[House Report 112-394]
[From the U.S. Government Publishing Office]
112th Congress Rept. 112-394
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
SECURING ANNUITIES FOR FEDERAL EMPLOYEES ACT OF 2012
_______
February 9, 2012.--Ordered to be printed
_______
Mr. Issa, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3813]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom
was referred the bill (H.R. 3813) to amend title 5, United
States Code, to secure the annuities of Federal civilian
employees, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
Committee Statement and Views.................................... 5
Section-by-Section............................................... 10
Explanation of Amendments........................................ 12
Committee Consideration.......................................... 12
Rollcall Votes................................................... 12
Application of Law to the Legislative Branch..................... 13
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 13
Statement of General Performance Goals and Objectives............ 14
Federal Advisory Committee Act................................... 14
Unfunded Mandate Statement....................................... 14
Earmark Identification........................................... 14
Committee Estimate............................................... 14
Budget Authority and Congressional Budget Office Cost Estimate... 14
Changes in Existing Law Made by the Bill as Reported............. 21
Minority Views................................................... 32
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Securing Annuities for Federal
Employees Act of 2012''.
SEC. 2. RETIREMENT CONTRIBUTIONS.
(a) Civil Service Retirement System.--
(1) Individual contributions.--Section 8334(c) of title 5,
United States Code, is amended--
(A) by striking ``(c) Each'' and inserting ``(c)(1)
Each''; and
(B) by adding at the end the following:
``(2) Notwithstanding any other provision of this subsection, the
applicable percentage of basic pay under this subsection shall, for
purposes of computing an amount--
``(A) for a period in calendar year 2013, 2014, or 2015, be
equal to the applicable percentage under this subsection for
the preceding calendar year (including as increased under this
paragraph, if applicable), plus an additional 0.5 percentage
point; and
``(B) for a period in any calendar year after 2015, be equal
to the applicable percentage under this subsection for calendar
year 2015 (as determined under subparagraph (A)).''.
(2) Government contributions.--Section 8334(a)(1)(B) of title
5, United States Code, is amended--
(A) in clause (i), by striking ``Except as provided
in clause (ii),'' and inserting ``Except as provided in
clause (ii) or (iii),''; and
(B) by adding at the end the following:
``(iii) The amount to be contributed under clause (i) shall, with
respect to a period in any year beginning after December 31, 2012, be
equal to--
``(I) the amount which would otherwise apply under clause (i)
with respect to such period, reduced by
``(II) the amount by which, with respect to such period, the
withholding under subparagraph (A) exceeds the amount which
would otherwise have been withheld from the basic pay of the
employee or elected official involved under subparagraph (A)
based on the percentage applicable under subsection (c) for
calendar year 2012.''.
(b) Federal Employees' Retirement System.--Section 8422(a)(3) of
title 5, United States Code, is amended--
(1) by striking ``(3) The'' and inserting ``(3)(A) The''; and
(2) by adding at the end the following:
``(B) Notwithstanding any other provision of this paragraph, the
applicable percentage under this paragraph shall, for purposes of
computing any amount--
``(i) for a period in calendar year 2013, 2014, or 2015, be
equal to the applicable percentage under this paragraph for the
preceding calendar year (including as increased under this
subparagraph, if applicable), plus an additional 0.5 percentage
point; and
``(ii) for a period in any calendar year after 2015, be equal
to the applicable percentage under this paragraph for calendar
year 2015 (as determined under clause (i)).''.
SEC. 3. AMENDMENTS RELATING TO SECURE ANNUITY EMPLOYEES.
(a) Definition of Secure Annuity Employee.--Section 8401 of title 5,
United States Code, is amended--
(1) in paragraph (35), by striking ``and'' at the end;
(2) in paragraph (36), by striking the period and inserting
``; and''; and
(3) by adding at the end the following:
``(37) the term `secure annuity employee' means an employee
or Member who--
``(A) first becomes subject to this chapter after
December 31, 2012; and
``(B) at the time of first becoming subject to this
chapter, does not have at least 5 years of civilian
service creditable under the Civil Service Retirement
System or any other retirement system for Government
employees.''.
(b) Individual Contributions.--Section 8422(a)(3) of title 5, United
States Code (as amended by section 2(b)) is further amended--
(1) in subparagraph (B) (as added by section 2(b)), in the
matter before clause (i), by striking ``this paragraph, the''
and inserting ``this paragraph and except in the case of a
secure annuity employee, the''; and
(2) by adding after subparagraph (B) (as so added) the
following:
``(C) Notwithstanding any other provision of this paragraph, in the
case of a secure annuity employee, the applicable percentage under this
paragraph shall--
``(i) in the case of a secure annuity employee who is an
employee, Congressional employee, or Member, be equal to 10.2
percent; and
``(ii) in the case of a secure annuity employee who is a law
enforcement officer, firefighter, member of the Capitol Police,
member of the Supreme Court Police, air traffic controller,
nuclear materials courier, or customs and border protection
officer, be equal to 10.7 percent.''.
(c) Average Pay.--Section 8401(3) of title 5, United States Code, is
amended--
(1) by striking ``(3)'' and inserting ``(3)(A)''; and
(2) by adding ``except that'' after the semicolon; and
(3) by adding at the end the following:
``(B) in the case of a secure annuity employee, the term
`average pay' has the meaning determined applying subparagraph
(A)--
``(i) by substituting `5 consecutive years' for `3
consecutive years'; and
``(ii) by substituting `5 years' for `3 years'.''.
(d) Computation of Basic Annuity.--Section 8415 of title 5, United
States Code, is amended--
(1) by striking subsections (a) through (e) and inserting the
following:
``(a) Except as otherwise provided in this section, the annuity of an
employee retiring under this subchapter is--
``(1) in the case of an employee other than a secure annuity
employee, 1 percent of that individual's average pay multiplied
by such individual's total service; and
``(2) in the case of an employee who is a secure annuity
employee, 0.7 percent of that individual's average pay
multiplied by such individual's total service.
``(b)(1) The annuity of a Member, or former Member with title to a
Member annuity, retiring under this subchapter is computed under
subsection (a)(1), except that if the individual has had at least 5
years of service as a Member or Congressional employee, or any
combination thereof, so much of the annuity as is computed with respect
to either such type of service (or a combination thereof), not
exceeding a total of 20 years, shall be computed by multiplying 1.7
percent of the individual's average pay by the years of such service.
``(2) The annuity of a Member, or former Member with title to a
Member annuity, retiring under this subchapter is, if the individual is
or was a secure annuity employee, computed--
``(A) under subsection (a)(2); and
``(B) disregarding paragraph (1) of this subsection.
``(c)(1) The annuity of a Congressional employee, or former
Congressional employee, retiring under this subchapter is computed
under subsection (a)(1), except that if the individual has had at least
5 years of service as a Congressional employee or Member, or any
combination thereof, so much of the annuity as is computed with respect
to either such type of service (or a combination thereof), not
exceeding a total of 20 years, shall be computed by multiplying 1.7
percent of the individual's average pay by the years of such service.
``(2) The annuity of a Congressional employee, or former
Congressional employee, retiring under this subchapter is, if the
individual is or was a secure annuity employee, computed--
``(A) under subsection (a)(2); and
``(B) disregarding paragraph (1) of this subsection.
``(d) The annuity of an employee retiring under subsection (d) or (e)
of section 8412 or under subsection (a), (b), or (c) of section 8425
is--
``(1) in the case of an individual other than a secure
annuity employee--
``(A) 1.7 percent of that individual's average pay
multiplied by so much of such individual's total
service as does not exceed 20 years; plus
``(B) 1 percent of that individual's average pay
multiplied by so much of such individual's total
service as exceeds 20 years; and
``(2) in the case of an individual who is a secure annuity
employee--
``(A) 1.4 percent of that individual's average pay
multiplied by so much of such individual's total
service as does not exceed 20 years; plus
``(B) 0.7 percent of that individual's average pay
multiplied by so much of such individual's total
service as exceeds 20 years.
``(e) The annuity of an air traffic controller or former air traffic
controller retiring under section 8412(a) is computed under subsection
(a)(1), except that if the individual has had at least 5 years of
service as an air traffic controller as defined by section
2109(1)(A)(i), so much of the annuity as is computed with respect to
such type of service shall be computed--
``(1) in the case of an individual other than a secure
annuity employee, by multiplying 1.7 percent of the
individual's average pay by the years of such service; and
``(2) in the case of an individual who is a secure annuity
employee, by multiplying 1.4 percent of the individual's
average pay by the years of such service.''; and
(2) in subsection (h)--
(A) in paragraph (1), by striking ``subsection (a)''
and inserting ``subsection (a)(1)''; and
(B) in paragraph (2), in the matter following
subparagraph (B), by striking ``or customs and border
protection officer'' and inserting ``customs and border
protection officer, or secure annuity employee.''.
SEC. 4. ANNUITY SUPPLEMENT.
Section 8421(a) of title 5, United States Code, is amended--
(1) in paragraph (1), by striking ``paragraph (3)'' and
inserting ``paragraphs (3) and (4)'';
(2) in paragraph (2), by striking ``paragraph (3)'' and
inserting ``paragraphs (3) and (4)''; and
(3) by adding at the end the following:
``(4)(A) Except as provided in subparagraph (B), no annuity
supplement under this section shall be payable in the case of an
individual whose entitlement to annuity is based on such individual's
separation from service after December 31, 2012.
