Federal Pensions:

Relationship Between Pensions and Final Salaries for Retired Former Members of Congress

GGD-97-178R: Published: Sep 26, 1997. Publicly Released: Sep 26, 1997.

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Pursuant to a congressional request, GAO responded to a series of questions concerning the final salaries of former members of Congress, focusing on: (1) determining the number of former members, if any, whose pensions have come to exceed the final salaries that they earned while working; (2) explaining why these members' pensions came to exceed their final salaries; and (3) determining the difference, if any, in these members' pension amounts had the current cost-of-living adjustment (COLA) policy been in effect without interruption since 1962, and also determining any difference in the number of retired members whose pensions would have exceeded their final salaries.

GAO noted that: (1) seventy-six, or about 19 percent, of the 404 former members of Congress who were living and on the federal retirement rolls as of October 1, 1995, were receiving pensions that had come to exceed their final salaries when these salaries were not adjusted for inflation; (2) however, when final salaries were adjusted for inflation--i.e., expressed in constant dollars--only one former member was receiving a pension that was larger than the final salary; (3) using constant dollars provides a more meaningful way to compare monetary values across time; (4) three factors played an important role in explaining why members' pensions came to exceed their unadjusted final salaries: (a) the number and size of COLAs that former members received; (b) a former member's years of federal service; and (c) whether a member had chosen a survivor annuity benefit; (5) GAO analysis of the effects that COLA policies have had on the pensions of retired former members of Congress and GAO prior analysis of general employees suggest that these polices have played an important role in maintaining the purchasing power of retiree pensions since automatic COLAs began; (6) the effects COLA policies actually have had on retiree pension amounts cannot be summarized easily because of the numerous changes that have been made in COLA policies over the past 35 years; (7) COLA policy changes have affected individual retirees differently, depending on when their retirements began; (8) if current COLA policy--that is, the COLA policy enacted in 1984, which established the formula and schedule used today by the Office of Personnel Management--had been in effect without interruption since 1962, the pensions of some former members would have been larger than the pensions that they actually received, and the pensions of other former members would have been smaller; and (9) the changes that would have occurred in the former members' pension amounts under current policy were enough to cause about a two percentage point (2.0) increase in the number of former members whose pensions would have come to exceed their unadjusted final salary.

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