Senate Report 115-330 - VOLUNTARY SEPARATION INCENTIVE PAYMENT ADJUSTMENT ACT OF 2017

[Senate Report 115-330]
[From the U.S. Government Publishing Office]

Calendar No. 562
115th Congress } { Report
SENATE
2d Session } { 115-330

_______________________________________________________________________

VOLUNTARY SEPARATION INCENTIVE PAYMENT ADJUSTMENT ACT OF 2017

__________

R E P O R T

of the

COMMITTEE ON HOMELAND SECURITY AND

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

to accompany

S. 1888

TO AMEND TITLE 5, UNITED STATES CODE, TO INCREASE THE
MAXIMUM AMOUNT OF A VOLUNTARY SEPARATION INCENTIVE
PAYMENT AND TO INCLUDE AN ANNUAL ADJUSTMENT IN ACCORDANCE WITH THE
CONSUMER PRICE INDEX

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

September 4, 2018.--Ordered to be printed

______

U.S. GOVERNMENT PUBLISHING OFFICE

79-010 WASHINGTON : 2018

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky HEIDI HEITKAMP, North Dakota
JAMES LANKFORD, Oklahoma GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming MAGGIE HASSAN, New Hampshire
JOHN HOEVEN, North Dakota KAMALA D. HARRIS, California
STEVE DAINES, Montana DOUG JONES, Alabama

Christopher R. Hixon, Staff Director
Gabrielle D'Adamo Singer, Chief Counsel
Courtney J. Allen, Deputy Chief Counsel for Governmental Affairs
Margaret E. Daum, Minority Staff Director
Charles A. Moskowitz, Minority Senior Legislative Counsel
Katherine C. Sybenga, Minority Counsel
Laura W. Kilbride, Chief Clerk

Calendar No. 562
115th Congress } { Report
SENATE
2d Session } { 115-330

======================================================================

VOLUNTARY SEPARATION INCENTIVE PAYMENT ADJUSTMENT ACT OF 2017

_______

September 4, 2018.--Ordered to be printed

_______

Mr. Johnson, from the Committee on Homeland Security and Governmental
Affairs, submitted the following

R E P O R T

[To accompany S. 1888]

[Including cost estimate of the Congressional Budget Office]

The Committee on Homeland Security and Governmental
Affairs, to which was referred the bill (S. 1888), to amend
title 5, United States Code, to increase the maximum amount of
a Voluntary Separation Incentive Payment and to include an
annual adjustment in accordance with the Consumer Price Index,
reports favorably thereon with an amendment and recommends that
the bill, as amended, do pass.

CONTENTS

Page
I. Purpose and Summary..............................................1
II. Background and Need for the Legislation..........................2
III. Legislative History..............................................5
IV. Section-by-Section Analysis......................................6
V. Evaluation of Regulatory Impact..................................6
VI. Congressional Budget Office Cost Estimate........................6
VII. Changes in Existing Law Made by the Bill, as Reported...........13

I. Purpose and Summary

The purpose of S. 1888, the Voluntary Separation Incentive
Payment Adjustment Act of 2017, is to increase the maximum
allowable amount of voluntary separation incentive payments
(VSIP) from $25,000 to $40,000 and to annually adjust the VSIP
maximum amount based on the Consumer Price Index. This bill
will also allow certain employees of the Transportation
Security Administration (TSA) and Federal Air Marshal Service
to have their law enforcement availability pay credited as
basic pay for retirement benefit purposes.

