Comparing replacement rates under private and federal retirement systems

One measure of the adequacy of retirement income is replacement rate - the percentage of pre-retirement salary that is available to a worker in retirement. This article compares salary replacement rates for private-sector employees of medium and large private establishments with those for federal employees under the Civil Service Retirement System and the Federal Employees Retirement System. Because there is no standard benefit formula to represent the variety of formulas available in the private sector, a composite defined benefit formula was developed using the characteristics of plans summarized in the Bureau of Labor Statistics Medium and Large Employer Plan Survey. The resulting "typical" private-sector defined benefit plan, with an accompanying defined contribution plan, was then compared with the two federal systems. The Civil Service Retirement System (CSRS) is a stand-alone defined benefit plan whose participants are not covered by Social Security. Until passage of the 1983 Amendments to Social Security Act, it was the only retirement plan for most federal civilian employees. Provisions of the 1983 Amendments were designed to restore long-term financial stability to the Social Security trust funds. One provision created the Federal Employees Retirement System (FERS), which covers federal employees hired after 1983. It was one of the provisions designed to restore long-term financial stability to the Social Security trust funds. FERS employees contribute to and are covered by Social Security. FERS, which is a defined benefit plan, also includes a basic benefit and a 401(k)-type plan known as the Thrift Savings Plan (TSP). To compare how retirees would fare under the three different retirement systems, benefits of employees retiring at age 65 with 35 years of service were calculated using hypothetical workers with steady earnings. Workers were classified according to a percentage of the average wage in the economy: low earners (45 percent), average earners (100 percent) high earners (160 percent), and maximum earners (earnings at the taxable maximum amount). Overall, this analysis found that: Excluding Social Security benefits and TSP and defined contribution annuities, CSRS retirees have a higher pre-retirement salary replacement rate than either FERS or private-sector retirees. Private-sector retirees, however, have higher replacement rate than their FERS counterparts. Including Social Security benefits but not TSP and defined contribution plan annuities, CSRS retirees who are maximum earners have a higher pre-retirement salary replacement rate (despite receiving no Social Security benefits) than FERS retirees with the same earnings. Private-sector retirees in all earnings categories have a higher replacement rate than federal retirees with the same earnings. Including Social Security and TSP and defined contribution plan annuities, private-sector retirees in all earnings categories have a higher replacement rate than federal retirees, but their rate is close to that of FERS retirees. The rate is higher for FERS retirees than for CSRS retirees in all earnings categories. This analysis shows that replacement creates could exceed 100 percent for FERS employees who contribute who contribute 6 percent of earnings to the TSP over full working career. Private-sector replacement rates were quite similar for those with both a defined benefit and a defined contribution pension plan. Social Security replacement rates make up the highest proportion of benefits for th private sector's lowest income quartile group. The replacement rate for 401(k) plans and the TSP account for a higher proportion of benefits than does Social Security for all other income groups, assuming the absence of a defined benefit plan.     

Disability beneficiaries who work and their experience under program work incentives.

This research examines the return to work by Disability Insurance beneficiaries who were first entitled to benefits in 1980-81 and who were originally selected to be interviewed in the New Beneficiary Survey. To facilitate an examination of actual labor-force participation by beneficiaries, information on work and participation in program work incentives was collected from their claims folders. The analysis shows that approximately 10 percent of disability beneficiaries work during their initial period of benefit entitlement. About 80 percent are granted a trial work period, and over 70 percent of those granted trial work successfully complete it. More than half of them, however, were not successful in leaving the rolls through their work effort. In fact, benefit terminations due to work occurred for fewer than 3 percent of all beneficiaries in the cohort; approximately one-third of them had returned to the rolls by the end of the period under study. Beneficiaries most likely to make a work attempt were young and had a high level of education. Those with a high Social Security benefit amount were less likely to make a work attempt.     

Proposed fiscal year 1997 budgets for social and behavioral science research

COSSA is the advocate in Washington for the social and behavioral sciences. He also chairs the Coalition for National Science Funding. He has testified before Congress many times and has written and spoken extensively on legislative-executive relations, the federal budget process and science policy, particularly as it affects the social and behavioral sciences. This report was prepared by the author with the assistance of the COSSA staff.     

Disabled-worker beneficiaries under OASDI: comparison with severely disabled PA recipients.

