NCPA - National Center for Policy Analysis

Congressional Retirement Benefits Much More Generous than Private Sector

May 18, 2011

In a blog post, Andrew Biggs, a resident scholar at the American Enterprise Institute, looks at retirement benefits earned by members of Congress in a particular year, then compares that to what private-sector workers at large firms tend to receive.

  • According to the Office of Personnel Management, the "normal cost" for congressional pensions -- that is, the average cost of benefits accruing in a particular year -- is equal to 17.9 percent of wages.
  • However, those costs are calculated using an assumed interest rate of 6.25 percent, higher than 5.5 percent Treasury yield Biggs assumes based upon Congressional Budget Office (CBO) projections.
  • Adjusting for this increases benefit accruals to 22.4 percent of wages.
  • On top of this, federal employees receive a government match to their defined- contribution Thrift Savings Plan account of up to 5 percent of pay.
  • They are also eligible for retiree health coverage, which is worth around 6 percent of wages.

Added together, the total retirement package provided by the federal government to members of Congress is worth somewhere around 33.4 percent of pay.  (In other words, the employee would be more or less indifferent between receiving these benefits or receiving a 33 percent salary increase.)

Using data from the Bureau of Labor Statistics, Biggs finds the average private sector worker in establishments of 100 employees or greater receives employer contributions to defined benefit pensions of around 3 percent of pay and contributions to defined contribution pensions of around 3.4 percent of pay -- a package worth around 6.4 percent of pay total.

Biggs calculates that annual retirement contributions for a member of Congress exceed those for private sector employees by a factor of five.

Source: Andrew Biggs, "Congressional Retirement Benefits Much More Generous than Private Sector," American Enterprise Institute, May 16, 2011.

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