II. Background and the Need for Legislation

Voluntary Separation Incentive Payment

Since 1993, some Federal agencies have been authorized to
provide VSIPs to facilitate agency workforce reductions or
restructuring.\1\ The Federal Workforce Restructuring Act of
1994 expanded VSIP authority Government-wide and set the
maximum payment amount at $25,000.\2\ The Clinton
Administration recommended this VSIP authority ``in order to
avoid excessive reductions-in-force that are costly,
disruptive, and disproportionately strike younger workers, many
of whom are recently hired women and minorities.''\3\ A tool
for the Clinton Administration's initiative to reduce the
number of Federal employees, the VSIP authority was created so
``agencies can target employees in unnecessary high level jobs
and maximize savings.''\4\
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\1\U.S. Gov't Accountability Office, Human Capital: Agencies are
Using Buyouts and Early Outs With Increasing Frequency to Help Reshape
Their Workforces, GAO-06-324, 9 (Mar. 2006), available at http://
www.gao.gov/assets/250/249480.pdf. See also National Defense
Authorization Act for Fiscal Year 1993, Pub. L. No. 102-484, Sec. 4436,
106 Stat. 2315, 2723-24 (1992).
\2\Federal Workforce Restructuring Act of 1994, Pub. L. No. 103-
226, Sec. 3, 108 Stat. 111, 112-15 (1994).
\3\The White House, Statement on Signing the Federal Workforce
Restructuring Act of 1994 (Mar. 30, 1994), available at https://
www.gpo.gov/fdsys/pkg/WCPD-1994-04-04/pdf/WCPD-1994-04-04-Pg651.pdf.
\4\Id.
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Since its creation, Congress has passed legislation to
strengthen the oversight and objectives of the VSIP authority.
In 1996, the Omnibus Consolidated Appropriations Act of 1997
included provisions limiting the VSIP authority by requiring an
agency to submit a strategic plan that described how the VSIP
would be used, the number of employees and the VSIP amount that
would be offered, and how the agency would operate without
those employees once the VSIP had been implemented.\5\ The law
required Federal agencies to reduce their number of Federally-
funded employee positions by one position for each vacancy
created by a VSIP acceptance.\6\ This law also charged the
Office of Management and Budget (OMB) with overseeing agencies'
use of VSIPs.\7\
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\5\Omnibus Consolidated Appropriations Act of 1997, Pub. L. No.
104-208, Sec. 663, 110 Stat. 3009, 3009-383 (1996).
\6\Id. at 3009-385.
\7\Id.
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The VSIP authorization process was later reformed by the
Homeland Security Act of 2002.\8\ That Act required the Office
of Personnel Management (OPM) to approve VSIP authority for an
agency based on that agency's strategic plan.\9\ An agency can
submit for OPM approval either a specific VSIP implementation
plan or the agency's human capital plan that describes its
intended use of VSIPs.\10\ The agency's plan for VSIP must
include:
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\8\Homeland Security Act of 2002, Pub. L. No. 107-296, Sec. 1313,
116 Stat. 2135, 2291-94 (2002).
\9\Id. at 2292.
\10\U.S. Off. of Personnel Mgmt., Guide to Voluntary Separation
Incentive Payments, 6 (Mar. 2017) available at https://www.opm.gov/
policy-data-oversight/workforce-restructuring/voluntary-separation-
incentive-payments/guide.pdf.

Identification of the specific positions and
functions to be reduced or eliminated, identified by
organizational unit, geographic location, occupational
series, grade level and any other factors related to
the position; A description of the categories of
employees who will be offered VSIP, identified by
organizational unit, geographic location, occupational
series, grade level, and any other factors, such as
skills, knowledge, or retirement eligibility; . . . The
time period during which incentives may be paid; . . .
The number and amounts of VSIPs to be offered; A
description of how the agency will operate without the
eliminated or restructured positions and functions; A
proposed organizational chart displaying the expected
changes in the agency's organizational structure after
the agency has completed the VSIPs; . . . A short
explanation of how Voluntary Early Retirement Authority
(VERA) will be used in conjunction with VSIP . . . A
description of how VSIPs offered under another
statutory authority are being used . . . .\11\
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\11\Id. at 6-7.

OPM must also consult with OMB in reviewing the agency's
strategic plan before issuing any approval for the use of
VSIP.\12\ The agency must also ensure that employees are not
coerced into accepting a VSIP or that an employee's acceptance
of a VSIP is not based on erroneous or misleading
information.\13\ An employee who leaves Federal service with a
VSIP, but believes the separation was coerced or involuntary,
can appeal the separation to the Merit Systems Protection
Board.\14\
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\12\Homeland Security Act of 2002, supra note 8 at 2292.
\13\U.S. Off. of Personnel Mgmt., supra note 10 at 15.
\14\Id.
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Since fiscal year 2012, OPM approved VSIP authority for 307
Federal agencies and agency components, including those of the
Department of Defense.\15\ During this time, 36,910 Federal
employees resigned from Federal service with a VSIP for a total
of $903,197,868, an average of $24,470.38 per person.\16\
According to OPM, ``agencies with prior VSIP authority reported
that buyouts were a successful tool that notably increased
voluntary attrition, particularly for [Voluntary Early
Retirement Authority] retirements of employees in excess
positions.''\17\
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\15\Email from U.S. Off. of Personnel Mgmt. representative to
Committee majority staff (Oct. 30. 2017). This data is from the
beginning of fiscal year 2012 through May 2017.
\16\Id.
\17\U.S. Off. of Personnel Mgmt., Workforce Reshaping Operations
Handbook: A Guide for Agency Management and Human Resource Offices, 12
(Mar. 2017), available at https://www.opm.gov/policy-data-oversight/
workforce-restructuring/reductions-in-force/workforce_reshaping.pdf.
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The $25,000 maximum amount for VSIPs Government-wide has
remained unchanged since the creation of VSIP authority in
1994.\18\ Adjusting for inflation, this amount in March 1994,
when the VSIP authority was first enacted, is worth $41,918.99
as of September 2017.\19\ In the National Defense Authorization
Act for Fiscal Year 2017, Congress increased the VSIP maximum
amount for Department of Defense civilian employees to
$40.000.\20\ This bill would extend the $40,000 VSIP maximum
amount Government-wide.
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\18\Federal Workforce Restructuring Act of 1994, supra note 2. See
also 5 U.S.C. Sec. 3523(b)(3)(B).
\19\U.S. Bureau of Labor Statistics, CPI Inflation Calculator,
available at https://www.bls.gov/data/inflation_calculator.htm, last
accessed Oct. 20, 2017.
\20\National Defense Authorization Act for Fiscal Year 2017, Pub.
L. No. 114-328, Sec. 1107, 130 Stat. 2000, 2449 (2016).
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An increase to $40,000 would help agencies restructure
their workforces and remove excess job positions by offering a
higher incentive amount. The VSIP maximum amount would also be
adjusted annually according to any change in the Consumer Price
Index from the previous year.

