Washington Windfall Generous congressional retirement benefits are turning former lawmakers into pension millionaires. Some want to change this. But will they create a true "citizen's Congress," or just a rich person's club? By most standards, Colorado's Pat Schroeder and Pennsylvania's Robert Walker have had long and productive careers representing their constituents in the US House of Representatives. Schroeder, a Democrat, is Congress's leading advocate for women in combat, and was an early coauthor of the 1993 Family and Medical Leave Act. Walker, a Republican, has chaired the House Science Committee in the 104th Congress and is a key deputy to Speaker Newt Gingrich. Congress has rewarded these two members well for their time and effort-perhaps, in some critics' view, too well. When Schroeder, who was elected in 1972, retires as announced at the end of this year, she will have accumulated lifetime pension benefits of $4.18 million, according to an estimate by the National Taxpayers Union Foundation. Walker, also outgoing, has served since 1976. His accumulated pension benefits will be $4.2 million, says the (slightly higher than Schroeder's due to actuarial assumptions). Both plan to take their pensions, but refuse to say what they are worth, although they contest the NTUF's calculations. What with 35 senators and representatives having announced their retirement this term, Congress will soon be creating "pension millionaires" at a terrific clip. The 23 departing representatives stand to pick up more than $1.1 million in lifetime pension benefits, and all but four who have not yet reached the minimum retirement age of 50 can start collecting next year. Only two of 12 senators who plan to step down will collect less than $1 million (see table, page page 28). But all this generosity did not start with this year's crop. Benefits payments for some 400 retired members of Congress, who receive an average benefit of $45,000 a year, cost taxpayers about $20 million annually, says the NTUF. Future costs depend on the turnover rate: The more who leave before they reach the five-year vesting threshold, the lower the annual payouts required. Over time, congressional pensions are expected to accumulate more modestly as fewer members stay on beyond six to 12 years, according to the NTUF. But the numbers remain generous, and have sparked a new debate over congressional retirement benefits. This poses a challenge for US lawmakers that many employers in the private sector will find all too familiar: How to scale back overgenerous pensions, without removing the inducements for talented people to seek office. Only in this case, employer and employee are one and the same. Pressure has been building for Congress to put a damper on its generosity to itself since 1989, when it passed a 25% pay increase that boosted the base salary for both senators and representatives from $89,500 to $133,600. That big jump provoked a backlash from taxpayer and congressional reform groups, with the result that for two years straight now, members have voted not to accept their usual cost-of-living pay increases. But the critics have not been silenced. Even without COLAs, congressional pay is so far above the average citizen's that it causes legislators to "forget about the rest of us" and identify instead with other high-salaried executives and professionals, complains Gary Ruskin, director of the Congressional Accountability Project, a Ralph Nader reform group. With Washington "asking every one else to sacrifice for the country, why doesn't the Congress sacrifice first?" Ruskin says. Criticism of congressional pensions has been just as pointed, fuelled in part by a series of frustrating defeats for the term limits movement. Despite polls that put support for term limits on representatives and senators at 70%, the Supreme Court last year voted 5 to 4 to invalidate 23 state limits on congressional offices. And while the Republican leadership carried out a promise in its Contract with America to hold the first-ever vote on a constitutional amendment on term limits, the bill was defeated. With term limits out of the picture for now, some critics are shifting their attention to cutting pensions as a way to keep politicians from becoming too distanced from their constituents. The Congressional Accountability Project, for example, supports scaling back congressional pensions to the same level as the rest of the federal civil service, and revoking pensions for convicted felons. Other groups that have weighed in include US Term Limits, the National Taxpayers Union, and Citizens Against Government Waste. One popular line of thinking among these groups is that long careers in Congress turn politicians into pawns of special interests that fund their reelection campaigns. A proper "citizen Congress" should instead be made up of people taking a few years off from their private-sector careers, the logic runs, and generous congressional pensions should not encourage them to stay too long in Washington. A first slew of proposals, introduced on Capitol Hill last year, ranged from cancelling the defined benefit portion of the system and enhancing the defined contribution part, to bringing pension levels into line with those for federal empoloyees in the executive branch, to outright abolition of the entire system. One proposal made its way into the budget reconciliation bill that passed Congress and was vetoed by President Clinton. Another batch of pension-cutting proposals has appeared this year, in the Senate as well as the House. And while most Congress watchers doubt that this or the next Congress will actually eliminate their own pensions, most expect significant trimming. Coincidentally, a similar movement is taking shape even faster in Canada. Parliamentary pension reform legislation passed last year, but 57 federal MPs still consider their plan too generous, and voluntarily gave up their benefits last March (see "Ottawa's pension give-backs," page 30). "It's only a matter of time, and a short time at that, before we see some pension reform," says Norman Ornstein, congressional analyst at the American Enterprise Institute. Sixty percent of the next Congress's members will have been elected since 1990, he estimates, placing the majority firmly within the group that came aboard after the 1989 pay raise made compensation of senators and representatives a live political issue.   