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Vol. 27, No. 10 • October, 2009 / www.Freeman-Spicer.com

Amid all the hubbub, keep this in mind: Congress has a pension plan ... and it's not at risk.

Members are eligible to start collecting at age 62 if they have at least five years of service. If they have 20 years of service under their belt, they can retire at 50. With 25 years of service, they can retire any time. What they get depends on a formula based on years of service and average pay. So, a congressman with 22 years of service and whose average salary for the top three years was $153,900 gets $84,645. A current congressman ending up with six years of service (it's two-year terms) would get at least $16,503 (at age 62). In actuality, the average congressional pension payment ranges between $41,000 and $55,000, based on 2002 data from the Congressional Research Service. Now, a retiring congressman isn't allowed to get more than 80 percent of their salary upon retirement. But after retiring, cost of living adjustments kick in, which can add substantially to the payment. Add it all together and the Congressional pension program is about two-to-three times more generous than the average corporate executive pension plan, according to the National Taxpayers Union. What did they pay in for this benefit? It's a little complicated, of course, because one kind of pension program applies to senators and representatives elected before 1984 and another applies to those elected after. Basically, the politicians chip in 8 percent of their salary split between the pension program (about 1.3-1.8 percent) and Social Security (contrary to various Internet rumors, Congress does pay Social Security taxes.) These payments cover about one-fifth of the actual cost of their pension, according to the Taxpayers Union. So Congress folk get a better pension and don't have to pay for all of it. They also have the equivalent of a 401k program (complete with a 5 percent employer match). In some cases Social Security kicks in. And given their medical, dental and travel benefits, plus expenses paid by the office, members of Congress have plenty of opportunity to save for retirement. (And if they get into trouble, as they sometimes do, the pension often isn't up for grabs).

U.S. Congress salaries and benefits have been the source of taxpayer unhappiness and myths over the years. Here are some facts for your consideration.

Rank-and-File Members: The current salary (2009) for rank-and-file members of the House and Senate is $174,000 per year. Members are free to turn down pay increase and some choose to do so. In a complex system of calculations, administered by the U.S. Office of Personnel Management, congressional pay rates also affect the salaries for federal judges and other senior government executives. During the Constitutional Convention, Benjamin Franklin considered proposing that elected government officials not be paid for their service. Other Founding Fathers, however, decided otherwise. From 1789 to 1855, members of Congress received only a per diem (daily payment) of $6.00 while in session, except for a period from December 1815 to March 1817, when they received $1,500 a year. Members began receiving an annual salary in 1855, when they were paid $3,000 per year.

Congress: Leadership Members' Salary (2009) - Leaders of the House and Senate are paid a higher salary than rank-and-file members. Senate Leadership: Majority Party Leader - $193,400, Minority Party Leader - $193,400. House Leadership: Speaker of the House - $223,500, Majority Leader - $193,400, Minority Leader - $193,400. A cost-of-living-adjustment (COLA) increase takes effect annually unless Congress votes to not accept it.

Benefits Paid to Members of Congress: You may have read that Members of Congress do not pay into Social Security. Well, that's a myth. Prior to 1984, neither Members of Congress nor any other federal civil service employee paid Social Security taxes. Of course, they were also not eligible to receive Social Security benefits. Members of Congress and other federal employees were instead covered by a separate pension plan called the Civil Service Retirement System (CSRS). The 1983 amendments to the Social Security Act required federal employees first hired after 1983 to participate in Social Security. These amendments also required all Members of Congress to participate in Social Security as of January 1, 1984, regardless of when they first entered Congress. Because the CSRS was not designed to coordinate with Social Security, Congress directed the development of a new retirement plan for federal workers. The result was the Federal Employees' Retirement System Act of 1986. Members of Congress receive retirement and health benefits under the same plans available to other federal employees. They become vested after five years of full participation. Members elected since 1984 are covered by the Federal Employees' Retirement System (FERS). Those elected prior to 1984 were covered by the Civil Service Retirement System (CSRS). In 1984 all members were given the option of remaining with CSRS or switching to FERS. As it is for all other federal employees, congressional retirement is funded through taxes and the participants' contributions. Members of Congress under FERS contribute 1.3 percent of their salary into the FERS retirement plan and pay 6.2 percent of their salary in Social Security taxes. Members of Congress are not eligible for a pension until they reach the age of 50, but only if they've completed 20 years of service. Members are eligible at any age after completing 25 years of service or after they reach the age of 62. Please also note that Members of Congress have to serve at least 5 years to even receive a pension. The amount of a congressperson's pension depends on the years of service and the average of the highest 3 years of his or her salary. By law, the starting amount of a Member's retirement annuity may not exceed 80% of his or her final salary. According to the Congressional Research Service, 413 retired Members of Congress were receiving federal pensions based fully or in part on their congressional service as of Oct. 1, 2006. Of this number, 290 had retired under CSRS and were receiving an average annual pension of $60,972. A total of 123 Members had retired with service under both CSRS and FERS or with service under FERS only. Their average annual pension was $35,952 in 2006. (About.com - US Government Info)

