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Old 05-31-2014, 12:53 PM
 
Location: Albuquerque NM
1,656 posts, read 1,521,661 times
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The employee contribution to FERS for those hired since Jan 1, 2014 has been raised to 4.4%. For those hired before 2013, it is only 0.8%. So that makes its even less lucrative for you. My federal agency also hires older, experienced engineers who previously worked as contractors to the agency. Many of these workers were in their mid 50's and hired on with the feds so that they could retire at age 62 with at least 5 years federal service time and collect a small pension upon retirement. They were also able to negotiate high salaries. But the real reason is to get the federal health insurance that they can carry into retirement. Fewer and fewer of our contractors are offering health benefits in retirement.

In my agency which primarily hires engineers and has higher grades (GS14, 15, etc. and excepted service in the Washington, DC area), it is actually becoming more attractive to be a fed than a contractor (but maybe the 4.4% hike in contributions will lessen that). That was not the case thirty years ago when I was hired. Over the years, our grades have increased and we now have many of the programs that the corporations do e.g., Flexible Savings Accounts, tax deductible child care accounts, Health Savings Accounts, LTC, dental insurance, flexible work schedules, family leave, locality pay, etc. On the other hand, our salaries were recently frozen for three years and we got a measly 1% raise last year and morale is low as people retire and some positions are not backfilled and the workload increases. But the large exodus of older federal employees retiring in the next five years may mean lots of opportunities for younger employees.

My agency has several, large Management & Operating contractors including the National Laboratories (5-10K employees at each) and the government re-competes and renegotiates their contracts every five years. As time goes by, the contractor health and retirement benefit packages are being eroded and defined benefit pensions are being replaced with 401Ks. Those at the most prestigious National Laboratories may be grandfathered in but most are not. And I noticed that Boeing, a big DOD contractor, recently froze their pension plan. But if you are working for a small technical consultant firm with a government contract or are a beltway bandit in Washington, DC, it may be another story. You might be better off as a contractor. But if you want to convert to a fed, don't wait too long as Congress (the House) wants to revamp the federal retirement system for cost savings and will continue to whittle away at reducing benefits. But you are generally grandfathered in under the old system if already a fed employee.
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Old 05-31-2014, 03:26 PM
 
5,635 posts, read 13,971,828 times
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ABQ, very interesting. Thanks for sharing. I was a fed employee for 2 years before I got RIFed. I wonder if that means I would fall under that system if anything changes in the future. Very interesting idea about becoming a fed a few years before retirement for the health benefits. Is it really possible? That would take care of the health care costs.
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Old 05-31-2014, 07:33 PM
 
Location: Central Massachusetts
4,800 posts, read 4,843,254 times
Reputation: 6377
Quote:
Originally Posted by ABQ2015 View Post
The employee contribution to FERS for those hired since Jan 1, 2014 has been raised to 4.4%. For those hired before 2013, it is only 0.8%. So that makes its even less lucrative for you. My federal agency also hires older, experienced engineers who previously worked as contractors to the agency. Many of these workers were in their mid 50's and hired on with the feds so that they could retire at age 62 with at least 5 years federal service time and collect a small pension upon retirement. They were also able to negotiate high salaries. But the real reason is to get the federal health insurance that they can carry into retirement. Fewer and fewer of our contractors are offering health benefits in retirement.

In my agency which primarily hires engineers and has higher grades (GS14, 15, etc. and excepted service in the Washington, DC area), it is actually becoming more attractive to be a fed than a contractor (but maybe the 4.4% hike in contributions will lessen that). That was not the case thirty years ago when I was hired. Over the years, our grades have increased and we now have many of the programs that the corporations do e.g., Flexible Savings Accounts, tax deductible child care accounts, Health Savings Accounts, LTC, dental insurance, flexible work schedules, family leave, locality pay, etc. On the other hand, our salaries were recently frozen for three years and we got a measly 1% raise last year and morale is low as people retire and some positions are not backfilled and the workload increases. But the large exodus of older federal employees retiring in the next five years may mean lots of opportunities for younger employees.