How much is too much? "These overly-generous pensions are not an incentive to run for Congress," says Representative Dan Miller (R-Florida), a leading voice for trimming congressional pensions. "But once members are elected, they become an incentive to stay." First elected in 1992, Miller advocates limiting congressional pension accruals to 12 years-making them, in effect, a surrogate 12-year term limit. "With this limit we would discourage career politics and encourage would-be citizen legislators," Miller says. But to say that congressional pensions are overgenerous is to beg the question, compared to what? An examination of the various proposals to limit what senators and representatives get in retirement reveals that the critics do not agree on just how much is too much. NTUF President David Keating describes congressional pensions as extremely generous, the "Rolls Royce" of retirement plans. Besides generous accrual rates for their defined benefit annuity, legislators receive ample matching provisions for their defined contribution plan. And, along with their COLAs, which the NTUF says appear in less than 10% of private pension plans, members also enjoy a lower retirement age with full benefits-50, depending on length of service-than private sector employees. Overall, a congressional pension is more generous "by a factor of four" than the average private sector plan, concludes Dallas Salisbury, president of the Employee Benefit Research Institute. The NTUF estimates a lawmaker's pension adds another $60,000 a year in value to his or her salary. And these pensions remain very generous in spite of a 1983 reform of the entire civil service pension system, of which Washington lawmakers are a part. But the present congressional pension scheme does have its defenders, and they insist that such numbers do not tell the whole story. One who stood by his accumulated benefits was former Senator Dennis DeConcini (D-Arizona), who claimed when he retired from Congress at 57 in 1994 that his lifetime compensation for service to the people was no more than it would have been for a comparable position in the private sector. "I didn't run for the job for the pension," DeConcini said then, "but yes, I'm going to take it. I earned it." DeConcini's final salary was $133,600 and his pension began paying out last year at $55,000. The NTUF then calculated the former senator's lifetime benefit to be worth $2.35 million. But DeConcini argued that he sacrificed income in the private sector to serve the public. Some outside observers too agree that any reform of congressional pensions should be cautious and modest. Sylvester Schieber, director of research at consultant Watson Wyatt Worldwide in Washington, DC, says that instead of creating a citizen legislature, outright elimination of pensions might instead make Congress exclusively a rich person's club. "The Senate is already pretty much a club of rich people, and the House is more so than the general population," he contends. Schieber challenges the rationale for comparing members of Congress with federal employees or workers in the private sector in determining how much they deserve in retirement benefits. "They're not ordinary people to begin with," he says, since many could have had successful and more lucrative careers doing something else. Eliminating a congressional pension from the enticements of the job might convince many talented candidates not to seek office, he warns-especially those who are not wealthy. Aside from the independently wealthy, who could afford to take time off from their careers, a congressional seat may become a position that only less talented people, with only low-paying alternatives in the private sector, will aspire to, Schieber says. The real bias in favor of longtime incumbents is in campaign finance laws, which is where Congress should focus its reform efforts, he contends.   From CSRS to FERS But the continuing popular support for term limits suggests that the next Congress will face considerable pressure to cut their own perks and privileges, at least to some extent. Those who have taken up this theme most vocally have been freshman House Republicans-perhaps in part because many of the current rules were put in place by Democrats during that party's long dominance. But the movement claims a following among members of both parties who were originally elected in 1990 or afterward, and either one could hope to turn this issue to advantage in the voting booth. In fact, the congressional pension system has changed considerably since civil service pension reform was enacted in 1983 (see "Under siege," Plan Sponsor, February 1995). Members of Congress elected before 1984 are part of the Civil Service Retirement System (CSRS). Those who were elected after 1984 participate in its successor, the Federal Employee Retirement System (FERS). Under FERS, their defined benefit plan accrues