Police . . . . . . . are called to an apartment and find a woman holding a bloody 5-iron standing over a lifeless man. The detective asks, “Ma’am, is that your husband?” “Yes,” says the woman. “Did you hit him with that golf club?” “Yes, yes I did . . . .” The woman begins to sob, drops the club, and puts her hands on her face. “How many times did you hit him?” “I don’t know, five, six, maybe seven times . . . just put me down for a five.” (Foti)

Cell Phone Stats . . . . . . . A recent Yankee Group report about the Palm Pre and manufacturer-wireless carrier relationships claims that 41% of U.S. consumers are likely to choose a smartphone the next time they’re in the market for a mobile phone. AND - According to a recent Crowd Science report, 38% of non-iPhone smartphone users surveyed said they’re likely buy an iPhone after they’re done with their current device. Tellingly, 82% of current iPhone users said they’d buy an IPhone replacement, but only 39% of current Blackberry users said they’d buy another Blackberry. (PCToday)

Five Tips For Women . . . . . . . . It is important that a man helps you around the house and has a job. It is important that a man makes you laugh. It is important to find a man you can count on and doesn’t lie to you. It is important that a man loves you and spoils you. It is important that these four men don’t know each other. (O’Brien)

Comedy’s 10 Tops Earners . . . . . . . . collectively raked in $256 million between June 2008 and June 2009 with many of them finding ways to cash in on merchandise, DVDs, television and Hollywood flicks: (in millions of dollars) 1. Jerry Seinfeld - $85, 2. Chris Rock - $42, 3. Jeff Dunham - $35, 4. Dane Cook - $20, 5. George Lopez - $20, Howie Mandel - $15, 7. Larry the Cable Guy - $13, 8. Jeff Foxworthy - $11, 9. Terry Fator - $10, and 10. Russell Peters - $10. (Forbes)

Kiplinger Predicts . . . . . . . First time home buyer credit, the $8,000 break that is set to expire on November 30 – The credit will be extended for a few months, lawmakers will clarify that first time purchasers don’t have to complete the sale by the expiration date to get the tax credit. They need only sign a contract. The odds are low that Congress will expand the credit to folks who aren’t first time home buyers, or increase the credit limit to $15,000. (Kiplinger Tax Letter)

Why Do Television Ads Seem So Loud? . . . . . . . The FCC does not regulate television volume. But it requires stations to limit peak volume. That’s the loudest portion of a television show or advertisement. Ads and programming must have the same peak volume. You’ll notice a wide range of volumes in a show. Certain parts are really quiet, while others are loud. Producers vary the volume to increase dramatic effect. Advertisers generally ignore dramatic effect. They have 30 seconds to sell a product. They want your attention, fast. So, how do advertisers grab your attention? Not through subtlety! They raise the audio to peak volume. Unfortunately for them, many viewers reach for the remote. You don’t need to endure this. Technology can help. First, there’s Dolby Volume. It promises a consistent volume for programming and ads. You just set your preference. It even works with DVDs. Dolby Volume is relatively new. Only a few products that use it have been announced. Watch for this improvement when shopping for your next TV. (Komando)

Dementia Quiz . . . . . . . .

First Question - You are a participant in a race. You overtake the second person. What position are you in? Answer: If you answered that you are first, then you are absolutely wrong. If you overtake the second person and you take his place, you are in second place!

Second Question - If you overtake the last person, then you are . . . ? Answer: If you answered that you are second to last they you are . . . . .wrong again. Tell me sunshine, how can you overtake the last person???

Third Question - Very tricky arithmetic! Note: This must be done in your head only. Do not use paper and pencil or a calculator. Try it! Take 1000 and add 40 to it. Now add another 1000, now add 30. Add another 1000. Now add 20 . . . . . now add another 1000. Now add 10. What is the total? Answer: Did you get 5000? The correct answer is actually 4100 . . . . If you don’t believe it, check it with a calculator.

Today is definitely not your day, is it? Maybe you’ll get the last question right . . . . maybe?

Fourth Question - Mary’s father had five daughters: 1. Nana, 2. Nene, 3. Nini, 4. Nono, and ??? What is the name of the fifth daughter????????? Answer: Did you answer Nunu??? NO! Of course it isn’t. Her name is MARY! Read the question again.

OK, Now the bonus round . . . . I.E., a final chance to redeem yourself:

Bonus - A mute person goes into a shop and wants to buy a toothbrush. By imitating the action of brushing his teeth he successfully expresses himself to the shopkeeper and the purchase is done. Next, a blind man comes into the shop who wants to buy a pair of sunglasses; How does he indicate what he wants??? Answer: It’s really very simple - He opens his mouth and asks for it! Does your employer actually pay you to think??? If so, do not let them see your answers for this test. (Novachek)                         

Sincerely,

Edward C. Levy

President