``(B) Nothing in this paragraph applies in the case of an individual
separating under subsection (d) or (e) of section 8412.''.
SEC. 5. CONTRIBUTIONS TO THRIFT SAVINGS FUND OF PAYMENTS FOR ACCRUED OR
ACCUMULATED LEAVE.
(a) Amendments Relating to CSRS.--Section 8351(b) of title 5, United
States Code, is amended--
(1) by striking paragraph (2)(A) and inserting the following:
``(2)(A) An employee or Member may contribute to the Thrift Savings
Fund in any pay period any amount of such employee's or Member's basic
pay for such pay period, and may contribute (by direct transfer to the
Fund) any part of any payment that the employee or Member receives for
accumulated and accrued annual or vacation leave under section 5551 or
5552. Notwithstanding section 2105(e), in this paragraph the term
`employee' includes an employee of the United States Postal Service or
of the Postal Regulatory Commission.'';
(2) by striking subparagraph (B) of paragraph (2); and
(3) by redesignating subparagraph (C) of paragraph (2) as
subparagraph (B).
(b) Amendments Relating to FERS.--Section 8432(a) of title 5, United
States Code, is amended--
(1) by striking paragraphs (1) and (2) and inserting the
following:
``(1) An employee or Member--
``(A) may contribute to the Thrift Savings Fund in any pay
period, pursuant to an election under subsection (b), any
amount of such employee's or Member's basic pay for such pay
period; and
``(B) may contribute (by direct transfer to the Fund) any
part of any payment that the employee or Member receives for
accumulated and accrued annual or vacation leave under section
5551 or 5552.
``(2) Contributions made under paragraph (1)(A) pursuant to an
election under subsection (b) shall, with respect to each pay period
for which such election remains in effect, be made in accordance with a
program of regular contributions provided in regulations prescribed by
the Executive Director.''; and
(2) by adding at the end the following new paragraph:
``(4) Notwithstanding section 2105(e), in this subsection the term
`employee' includes an employee of the United States Postal Service or
of the Postal Regulatory Commission.''.
(c) Regulations.--The Executive Director of the Federal Retirement
Thrift Investment Board shall promulgate regulations to carry out the
amendments made by this section.
(d) Effective Date.--The amendments made by subsections (a) and (b)
shall take effect one year after the date of the enactment of this
section, or upon such earlier date as may be established by the
Executive Director of the Federal Retirement Thrift Investment Board
under the regulations promulgated pursuant to subsection (c).
SEC. 6. COORDINATION WITH OTHER RETIREMENT SYSTEMS.
(a) Foreign Service.--For provisions of law requiring maintenance of
existing conformity--
(1) between the Civil Service Retirement System and the
Foreign Service Retirement System, and
(2) between the Federal Employees' Retirement System and the
Foreign Service Pension System,
see section 827 of the Foreign Service Act of 1980 (22 U.S.C. 4067).
(b) CIARDS.--
(1) Compatibility with csrs.--For provisions of law relating
to maintenance of existing conformity between the Civil Service
Retirement System and the Central Intelligence Agency
Retirement and Disability System, see section 292 of the
Central Intelligence Agency Retirement Act (50 U.S.C. 2141).
(2) Applicability of fers.--For provisions of law providing
for the application of the Federal Employees' Retirement System
with respect to employees of the Central Intelligence Agency,
see title III of the Central Intelligence Agency Retirement Act
(50 U.S.C. 2151 and following).
(c) TVA.--Section 3 of the Tennessee Valley Authority Act of 1933 (16
U.S.C. 831b) is amended by adding at the end the following:
``(c) The chief executive officer shall prescribe any regulations
which may be necessary in order to carry out the purposes of the
Securing Annuities for Federal Employees Act of 2012 with respect to
any defined benefit plan covering employees of the Tennessee Valley
Authority.''.
Committee Statement and Views
PURPOSE AND SUMMARY
Personnel costs for both current and former federal
employees continue to rise. The taxpayer spends about $200
billion per year on the federal civilian workforce, and also
bears the risk of the federal pension system, which has a
liability nearing $700 billion.\1\ The Congressional Budget
Office (CBO) recently found the Federal Government provides its
civilian employees 48 percent more in benefits than does the
private sector.\2\
---------------------------------------------------------------------------
\1\Civil Service Retirement and Disability Fund, Annual Report of
the Board of Actuaries, Civil Service Retirement and Disability Fund,
Fiscal Year Ended September 30, 2011.
\2\Congressional Budget Office. Comparing the Compensation of
Federal and Private-Sector Employees. January 2011, page ix. http://
www.cbo.gov/ftpdocs/126xx/doc12696/01-30-FedPay.pdf.
---------------------------------------------------------------------------
Like other Americans, our Nation's civil servants, by and
large, work hard, do a good job, and provide for their
families. But it is unfair to ask taxpayers to keep footing the
bill for unsustainable public sector pensions when those
benefits far exceed what the private sector offers. State and
local governments have already implemented reforms that
strengthen their pension systems to help ensure solvency and
ensure that current employees will be able to receive the
annuities they have been promised.
The purpose of H.R. 3813 is to modernize the federal
pension system to better reflect the reality of today's world.
H.R. 3813 increases the employee retirement contribution by 1.5
percent of salary over three years. The bill also eliminates
the supplemental payment to individuals who voluntarily retire
before age 62. For new hires, H.R. 3813 increases the employee
retirement contribution by 3.2 percent, changes the multiplier
used in the pension formula, and uses a five-year average
salary base. Asking federal employees to share more equitably
in the cost of their retirement is a tough, but necessary
choice to reduce our deficit.
BACKGROUND AND NEED FOR LEGISLATION
Most federal civilian employees are enrolled in one of two
defined benefit, retirement programs: the Civil Service
Retirement System (CSRS) or the Federal Employees Retirement
System (FERS). In FY 2011, the Office of Personnel Management
(OPM) paid $69.79 billion in benefits from the Civil Service
Retirement and Disability Fund (CSRDF).\3\
---------------------------------------------------------------------------
\3\U.S. Office of Personnel Management. Agency Financial Report:
Fiscal Year 2011. Office of Personnel Management. Web. .
---------------------------------------------------------------------------
A combination of both employee and employer contributions
fund the CSRDF based on statute and actuarial assumptions.
Shortfalls accruing under the CSRS are covered by taxpayers
through a transfer from the General Fund to the CSRDF.
The Federal Employee Pension System: An Unfunded Liability
Under the CSRS, most federal employees are required to
contribute seven percent of their salaries to the Civil Service
Retirement Disability Fund (CSRDF). The employing agency, with
the exception of the United States Postal Service, matches the
employee contribution.
OPM estimates the normal cost (i.e., the cost of providing
future pension benefits in current dollars) of CSRS to be 26
percent of an employee's salary. The 14 percent combined
employee and employer contribution is not enough to fully fund
the retirement benefits provided under CSRS, leaving a
shortfall that is covered by taxpayers through a transfer from
the General Fund to the CSRDF. For FY 2011 and 2010, the
government paid a combined $64.5 billion to cover the
shortfall. At the start of FY 2010, the CSRDF had an unfunded
liability of $663.4 billion for the CSRS.
In 1986, Congress established the FERS in part to help
address the unfunded liability created by the CSRS. When it
became effective on January 1, 1987, CSRS interim employees
with less than five years of creditable civilian service on
December 31, 1986, were automatically converted to FERS.
The FERS uses three sources to provide employees with
retirement income: Social Security, a defined benefit annuity,
and the Thrift Savings Plan, to which the employing agency
contributes an amount equal to one percent of basic pay.
Agencies match employee contributions up to five percent of
basic pay.
Both FERS participants and their employing agencies are
required by statute to make contributions to fully fund FERS
coverage. FERS covered federal employees contribute the CSRS
contribution amount minus the prevailing Old Age Survivor and
Disability Insurance deduction rate. For most federal
employees, the individual contribution rate is 0.8 percent of
their basic pay. For Members of Congress, congressional
employees, and other special occupational groups such as law
enforcement, this amount equals 1.3 percent of basic pay.
The employing agency is responsible for paying the
remaining normal cost not covered by the employee contribution.
For most federal employees, the employing agency currently pays
11.9 percent of the salary (the 12.7 percent normal cost minus
the employee's 0.8 percent contribution). For congressional
employees, the employer pays 16.7 percent. For Members of
Congress, the employer pays 18.3 percent. Employing agencies
pay 16.7 percent for law enforcement officers, firefighters,
nuclear materials couriers, customs and border protection
officers, and air traffic controllers. OPM recalculates the
normal cost each year based on actuarial assumptions.
The normal cost is subject to increase each year based on
actuarial assumptions such as longer life expectancy, lower
Treasury yields, and a deficit from the previous year. The
employing agencies--and ultimately the taxpayers--are
responsible for the additional expense incurred from increased
normal costs.
The normal cost has steadily increased over the past
decade: In FY 2002, the normal cost was 11.5 percent. At that
time, the employee's contribution covered 6.9 percent of the
normal cost. Today, because the normal cost continues to
increase while employee contributions remain the same,
employees only pay for 6.3 percent of their pension benefits,
and the government pays an increasingly higher portion of the
employee benefits. In FY 2012, the normal cost for most federal
employees increased from 12.5 percent to 12.7 percent.
Further, the pre-funding of FERS benefits still represents
a liability for the Federal Government. The CSRDF had an
unfunded liability of $681.7 billion at the start of FY 2011.
