Ask The Experts: Retirement

By Reg Jones

Taking benefits retroactively

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Q. As a younger federal employee with seven years in, I’m left wondering how I can plan for retirement with Congress constantly threatening to not only change contribution amounts, but benefit payouts. What, if any, limits does Congress face in reducing pensions? Since I’ve already worked 7 years and both I and my employer made contributions during that time, isn’t there an account somewhere with money deposited in my name? Or can Congress come in when I’m 61 and decide to vacate entirely the pension I’ve already earned? I understand changes in calculation of payout growth like what the military has faced, but the Simpson-Bowles Commission, for instance, proposed changing from 1 to 0.7 percent salary payout per year worked. Would that only be for new employees, new years worked, or retroactive? Put simply, is anything in my pension statement legally guaranteed, or can it all be taken away after the work is done?

A. Everything associated with your pay and benefits was put there by action of a Congress and approval of the president then in office. What Congress and the president have formerly agreed to is subject to change. As a rule, laws affecting benefits are prospective, rather than retroactive. However, depending on where you are in your career, a change could affect you. Although not confined to federal employees, a good example of how your future can be affected is the passage of the law changing the age at which retirees can receive full Social Security benefits. It moved the full retirement age from 65 to 67. Only those born in 1937 or earlier are eligible for full benefits at age 65, with those born in 1960 or later having to wait until age 67.

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