WILL REFORMING FEDERAL PAY BENEFIT RETIREMENT

The Federal Pay Schedule commonly called the General Schedule is over 50 years old.  I personally think a lot of work and integrity went into constructuring a pay system based on a theory of equity.  The GS Schedule has 15 grades ranging from a GS-1 to a GS-15 with ten steps for each grade.  The design was meant to show growth in earnings over a work career of approximately 30 years.  Further, the idea was that you didn’t move or advance too quickly thus feeling as if you were not growing from a financial standpoint.  We would hope there are no GS-1s – GS-4s in the system.

However, when a Federal employee initially comes into service, they start at their grade and a step 1 unless being hired via superior qualifications allowing one to start generally at a step 5.  The growth theory, not including cost-of-living adjustments, was predicated on a work-incentive that over a period of time the salary would grow.  Initial entry at a step 1 and then every year for 3 years there is a step increase.  Therefore after 3 years on the job, the employee would be at a step 4.  After which the number of years it takes to get to the top of the step (10), increases.  The rationale being that by the time you get to the 10th step you would be facing retirement.

If however, you were to be promoted to another grade outside of continuing to grow in the same grade, the increase would be the equivalent of two grades.  For example, GS-12, step 2 being promoted to a GS-13.  Whatever the salary is on the GS-12 level, two steps – a GS-12, step 4 equivalent would be found on the GS-13 level.

Will reforming federal pay benefit retirement?  If the reform increases salaries across the board or provide a mechanism for quicker advancement based on high performance, then the retirement benefit would be impacted.  The annuity is calculated based on the highest earnings over 3 years.  The higher the salary, the higher the annuity calculation thus the greater financial reward in retirement all things being equal.

P. S.  Always Remember to Share What You Know.

Dianna Tafazoli