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In response to some comments on my previous post on the generosity of federal pensions, I thought I would follow up with some information that might provide additional detail. Instead of looking at the final benefits received in retirement, here I’ll look at retirement benefits earned in a particular year, then compare 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. (The Federal Register lists a normal cost of 19.2 percent, but that doesn’t net out a 1.3 percent contribution from the Member.) However, those costs are calculated using an assumed interest rate of 6.25 percent, higher than 5.5 percent Treasury yield I’m assuming based upon CBO projections. Adjusting for this (see this recent CBO paper to see why these adjustments make sense, although CBO presents it from a macro, budget-side perspective) 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, according to a 2002 CBO report. Relatively few private-sector employees today receive retiree health coverage, and for those who do it is less generous than in the public sector. So you add together the total retirement package provided by the federal government to members of Congress and it’s 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.)

In my work with Jason Richwine on federal pay, we compare federal employees to private sector workers at large firms. The BLS publishes benefits data and we compare to private workers in establishments of 100 employees or greater. (The establishment size is the number of employees at the location where you work; the firm size is the number of total employees. An establishment size of 100+ correlates with firm size of around 1000+, which is the largest available for salary comparisons, which our paper also calculates.) In any case, the average private sector worker in this category 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. So if we look at larger private firms, which tend to pay better salaries and benefits, we get a larger employer pension contribution.

But still, a member of Congress receives employer retirement contributions of around 33.4 percent of pay each year while a private sector worker in a large firm receives around 6.4 percent. By my math, 33.4/6.4 = 5.2 – that is, annual retirement contributions for a member of Congress exceed those for private sector employees by a factor of five. Again, not to say that these figures confirm the myths that Norm Ornstein debunks—they don’t. But we shouldn’t come away from this with a conclusion other than that congressional retirement benefits—like federal employee benefits in general—are far more generous than those a typical private sector worker receives.