Transportation Security Administration Law Enforcement Availability Pay
Reform

Signed into law on November 19, 2001, the Aviation and
Transportation Security Act (ATSA) allows TSA to set its own
compensation system outside of the statutory provision--Title 5
of the United States Code--that governs most of the Federal
workforce.\21\ Under ATSA, TSA employees can be compensated
above the annual pay limitation to which the rest of the
Federal workforce is subject.\22\ However, TSA employees
receive the same retirement benefits as Federal employees
through the Civil Service Retirement System (CSRS) Federal
Employee Retirement System (FERS).\23\
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\21\Aviation and Transportation Security Act, Pub. L. No. 107-71,
Sec. 101, 115 Stat. 597, 601 (2001). See 49 U.S.C. Sec. 114(n); 49
U.S.C. Sec. 40122(g).
\22\49 U.S.C. Sec. 40122(g)(2).
\23\49 U.S.C. Sec. 40122(g)(2)(G).
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Under CSRS and FERS, certain types of employee compensation
are credited towards retirement annuity calculations, and some
types of compensation are not.\24\ One type of credited pay is
unscheduled overtime pay for criminal investigators, also known
as LEAP pay.\25\ For Federal criminal investigators,
eligibility for LEAP pay is governed by Title 5 but is still
subject to the annual pay limitation for Federal employees.\26\
Although TSA employees' compensation is not governed by Title
5, the TSA Core Compensation System allows TSA criminal
investigators and Federal air marshals to be compensated for
unscheduled overtime under an identical LEAP payment.\27\
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\24\5 U.S.C. Sec. 8331(3).
\25\5 U.S.C. Sec. 8331(3)(E). See also 5 U.S.C. Sec. 5545a.
\26\5 U.S.C. 5545a. See also 5 U.S.C. Sec. 5547. Federal employees
receiving LEAP pay are also exempt from the minimum wage and maximum
hours requirements of the Fair Labor Standards Act of 1938, as amended.
See 29 U.S.C. Sec. 213(a)(16).
\27\Transp. Security Admin., TSA Management Directive 1100.53-7
Handbook: Setting Pay Upon Appointment, 4 (June 25, 2017).
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On July 1, 2016, OPM issued a letter to TSA explaining that
the LEAP pay provided to TSA criminal investigators would no
longer be considered creditable as basic pay for retirement
annuity calculations and that LEAP pay would be subject to
annual pay limitations for retirement credibility purposes.\28\
Former OPM Acting Director Beth Cobert wrote:
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\28\Letter from Beth Cobert, Acting Director, Off. of Personnel
Mgmt., to Huban Gowadia, Deputy Administrator, Transp. Security Admin.
(July 1, 2016).

[B]ecause TSA created its own personnel and
compensation system, TSA's criminal investigators are
not actually paid [LEAP pay] under [title 5.] Their
payment scheme looks the same in many respects, but
they are not paid under title 5; they are paid under
TSA's own authority contained in title 49. . . . [W]ith
respect to TSA criminal investigators, OPM's position
is that we do not presently have authority to credit
any amount of [LEAP] pay for retirement purposes in the
computation of TSA criminal investigators' annuities,
because they are not receiving their [LEAP] pay ``under
[title 5].''\29\
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\29\Id.

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For Federal air marshals, Cobert wrote:

[LEAP] pay for air marshals is creditable as part of
basic pay for purposes of retirement, but only to the
extent it is subject to the restrictions and earning
limitations imposed on criminal investigators under
[title 5]. . . . [N]otwithstanding TSA's authority to
establish its own compensation system, it must comply
with existing retirement laws in title 5 unless and
until Congress provides otherwise.\30\
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\30\Id.

As a result of this decision, OPM prepared, and in a few
instances delivered, debt notices to TSA criminal investigators
and Federal air marshals who received retirement annuity
payments based on previous calculations that included LEAP
pay.\31\ OPM also issued notices to those TSA annuitants
explaining that their monthly annuity payments would be
recalculated and reduced based on new calculations that exclude
LEAP pay and that exclude any compensation in excess of the
annual pay limitation for the Federal workforce under Title
5.\32\ TSA and OPM estimate that approximately 200 TSA criminal
investigators and Federal air marshals are affected by this OPM
decision.\33\
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\31\Information provided to Committee staff by Off. of Personnel
Mgmt. (Sept. 26, 2017).
\32\Letter from Off. of Personnel Mgmt. representative to Transp.
Security Admin. annuitant (May 26, 2016).
\33\Information provided by Committee staff by U.S. Off. of
Personnel Mgmt. (Sept. 26, 2017).
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For TSA criminal investigators, this bill would provide
parity in the treatment of their LEAP pay compared to that of
other Federal criminal investigators receiving LEAP pay under
title 5. For those TSA criminal investigators and Federal air
marshals who have paid retirement contributions above the
annual pay limitation under Title 5, this bill will allow their
compensation that exceeded the limitation to also be credited
to their retirement annuities. TSA criminal investigators and
Federal air marshals who have not paid retirement contributions
above the annual pay limitation would be subject to the
limitation for the purposes of calculating retirement
annuities.