at a lower rate, but they also get to participate in the federal employees' Thrift Savings Plan, which provides employer matches to employee contributions. Lawmakers who are still part of CSRS rely almost entirely on a defined benefit plan based on the following formula: the member's highest average annual salary for three consecutive years, multiplied by number of years of service, then multiplied by a 2.5% accrual rate. This is more generous that the accrual rate for executive-branch employees in CSRS. Their accrual rate is 1.5% for the first five years' service; 1.75% for the next five; and 2% for all years over 10. They can also contribute to the Thrift Savings Plan, but with no employer match. Under CSRS, Representative Miller's office calculates, if their high-three salaried years averaged $133,600, then the initial annuity for 15 years of service would be $50,100 for members of Congress, versus $40,080 for executive branch employees. The gap is actually wider under FERS due to more divergent accrual methods. While executive-branch employees hired after 1984 accrue benefits at a 1% rate for their first 20 years' service and 1.1% for subsequent years, the accrual rate for members of Congress is 1.7% for the first 20 years and 1% for years after that. Under this system, members of Congress earning a high-three-years' average salary of $133,600 would earn an initial retirement annuity of $34,068 for 15 years of service, compared to $20,040 for executive branch employees, says Miller's office. But how generous are congressional salaries and pensions compared with those in the private sector? And which is likely to appear more enticing to a talented, prospective lawmaker? Congressional salaries are most comparable to those of line managers or mid-level managers, who now earn $100,000 to $135,000 a year, says Deborah Milne, special projects director at EBRI. But private-sector defined benefit plans typically feature accrual rates of 1.4%, as opposed to the 1.7% rate for Congress. Also, private-sector plans tend not to carry automatic COLAs, and most private employers set the minimum age to collect at 60 to 65, not 50. Furthermore, the Thrift Savings Plan in which lawmakers participate is more generous than most private-sector defiuend contribution plans. It offers a 1%-of-salary employer's contribution without requiring the employee to chip in anything. In fact, the only private-sector employees who typically receive defined benefit pension packages in the $1 million to $4 million range of some mambers of Congress are senior executives earning $250,000 or more a year in salary, according to EBRI. But there is no firm data on this, and comparing these two groups closely is difficult because much of senior executives' compensation comes in less tangible forms such as non-qualified plans, life insurance, trusts that pay out annuities, and stock options. Criticism of congressional pensions appears to stem as much from the temper of the times-and of this particular Congress-as it does from the facts themselves, however. Take GOP Representative Dan Miller, who became attracted to this issue after he was elected in 1992. A Bradenton, Florida businessperson, he had previously helped run a family-owned enterprise that included a restaurant, a marina, and nursing homes. All of which makes Miller a prime example of the "citizen legislator" model.   Citizen lawmakers According to his press secretary, Miller got the idea at a town hall meeting for constituents in April 1993 at a community center in Venice, Florida, where he was asked about congressional pensions. After some research of his own, Miller devised his first reform proposal-a 12-year limit on the defined benefit portion of congressional pensions. Under the bill, which he introduced in 1994, the defined benefit for those elected under the FERS formula would cap the payout at $27,254 a year for 12 years of service. That compares with the initial-year payouts that Pat Schroeder and Robert Walker will receive in 1997-$70,971 and $85,941, respectively. But Miller's proposal met with virtually no support-and some open hostility-during the last Congress. Miller's enthusiasm for pension cutbacks did not cool-and was reenforced by the 1994 elections, which ushered in a new Congress with 73 change-minded Republican freshmen. One of the newcomers, Representative Tom Coburn (R-Oklahoma), turned down the opportunity to participate in the congressional pension system shortly after taking his oath of office. "It's not because I don't need a pension," he told reporters in January 1995. "If we're going to ask people to help us get a balanced budget, and we're going to ask people to make some sacrifice themselves, there's no way that I can accept a pension that is far above anything offered in the private sector." Encouraged, Miller introduced a more sweeping reform proposal-to eliminate the defined benefit portion of the pension entirely, and enhance the matching formula in the Thrift Savings Plan. He has garnered 29 cosponsors for his latest bill, giving it more support in the House than any other pension cutback proposal. Under the bill, any new member of Congress who takes office in 1997 or later would be eligible to receive a government match for up to 5% of salary. This way, a senator or representative could save an amount equal to 10% of annual pay while in Congress. But the 5% match would last for only 12 years. After that, members could continue to contribute up to 10% of their salary with no match. Aside from the government's base contribution of 1% of salary, the Thrift Savings Plan currently matches 100% of employees' first 3%-of-salary