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6-figure federal pensions drag on system in red

Ex-leaders help make deficit swell to $674b

WASHINGTON - Almost 15,000 federal retirees - including former leaders of Congress, a university president, and a banker - are receiving six-figure pensions from a system that faces a $674.2 billion shortfall.

About one of every 125 retired federal civilian workers collects more than $100,000 in benefits annually. They include physicians, postal workers, and presidential candidate Newt Gingrich, according to data obtained by Bloomberg News under the federal Freedom of Information Act.

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“We don’t want to bash federal employees,’’ said Jim Kessler, vice president for policy at Third Way, a research organization. “Still, when you have today’s economy, public sector jobs look better and better. And there are some pensions that make you question the system as a whole.’’

About half of all private-sector workers have no retirement plan other than Social Security, according to figures from the Employee Benefit Research Institute, a nonprofit that studies pensions. About 16 percent are in plans similar to the federal system, which guarantees payouts based on workers’ earnings. Some private employers offer defined-contribution plans, including 401(k) plans, in which benefits depend on employees’ contributions and how they are invested.

The federal retirement system has emerged as a cost-cutting target as the government faces a budget deficit exceeding $1 trillion. A 2010 Congressional Research Service study reported that US government pension programs had a shortfall of $674.2 billion, mostly due to insufficient funding for workers hired before 1984.

The Treasury pays about $4.9 billion every month for about 1.8 million retirees, an average of $31,633 annually. Federal employees contribute $1 of every $14 toward retirement, according to the National Commission on Fiscal Responsibility and Reform, a bipartisan panel created by President Obama.

Public employees at the state and local levels already have faced moves to cut future benefits, as officials seek to address a cumulative pension gap that exceeds $4 trillion. Dallas Salisbury, president of the benefits institute, said in an interview that federal pensions might be “richer than we can now afford. Something’s going to have to give.’’

The number of federal employees eligible to retire and collect a pension will grow to 956,613 by the end of the 2016 budget year, a 35 percent increase from the 707,750 who could have retired at the end of September, according to the Office of Personnel Management.

Retirees in the database released to Bloomberg News had careers that lasted an average of roughly 27 years. The database is dated Sept. 29, 2011, and does not contain the names of employees’ survivors who receive benefits. The Congressional Budget Office said in a report last March that in 2010, the US government paid $69 billion to 2.5 million civilian retirees and their survivors, and $51 billion to 2.2 million military retirees and their survivors.

Retired physicians and politicians ranked among those collecting the largest benefits. The chance of getting a six-figure pension was best at the Securities and Exchange Commission, where 9.3 percent of retirees collect at least $100,000 annually.

Irving K. Jordan Jr., former president of Gallaudet University in Washington, led the list at $375,900. Gallaudet gets about $120 million federal funding each year. Jordan did not return a request for comment left with the university president’s office.

Maxey D. Love Jr., of Columbia, S.C., is second on the list at $322,272 a year. For years, he was president of a farm credit bank he first joined as a college student, he said. His salary eventually topped $300,000 a year.

“I’m a fortunate person to have been at the right place at the right time,’’ said Love, 78. Shortly after he was hired, the chance for workers at farm credit banks to stay in the federal pension system ended, he said.

Because of cost of living adjustments, at least 48,500 retirees are making more now than they did on the federal payroll. For example, former congressman Robert Michel, 88, a Republican from Illinois, is collecting $211,452, fourth on the list and more than any other employee of the congressional branch. He retired in 1994 as House minority leader with 49 years of federal service and is now a senior adviser in Washington to Hogan Lovells, a law firm.

“I didn’t realize it was up there,’’ Michel said in an interview when told of his ranking.

Former lawmakers, including some who have become lobbyists or strategic consultants, also received six-figure pensions, according to the Office of Personnel Management database. They include former House majority leader Dick Gephardt ($106,512 for his 28 years of work as a Missouri Democratic congressman); former Senate majority leader Tom Daschle ($105,804 for his 33 years as a South Dakota Democratic lawmaker); former Senate majority leader Bob Dole ($144,432 for his 40 years as a Kansas Republican lawmaker); and former Senate majority leader Trent Lott ($110,352 after his 39 years as a Republican lawmaker from Mississippi). Calls to Gephardt, Daschle, Dole, and Lott were not returned.

The amount of a federal retiree’s pension is generally based on his or her three highest-paying years.

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