Traditionally a job in the federal government meant two things: job security and excellent benefits. However, with spiraling debt and widespread talk of large cuts in agency budgets, some older federal employees are looking for the door. Stephen Losey of the Federal Times reported last month that there has been growing interest in retirement seminars amongst federal employees with some venues seeing their largest attendance ever. One of the biggest reasons for the retirement rush, according to Losey, are fears that the government will slash federal employee retirement benefits. They are right to worry. Currently federal employee pensions are calculated based on their three highest annual salaries. However, numerous proposed budget plans, reportedly including the agreement between President Barack Obama and Speaker of the House John Boehner have included a provision to calculate the pensions of federal employees on their five highest annual salaries.
“Many federal employees nearing retirement view the high-five reform as a double whammy”, reported Losey, “first it would reduce their pensions by factoring two lower salaries into their pension calculations. Second a high-five average salary would be further tamped down by pay freezes in effect this year and next.”
If cuts in retirement benefits are approved, federal agencies could well see a “brain drain” of their most experienced employees as those workers attempt to retire — and therefore lock in their pension and other retirement benefits — before the cuts go into effect. If the exodus of older employees is large enough, it could negatively impact the operations of any number of federal agencies. Furthermore, the changes, or even the threat of changes, could cause many experienced professionals to shy away from federal positions, instead finding work in the private sector.
However, if pensions are cut, and a large number of older federal employees do opt for retirement, there could well be a silver lining. The large scale retirement of older federal workers would open up jobs for younger employees far away from retirement and thus less concerned about pension cuts. In the end, any “brain drain” might well allow a new generation of young men and women to enter government service, injecting much needed new blood into federal agencies.