large companies in the private sector contributed to a pension plan. That rate dropped below 20% by 2011, per the U.S. Bureau of Labor Statistics. Between 2001 and 2004, almost one-fifth of the Fortune 1000 closed down or at least froze their defined benefit retirement plans.
In 2017, defined contribution plans have become more prominent with 47% of private sector companies offering them versus 8% offering defined benefit plans. In the private sector, 66% of workers report access to retirement benefits and 50% report that they are participating.
Increasingly, American workers are forced to rely on 401(k) plans, individual retirement accounts (IRAs) and Social Security for their retirement. Among these, only Social Security provides a guaranteed minimum payment in retirement, and even those benefits seem uncertain, considering the massive unfunded future liabilities faced by the U.S. government.
BY SEAN ROSS Updated Feb 5, 2018