The CSDRF is similar to the Social Security Trust Fund in that
100 percent of the monies deposited must be used to purchase
special-issue, U.S. Treasury bonds. These bonds are I.O.U.s
issued by one agency of the Federal Government and held by
another agency of the same government. The bonds cannot be sold
by the trust fund to the general public in exchange for cash.
They can only be redeemed through the Treasury, which must
either collect taxes or borrow from the public in order to
obtain the required cash.
As the President's Fiscal Year 2010 Budget states:
``These [trust fund] balances are available for
future benefit payments and other trust fund
expenditures, but only in a bookkeeping sense. The
holdings of the trust funds are not assets of the
Government as a whole that can be drawn down in the
future to fund benefits. Instead, they are claims on
the Treasury. From a cash perspective, when trust fund
holdings are redeemed to authorize the payment of
benefits, the Department of the Treasury finances the
expenditure in the same way as any other Federal
expenditure--by using current receipts or by borrowing
from the public. The existence of large trust fund
balances, therefore, does not, by itself, increase the
Government's ability to pay benefits. Put differently,
these trust fund balances are assets of the program
agencies and corresponding liabilities of the Treasury,
netting to zero for the Government as a whole.''\4\
---------------------------------------------------------------------------
\4\U.S. Office of Management and Budget, Budget of the United
States Government, Fiscal Year 2010: Analytical Perspectives, 2009, p.
245.
---------------------------------------------------------------------------
State and local government enacted pension reform
The recent economic recessions, first in 2000-2001 and more
recently in 2008-2009, have made State and local governments
painfully aware that their generous pension benefits are
unsustainable and unfair to taxpayers. Since 2001, at least 30
states have made changes to their pension plans. According to
the National Conference of State Legislatures (NCSL), more
states enacted changes to their pension systems in 2010 than in
any other year. Although some of these reforms are designed to
shore up liabilities caused by the underfunding of the pension
plans, the Center for State and Local Government Excellence
(CSLGE) found that most pension funding shortfalls were a
result of the weak economy. The CSLGE reported:
``The most common changes have been to increase
employee contributions to pensions or to establish
different tiers of benefits for newly hired employees.
New hires might have higher vesting requirements,
longer service requirements, a later retirement age,
and/or a lower pension. There also are more
restrictions on retired public workers returning to
covered service while continuing to receive their
retirement benefit.''\5\
---------------------------------------------------------------------------
\5\Center for State and Local Government Excellence, State & Local
Pensions, An Overview of Funding Issues and Challenges, January 2011.
During its review of public sector pensions, the Committee
identified 29 states and 33 localities that had enacted major
pension reform since 2000. These reforms include:\6\
---------------------------------------------------------------------------
\6\Center for State and Local Government Excellence, (Pension
Reform Map), http://maps.google.com/maps/
ms?hl=en&ie=UTF8&msa=0&msid=109918998022670131860.0004920a8519
bafb03a45&ll=39.639538,-98.789062&spn=26.989212,
87.890625&z=3&source=embed.
---------------------------------------------------------------------------
Moving from a high-three average salary to a high-
five average salary calculation (The Virginia Retirement
System, e.g.).
Increasing employee contributions and decreasing
employer contributions (The Florida Retirement System, e.g.).
Closing the defined benefit to new hires and
creating a Tier II retirement system for new employees, who
choose between a defined contribution plan and a hybrid plan
(The State of Utah, e.g.).
Replacing an existing defined benefit plan with a
defined contribution plan for new employees (Gwinnett County,
Georgia, e.g.).
Many of these reforms require that employees pay a greater
share of the normal cost of their pension benefits. State and
local government employees covered by Social Security pay on
average five percent of their salary toward pension benefits.
The median employer contribution is 9.5 percent.\7\
---------------------------------------------------------------------------
\7\Public Fund Survey, Summary of Findings for FY 2010, December
2011, p. 9.
---------------------------------------------------------------------------
Compared to the FERS, State and local government employees
pay more as a percentage of their salaries and more as a
percentage of total benefits. Meanwhile, taxpayers at the local
level pay less toward public sector pensions as both a
percentage of civil servant salaries and as a percentage of
total benefits.
On average, State and local employees pay for 35 percent of
their pension benefits while federal employees pay only 6
percent. H.R. 3813 requires current federal employees to
contribute only 18 percent of the normal cost--phased in over
three years.
New federal employees under H.R. 3813 will contribute four
percent of their basic pay to the CSDRF--still less than the
median five percent of salary State and local government
employees pay.
Private sector trends
According to Towers Watson, only 13 of this year's Fortune
100 companies offered new employees a traditional defined
benefit plan in 2011, compared to 58 in 2003.\8\
---------------------------------------------------------------------------
\8\Towers Watson. Prevalence of Retirement Plan Types in the
Fortune 100 in 2011, July 2011.
---------------------------------------------------------------------------
Only half of all private sector workers have no retirement
plan other than Social Security, according to the Employee
Benefit Research Institute. The average annual Social Security
benefit of $14,000 is meager when compared to the annual
pension provided to Members retiring from Congress ($53,940).
Calls for reform
The President's National Commission on Fiscal
Responsibility and Reform (Simpson-Bowles) found that federal
civilian employee pensions were out of line with pension
benefits available to the average private sector worker. It
therefore recommended that Congress change the federal employee
pension system to bring it more in line with private sector
practice. Simpson-Bowles recommended that an employee's highest
five years average salary be used as the base for computing
pensions, and that the employee and his employing agency make
equal contributions toward pension costs.\9\ The FY 2012 Budget
Resolution (H. Con. Res. 34) adopted by the House last April
incorporates these reforms proposed by Simpson-Bowles.
---------------------------------------------------------------------------
\9\United States. The White House. The National Commission on
Fiscal Responsibility and Reform. The Moment of Truth. Web. http://
www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/
TheMomentofTruth12_1_2010.pdf.
---------------------------------------------------------------------------
On March 9, 2011, the Federal Workforce Subcommittee held a
hearing to examine federal employee compensation.
In his Plan for Economic Growth and Deficit Reduction:
Living Within Our Means, the President last September called on
federal employees to contribute an additional 1.2 percent of
their annual salary toward their defined benefit pension, and
he proposed eliminating the FERS minimum supplement for new
hires not subject to mandatory retirement.
Also last fall, the Committee recommended the Joint Select
Committee on Deficit reduction eliminate FERS for new hires,
allowing the Federal Government to gradually end the fiscally
irresponsible practice of accumulating large unfunded
liabilities for retiree pensions.
On December 13, 2011, the House passed H.R. 3630, the
Middle Class Tax Relief and Job Creation Act, which requires
federal employees to pay more to retain their defined benefit.
The bill also establishes a new formula for the FERS defined
benefit for new federal employees and Members of Congress that
would increase its affordability by dramatically increasing
contribution levels and reducing pension payouts.
On January 25, 2012, Federal Workforce Subcommittee
Chairman Dennis Ross held a hearing to examine the federal
employee pension system, including the benefits provided to
Members of Congress. Mr. Ross introduced legislation, H.R.
3813, in connection with the hearing.
On January 31, 2012, the Congressional Budget Office (CBO)
found that federal employees receive an average of 16 percent
more in total compensation (salary + benefits) than private
sector employees. The predominant factor in this gap is the
generous benefits that federal employees receive. On average,
federal employees receive 48 percent more in benefits than
their private sector peers. For some federal employees, the
benefits package they receive is worth more than their salary.
H.R. 3813 encompasses the recommendations of the Simpson-
Bowles Commission, the FY 2012 House Budget Resolution (H. Con.
Res. 34), the President's Plan for Economic Growth and Deficit
Reduction, and the Middle Class Tax Relief and Job Creation Act
of 2011 (H.R. 3630).
H.R. 3813 increases current federal employee and Member of
Congress contributions by 1.5 percent of salary over three
years. The bill also eliminates the supplemental payment to
individuals who voluntarily retire before age 62. For new
hires, H.R. 3813 increases the employee retirement contribution
by 3.2 percent, changes the multiplier used in the pension
formula, and substitutes a five-year average salary computation
base for the current three-year one. The pension formula
established in H.R. 3813 for federal employees with less than 5
years of service hired after December 31, 2012 would apply
equally to new Members of Congress (with less than 5 years of
prior federal service).
The bill also allows retiring federal employees to deposit
lump-sum payments for unused annual leave into their TSP
accounts. These contributions would be subject to the existing
Internal Revenue Service (IRS) annual contribution limits. The
provision helps align federal employee benefits with the
private sector. In September 2009, the IRS issued regulations
allowing employees to deposit any cash payment they received
from their employer for accumulated leave into their 401(k)
plans. This provision allows such contributions to be deposited
in the TSP. Similar legislation was ordered reported by the
Committee on April 14, 2010 (H.R. 4865).
LEGISLATIVE HISTORY
The Civil Service Retirement Act of 1920\10\ established
pension benefits for civilian federal employees. Federal
civilian employees hired on or after January 1, 1984, were
required to participate in Social Security,\11\ which
contributed to the development of the FERS.\12\
---------------------------------------------------------------------------
\10\P.L. 66-215.
\11\P.L. 98-21.
\12\P.L. 99-335.
---------------------------------------------------------------------------
Section-by-Section
Section 1. Short title
The short title of the bill is the ``Securing Annuities for
Federal Employees Act of 2012.''