My agency has several, large Management & Operating contractors including the National Laboratories (5-10K employees at each) and the government re-competes and renegotiates their contracts every five years. As time goes by, the contractor health and retirement benefit packages are being eroded and defined benefit pensions are being replaced with 401Ks. Those at the most prestigious National Laboratories may be grandfathered in but most are not. And I noticed that Boeing, a big DOD contractor, recently froze their pension plan. But if you are working for a small technical consultant firm with a government contract or are a beltway bandit in Washington, DC, it may be another story. You might be better off as a contractor. But if you want to convert to a fed, don't wait too long as Congress (the House) wants to revamp the federal retirement system for cost savings and will continue to whittle away at reducing benefits. But you are generally grandfathered in under the old system if already a fed employee.
Since I am a Fed technician and know the changes, I will tell you that I do not think that it will push people to contracting. Once they are in they tend to stay in longer and when they see the result of the pay grab they will see it differently. I know that some wont come in but those looking for stability and a future retirement they will see it as a win.
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Old 06-01-2014, 04:47 AM
 
Location: San Antonio
7,629 posts, read 14,374,443 times
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We had to make a decision on contractor (much better pay) vs Civil Service for DH when he retired from the AF 13+ yrs ago...we made the joint decision to go civil service. Back then, everyone thought we were crazy given the "pay difference" between his starting civil service grade and his income potential as a contractor (would have been about an additional $10K per year).

13 yrs later, we have more security being Civil Service (altho NOTHING is really that secure anymore) than those that went the higher pay route as contractors. Many have seen their contracts cut, forcing them to move to find a comparable job or change companies to continue working here without moving, and having to "start over" on the leave/benefits ladder.

Even given the "loss" of potential income, we are still happy with our decision. I will retire CS this year (with pension and TSP), he will retire in 4 more years (with pension and TSP) and with our military retirement we have been able to enjoy living where we want without having to worry about "contract end dates", which is a HUGE stressor these days with cut backs.

No decision is right for everyone, but consider what works best for you and your needs. Ours was ensuring that we had several pensions to enjoy our "early" (60 for me, 62 for him) retirement goals.
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Old 06-01-2014, 09:37 AM
 
Location: Albuquerque NM
1,656 posts, read 1,521,661 times
Reputation: 3627
Quote:
Originally Posted by doss1 View Post
ABQ, very interesting. Thanks for sharing. I was a fed employee for 2 years before I got RIFed. I wonder if that means I would fall under that system if anything changes in the future. Very interesting idea about becoming a fed a few years before retirement for the health benefits. Is it really possible? That would take care of the health care costs.
The 4.4% FERS contribution is being waived for rehires who had at least five years of previous federal service.
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Old 06-01-2014, 10:43 AM
 
Location: Maryland
282 posts, read 305,751 times
Reputation: 338
Quote:
Originally Posted by Pilgrim21784 View Post
My advice to you - Stay with the private sector, absolutely keep up with technology developments and shoot for the highest security clearance(s) you can get.

The problem with Federal employment at those levels for a youngster in their 30's is this - you have very little salary increase room down the pike. Annual pay increases, whether through step increases or COLA factors, are fairly dinky and do not even keep you even with real cost of living changes at a static salary level.

If my old CSRS pension system were still available, this would be a different discussion. Under FERS, the numbers do not favor a Federal career versus a Fed contractor position. The FERS 1%, high 3 pension (under age 60 or 1.1% 60+) plus the FED's maximum contribution of 5% of salary does not cut it in comparison to most decent Federal contractor compensation packages I am familiar with; your company's 18% level is awesome! Combined with your own savings/investment program you should be able to amass an excellent retirement nut unless you are genuinely stupid.
I agree! The federal retirement system was overhauled way back in the 1980's and FERS replaced the CSRS retirement benefit. It is getting worse every year. If you start in the federal service now, you will pay 4.4% of salary for the tiny FERS-FRAE (January 2014) annuity, the normal 6.2% into Social Security and 1.45% into medicare. Not to mention your share of the health insurance (~25%, employer pays ~75%).

CSRS allowed younger retirement, a larger pension with 7% contribution (but no social security benefits). FERS employees prior to 2013 paid 0.8%, and Jan-Dec 2013 pay 3.1% (FERS-RAE), and post 2014 FERS-FRAE 4.4%.

Last edited by CSRSJim; 06-01-2014 at 10:52 AM..
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