III. Legislative History

S. 1888, the Voluntary Separation Incentive Payment
Adjustment Act of 2017, was introduced on September 28, 2017,
by Senator James Lankford. The bill was referred to the
Committee on Homeland Security and Governmental Affairs. The
Committee considered S. 1888 at a business meeting on October
4, 2017.
During the business meeting, Chairman Ron Johnson offered
an amendment allowing the law enforcement availability pay for
certain TSA employees to be creditable for retirement benefits.
The Committee adopted the amendment by voice vote and ordered
the bill, as amended, reported favorably by voice vote en bloc
with Senators Johnson, Lankford, Daines, McCaskill, Tester,
Heitkamp, Hassan, and Harris present.

IV. Section-by-Section Analysis of the Bill, as Reported

Section 1. Short title

This section establishes the short title of the bill as the
``Voluntary Separation Incentive Payment Adjustment Act of
2017.''

Section 2. Voluntary separation incentive pay increase

This section increases the authorized amount an agency,
including the Department of Defense, can provide as a VSIP to a
Federal employee from $25,000 to $40,000. This section also
requires OPM to adjust this amount annually based on the
percentage increase in the Consumer Price Index.

Section 3. Retirement-credible basic pay

This section allows the LEAP pay earned by TSA criminal
investigators and Federal air marshals to be credited for
purposes of calculating the employees' basic pay for retirement
annuities. OPM is required to implement this credibility within
90 days of enactment of this bill. OPM must also immediately
begin refunding any TSA criminal investigator or Federal air
marshal who made a debt collection payment as a result of the
July 1, 2016, OPM decision.

V. Evaluation of Regulatory Impact

Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee has
considered the regulatory impact of this bill and determined
that the bill will have no regulatory impact within the meaning
of the rules. The Committee agrees with the Congressional
Budget Office's statement that the bill contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA) and would impose no costs
on state, local, or tribal governments.

VI. Congressional Budget Office Cost Estimate

U.S. Congress,
Congressional Budget Office,
Washington, DC, August 29, 2018.
Hon. Ron Johnson,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1888, the Voluntary
Separation Incentive Payment Adjustment Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Dan Ready.
Sincerely,
Keith Hall,
Director.
Enclosure.

S. 1888--Voluntary Separation Incentive Payment Adjustment Act of 2017

Summary: S. 1888 would increase from $25,000 to $40,000 the
amount that federal agencies can offer to employees as part of
a separation incentive. That amount would rise annually to
account for inflation.
The bill also would clarify the treatment of law
enforcement availability pay (LEAP) for federal air marshals
and criminal investigators of the Transportation Security
Administration (TSA). A recent review of the relevant federal
statutes by the Office of Personnel Management (OPM) found that
LEAP has been incorrectly applied to the retirement benefit
calculations for certain TSA criminal investigators and federal
air marshals, resulting in benefit payments that are higher
than authorized under current law. S. 1888 would hold harmless
the retirees and current employees who are affected by OPM's
findings and would clarify the treatment of LEAP for future
retirees.
CBO estimates those changes would, assuming appropriation
of the necessary amounts, increase discretionary outlays by
$698 million over the 2019-2023 period. In addition, direct
spending would increase by $314 million and revenues would
increase by $1 million over the 2019-2028 period.
Because enacting S. 1888 would affect direct spending and
revenues, pay-as-you-go procedures apply.
CBO estimates that enacting S. 1888 would not increase net
direct spending by more than $2.5 billion or on-budget deficits
by more than $5 billion in any of the four consecutive 10-year
periods beginning in 2029.
S. 1888 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
Estimated Cost to the Federal Government: The estimated
budgetary effects of S. 1888 are shown in Table 1. The costs of
the legislation stemming from estimated increases in
authorization levels fall within all budget functions that have
personnel accounts. The direct spending costs fall within
budget functions 550 (health) and 600 (income security).

TABLE 1.--SUMMARY OF BUDGETARY EFFECTS OF S. 1888
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By fiscal year, in millions of dollars
--------------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-2023 2019-2028
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INCREASES IN SPENDING SUBJECT TO APPROPRIATION

Estimated Budget Authority........................... 0 73 81 91 226 236 n.a. n.a. n.a. n.a. n.a. 707 n.a.
Estimated Outlays.................................... 0 70 81 91 221 235 n.a. n.a. n.a. n.a. n.a. 698 n.a.