Section 2. Retirement contributions
Subsection (2)(a) increases the employee contribution to
the Civil Service Retirement System (CSRS) by 1.5 percent of
salary over three years, beginning in calendar year 2013. The
employer contribution is reduced by the increased employee
contribution.
Subsection (2)(b) increases the employee contribution to
the Federal Employees Retirement System (FERS) by 1.5 percent
of salary over three years, beginning in calendar year 2013.
Under existing law, the employer contribution equals the normal
retirement cost reduced by the employee contribution.
Section 3. Amendments relating to secure annuity employees
Subsection 3(a) establishes a new pension formula for
federal employees and Members of Congress entering service
after December 31, 2012, who have less than 5 years of
creditable service for retirement purposes.
Subsection 3(b) sets the employee, congressional employee,
and Member of Congress contribution to FERS at 4 percent of
salary. Employees in special occupational groups with a higher
accrual rate, such as law enforcement, will contribute 4.5
percent of their salary. Under existing law, Members of
Congress, congressional employees, and special occupational
groups contribute 0.5 percent more of their salary to FERS then
the vast majority of federal employees.
Subsection 3(c) calculates pensions using the average of an
employee's highest five years of salary. Current CSRS and FERS
employees will continue to have their pensions calculated using
the average of their highest three years of salary.
Subsection 3(d) sets the FERS pension formula multiplier
for employees, congressional employees, and Members of Congress
at 0.7 percentage points. Employees in special occupational
groups such as law enforcement are subject to a proportional
adjustment to the multiplier (0.3 percentage points lower than
current law).
Under current law, employee pensions are calculated using a
multiplier of 1 percentage point. Pensions for employees
retiring at age 62 with more than 20 years of service are
calculated using a multiplier of 1.1 percentage points.
Pensions for Members of Congress, congressional employees, and
special occupational groups such as law enforcement are
calculated using a pension multiplier of 1.7 percentage points
for the first 20 years of service, and 1 percentage point for
service beyond 20 years. Pensions for air traffic controllers
are calculated using a pension multiplier of 1.7 percentage
points.
Section 4. Annuity supplement
Section 4 eliminates the FERS minimum supplement for
individuals not subject to mandatory retirement who retire on
or after January 1, 2013. Individuals subject to mandatory
retirement include law enforcement officers, fire fighters, air
traffic controllers, and nuclear materials couriers. Under
current law, the FERS minimum supplement is paid to these
employees and to Members of Congress and federal employees who
retire before the age of 62. The FERS minimum supplement equals
the amount the employee would have received from Social
Security if he were 62 years old at age of retirement.
Section 5. Contributions to Thrift Savings Fund of payments for accrued
or accumulated leave
Section 5 provides that employees (including postal
employees and employees of the Postal Regulatory Commission)
and Members may contribute in any pay period any part of any
payment that the employee or Member receives as a lump-sum
payment for accumulated and accrued annual or vacation leave
upon separation or entering active duty.
Section 6. Coordination with other retirement systems
Section 6 references the conforming changes required for
Foreign Service, CIA, and TVA employees.
Explanation of Amendments
Mr. Ross offered an amendment in the nature of a substitute
(ANS). The amendment made technical and conforming changes to
H.R. 3813.
Mr. Cummings offered an amendment limiting the increase in
current employee pension contributions to those earning more
than $100,000 per year. The amendment was defeated by voice
vote.
Ms. Norton offered an amendment expressing the sense of
Congress that a portion of the savings from H.R. 3813 should be
directed to the Office of Personnel Management to increase its
capacity to process retirement claims and to help eliminate the
backlog of claims. The amendment was defeated by voice vote.
Mr. Lynch offered an amendment to make increased employee
contributions inapplicable during a pay freeze year. The
amendment was defeated by a recorded vote of 17 ayes to 21
nays.
Mr. Davis offered an amendment to strike section 4 of the
bill. The amendment was defeated by a recorded vote of 15 ayes
to 22 nays.
Mr. Kucinich offered an amendment to strike section 3 of
the bill. The amendment was defeated by a recorded vote of 15
ayes to 22 nays.
Mr. Lynch offered an amendment (with Mr. Chaffetz) to allow
federal employees to deposit all or part of the lump-sum
payment they receive for unused annual leave into their Thrift
Savings Plan account. The amendment was agreed to by voice
vote.
Mr. Cummings offered an amendment limiting the increase in
current employee pension contributions to those earning more
than $30,000 per year. The amendment was defeated by voice
vote.
Committee Consideration
On February 7, 2012, the Committee met in open session and
ordered reported favorably the bill, H.R. 3813, as amended, by
roll call vote, a quorum being present.
Rollcall Votes
The following votes occurred during the consideration of
H.R. 3813:
1. Mr. Lynch offered an amendment to the Ross ANS to make
increased employee contributions inapplicable during a pay
freeze year. The amendment was defeated by a roll call vote of
17 Ayes to 21 Nays.
Ayes: Platts, Cummings, Towns, Maloney, Norton,
Kucinich, Tierney, Clay, Lynch, Connolly, Quigley,
Davis, Braley, Welch, Yarmuth, Murphy, and Speier.
Nays: Issa, Burton, Mica, Turner, McHenry, Jordan,
Chaffetz, Walberg, Lankford, Amash, Buerkle, Gosar,
Labrador, Meehan, DesJarlais, Walsh, Gowdy, Ross,
Guinta, Farenthold, and Kelly.
2. Mr. Davis offered an amendment to the Ross ANS to strike
section 4 of the bill. The amendment was defeated by a roll
call vote of 15 Ayes to 22 Nays.
Ayes: Cummings, Towns, Maloney, Norton, Kucinich,
Tierney, Clay, Lynch, Connolly, Davis, Braley, Welch,
Yarmuth, Murphy, and Speier.
Nays: Issa, Burton, Mica, Platts, Turner, McHenry,
Jordan, Chaffetz, Walberg, Lankford, Amash, Buerkle,
Gosar, Labrador, Meehan, DesJarlais, Walsh, Gowdy,
Ross, Guinta, Farenthold, and Kelly.
3. Mr. Kucinich offered an amendment to the Ross ANS to
strike section 3 of the bill. The amendment was defeated by a
rollcall vote of 15 Ayes to 22 Nays.
Ayes: Cummings, Towns, Maloney, Norton, Kucinich,
Tierney, Clay, Lynch, Connolly, Davis, Braley, Welch,
Yarmuth, Murphy, and Speier.
Nays: Issa, Burton, Mica, Platts, Turner, McHenry,
Jordan, Chaffetz, Walberg, Lankford, Amash, Buerkle,
Gosar, Labrador, Meehan, DesJarlais, Walsh, Gowdy,
Ross, Guinta, Farenthold, and Kelly.
4. The bill, H.R. 3813, as amended, was ordered favorably
reported to the House, a quorum being present, by a recorded
vote of 22 Ayes to 16 Nays.
Ayes: Issa, Burton, Mica, Platts, Turner, McHenry,
Jordan, Chaffetz, Walberg, Lankford, Amash, Buerkle,
Gosar, Labrador, Meehan, DesJarlais, Walsh, Gowdy,
Ross, Guinta, Farenthold, and Kelly.
Nays: Cummings, Towns, Maloney, Norton, Kucinich,
Tierney, Clay, Lynch, Connolly, Quigley, Davis, Braley,
Welch, Yarmuth, Murphy, and Speier.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations.
This bill increases the employee retirement contribution by 1.5
percent of salary over three years and eliminates the
supplemental payment to individuals who voluntarily retire
before age 62. For new hires, H.R. 3813 increases the employee
retirement contribution by 3.2 percent, changes the multiplier
used in the pension formula, and uses a five year average
salary base. Legislative branch employees and their families,
to the extent that they are otherwise eligible for the benefits
provided by this legislation, have equal access to its
benefits.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the descriptive portions of
this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandate Reform Act, P.L. 104-4) requires a statement as to
whether the provisions of the report include unfunded mandates.
In compliance with this requirement the Committee has received
a letter from the Congressional Budget Office included herein.
Earmark Identification
H.R. 3813 does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 3813. However, clause 3(d)(3)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 3813 from the Director of
Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, February 9, 2012.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3813, the Securing
Annuities for Federal Employees Act of 2012.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Amber G.
Marcellino.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 3813--Securing Annuities for Federal Employees Act of 2012
Summary: H.R. 3813 would make several changes to the
current retirement system for federal employees. Specifically,
the legislation would increase the percentage of salary that
federal employees in the Civil Service Retirement System
(CSRS), Federal Employee Retirement System (FERS), and smaller
retirement systems are required to pay towards their
retirement, make changes to the benefit formula used to
calculate retirement annuities for certain employees, eliminate
the FERS retirement supplement that would be paid under current
law to certain future retirees under the age of 62, and allow
employees to contribute to their Thrift Savings Plan (TSP)
accounts any payment received for accumulated and accrued
annual leave.
CBO estimates that implementing the legislation would
increase revenues by $42 billion and decrease direct spending
by $2 billion over the 2012-2022 period. Pay-as-you-go
procedures apply because enacting the legislation would affect
direct spending and revenues.
H.R. 3813 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments.
The bill would impose a private-sector mandate on federal
workers under FERS who are eligible by December 31, 2012 to
retire and receive an annuity supplement and were not going to
do so. Because of a lack of information about the potential
behavioral responses of individuals to such a change, CBO
cannot determine whether the cost of the mandate would exceed
the annual threshold established in UMRA for private-sector
mandates ($146 million in 2012, adjusted annually for
inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 3813 is shown in the following table.
