I used to believe that federal workers had it best of all the working-class wage earners, not because of their pay but because they were one of the last remaining groups of workers that still had a pension when they retired.
I immediately became intrigued with understanding exactly how they worked. I contacted American Benefits Exchange, they are a third party organization that primarily deals with the federal government and provides free benefits reviews to workers.
The Federal Employees Retirement System (FERS) retirement system is for the majority of federal workers in the U.S., prior to 1984 the old retirement system was Civil Service Retirement System, or CSRS.
As I started studying their benefits, I quickly noted the tremendous cost that was attached to the benefits, especially their group life insurance. A worker can elect up to five times their salary in what they call FEGLI (Federal Employee Group Life Insurance).
An example of these skyrocketing costs: for a worker that earns a base rate of $60,000, if they elected five times their salary, their death benefit would be $300,000. The cost would only be $6 per paycheck while the worker is under 35, but balloons up to $60 per paycheck at 55, then $132 at 60. This is for the same benefit!
They all receive life insurance for working in the federal government that is a benefit for life, but what very few see is that the day the worker turns 65, they lose 75% of their insurance.
A worker who earned $60,000 is eligible for $62,000 worth of life insurance, and it will increase as their base rate increases. That death benefit will be reduced down to $16,250 the day they turn 65. There are cases where a worker passed away and the small print was missed and the family found out the hard way that their benefits were reduced.
A worker who makes a 3-year average of $70,000, even if they work overtime during this time period, can easily add an extra $10,000 to total $80,000. Assuming this worker had a 30 year career and over 62, their pension would be $23,100. Unfortunately for the pension, it is calculated on the base income and it's not uncommon for a federal employee to lose up to 80% of their income to their pension.
The sad part is that most workers have no idea how much they lose. I have met with close to 100 federal workers, mostly postal workers (from first year to postmasters), who expressed a lot of concern about their future when they stopped working.
You would think the unions are educating their members. No. Recently I flew out to Phoenix and spoke at a post office in a scheduled meeting. I had a lot of buzz going on and workers were excited to get a free benefit review.
When I finished speaking and people were eagerly letting me know what they were interested in learning, a lady who was the union rep said the meeting needed to go through the union and none of the people who wanted to meet with me was allowed.
There is a big problem with information going out to federal employees on their benefits and there is a bigger concern on why the union would not want their members to be knowledgeable on how their benefits actually work.
I am not going to speculate the reason but it is wrong for people to give their lives to a job only to find out it was not as they envisioned. I've contacted many of the city's union presidents after my situation. I have not received any callbacks, so if you know a federal worker, send this article to them.
Mario Henry, a former National Football League player, is a financial services professional with 18 years of experience in the industry and author of "How to Hire Your House," an innovative guide on how to create a tax-free pension and sustain sufficient income through retirement. Mario also is a licensed insurance broker and a national motivational speaker. He was a wide receiver with the NFL’s New England Patriots and a scholarship football player at Rutgers University.
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