The 1972 Survey of Disabled and Nondisabled Adults found that more than 1 million severely disabled persons aged 20-64 were receiving payments under Federal-State public assistance programs. To determine the reasons why most of these individuals did not qualify for disabled-worker benefits under the social security program, their characteristics were compared with those of the approximately 1.5 million disabled-worker beneficiaries. The public assistance recipients were found to be younger and less well educated than their disabled-worker beneficiary counterparts. A greater proportion of them were women and more were members of minority races. Public assistance recipients became disabled at an earlier age and had been disabled longer. Compared with disabled-worker beneficiaries, they had held less skilled jobs, had earned less money, and had had a weaker attachment to the labor force. These characteristics greatly reduced their chances of qualifying for disabled-worker benefits. Lack of knowledge about the program was also an important contributing factor.     

Partisan politics and public finance: Changes in public spending in the industrialized democracies, 1955–1989

This paper evaluates the role that partisan politics plays in altering public spending levels. The analysis covers over three decades of data on the developments of the public sectors in 16 OECD countries. The results of the analysis lend firm support to the partisan politics model. Of special note is the distinction between the electorate' and the government' ideological preferences and the dominant role that the former plays. The results also suggest, contrary to conventional wisdom, that partisan political influences have not been eliminated with the tightening of linkages to the international economy.     

Ineligible spouses of SSI beneficiaries, December 1976.

A study based on program records showd that about 200,000 persons receiving supplemental security income (SSI) payments in December 1976 were living with a spouse who was not eligible for payments. In most cases, the beneficiaries were disabled and the spouses were too young to be eligible. Some spouses were receiving help indirectly from the program through the essential-person increment, State supplementary payments, or the deeming-of-income provision. Fewer than half the spouses had income of their own, however, and even when the income of both partners was combined, 55,000 households had no income other than the SSI payment. A sizable number of families included dependent children and thus may have been eligible for aid to families with dependent children.     

On the link between fiscal decentralization and public debt in OECD countries

Excessive borrowing by subnational governments is considered to be one of the perils of fiscal decentralization. On the other hand, fiscal decentralization might ensure the fiscal stability of the public sector by constraining Leviathan governments. Since the impact of decentralized government on fiscal outcomes is therefore ambiguous from a theoretical perspective, we explore this question empirically with a panel of 17 OECD countries over the 1975–2001 period. Our findings suggest that expenditure decentralization significantly reduces public indebtedness, whereas tax decentralization and vertical fiscal imbalances are insignificant.     

Oil,elections and fiscal transparency

How does governments’ ability to gain financing from oil income affect their behaviour? Numerous studies have explored the effects of oil wealth on countries’ political characteristics, especially the level of democracy. Oil has also been associated with a significant electoral incumbency advantage across different political regimes. However, the relationship between oil wealth and incumbent governments’ behaviour, including election-year fiscal manipulation, has been studied to a lesser extent. This article argues that higher oil rents increase election-year public spending as they provide national governments both with direct revenue and increased financing opportunities. However, fiscal transparency mitigates this effect. Consequently, oil-induced electoral budget cycles decrease as fiscal transparency increases. Using a high-quality measure of fiscal transparency in a panel of countries, robust evidence in favour of this argument is found. The findings suggest that many of the previous results on the political effects of oil, including incumbency advantage, might run through an election-year spending channel, and that fiscal institutions might matter substantially for the political effects of oil.     

Relating systems concepts and public planning

Scientism so pervades our society that its methodological arm, the research approach, is assumed to be de rigeur for establishing policies and solving problems. Using the research approach, modern disciplinary developments created many techniques, such as operations research/management science/systems analysis (OR/MS/SA), ostensibly for finding solutions to pressing organizational and societal problems.This paper's emphasis on scientism and the research approach is deliberate - these concepts are the Weltanschauung of OR/MS/SA, the major systems concepts available. Their analysis, modeling of what exists, quantification, and reductionism are assumed to be the beauty of their logic and their only rationality. Public planning also assumes that analysis, modeling, quantification, and reductionism are the fundamental parts of problem solving and policy setting. This paper shows how this research approach and the unstated assumption that it must be used when establishing policies or solving problems now loom as the problems, and may be the biggest stumbling blocks to finding the good solutions society needs.Adapted from the author's forthcoming book, The Planning and Design Professions: An Operational Theory, New York: John Wiley and Sons, 1981.