What kinds of benefits do Members receive?
The public is frequently misled and misinformed about this question, in part due to confusion over the variety of current arrangements still in effect. Unfounded allegations of lavish pensions being awarded for only a few years of service and of huge annuities paid to spouses and widows have contributed to creating the misconception that Members receive benefits far beyond those that are accessible to most Americans.
All Members are eligible to participate in the standard Federal employee health and life insurance coverage options under the Federal Employees Health Benefits Program and the Federal Employees Group Life Insurance Program.
The retirement benefits of Members can be much more confusing. All Members, like other working citizens, are required to participate in Social Security, paying 6.2% on the first $87,900 of their wages (the cap currently set for all worker earnings) and an additional 1.45% on all earnings for Medicare.
From here, Congressional benefits get more complicated. An old program dating from 1920 for providing pensions to civil servants, the Civil Service Retirement System (CSRS) is still in effect for Members who first took office before 1984. The system was designed to provide pensions for officials who could be serving for a relatively limited period of time compared to other workers due to constantly changing political appointments and election results. Members still covered by the CSRS pay 8% of their earnings to the system, a contribution that is matched by the Congress. This is in addition to the 6.2% they pay on their first $94,200 to Social Security. If a Member chooses to combine their CSRS coverage with Social Security, they pay 6.2% to Social Security and 1.8% to CSRS on the first $87,000 and 8% on everything over that. The average pension paid out in 2002 for CSRS was $55,788 to a total of 340 retired Members.
In 1987, the CSRS was phased out and replaced with the Federal Employee’s Retirement System (FERS). FERS was designed to work with Social Security to provide pensions for all Federal employees and requires Members to pay the standard 6.2% to Social Security, and an additional 1.3% on their first $94,200 and 1.3% on all income over that to FERS. A major innovation that came with FERS was the Thrift Savings Plan, which functions similarly to a 401(k) account and allows Members to contribute up to 14% of their pay (depending on IRS limits), a sum that is matched up to 5% of the salary by the employer.
The actual amount a retiring Member receives per year is based on a formula that evaluates their years of service, highest salaries, and a benefits accrual rate.* The exact number varies widely from person to person depending on how long they worked in Congress and how they chose to plan for their retirement. The average retired Member in 2002 who had used the FERS system while in office had served for served 18.7 years and receives $41,856 annually. Those who had retired under the older CSRS system averaged 20 years of service and a retirement of $55,788 per year in 2002.
* FERS formula, as of 2004:
[ (3-year average high salary) * .017 * (years of service through 20)] + [ (3-year high salary average) * .01 * (years of service over 20) ] = Annual pension