According to a Congressional Research Service report updated yesterday, some federal workers could end up losing well over $100,000 in retirement - not the news you want to hear during a recession. (Yes, we used the R word. An adjustment is something guys do when they think no one is looking. But when the government bails out the entire banking sector and the market collapses to 2004 levels, it's time to recognize the nation's predicament as more than an adjustment.)

Semantics aside, the situation spells trouble for about 13,000 GS-15 workers (and NSPS equivalents) that live in areas with high locality pay adjustments and are affected by the pay cap. The cap prevents those maxing out the GS pay table at $149,000 from receiving the 3.9 percent increase Congress promised the rest of the workforce the next fiscal year. And because retirement pay is based upon the three highest salary years, the pay cap can have a huge impact on retirement benefits. 

The following example from the Washington Post provides greater insight into the actual losses that may accrue from the pay cap.

"Consider a GS-15, step 10, employee in San Francisco, where the cap hit early because of locality pay based on the cost of labor. Since 2002, she would have lost $49,000 in pay, according to calculations in the Congressional Research Service report. Her annual pension would be $7,068 less. That amounts to missing $141,360 in retirement income over a 20-year period...The cap also is spreading like germs in flu season. Look out GS-15s in Philadelphia, Seattle and Minneapolis. Copeland says you'll be next."

Given the small number of people affected and their lack of union representation, it's unlikely the situation will change anytime soon, despite complaints from those affected who suffer from morale loss. On the bright side, at least they have a job amidst this tumultuous economy.

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