INCREASES IN DIRECT SPENDING

Estimated Budget Authority........................... 0 6 15 18 27 40 44 43 41 40 38 107 314
Estimated Outlays.................................... 0 6 15 18 27 40 44 43 41 40 38 107 314

INCREASES IN REVENUES

Estimated Revenues................................... 0 0 1 0 0 0 0 0 0 0 0 1 1

NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES

Effect on the Deficit................................ 0 6 14 18 27 40 44 43 41 40 38 106 313
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Components do not sum to totals because of rounding; n.a. = not applicable.

Basis of estimate: For this estimate, CBO assumes that S.
1888 will be enacted at the beginning of fiscal year 2019 and
that future appropriations will be increased by the amount of
the estimated authorizations.

Spending Subject to Appropriation

S. 1888 would permanently increase, to $40,000, the maximum
amount of lump-sum payments that federal agencies can offer to
employees as an incentive to separate voluntarily from federal
service earlier than they otherwise would. In addition, that
new maximum amount would rise annually with inflation, reaching
$45,000 by 2023, CBO estimates. Under current law, most federal
agencies are authorized to make separation payments of no more
than $25,000. The Department of Defense (DoD) has temporary
authority--through 2021--to offer up to $40,000 for such
payments. The proposed changes would increase federal spending
for voluntary separations by raising the costs of separations
that would have occurred under current law and by inducing more
people to voluntarily separate from federal service. CBO
estimates that implementing S. 1888 would effectively authorize
additional appropriations totaling $707 million over the 2019-
2023 period.
Using information from OPM, CBO estimates that in 2016 and
2017 about 2,100 employees at DoD and 2,000 employees at all
other agencies received a voluntary separation incentive
payment (sometimes called a ``buyout'') each year. CBO expects
that nearly all employees who will receive a buyout under
current law would see an increased payment under S. 1888.
Buyout recipients at DoD would see small increases averaging a
little over $1,000 each year through 2021. All other employees
would see an increase of about $16,000, on average, through
that year. Following the expiration of DoD's temporary
authority to pay higher amounts, both defense and nondefense
employees would see much larger payments--about $18,000 in 2022
and $20,000 through 2023. CBO estimates that the incremental
increase in the costs of buyouts paid to employees who would
have separated under current law would total $365 million over
the 2019-2023 period.
CBO also expects that a number of people would be induced
to separate by the higher payments under S. 1888. Using
information from DoD and OPM, CBO estimates that about 1,000
additional people would separate from the federal workforce
through 2021. In 2022, that number would jump to 2,500
additional people each year. The amounts paid to those people
would range from $40,000 in 2019 to $45,000 in 2023. In total,
those additional payments would cost the federal government
$342 million over the 2019-2023 period. Those additional
separations would probably lead to some employees retiring
sooner than they would have under current law. The cost of
those early retirements are discussed below under the heading
``Direct Spending and Revenues.''
Increased buyouts could have other effects on personnel
costs. For example, if an agency hired lower paid employees to
replace those who separated, it might save on personnel costs,
even after considering the costs of hiring and training those
new employees. However, those potential savings could be offset
by other personnel decisions, such as promoting current
employees into vacated, higher-paying positions; hiring
additional people to fill agency needs in other areas; or
rewarding high-performing employees with bonuses.
Ultimately, enacting S. 1888 would not fundamentally alter
any agency's mission or legal obligations. Without a reduction
in the amount of work required of an agency, CBO assumes
agencies would shift any resources freed up by buyouts to boost
the level of service it would otherwise be able to provide,
instead of allowing those resources to lapse. Therefore, CBO
does not estimate any changes in spending resulting from other
personnel decisions related to employee buyouts.

Direct Spending and Revenues

As shown in Table 2, enacting S. 1888 would increase direct
spending by $314 million over the 2019-2028 period. That
increase arises from two changes in law. First, the provisions
of S. 1888 that would increase the maximum amount agencies can
pay employees to leave the workforce would cause some employees
to retire sooner than they would under current law. CBO
estimates those induced retirements would increase benefits for
retirees by $302 million. Second, the bill would hold harmless
certain current and former employees of the TSA for an error
the agency made when calculating their pension benefits.
Because of that change, those employees would receive $12
million more than they would under current law. In addition,
the TSA provisions would increase revenues by $1 million.
Retirement Effects of Voluntary Separation Incentive
Payments. In total, CBO estimates that direct spending for
annuities and health insurance premiums for retired federal
employees would increase by $302 million under S. 1888. As
discussed above, those costs arise because S. 1888 would
permanently increase the maximum amount of lump-sum payments
that federal agencies can offer to employees to entice them to
separate from federal service, which would, in CBO's
estimation, induce employees to retire, on average, 1.5 years
sooner than they otherwise would have. Using information from
OPM and DoD, CBO estimates that over the 2019-2021 period, an
annual average of about 300 employees would receive their
retirement annuities sooner than they would under current law,
which would rise to 700 such employees in 2022, after DoD's
temporary authority expires.
However, the annuities of individuals who accept the buyout
would be smaller than what those workers would have otherwise
received, because retirement benefits are based on the number
of years of service that the annuitant worked; that number
would be somewhat lower as a result of the decision to accept
an earlier retirement. Nevertheless, CBO estimates the net
effect of those early retirements would increase spending for
retirement annuities by $196 million over 2019-2028 period.
Federal employees also participate in the Federal Employees
Health Benefits (FEHB) program. When those employees retire,
the federal government pays a portion of their health insurance
premiums; those payments are classified as direct spending. CBO
estimates that the government's share of those premiums for
each retiree will average $11,000 in 2019, rising to $17,000 by
2028. Because of the early retirements resulting from S. 1888,
the legislation also would increase the federal government's
contributions for annuitants under the FEHB program. CBO
estimates that those contributions would increase direct
spending by $106 million over the 2019-2028 period.