The impacts of this legislation fall within all functions of
the budget.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012-2017 2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUESa
Estimated Revenues............................... 0 1,163 2,342 3,470 3,977 4,305 4,664 5,060 5,465 5,898 5,807 10,951 42,151
CHANGES IN DIRECT SPENDINGb
Estimated Budget Authority....................... 0 -24 -89 -134 -176 -213 -242 -266 -298 -338 -390 -636 -2,169
Estimated Outlays................................ 0 -24 -89 -134 -176 -213 -242 -266 -298 -338 -390 -636 -2,169
NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Impact on Deficit................................ 0 -1,187 -2,430 -3,604 -4,153 -4,518 -4,906 -5,325 -5,763 -6,235 -6,197 -15,893 -44,320
CHANGES IN SPENDING SUBJECT TO APPROPRIATIONb
Estimated Authorization Level.................... 0 -1,175 -2,353 -3,478 -3,986 -4,315 -4,676 -5,074 -5,481 -5,916 -5,827 -15,306 -42,281
Estimated Outlays................................ 0 -1,175 -2,353 -3,478 -3,986 -4,315 -4,676 -5,074 -5,481 -5,916 -5,827 -15,306 -42,281
Memorandum:
Reduction in Offsetting Receipts Resulting 0 1,175 2,353 3,478 3,986 4,315 4,676 5,074 5,481 5,916 5,827 15,306 42,281
from Lower Employer Contributionsc..........
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office and Joint Committee on Taxation.
a. For revenues, positive numbers indicate a decrease in the deficit.
b. For direct spending and changes in spending subject to appropriation, negative numbers indicate a decrease in the deficit.
c. Employer contributions are intragovernmental transactions that do not affect the deficit; positive numbers indicate a decrease in offsetting receipts.
Basis of estimate: CBO estimates that H.R. 3813 would
increase revenues by $42 billion over the 10-year period,
stemming mostly from changes to the retirement contribution
rates for federal employees ($43 billion), offset slightly by
lower revenues ($367 million) from a proposal to allow
employees to contribute any payment received for accumulated
annual leave to their TSP accounts.
Proposed reductions in the rates that agencies pay into the
Civil Service Retirement and Disability Fund (CSRDF) on behalf
of their employees would reduce spending subject to
appropriations by $42 billion over the 2012-2022 period, CBO
estimates; those lower payments from agencies would also reduce
the amount of offsetting receipts received by the CSRDF;
together those changes would have no impact on the deficit.
However, since discretionary spending is currently subject to
caps through 2021 (as specified in the Budget Control Act of
2011--Public Law 112-25) and the legislation does not reduce
those caps, CBO assumes the reductions in such spending would
not result in a net decrease in discretionary funding.
CBO also estimates that H.R. 3813 would reduce direct
spending by $2 billion over the 2012-2022 period, as a result
of eliminating the FERS annuity supplement for certain
employees who retire before the age of 62 ($1.9 billion) and
because of proposed changes to the retirement formula for
federal employees ($274 million).
Changes in employee and agency contributions
H.R. 3813 would increase the required contribution rate
paid by federal employees and Members of Congress (in both CSRS
and FERS) for their retirement by 1.5 percent of salary, phased
in over three years (0.5 percent per year), beginning in
January 2013. Under current law, most CSRS employees contribute
7 percent of their salary towards retirement and most FERS
employees contribute 0.8 percent. The proposed rate increase
would apply to all employees and Members with 5 or more years
of federal service as of January 1, 2013.
For employees and Members who begin service on that date or
later and have less than five years of prior federal service,
H.R. 3813 would create a new retirement category of ``secure
annuity employees.'' Such employees would be subject to a
different contribution rate than CSRS and FERS employees:
secure annuity employees would be required to pay 4 percent of
their salary towards retirement (under current law this group
would pay 0.8 percent of salary). A rate of 4.5 percent would
apply to certain occupational groups--such as law enforcement
officers, firefighters, air traffic controllers and nuclear
materials couriers--who receive a higher pension benefit (the
rate for this group under current law is 1.3 percent of
salary).
For the purposes of this estimate, CBO assumes that the
current population of approximately 2.8 million federal
employees will be maintained throughout the period. As
employees in place as of January 1, 2013, retire or otherwise
withdraw from federal service, CBO assumes they would be
replaced, in equal number, by secure annuity employees. The
estimated annual rate of attrition for the group in place as of
January 2013 increases from 17 percent in 2013 to 22 percent by
2022 for CSRS employees. The attrition rate for FERS employees
is lower, ranging from 5 percent to 13 percent over the same
time period, because of differences in the average age of each
group.
H.R. 3813 specifies that the following additional
retirement systems must conform with the provisions outlined in
the legislation: the Foreign Service Retirement System, the
Central Intelligence Agency Retirement and Disability System,
and any defined benefit program that covers employees of the
Tennessee Valley Authority.
Contributions by federal employees for their retirement are
shown as revenues to the federal government; CBO estimates that
the increase in the contribution rates proposed in H.R. 3813
would boost revenues by $43 billion over the 2012-2022 period.
Federal agencies are also required to make contributions
toward their employees' retirement. For each of the proposed
rate increases for employees described above, H.R. 3813 would
make a corresponding reduction in the rate required to be paid
by the employing agencies. Reducing the employer contribution
rates would lower spending subject to appropriation by $42
billion over the 2012-2022 period.\1\ However, this bill--or
any legislation that would reduce the funds available for a
particular discretionary program or that would achieve savings
by undertaking a particular discretionary activity--would only
reduce projected total appropriations if the caps on
discretionary spending were also lowered. Without a reduction
in the caps, CBO assumes funding for other discretionary
programs would fill the gap created by the specific reduction
or savings.
---------------------------------------------------------------------------
\1\The estimated reduction in spending subject to appropriation
(from decreased employer contributions) does not exactly equal the
increase in revenues (from increased employee contributions) because
the Tennessee Valley Authority (TVA) does not receive funding through
the appropriations process.
---------------------------------------------------------------------------
Changes to the retirement annuity formula
For secure annuity employees, H.R. 3813 would make changes
to the formula used to calculate retirement benefits. Instead
of calculating benefits based on an employee's highest three
consecutive years of salary, as under current law, the bill
would calculate benefits based on the highest five consecutive
years of salary. In addition, the multiplier used in the
annuity calculation would be reduced by 0.3 percentage points,
from 1.0 percent to 0.7 percent of salary, for most
employees.\2\ (Special occupational groups have a higher
multiplier under current law, but would face the same
proportional reduction under H.R. 3813.) The proposed changes
in the multiplier and average pay calculations would reduce
retirement annuities relative to current law. However, CBO
expects that only a small number of secure annuity employees
would retire in the 2012-2022 period; we estimate that the
resulting drop in direct spending would total $274 million over
that 10-year period.
---------------------------------------------------------------------------
\2\The formula for calculating retirement benefits for most secure
annuity employees under H.R. 3813 would be: average high-5 salary *
number of years of service * 0.7.
---------------------------------------------------------------------------
Eliminate the FERS annuity supplement
Under current law, certain FERS employees who retire before
the age of 62 receive a supplement to their annuity that is
intended to equal what they would receive from the Social
Security Administration if they were eligible for Social
Security benefits at the time of retirement. The supplement
ends when the retiree turns 62 or becomes eligible to receive
actual Social Security benefits. H.R. 3813 would eliminate that
supplement for all FERS employees other than law enforcement
officers, fire fighters, air traffic controllers and nuclear
materials couriers who retire after December 31, 2012.
Approximately 7,600 new retirees (that are not on the list of
exceptions listed above) each year receive an annual supplement
of just under $8,000 (inflated in future years to account for
increased salaries). As a result, CBO estimates that this
provision will lower direct spending by $1.9 billion over the
2012-2022 period.
Leave payout contributions to the Thrift Savings Plan
H.R. 3813 would allow any employee of the federal
government who is eligible to make contributions to the TSP to
contribute to it any payment received for accumulated annual
leave. Such contributions would be subject to the annual limits
that otherwise apply--annual contributions are currently
limited to $17,000 for individuals ages 49 or younger and
$22,500 for individuals ages 50 or older.
Because income taxes are deferred on contributions to
regular (non-Roth) TSP accounts, and earnings within the
accounts would not be taxable, the anticipated increase in
contributions would initially result in lower revenues from
income taxes. The staff of the Joint Committee on Taxation
estimates that the legislation would reduce revenues by $367
million over the 2012-2022 period.
Pay-as-you-go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
Estimated Impact on State, Local, and Tribal Governments:
H.R. 3813 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on state, local, or tribal
governments.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3813, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT AFFAIRS ON FEBRUARY 7, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012-2017 2012-2022
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact................... 0 -1,187 -2,430 -3,604 -4,153 -4,518 -4,906 -5,325 -5,763 -6,235 -6,197 -11,375 -44,320
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated impact on the private sector: The bill would
impose a private-sector mandate on federal workers under FERS
who are eligible by December 31, 2012 to retire and receive an
annuity supplement and were not going to do so. The cost of the
mandate would be the income some employees would forego as a
result of losing the option to retire at a later date and draw
the annuity supplement. Because of a lack of information about
the potential behavioral responses of individuals to such a
change, CBO cannot determine whether the cost of the mandate
would exceed the annual threshold established in UMRA for
private-sector mandates ($146 million in 2012, adjusted
annually for inflation).
