The Pension Tease
Federal workers who would like to retire but don't qualify for decent pensions got a political reality check last week. The House slammed the door on an innovative National Security Agency plan to enhance early retirement. The NSA, eager to replace some its not-so-old cold warriors, wanted to offer some of them six-figure exit bonuses to take the sting out of early departure into an uncertain job market. Had the NSA succeeded, other agencies that are downsizing or reinventing themselves would have asked Congress for similar authority to encourage early-outs. The typical civil servant retires at age 61. To get unreduced benefits (based on salary, age and service time), civil servants must be age 55 with 30 years of service, 60 with 20 years of service or 62 with five years of service. The percentage of final salary they get as an annuity is based on service time, and annuities are indexed to inflation.</br></br>But early retirees (age 50 with 20 years of service or at any age with 25 years) pay a price. Annuities are reduced 2 percent for each year the retiree is younger than 55. That's why fewer than 3 percent of feds offered early-outs take them. The NSA thought it had found a unique way out. The agency wanted to provide a golden parachute for early retirees. Many NSA employees, because of their super-secret jobs and specialized skills, couldn't get decent-paying jobs in the private sector because their resumes (for security reasons) would look rather skimpy for 20 or 30 years of work. Many NSA specialists were recruited very young. Some reached high-paying jobs early and are well short of 55.</br></br>The NSA proposed a system whereby it would compute how much early retirement (the 2 percent penalty) would cost the early retirees and then, in a special, one-time-only offer, pay them a lump sum representing the lifetime pension reduction they would take. Officials estimated that the payments would average $80,000 to $90,000 but that for some employees the amounts would have been much, much higher.</br></br>Some agencies objected to the NSA proposal (buried in an intelligence reform bill) on the ground that they wouldn't be able to offer it to their employees. Officials of the House Government Oversight Subcommittee on the Civil Service, which has jurisdiction over federal employee benefits such as retirement, went ballistic when they learned of the NSA's effort.</br></br>Many rank-and-file feds wished the NSA well. They figured that they might get something out of it, perhaps a waiver of the 2 percent reduction, if the super-secret agency was successful. But Congress balked, saying it would be costly to the retirement system and set an expensive precedent. That means early retirement still is available to most federal agencies (through Sept. 30) but the 2 percent penalty still applies.