TABLE 2.--DIRECT SPENDING EFFECTS OF S. 1888
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By fiscal year, in millions of dollars--
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2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2019-2023 2019-2028
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INCREASES IN DIRECT SPENDING

Retirement Effects of Voluntary Separation Incentive
Payments:
Estimated Budget Authority....................... 0 6 14 17 25 39 43 42 40 39 37 101 302
Estimated Outlays................................ 0 6 14 17 25 39 43 42 40 39 37 101 302
TSA LEAP Authority:
Estimated Budget Authority....................... 0 1 1 1 1 1 1 1 1 1 1 6 12
Estimated Outlays................................ 0 1 1 1 1 1 1 1 1 1 1 6 12
Total Changes:...................................
Estimated Budget Authority................... 0 6 15 18 26 40 44 43 41 40 38 107 314
Estimated Outlays............................ 0 6 15 18 26 40 44 43 41 40 38 107 314

INCREASES IN REVENUES

TSA LEAP Authority:
Estimated Revenues............................... 0 0 1 0 0 0 0 0 0 0 0 1 1

NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES

TSA LEAP Authority. The bill would allow TSA criminal
investigators and federal air marshals who, at the time of
enactment, are paid above the premium pay cap to include above-
the-cap salary amounts in the calculation of their future
retirement annuities. Upon their retirement, employees whose
salaries do not exceed the cap as of enactment would have their
annuities calculated subject to the cap. In addition, the bill
would authorize TSA's criminal investigators to receive LEAP.
Enacting S. 1888 would increase net direct spending by $12
million over the 2019-2028 period. That increase would be
partially offset by increased revenues from the cancellation of
refunds of employee retirement contributions that are expected
under current law.
Background. In 2016, OPM issued a notice to TSA that LEAP
was being improperly incorporated into the retirement benefit
calculations for two categories of employees at TSA: federal
air marshals and criminal investigators. LEAP is a type of
premium pay (that pays an additional 25 percent of base salary)
provided to certain law enforcement officers whose positions
require a substantial amount of unscheduled duty. Employees of
federal agencies that use the General Schedule pay scale and
are subject to provisions of title 5 of the U.S. Code have a
statutory limit on LEAP: An employee's total biweekly pay (base
pay plus LEAP) cannot exceed the premium pay cap--the rate
payable for GS-15, step 10.
TSA has the authority to administer its own compensation
system--the agency is exempt from many of the provisions of
title 5, and its employees are not paid under the General
Schedule. Under TSA's authority, criminal investigators and air
marshals at TSA can receive a salary including LEAP that
exceeds the premium pay cap. (However, OPM has determined that
TSA's criminal investigators are not properly authorized to
receive LEAP.) Before OPM's review of the governing statutes,
TSA had been including all earned LEAP in the calculation of
annuities for retiring air marshals and criminal investigators.
OPM concluded that TSA has the authority to pay salaries that
exceed the premium pay cap but that OPM's statutory authority
to administer the civil service retirement system requires it
to apply the cap when calculating retirement annuities. Thus,
in OPM's view, the annuity calculations for TSA's criminal
investigators and air marshals should not include LEAP amounts
that exceed the premium pay cap.
After it provided notice to TSA, OPM began to calculate
annuities for new retirements of criminal investigators and air
marshals on the basis of the premium pay cap and the exclusion
of LEAP from the benefit calculation for criminal
investigators' annuities. In addition, OPM will recalculate
benefits for existing retirees and refund contributions that
were based on the higher pay to retirees and current employees.
OPM has not yet pursued those actions, but CBO expects that it
will shortly. Under those actions:
All criminal investigators and federal air
marshals who retired before 2016 with salaries in
excess of the premium pay cap at the time of retirement
(or, in the case of TSA criminal investigators, that
contained any LEAP amounts) have been paid retirement
benefits in excess of what they should have received.
Retroactively adjusting retirement benefits will reduce
those retirees' future benefits and also require them
to repay OPM the portion of benefits received that was
based on salary amounts over the cap.
Those retirees and any current criminal
investigators and air marshals who are earning salaries
over the premium pay cap have paid retirement
contributions in excess of what is required to fund
their future benefits. Those contributions are recorded
in the budget as revenues. They are owed refunds for
the contributions paid on the portions of their
salaries that have been deemed not creditable toward
retirement. (In addition, TSA has paid the required
agency share of retirement contributions on the portion
of employee salaries that is not creditable toward
retirement and is owed a refund of those amounts from
OPM.)
Retirement Annuities. Using data provided by TSA, CBO
estimates that enacting S. 1888 would increase the average
retirement benefit by about $10,000 a year for a TSA criminal
