CBO cooks up benefits comparison

Hold on to your wallet! A report issued by the Congressional Budget Office last month suggested that federal workers receive more generous benefits then private-sector employees. It is only a matter of time before someone— maybe the president, maybe a congressman— uses that report to justify keeping federal employees' pay down.

At the request of Congress, the CBO compared employee benefits offered by the federal government with those of the private sector in such areas as retirement benefits and health insurance. The study, "Comparing Federal Employee Benefits With Those in the Private Sector," was a follow-on to a 1997 analysis in which the CBO compared federal and private-sector pay. That analysis found that, on average, the federal government pays less than private-sector firms for similar jobs.

Depending on age, salary, length of service and retirement plan, the value of employee benefits as calculated by the CBO ranged from 26 percent to 50 percent of the pay received by the hypothetical federal employees and from 24 percent to 44 percent of pay for similar employees of large private firms.

In most cases examined, the value of the employee benefits package offered by the federal government exceeded the value of comparable benefits offered by private firms for this hypothetical set of employees. The so-called advantage of federal employee benefits was calculated by the CBO at about 7.2 percent of employees' pay.

The analysis also indicated that federal workers covered by the Federal Employees Retirement System have somewhat higher benefits overall than employees of large private firms. The benefits of FERS employees also are more generous than those of their counterparts who are covered by the Civil Service Retirement System, according to the CBO.

If you think this is a typo, I don't blame you. The reason the CBO considers FERS more generous than CSRS is because of the method that is used to calculate the value of each system. Because federal employees in CSRS contribute 7 percent of their salaries to their retirement plans, while FERS employees contribute less (0.8 percent plus 6.2 percent into Social Security), the CBO concluded that FERS employees are getting more for their money on a relative basis. In reality, everyone knows that the defined benefits paid by CSRS are more generous than the defined benefits paid by FERS. That tells you something about the CBO's methodology.

The CBO also concluded that federal vacation, holiday, disability, FERS and retiree health benefits for the hypothetical group of employees generally were more generous than benefits of the same type offered by the private firms. Federal health and life insurance, however, lag behind those benefits in the private sector. How the value of CSRS benefits depends on the employee's age.

The analysis used five hypothetical employees ages 25, 35, 50, 55 and 60. These employees were arbitrarily assigned different lengths of service, specifically two, 10, 20 and 25 years. Each employee also was assigned a different salary. The analysis then used a common set of assumptions about interest rates, retirement patterns and other factors to compute the dollar values of federal and private-sector benefits for these employees. The calculation was performed for the CBO by a benefits consulting firm with impeccable credentials.

I have no doubt that all the calculations were properly done. I am equally certain that this report is meaningless. There was no explanation given for how the hypothetical employees were chosen. There was no rhyme or reason for selecting the years of service, ages and salaries used to perform these calculations.

It is absurd to create five hypothetical employees out of thin air. If different years of service, age and salary were chosen, how would the results have differed? The report is silent on this issue.



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