And I've seen some whoppers. Some emails have claimed that senators, after one disgraced year in congress, are immediately able to retire for over $15,000/month.
Now that seems unreal. And it is.
The fact is, anyone who wants to see what the congressional retirement plan is can easily find it online.
So... let's take a look.
A tale of two pension plans
Actually, there are two (maybe three or four, if you want to get technical) congressional pension plans.
The first congressional pension plan started in 1920. Back in those days, there was no social security. And if you had a decent job, you were usually eligible for a defined pension plan from your employer.
So, in order for the federal government to attract reasonably qualified folks, they had to offer a pension as well. And so, they did. And senators, with a few minor tweaks (to reflect the fact that they faced a risky reelection process rather than less-risky professional performance evaluations), recieved the same pension plan that other federal employees recieved.
Well, time marched on.
Social security passed congress 15 years after the congressional pension plan was initated.
Unfortunately, that left legislators in a dilemma. If someone were forced to pay into social security and the federal pension plan, they'd have to give over 13% of their salary toward their defined retirement plan. And a lot of the features of these plans, essentially, would have been duplicated.
So, congress, in it's infinite wisdom, decided that most federal workers (including congressmen) were satisfied with the retirement benefits they already had. And so, they were exempted from donating to, or recieving social security benefits.
Time continued to march on. The "defined benefit" pension became a much rarer thing in the job marketplace. Most folks were in 401(k)s, or similar plans. And folks started wondering whether federal employees should recieve the "defined benefits" that most people no longer recieved. Or whether they should be exempted from social security.
So, the federal retirement plan was modernized in 1984.
Folks who were initially elected into office before 1984 could choose one of four ways to proceed. They could:
- Keep their old, expensive retirement plan, without social security payments or benefits.
- Keep their old retirement plan, pay into social security, have their costs (and retirement earnings) offset by what they contributed to social security, and recieve social security.
- Join the new (less expensive) retirement plan, recieve a lower annuity, and be eligible to set aside money in a "Thrift Savings Plan" (similar to a 401k). Folks in the new retirement program, however, are required to pay into social security, and are eligible for social security benefits.
- Only pay into social security, and only recieve social security.
This begs the question: How many congresspeople can grandfather into the old retirement plan?
Not many. As of this writing, only 9 senators and 28 representatives elected before 1984 are still holding onto their seats.
And of those congressmen, I don't know how many have decided to actually keep their old retirement plan. Perhaps some more industrious bloggers will call their offices to ask... but I'll stop here, only quoting the document above when it states that most congresspeople who kept the old plan also decided to utilize the social security offset.
The Pension Plan of the Modern-Day Congressman
First of all, congresspeople starting their first term after 1984 have to donate to social security. No exceptions.
Now - for the defined benefit.
First of all, in order to collect anything from this plan, congresspeople need to:
- Have 5 years of eligible federal service. Either as a congressman, or in another federal job recieving retirement benefits. So, no, congresspeople unable to hold their jobs for 5 years get no federal pension.
- Avoid being convicted of certain crimes. These include treason, espionage, bribery of public officials or witnesses, conspiracy to commit an offense against or defraud the United States, perjury, or subordination of perjury. So, disgraced congresspeople don't earn pensions. At least if they get convicted.
- Reach retirement age. The conditions are a little bit complex (read the document if you want the full story), but in order to recieve a full pension, a congressperson must be 60 years old. Early retirement can be taken as early as age 55, with a penalty. So, no, unless you're old, or you've served 20 years in federal service (with 10 as a congressman), you have to wait to get your pension.
(Average of highest 3 years salary x .017 x years of service through 20) + (Average of highest 3 years salary x .01 x years of service after 20) = Annual pensionSo, let's say that a representative (under the "new" pension plan), is elected at age 25 (the minimum age), and retires at age 65. Assuming that they're retiring this year (again, this is fictional), the average highest 3 years salary is $174,000. So, our fictional representative is eligible to retire on $93,980 per year. A nice benefit - but no where near the $15,000/month claimed in some viral emails.
Meanwhile, folks who only managed to eke out 5 years (the minimum needed to collect a pension)? They earn $19,818 per year at age 65. Again, not a shabby reward for 5 years work. But, again, no where close to $15,000 a month.
But What About The Folks On The Old Plan?
I'm not going to go in as much detail here, considering there are only 37 congresspeople eligible for it. And probably fewer are actually on it.
Under the old pension system, payments are capped at 80% of their final congressional salary. This would occur after 32 years of congressional service. So, if such a member were to retire today, they would earn an annual pension of $139,200.
A very nice retirement. And actually starting to come (somewhat) close to $15,000/month. But not that close.
So where did these inflated figures of congressional pensions come from?
Beats me. It's just another frequently assumed falsehood.