investigator and by about $2,000 a year for an affected federal
air marshal. (The effect is much larger for the criminal
investigators because of OPM's determination that criminal
investigators are not eligible to receive LEAP under current
law--LEAP increases an employee's base salary by 25 percent.)
Retirees. CBO estimates that the effect of including salary
amounts that exceed the cap in the retirement benefit
calculation for the identified population of current retirees--
53 TSA criminal investigators and 63 federal air marshals--
would increase direct spending for retirement benefits
scheduled to be paid over the 2019-2028 period by about $7
million.
In addition, under current law, those retirees will be
expected to repay the difference between their recalculated
annual retirement benefit (based on the capped salary) and
their prior annual benefit (which included salary amounts over
the premium pay cap) for all years in which an annuity payment
was received. According to data provided by TSA, the average
length of retirement for affected TSA criminal investigators
and federal air marshals is 5 years and 3 years, respectively.
Overpayments to annuitants are generally recovered by OPM
on an installment basis and CBO expects that such payments will
occur over the 2020-2025 period. Enacting S. 1888 would
eliminate those expected recoveries, which CBO estimates would
reduce offsetting receipts (which are recorded in the federal
budget as a decrease in direct spending) by about $3 million
over the 10-year period.
Employees. S.1888 also would increase benefits for future
retirees--the 47 TSA criminal investigators and 84 federal air
marshals who are currently in service and are expected to earn
a salary in excess of the salary cap at the time of enactment.
Using retirement eligibility data provided by TSA, CBO
estimates that about 75 of the 131 identified employees would
retire over the 2019-2028 period. The increase in benefits
associated with including salary amounts over the premium pay
cap in the annuity calculation for those future retirements
would increase direct spending by an estimated $2 million over
the same period.
Retirement Contributions. Under current law, OPM is
expected to refund the portion of retirement contributions that
were withheld from paychecks for salaries that exceeded the
premium pay cap to 100 retired and current TSA criminal
investigators and to 147 retired and current federal air
marshals. Enacting S. 1888 would stop those payments. According
to TSA, the average overpayment of retirement contributions per
employee is about $5,500 for a TSA criminal investigator and
about $500 for a federal air marshal. (In most cases, those
employees pay 1.3 percent of salary toward their future federal
retirement.) CBO estimates that canceling those refunds would
increase revenues by about $1 million in 2020.
Under current law, OPM also is expected to refund to TSA
the portion of the agency's share of retirement contributions
that has been paid for salaries over the cap. Data from TSA
show that the agency's average overpayment for a TSA criminal
investigator is about $110,000 and for a federal air marshal is
about $11,000. (The percentage of an employee's salary that
federal agencies contribute toward their employees' federal
retirement is adjusted from time to time based on actuarial
calculations by OPM; the average rate contributed by TSA for
the affected population is about 25 percent.) CBO estimates
that the overpayment from TSA to OPM totals $12 million. Under
S. 1888 OPM would not refund that amount to TSA. Because
payments between TSA and OPM are intragovernmental transfers,
those transactions do not affect the deficit.
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.

TABLE 3.--CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1888, AS ORDERED REPORTED BY THE SENATE COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
ON OCTOBER 4, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2018-2023 2018-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN THE DEFICIT

Statutory Pay-As-You-Go Impact....................... 0 6 14 18 27 40 44 43 41 40 38 106 313
Memorandum:
Increases in Direct Spending..................... 0 6 15 18 27 40 44 43 41 40 38 107 314
Increases in Revenues............................ 0 0 1 0 0 0 0 0 0 0 0 1 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components do not sum to totals because of rounding.

Intergovernmental and private-sector impact: S. 1888
contains no intergovernmental or private-sector mandates as
defined in UMRA.
Increase in long-term direct spending and deficits: CBO
estimates that enacting S. 1888 would not increase net direct
spending or on-budget deficits by more than $5 billion in any
of the four consecutive 10-year periods beginning in 2029.
Previous CBO estimate: On June 8, 2018, CBO transmitted an
estimate for S. 2987, the John S. McCain National Defense
Authorization Act for Fiscal Year 2019. Section 1123 of that
bill would have authorized voluntary separation payments up to
$40,000 and linked them to inflation in the same manner as
would S. 1888. The estimated budgetary effects for those
provisions are the same.
Estimate prepared by: Federal costs: Dan Ready, Amber
Marcellino; Impact on State, local, and tribal governments and
the Private sector: Susan Willie.
Estimate reviewed by: Christina Hawley Anthony, Chief,
Projections; H. Samuel Papenfuss, Deputy Assistant Director for
Budget Analysis.

