Do Senators Pay Taxes On Retirement Income?

Congress Social Security Confusion

Before 1984, no one in Congress paid into Social Security and neither did federal government employees because they were covered under a pension plan called Civil Service Retirement System or CSRS. CSRS was an independent program that did not coordinate its benefit structure with any other program, including Social Security. Since these officials and governent employees did not contribute to Social Security, they were not entitled to receive benefits from Social Security. The misconception has been that since they did not contribute to Social Security, they were not subject to taxation either, but this is not true since pensions are considered income by the IRS and subject to taxation like any other income.

Congress passed a law in 1983 requiring all new federal employees to contribute to Social Security just like the rest of the population. Federal employees who were grandfathered into CSRS were exempt from contributing into Social Security but would only receive pensions through the older plan. The law (P.L. 98-21) also required all members of Congress to contribute regardless of their tenure and a new retirement program for federal employees was designed and implemented to coordinate retirement benefits with those from Social Security. The new plan is called FERS, or Federal Employees Retirement System.

Congress Retirement Structure

Members of the Legislative Branch are eligible to a structured pension based on the following criteria:

• Must be 62 years old and have served a mimimum of five years.
• Must have served 20 years to be elegible for pension at age 50.
• Must have completed 25 years of service to receive pension benefits at any other age.

The pension benefits are structured based on years of service and the three highest salary years. The law clearly states that their benefit amount must not exceed 80% of their final salary, and contrary to popular belief, the average retirement from the most recent figures available in the year 2000 does not reflect kingly benefits. The benefits range from an average of $47,000 to $52,000 based on their individual retirement plan. (FERS or CSRS, or those who were able to combine the two based on grandfathering into the system).

Do senators pay taxes on retirement income? According to the IRS the taxable portion of pensions is treated as ordinary income and is subject to taxation just like any other income. So, yes, they do have to file income taxes and pay taxes just like everyone else. Each senator’s situation, based on itemized deductions, is as varied as the rest of the population and may be subject to additional taxes based on the state and county of residency.

Governors Salaries And Pensions

Governor salaries are varied across the Nation. Recent figures from Staline.org show a range of $70,000 a year in Maine to $179,000 in New York. Not all governors elect to draw a pay check, for instance, Governor Rick Scott is independently wealthy and chose not to receive compensation. In light of the dire economic straits of the country, several states have reduced their governor’s salaries by percentages. For instance, the State of Hawaii decreased the governmor’s pay by 5% while Florida decreased it by 2%. The current salary rates for both states are $130,273 and $117,312 respectively. Their retirement beneftis are based independently by state and by the amount of years they serve as governors. Pension distribution taxation varies by state but they may still be considered taxable by the IRS based on how the pension plan was funded and each governor’s itemized deductions.

Resources

https://www.senate.gov/reference/resources/pdf/RL30631.pdf

https://www.legistorm.com/member_of_congress_salaries.html

https://www.stateline.org/live/details/story?contentId=565482

https://www.irs.gov/publications/p575/ar02.html

Photos:

Wikimedia Commons: Congressional Seal

Free Digital Photos: World Map USA; Ohmega1982