No Shared Sacrifice: CEO Contractor Retirement Packages Soar While Federal Employees Asked to Pay More
by Scott Klinger, 12/11/2013
The budget deal announced last evening by Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI) would require federal workers to pay more of their salary towards their federal pension benefits and reduce military pensions. But the deal targets the wrong crowd.
In announcing their deal, Murray and Ryan continue to paint federal employees’ pensions as a core part of the budget problem. Yet, they and other members of Congress have been silent on soaring retirement accounts among CEOs of government contractors. We recently looked at the retirement accounts of CEOs that head the ten largest federal contractors that report annual executive compensation data to the Securities and Exchange Commission (SEC).
These ten CEOs of the private contracting firms have an average retirement package of $40.4 million, which would result in a monthly retirement check of $236,421 starting at age 65. The largest retirement account belongs to John Hammergren, CEO of McKesson, a leading drug wholesaler that benefits from Medicare. Hammergren’s $144.3 million in retirement assets will deliver him a $844,318 monthly retirement check, in addition to his Social Security. Hammergren’s golden nest egg will provide him 610 times the retirement benefits of the average federal government employee.
Federal law caps the amount of contractor compensation that can be charged to government contracts, including employer contributions to retirement accounts. Murray and Ryan’s proposal would reduce this cap. This would potentially help. But this only applies to what companies directly charge the government.
By contrast, the proposed plan requires federal workers hired after January 1, 2014 and with less than five years of previous government service, to pay 4.4 percent of their salary toward their federal pension benefits. Workers hired in 2013 have been paying 3.1 percent of their salary, and workers in the Federal Employee Retirement System hired before this year pay 0.8 percent of their salary for their pensions. The average federal worker who retired in 2011 (most recent data available) received a monthly government pension check of $1,383, in addition to their Social Security and 401(k) benefits. The budget deal would also reduce military pensions for retired veterans up to the age of 62. Under the terms of the deal, annual increases in military pensions to keep up with cost-of-living increases would be cut 0.25 percent next year and 0.5 percent in 2015.
Given that many private contractors are dependent on taxpayer-funded contracts for their very existence, it is not hard to make the connection between excessive profits from federal contracts and soaring CEO retirement assets among government contractors. For instance, Robert Stevens, CEO of Lockheed Martin, the nation’s largest government contractor has more than $77 million in his corporate retirement account. Lockheed Martin’s government contracts accounted for 82 percent of total sales last year. While Lockheed may not be able to directly charge the government for Steven’s annual compensation—including contributions to his retirement account—the profits the company receives from its government indirectly pays for it.
It is time for Congress to look at waste and excess among government contractors, rather than continuing to punish those who give their lives to public service.
Notes: Top contractors included in the survey were: Lockheed Martin, Boeing, Raytheon, General Dynamics, Northrop Grumman, United Technologies, Huntington Ingalls, L-3 Communications, McKesson, and URS Corporation. Data on CEO retirement drawn from most recent Form DEF 14A filed by company with SEC. Calculations of monthly CEO retirement checks derived from annuity calculator found at www.immediateannuities.com. Value of military pension derived from pension calculator at http://militarypay.defense.gov/mpcalcs/Calculators/FinalPayHigh3.aspx and assumed retirement in 2013, 30 years of service and pay grades of E-8 (First Sergeant), O-6 (Colonel) and O-10 (4-Star General). Federal civilian retirement information taken from http://www.fedbens.us/Retire_Stats.pdf