contribution, and provides a 50% match for the next 2%. CSRS employees may contribute to the Thrift Savings Plan, but they get no match. The House leadership was focusing on other items in the Contract with America, and Miller's proposal also faced competition from dozens of other proposals. But the movement he sparked got a boost when a surprise convert-Democratic Senator Richard Bryan of Nevada-joined the cause. Like Miller, Bryan first got interested in congressional pensions when a constituent raised the issue in a town hall meeting in 1994. After looking closely at the numbers, Bryan concluded that it was "unfair" that members of Congress were treated more generously than government workers. Bryan introduced his Pension Equity Act in January 1995. It would reduce congressional pensions to the same level as executive branch employees', and cap cost-of-living adjustments so that retired members' retirement annuities would be no higher than their final congressional salary. The Senate Governmental Affairs Committee agreed to take up the issue in May, but committee chair Ted Stevens (R-Alaska) was less than enthusiastic, and the bill failed to emerge from committee. Then last September, Stevens had a change of heart. As Senate leaders began looking for ways to reduce the budget deficit, he suddenly decided he liked Bryan's idea, which was estimated to save $9 million over seven years. "Whether these changes are made in the context of reform or balancing the budget, it doesn't matter to me," Bryan says. "The important thing is that a level of fairness will be achieved, so that members of Congress do not receive a pension that is more generous than other federal employees." After removing the cap on COLAs from the bill, Senate Republicans incorporated Bryan's proposal into the budget reconciliation plan that eventually passed the chamber. Later, House delegates agreed to include the provision in the final budget-balancing bill which passed Congress late last year-and then fell to a presidential veto.  Keeping the pressure on The effort to curtail Congressional pensions faltered early this year as public approval of Republicans in Congress sagged, forcing them to back off from some of their bolder positions. By the time their fortunes began to recover, the party leadership had again lost interest in the pension proposal and was focusing on a limited number of issues such as welfare reform, which they considered more important and more likely to get through Congress ahead of November's elections without a presidential veto. But the effort did not die. Mark Sanford, a former freshman GOP representative from South Carolina, now South Carolina's governor, offered the most sweeping cutbacks package yet of congressional perks and privileges. Dubbed the Citizen Congress Act, Sanford's proposal has slowly gathered support from other representatives and several major lobbies including US Term Limits, Americans for Tax Reform, the National Taxpayers Union, and Citizens Against Government Waste. Reader's Digest described the proposal in its May 1996 issue, exposing it to an estimated 15 million US subscribers. Sanford would abolish the defined benefit plan entirely and eliminate all matching government contributions to the Thrift Savings Plan. In effect, it would leave only a voluntary savings plan. The Citizen Congress Act would eliminate a host of other perks as well: Automatic COLAs on congressional pay would disappear, and all matters affecting congressional pay would be subject to a roll call vote. The bill would ban all postal patron franked mailings entirely, and prohibit members from receiving the free medical care they now enjoy at military hospitals, unless they are veterans. Sanford, like many GOP mavericks, believes Congress's lavish perks and privileges-including the pension system-have tended to disconnect lawmakers from the daily realities of "normal people." The National Taxpayer's Union is cheering his proposal, arguing that the Citizen Congress Act can go a long way toward repairing some of the damage done to the public's opinion of its legislators. In July, another group of enthusiasts rallied behind a more modest proposal from freshman Representative Bill Bass (R-New Hampshire). Like Bryan's, this would have reduced congressional pensions to the same level as those of other federal employees. Dubbed the RIGHT Congress Act (for Restore Integrity, Goodwill, Honesty, and Trust in Congress), it would eliminate automatic pension COLAs, repeal automatic pay increases, and require roll call votes on any action affecting members' pay. It would also prohibit members and senior staff from lobbying for two years after leaving Congress, and deny House floor access to former members who have become lobbyists. Attempts to tack it onto various appropriations bills over the summer failed. But support for action on congressional pensions is building in the Senate this year as well. Freshman Republican Bill Frist (R-Tennessee) has taken up the banner of the Citizen Congress Act. Another supporter of term limits, freshman James Inhofe (R-Oklahoma) introduced a bill in May to limit accrual for congressional pensions to 12 years. Instead of the $50,000 to $100,000 pensions now enjoyed by lawmakers, the maximum benefit for new members would be $27,254. And a raft of proposals this year in both the House and Senate would deny pensions to members of Congress who are convicted of felonies. Judging from both the number of pension-cutting proposals and the number of their sponsors, the pressure will not go away, if only because it resonates with voters-as Representative Miller and Senator Bryan discovered.