The Federal Reserve Board isn't being fair to its employees in its own pension plan. Its defined benefit pension plan requires certain longtime employees to contribute 7% of their pay into it. The Fed itself quit contributing in 1985, because the plan reportedly was well funded. Yet, the Fed has continued to require employees to contribute.
Now, a group of participants has sued, seeking to recover millions of dollars in contributions. The suit contends the Fed should have stopped taking employee contributions when it stopped making its own. A lawyer claims the plan has $5 billion in assets, $3 billion more than it would need to pay the pensions. Fed officials won't comment, a spokesman said.
The Fed, as employer, bears all the risk of investing and paying pensions. If its investments had collapsed, participants wouldn't be complaining. In that scenario, the Fed wouldn't tap them for additional contributions.
But the contribution rate isn't immutable. If the Fed believes the risk is minimized enough to eliminate all of its contributions for the past 15 years, it should have ended by now all employee contributions. It could incorporate a condition to resume employee contributions if the overfunding dissipates.
The Fed isn't under ERISA, so it faces no penalty if it ever wants to take all of the surplus assets itself. A corporation, however, has to share some surplus or face an extra tax.
But remember, the Fed is part of the government and the government doesn't easily give back money, whether in taxes from huge budget surpluses or contribtutions from big overfunded pension plans.