Estimate prepared by: Federal Costs: Amber G. Marcellino;
Impact on Federal Revenues: Joint Committee on Taxation; Impact
on State, Local, and Tribal Governments: Elizabeth Cove-
Delisle; Impact on the Private Sector: Paige Piper/Bach.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
SUBPART G--INSURANCE AND ANNUITIES
* * * * * * *
CHAPTER 83--RETIREMENT
* * * * * * *
SUBCHAPTER III--CIVIL SERVICE RETIREMENT
* * * * * * *
Sec. 8334. Deductions, contributions, and deposits
(a)(1)(A) * * *
(B)(i) [Except as provided in clause (ii),] Except as
provided in clause (ii) or (iii), an equal amount shall be
contributed from the appropriation or fund used to pay the
employee or, in the case of an elected official, from an
appropriation or fund available for payment of other salaries
of the same office or establishment. When an employee in the
legislative branch is paid by the Chief Administrative Officer
of the House of Representatives, the Chief Administrative
Officer may pay from the applicable accounts of the House of
Representatives the contribution that otherwise would be
contributed from the appropriation or fund used to pay the
employee.
* * * * * * *
(iii) The amount to be contributed under clause (i) shall,
with respect to a period in any year beginning after December
31, 2012, be equal to--
(I) the amount which would otherwise apply under
clause (i) with respect to such period, reduced by
(II) the amount by which, with respect to such
period, the withholding under subparagraph (A) exceeds
the amount which would otherwise have been withheld
from the basic pay of the employee or elected official
involved under subparagraph (A) based on the percentage
applicable under subsection (c) for calendar year 2012.
* * * * * * *
[(c) Each] (c)(1) Each employee or Member credited with
civilian service after July 31, 1920, for which retirement
deductions or deposits have not been made, may deposit with
interest an amount equal to the following percentages of his
basic pay received for that service:
------------------------------------------------------------------------
Percentage of basic pay Service period
------------------------------------------------------------------------
Employee 2 1/2 August 1, 1920, to
June 30, 1926.
3 1/2 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6 1/2 November 1, 1956, to
December 31, 1969.
7 January 1, 1970, to
December 31, 1998.
7.25 January 1, 1999, to
December 31, 1999.
7.4 January 1, 2000, to
December 31, 2000.
7 After December 31,
2000.
Member or employee for 2 1/2 August 1, 1920, to
Congressional employee June 30, 1926.
service
3 1/2 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6 1/2 November 1, 1956, to
December 31, 1969
7.5 January 1, 1970, to
December 31 1998.
7.75 January 1, 1999, to
December 31, 1999.
7.9 January 1, 2000, to
December 31, 2000.
7.5 After December 31,
2000.
Member for Member service 2 1/2 August 1, 1920, to
June 30, 1926.
3 1/2 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
August 1, 1946.
6 August 2, 1946, to
October 31, 1956.
7 1/2 November 1, 1956, to
December 31, 1969.
8 January 1, 1970, to
December 31, 1998.
8.25 January 1, 1999, to
December 31, 1999.
8.4 January 1, 2000, to
December 31, 2000.
8.5 January 1, 2001, to
December 31, 2002.
8 After December 31,
2002.
Law enforcement officer 2 1/2 August 1, 1920, to
for law enforcement June 30, 1926.
service, member of the
Supreme Court Police for
Supreme Court Police
service, and firefighter
for firefighter service
3 1/2 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6 1/2 November 1, 1956, to
December 31, 1969.
7 January 1, 1970, to
December 31, 1974.
7.5 January 1, 1975, to
December 31, 1998.
7.75 January 1, 1999, to
December 31, 1999.
7.9 January 1, 2000, to
December 31, 2000.
7.5 After December 31,
2000.
Bankruptcy judge 2 1/2 August 1, 1920, to
June 30, 1926.
3 1/2 July 3, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6 1/2 November 1, 1956, to
December 31, 1969.
7 January 1, 1970, to
December 31, 1983.
8 January 1, 1984, to
December 31, 1998.
8.25 January 1, 1999, to
December 31, 1999.
8.4 January 1, 2000, to
December 31, 2000.
8 After December 31,
2000.
Judge of the United 6 May 5, 1950, to
States Court of Appeals October 31, 1956.
for the Armed Forces for
service as a judge of
that court
6 1/2 November 1, 1956, to
December 31, 1969.
7 January 1, 1970, to
(but not including)
the date of the
enactment of the
Department of
Defense
Authorization Act,
1984
8 The date of
enactment of the
Department of
Defense
Authorization Act,
1984, to December
31, 1998.
8.25 January 1, 1999, to
December 31, 1999.
8.4 January 1, 2000, to
December 31, 2000.
8 After December 31,
2000.
United States Magistrate 2 1/2 August 1, 1920, to
judge June 30, 1926.
3 1/2 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6 1/2 November 1, 1956, to
December 31, 1969.
7 January 1, 1970, to
September 30, 1987.
8 October 1, 1987, to
December 31, 1998
8.25 January 1, 1999, to
December 31, 1999.
8.4 January 1, 2000, to
December 31, 2000.
8 After December 31,
2000.
Court of Federal Claims 2 1/2 August 1, 1920, to
Judge June 30, 1926.
3 1/2 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6 1/2 November 1, 1956, to
December 31, 1969.
7 January 1, 1970, to
September 30, 1988.
8 October 1, 1988, to
December 31, 1998.
8.25 January 1, 1999, to
December 31, 1999.
8.4 January 1, 2000, to
December 31, 2000.
8 After December 31,
2000.
Member of the Capitol 2.5 August 1, 1920, to
Police June 30, 1926.
3.5 July 1, 1926, to
June 30, 1942.
5 July 1, 1942, to
June 30, 1948.
6 July 1, 1948, to
October 31, 1956.
6.5 November 1, 1956, to
December 31, 1969.
7.5 January 1, 1970, to
December 31, 1998.
7.75 January 1, 1999, to
December 31, 1999.
7.9 January 1, 2000, to
December 31, 2000.
7.5 After December 31,
2000
Nuclear materials courier 7 October 1, 1977 to
October 16, 1998.
7.5 October 17, 1998 to
December 31, 1998.
7.75 January 1, 1999 to
December 31, 1999.
7.9 January 1, 2000 to
December 31, 2000.
7.5 After December 31,
2000.
Customs and border 7.5 After June 29, 2008.
protection officer
------------------------------------------------------------------------
(2) Notwithstanding any other provision of this subsection,
the applicable percentage of basic pay under this subsection
shall, for purposes of computing an amount--
(A) for a period in calendar year 2013, 2014, or
2015, be equal to the applicable percentage under this
subsection for the preceding calendar year (including
as increased under this paragraph, if applicable), plus
an additional 0.5 percentage point; and
(B) for a period in any calendar year after 2015, be
equal to the applicable percentage under this
subsection for calendar year 2015 (as determined under
subparagraph (A)).
* * * * * * *
Sec. 8351. Participation in the Thrift Savings Plan
(a) * * *
(b)(1) * * *
[(2)(A) An employee or Member may contribute to the Thrift
Savings Fund in any pay period any amount not exceeding the
maximum percentage of such employee's or Member's basic pay for
such pay period allowable under subparagraph (B).]
(2)(A) An employee or Member may contribute to the Thrift
Savings Fund in any pay period any amount of such employee's or
Member's basic pay for such pay period, and may contribute (by
direct transfer to the Fund) any part of any payment that the
employee or Member receives for accumulated and accrued annual
or vacation leave under section 5551 or 5552. Notwithstanding
section 2105(e), in this paragraph the term ``employee''
includes an employee of the United States Postal Service or of
the Postal Regulatory Commission.
[(B) The maximum percentage allowable under this subparagraph
shall be determined in accordance with the following table:
------------------------------------------------------------------------
[In the case of a pay period The maximum percentage allowable
beginning in fiscal year: is:
------------------------------------------------------------------------
2001 6
2002 7
2003 8
2004 9
2005 10
2006 or thereafter 100.]
------------------------------------------------------------------------
[(C)] (B) Notwithstanding any limitation under this
paragraph, an eligible participant (as defined by section
414(v) of the Internal Revenue Code of 1986) may make such
additional contributions to the Thrift Savings Fund as are
permitted by such section 414(v) and regulations of the
Executive Director consistent therewith.
* * * * * * *
CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM
SUBCHAPTER I--GENERAL PROVISIONS
Sec. 8401. Definitions
For the purpose of this chapter--
(1) * * *
* * * * * * *
(3)(A) the term ``average pay'' means the largest
annual rate resulting from averaging an employee's or
Member's rates of basic pay in effect over any 3
consecutive years of service or, in the case of an
annuity under this chapter based on service of less
than 3 years, over the total service, with each rate
weighted by the period it was in effect; except that
(B) in the case of a secure annuity employee, the
term ``average pay'' has the meaning determined
applying subparagraph (A)--
(i) by substituting ``5 consecutive years''
for ``3 consecutive years''; and
(ii) by substituting ``5 years'' for ``3
years''.