VII. Changes in Existing Law Made by the Bill, as Reported

In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill, as reported, are shown as follows: (existing law
proposed to be omitted is enclosed in brackets, new matter is
printed in italic, and existing law in which no change is
proposed is shown in roman):

UNITED STATES CODE

* * * * * * *

TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

* * * * * * *

Part III--Employees

* * * * * * *

Subpart B--Employment and Retention

* * * * * * *

Chapter 35--Retention Preference, Voluntary Separation Incentive
Payments, Restoration, and Reemployment

* * * * * * *

Subchapter II--Voluntary Separation Incentive Payments

* * * * * * *

SEC. 3523. AUTHORITY TO PROVIDE VOLUNTARY SEPARATION INCENTIVE
PAYMENTS.

(a) * * *
(b) * * *
(1) * * *
(2) * * *
(3) * * *
(A) * * *
(B) an amount determined by the agency head,
not to exceed [$25,000] $40,000, as adjusted in
accordance with subsection (c);

* * * * * * *

(c) Consumer Price Index Adjustment.--
(1) In general.--On March 1 of each year, the
Director of the Office of Personnel Management shall
adjust the amount under subsection (b)(3)(B) by the
amount determined by the Secretary of Labor to reflect
the percentage increase between--
(A) the Consumer Price Index (all items;
United States city average) published for
December of the preceding year; and
(B) the Consumer Price Index (all items
United states city average) published for
December of the year before the preceding year.
(2) Rounding.--In making an adjustment under
paragraph (1), the Director of the Office of Personnel
Management shall--
(A) round the percentage increase to the
nearest 1/10 of 1 percent; and
(B) round the amount of adjustment to the
nearest multiple of $1,000.

* * * * * * *

Subpart G--Insurance and Annuities

* * * * * * *

CHAPTER 83--RETIREMENT

* * * * * * *

Subchapter III--Civil Service Retirement

* * * * * * *

SEC. 8331. DEFINITIONS.

(1) * * *
(2) * * *
(3) * * *
(A) * * *

* * * * * * *

(E) * * *
(i) * * *
(ii) received after September 11,
2001, by a Federal air marshal or
criminal investigator (as defined in
section 5545a(a)(2)) of the
Transportation Security Administration,
subject to all restrictions and earning
limitations imposed on criminal
investigators receiving such pay under
section 5545a, including the premium
pay limitations under section 5547;

* * * * * * *

Subpart I--Miscellaneous

* * * * * * *

CHAPTER 99--DEPARTMENT OF DEFENSE PERSONNEL AUTHORITIES

* * * * * * *

SEC. 9902. DEPARTMENT OF DEFENSE PERSONNEL AUTHORITIES.

(a) * * *

* * * * * * *

(f) * * *
(1) * * *

* * * * * * *

(5)(A)
(i) * * *
(ii) [$25,000] an amount determined by the
Secretary, not to exceed $40,000, as adjusted
in accordance with subparagraph (D).
(B) * * *
(C) * * *
(D) * * *
(i) On March 1 of each year, the Secretary of
Defense shall adjust the amount under
subparagraph (A)(ii) by the amount determined
by the Secretary of Labor to reflect the
percentage difference between--
(I) the Consumer Price Index (all
items; United States city average)
published for December of the preceding
year; and
(II) the Consumer Price Index (all
items; United States city average)
published for December of the year
before the preceding year.
(ii) In making an adjustment under clause
(i), the Secretary of Defense shall--
(I) round the percentage increase to
the nearest 1/10 of 1 percent; and
(II) round the amount of the
adjustment to the nearest multiple of
$1,000.

* * * * * * *

TITLE 29--LABOR

* * * * * * *

CHAPTER 8--FAIR LABOR STANDARDS

* * * * * * *

SEC. 213. EXEMPTIONS.

(a) * * *
(1) * * *

* * * * * * *

(16) a criminal investigator who [is paid] is
entitled to availability pay under section 5545a of
title 5, or a Federal air marshal or criminal
investigator employed by the Administrator of the
Transportation Security Administration who is entitled
to availability pay as described in section
8331(3)(E)(ii) of such title (where entitlement is
determined before the application of any premium pay
limitation;

* * * * * * *

(b) * * *
(1) * * *

* * * * * * *

(30) a criminal investigator who [is paid] is
entitled to availability pay under section 5545a of
title 5, or a Federal air marshal or criminal
investigator employed by the Administrator of the
Transportation Security Administration who is entitled
to availability pay as described in section
8331(3)(E)(ii) of such title (where entitlement is
determined before the application of any premium pay
limitation).

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