Political Myth: Members of Congress, unlike other federal workers, do not have to pay Social Security taxes, and they get a pension of $174,000 for life upon retirement.
Reality: Members of Congress receive essentially the same retirement benefits as other federal workers. Like other federal workers, they must pay Social Security taxes.
In 1920, federal civil service employees began to be covered under the Civil Service Retirement System, under which federal workers were entitled, upon retirement, to a lifetime pension of as much as 80% of their annual salary. The exact percentage each worker got was determined by means of a fairly simple formula: 1.5% for each year of service for the first five years, 1.75% for each year of service for the second five years, and 2% for each year of service thereafter. So, if a federal worker retired after only 10 years of service, his lifetime pension would be 16.75% of his former annual salary, but if he waited until he had served 20 years, that amount would go up to 36.75%. These employees did not pay social security taxes, but the trade-off was that they would not be eligible to receive social security benefits upon retirement. All that changed in 1987.
That is when the Federal Employee Retirement System came into being. Under FERS, federal employees do pay Social Security taxes, and receive social security benefits upon retirement. The trade-off is that their annual pension is reduced to 1% for each year of service, as opposed to the 1.5-2% they were receiving under CSRS. In addition to the pension and Social Security benefits, federal employees covered by FERS may also participate in what the federal government calls the “Thrift Savings Plan” — essentially a defined contribution plan, under which a pre-determined amount is deducted from each paycheck, the employer matches it, and it is invested to help fund the federal employee’s retirement. All federal employees hired after 1984 participate in this plan. Federal employees hired before 1984 may choose between FERS and CSRS.
That brings us to members of Congress. Until 1946, members of Congress weren’t covered by any retirement plan at all. Then, Congress passed Public Law 79-601, under which they participated in CSRS, along with other federal employees. That continued until CSRS was replaced by FERS, both for Congress and for other federal employees. Now, members of Congress who were elected after 1984 participate in FERS, while those who joined Congress before 1984 can choose between FERS and CSRS. There are currently 9 U.S. Senators and 28 members of the House of Representatives who were elected early enough to be covered by CSRS.
Upon retirement, years of service in Congress is combined with any years of other federal service in determining a former member of Congress’ retirement benefits, but no member of Congress would be eligible for a lifetime pension of as much as $174,000. $174,000 is the current annual sallary of a member currently serving in Congress. Even under CSRS, the highest annuity a person can be eligible for is 80% of the person’s former salary.