* * * * * * *
(35) the term ``air traffic controller'' or
``controller'' means--
(A) * * *
(B) a civilian employee of the Department of
Transportation or the Department of Defense who
is the immediate supervisor of a person
described in section 2109(1)(B); [and]
(36) the term ``customs and border protection
officer'' means an employee in the Department of
Homeland Security (A) who holds a position within the
GS-1895 job series (determined applying the criteria in
effect as of September 1, 2007) or any successor
position, and (B) whose duties include activities
relating to the arrival and departure of persons,
conveyances, and merchandise at ports of entry,
including any such employee who is transferred directly
to a supervisory or administrative position in the
Department of Homeland Security after performing such
duties (as described in subparagraph (B)) in 1 or more
positions (as described in subparagraph (A)) for at
least 3 years[.]; and
(37) the term ``secure annuity employee'' means an
employee or Member who--
(A) first becomes subject to this chapter
after December 31, 2012; and
(B) at the time of first becoming subject to
this chapter, does not have at least 5 years of
civilian service creditable under the Civil
Service Retirement System or any other
retirement system for Government employees.
* * * * * * *
SUBCHAPTER II--BASIC ANNUITY
* * * * * * *
Sec. 8415. Computation of basic annuity
[(a) Except as otherwise provided in this section, the
annuity of an employee retiring under this subchapter is 1
percent of that individual's average pay multiplied by such
individual's total service.
[(b) The annuity of a Member, or former Member with title to
a Member annuity, retiring under this subchapter is computed
under subsection (a), except that if the individual has had at
least 5 years of service as a Member or Congressional employee,
or any combination thereof, so much of the annuity as is
computed with respect to either such type of service (or a
combination thereof), not exceeding a total of 20 years, shall
be computed by multiplying 1 7/10 percent of the individual's
average pay by the years of such service.
[(c) The annuity of a Congressional employee, or former
Congressional employee, retiring under this subchapter is
computed under subsection (a), except that if the individual
has had at least 5 years of service as a Congressional employee
or Member, or any combination thereof, so much of the annuity
as is computed with respect to either such type of service (or
a combination thereof), not exceeding a total of 20 years,
shall be computed by multiplying 1 7/10 percent of the
individual's average pay by the years of such service.
[(d) The annuity of an employee retiring under subsection (d)
or (e) of section 8412 or under subsection (a), (b), or (c) of
section 8425 is--
[(1) 1 7/10 percent of that individual's average pay
multiplied by so much of such individual's total
service as does not exceed 20 years; plus
[(2) 1 percent of that individual's average pay
multiplied by so much of such individual's total
service as exceeds 20 years.
[(e) The annuity of an air traffic controller or former air
traffic controller retiring under section 8412(a) is computed
under subsection (a), except that if the individual has had at
least 5 years of service as an air traffic controller as
defined by section 2109(1)(A)(i), so much of the annuity as is
computed with respect to such type of service shall be computed
by multiplying 1 7/10 percent of the individual's average pay
by the years of such service.]
(a) Except as otherwise provided in this section, the annuity
of an employee retiring under this subchapter is--
(1) in the case of an employee other than a secure
annuity employee, 1 percent of that individual's
average pay multiplied by such individual's total
service; and
(2) in the case of an employee who is a secure
annuity employee, 0.7 percent of that individual's
average pay multiplied by such individual's total
service.
(b)(1) The annuity of a Member, or former Member with title
to a Member annuity, retiring under this subchapter is computed
under subsection (a)(1), except that if the individual has had
at least 5 years of service as a Member or Congressional
employee, or any combination thereof, so much of the annuity as
is computed with respect to either such type of service (or a
combination thereof), not exceeding a total of 20 years, shall
be computed by multiplying 1.7 percent of the individual's
average pay by the years of such service.
(2) The annuity of a Member, or former Member with title to a
Member annuity, retiring under this subchapter is, if the
individual is or was a secure annuity employee, computed--
(A) under subsection (a)(2); and
(B) disregarding paragraph (1) of this subsection.
(c)(1) The annuity of a Congressional employee, or former
Congressional employee, retiring under this subchapter is
computed under subsection (a)(1), except that if the individual
has had at least 5 years of service as a Congressional employee
or Member, or any combination thereof, so much of the annuity
as is computed with respect to either such type of service (or
a combination thereof), not exceeding a total of 20 years,
shall be computed by multiplying 1.7 percent of the
individual's average pay by the years of such service.
(2) The annuity of a Congressional employee, or former
Congressional employee, retiring under this subchapter is, if
the individual is or was a secure annuity employee, computed--
(A) under subsection (a)(2); and
(B) disregarding paragraph (1) of this subsection.
(d) The annuity of an employee retiring under subsection (d)
or (e) of section 8412 or under subsection (a), (b), or (c) of
section 8425 is--
(1) in the case of an individual other than a secure
annuity employee--
(A) 1.7 percent of that individual's average
pay multiplied by so much of such individual's
total service as does not exceed 20 years; plus
(B) 1 percent of that individual's average
pay multiplied by so much of such individual's
total service as exceeds 20 years; and
(2) in the case of an individual who is a secure
annuity employee--
(A) 1.4 percent of that individual's average
pay multiplied by so much of such individual's
total service as does not exceed 20 years; plus
(B) 0.7 percent of that individual's average
pay multiplied by so much of such individual's
total service as exceeds 20 years.
(e) The annuity of an air traffic controller or former air
traffic controller retiring under section 8412(a) is computed
under subsection (a)(1), except that if the individual has had
at least 5 years of service as an air traffic controller as
defined by section 2109(1)(A)(i), so much of the annuity as is
computed with respect to such type of service shall be
computed--
(1) in the case of an individual other than a secure
annuity employee, by multiplying 1.7 percent of the
individual's average pay by the years of such service;
and
(2) in the case of an individual who is a secure
annuity employee, by multiplying 1.4 percent of the
individual's average pay by the years of such service.
* * * * * * *
(h)(1) In applying [subsection (a)] subsection (a)(1) with
respect to an employee under paragraph (2), the percentage
applied under such subsection shall be 1.1 percent, rather than
1 percent.
(2) This subsection applies in the case of an employee who--
(A) * * *
* * * * * * *
but does not apply in the case of a Congressional employee,
military technician (dual status), law enforcement officer,
member of the Supreme Court Police, firefighter, nuclear
materials courier, air traffic controller, [or customs and
border protection officer] customs and border protection
officer, or secure annuity employee.
* * * * * * *
Sec. 8421. Annuity supplement
(a)(1) Subject to [paragraph (3)] paragraphs (3) and (4), an
individual shall, if and while entitled to an annuity under
subsection (a), (b), (d), or (e) of section 8412, or under
section 8414(c), also be entitled to an annuity supplement
under this section.
(2) Subject to [paragraph (3)] paragraphs (3) and (4), an
individual shall, if and while entitled to an annuity under
section 8412(f), or under subsection (a) or (b) of section
8414, also be entitled to an annuity supplement under this
section if such individual is at least the applicable minimum
retirement age under section 8412(h).
* * * * * * *
(4)(A) Except as provided in subparagraph (B), no annuity
supplement under this section shall be payable in the case of
an individual whose entitlement to annuity is based on such
individual's separation from service after December 31, 2012.
(B) Nothing in this paragraph applies in the case of an
individual separating under subsection (d) or (e) of section
8412.
* * * * * * *
Sec. 8422. Deductions from pay; contributions for other service;
deposits
(a)(1) * * *
* * * * * * *
[(3) The] (3)(A) The applicable percentage under this
paragraph for civilian service shall be as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
Employee 7 January 1, 1987, to
December 31, 1998.
7.25 January 1, 1999, to
December 31, 1999.
7.4 January 1, 2000, to
December 31, 2000.
7 After December 31,
2000.
Congressional employee 7.5 January 1, 1987, to
December 31, 1998.
7.75 January 1, 1999, to
December 31, 1999.
7.9 January 1, 2000, to
December 31, 2000.
7.5 After December 31,
2000.
Member 7.5 January 1, 1987, to
December 31, 1998.
7.75 January 1, 1999, to
December 31, 1999.
7.9 January 1, 2000, to
December 31, 2000.
8 January 1, 2001, to
December 31, 2002.
7.5 After December 31,
2002.
Law enforcement 7.5 January 1, 1987, to
officer, firefighter, December 31, 1998.
member
of the Capitol Police, 7.75 January 1, 1999, to
member of December 31, 1999.
the Supreme Court 7.9 January 1, 2000, to
Police, or air December 31, 2000.
traffic controller 7.5 After December 31,
2000.
Nuclear materials 7 January 1, 1987, to
courier October 16, 1998.
7.5 October 17, 1998, to
December 31, 1998.
7.75 January 1, 1999, to
December 31, 1999.
7.9 January 1, 2000, to
December 31, 2000.
7.5 After December 31,
2000.
Customs and border 7.5 After June 29, 2008.
protection officer
------------------------------------------------------------------------
(B) Notwithstanding any other provision of this paragraph and
except in the case of a secure annuity employee, the applicable
percentage under this paragraph shall, for purposes of
computing any amount--
(i) for a period in calendar year 2013, 2014, or
2015, be equal to the applicable percentage under this
paragraph for the preceding calendar year (including as
increased under this subparagraph, if applicable), plus
an additional 0.5 percentage point; and
(ii) for a period in any calendar year after 2015, be
equal to the applicable percentage under this paragraph
for calendar year 2015 (as determined under clause
(i)).
(C) Notwithstanding any other provision of this paragraph, in
the case of a secure annuity employee, the applicable
percentage under this paragraph shall--
(i) in the case of a secure annuity employee who is
an employee, Congressional employee, or Member, be
equal to 10.2 percent; and
(ii) in the case of a secure annuity employee who is
a law enforcement officer, firefighter, member of the
Capitol Police, member of the Supreme Court Police, air
traffic controller, nuclear materials courier, or
customs and border protection officer, be equal to 10.7
percent.
* * * * * * *
SUBCHAPTER III--THRIFT SAVINGS PLAN
* * * * * * *
Sec. 8432. Contributions
(a)[(1) An employee or Member may contribute to the Thrift
Savings Fund in any pay period, pursuant to an election under
subsection (b), an amount not to exceed the maximum percentage
of such employee's or Member's basic pay for such pay period
allowable under paragraph (2). Contributions under this
subsection pursuant to such an election shall, with respect to
each pay period for which such election remains in effect, be
made in accordance with a program of regular contributions
provided in regulations prescribed by the Executive Director.
[(2) The maximum percentage allowable under this paragraph
shall be determined in accordance with the following table:
------------------------------------------------------------------------
[In the case of a pay period The maximum percentage allowable
beginning in fiscal year: is:
------------------------------------------------------------------------
2001 11
2002 12
2003 13
2004 14
2005 15
2006 or thereafter 100.]
------------------------------------------------------------------------
(1) An employee or Member--
(A) may contribute to the Thrift Savings Fund in any
pay period, pursuant to an election under subsection
(b), any amount of such employee's or Member's basic
pay for such pay period; and
(B) may contribute (by direct transfer to the Fund)
any part of any payment that the employee or Member
receives for accumulated and accrued annual or vacation
leave under section 5551 or 5552.
(2) Contributions made under paragraph (1)(A) pursuant to an
election under subsection (b) shall, with respect to each pay
period for which such election remains in effect, be made in
accordance with a program of regular contributions provided in
regulations prescribed by the Executive Director.
* * * * * * *
(4) Notwithstanding section 2105(e), in this subsection the
term ``employee'' includes an employee of the United States
Postal Service or of the Postal Regulatory Commission.
* * * * * * *
----------
TENNESSEE VALLEY AUTHORITY ACT OF 1933
* * * * * * *
Sec. 3. (a) * * *
* * * * * * *
(c) The chief executive officer shall prescribe any
regulations which may be necessary in order to carry out the
purposes of the Securing Annuities for Federal Employees Act of
2012 with respect to any defined benefit plan covering
employees of the Tennessee Valley Authority.
* * * * * * *
MINORITY VIEWS
Committee Democrats strongly oppose H.R. 3813, the Securing
Annuities for Federal Employees Act of 2012, as ordered
reported by the Committee on February 7, 2012.
Federal workers are the backbone of our government. They
support our troops in the battlefield and provide care upon
their return. They protect our borders, safeguard our food
supply, ensure that our seniors' social security checks are
disbursed, and help hunt down terrorists like Osama bin Laden.
They carry out each and every federal program, service, and
initiative.
In return for their hard work and dedication, the majority
has rewarded federal workers with an unprecedented assault on
their compensation and benefits, including proposals to extend
their current two-year pay freeze, to arbitrarily cut the
number of federal employees, and now to slash their retirement
benefits. H.R. 3813 breaks the promises made to federal workers
and undermines morale, recruitment, and retention.
According to the Congressional Budget Office, H.R 3813
would take more than $45 billion out of the pockets of millions
of middle-class American workers over the next ten years.\1\
This is in addition to the $60 billion that federal workers are
already contributing as a result of the existing two-year pay
freeze. While the majority would have federal workers
contribute more than $100 billion toward reducing the nation's
deficit, they have refused to ask the wealthiest Americans to
sacrifice even a penny toward this goal.
---------------------------------------------------------------------------
\1\Letter from Douglas W. Elmendorf, Director, Congressional Budget
Office, to Rep. Dave Camp, Chairman, Committee on Ways and Means (Dec.
9, 2011) (online at www.cbo.gov/ftpdocs/126xx/docl2609/hr3630.pdf).
---------------------------------------------------------------------------
One of the most damaging aspects of H.R. 3813 is its
provision eliminating FERS annuity supplements for workers who
plan to retire beginning in 2013. Annuity supplements are
payments intended to make up for amounts employees would
receive as Social Security payments if they retire before
becoming eligible for Social Security. Eliminating this benefit
would throw into chaos the longstanding retirement plans of
federal workers who have dedicated decades of service to this
country.
During a hearing before the Federal Workforce Subcommittee,
the majority's own witness, Andrew Biggs, Research Scholar at
the American Enterprise Institute, made exactly this point. He
testified:
Benefits already accrued should not be altered. Those
benefits have been promised and earned, and the
obligation to pay them should be honored.\2\
---------------------------------------------------------------------------
\2\Andrew G. Biggs, Ph.D., Statement Before the House Committee on
Oversight and Government Reform, Subcommittee on Federal Workforce,
U.S. Postal Service and Labor Policy, Hearing on ``Retirement
Readiness: Strengthening the Federal Pension System'' (Jan. 25, 2012).
The National Treasury Employees Union estimates that
eliminating this benefit for the average employee eligible to
retire at 55 would result in the ``loss of over $65,000 over
seven years.''\3\
---------------------------------------------------------------------------
\3\Letter from Colleen M. Kelly, National President, National
Treasury Employees Union, to Members of Congress (Feb. 6, 2012).
---------------------------------------------------------------------------
Many federal employees have been working for up to 30 years
with the expectation of receiving this benefit, and many of
them elected to switch out of CSRS and into FERS based on the
promise of receiving these payments. For example, John Kelshaw,
an employee working in the IRS' appeals office in New Jersey,
started out as a CSRS employee, but switched over to FERS
partly because of the promised supplement. In speaking on the
unfairness of the proposed pension rule modification, Mr.
Kelshaw stated, ``I have kept up my end of the bargain, but
Congress wants to change the rules now.'' As Mr. Kelshaw
stated, ``a promise made should be a promise kept.''\4\
---------------------------------------------------------------------------
\4\Rep. Gerry Connolly, NTEU Blast Bill Cutting Feds' Retirements,
Federal Times (Feb. 6, 2012) (http://blogs.federaltimes.com/federal-
times-blog/2012/02/06/rep-gerry-connolly-nteu-blast-bill-cutting-feds-
retirements/).
---------------------------------------------------------------------------
Although Congressman Davis offered an amendment to strike
this provision, the majority rejected it.
H.R. 3813 would also negatively affect millions of middle-
class American workers by cutting by 1.5% the government
portion of retirement contributions for federal employees
covered by CSRS and FERS. The bill would force these employees
to increase their own contributions by the same amount. These
cuts would be phased in over three years, beginning in 2013,
with a 0.5% decrease each year. These changes would also apply
to Members of Congress, congressional staff, and employees of
the U.S. Postal Service, Foreign Service, CIA, and Tennessee
Valley Authority.
Finally, the bill would negatively affect new employees. It
would create a separate retirement system for ``secure annuity
employees,'' which would include new employees and Members, as
well as returning employees or Members with fewer than five
years of prior federal service. Those employees would face a
decrease of 3.2% compared to current government pension
contributions; pensions based on the highest five years'
average salary, rather than the current high three; and
reductions in the pension formula multiplier to 0.7% of average
pay. Law enforcement officers, firefighters, and air traffic
controllers would receive a reduction in the multiplier from
1.7% to 1.4%. Current law provides a 1% multiplier for federal
employees and a 1.7% multiplier for Members of Congress and
congressional staff. The cumulative effect of these changes is
that newly hired federal employees would contribute
significantly more for an annuity worth roughly 40% less than
under existing law.\5\
---------------------------------------------------------------------------
\5\Letter from Joseph A. Beaudoin, President, National Active and
Retired Federal Employees Association, to the House Committee on
Oversight and Government Reform (Feb. 7, 2012).
---------------------------------------------------------------------------
Although Congressman Kucinich offered an amendment to
strike these provisions, the majority rejected them.
During the Committee's consideration of H.R. 3813, Ranking
Member Cummings offered several amendments intended to prevent
the most destructive cuts in the legislation from being applied
to low and middle income workers. He offered one amendment that
would have prevented these cuts from applying to federal
workers who make less than $100,000, and he offered a second
amendment to protect federal workers who make less than
$30,000. The majority rejected both amendments.
Congressman Lynch offered an amendment that would have
deferred these cuts while federal workers continue to operate
under an existing pay freeze. As he and others explained, it
would be unfair to require federal workers to pay more toward
their retirement benefits while effectively reducing the value
of their compensation through a multi-year pay freeze, a result
that would constitute a double hit to employee paychecks. This
amendment was also rejected.
The Committee did approve one amendment offered by
Congressman Lynch that would allow federal and postal employees
enrolled in CSRS or FERS to deposit unused annual or vacation
leave into their TSP accounts upon retirement. This change
would be consistent with changes adopted by the IRS in 2009 for
private sector 401(k) plans and would ensure parity between
federal and private sector retirement plans. It would also
allow federal employees to rebuild their TSP accounts to make
up for losses from the recession and from the reductions in pay
and benefits that would result from implementation of this
bill.
Throughout debate on this legislation, the majority failed
to offer any legitimate rationale for why these cuts are
necessary or for what purpose the resulting savings would be
used. After the Committee approved the bill, the House
Republican leadership indicated that it intends to use the
savings generated by this legislation not for deficit reduction
efforts, but to pay for unrelated surface transportation and
highway projects.
Elijah E. Cummings.