Order Code RS20255
Updated June 28, 2000
CRS Report for Congress
Received through the CRS Web
Civil Service Retirement
Bills in the 106th Congress
Patrick J. Purcell
Specialist in Social Legislation
Domestic Social Policy Division
Among the civil service retirement issues addressed in bills introduced thus far in
the 106th Congress are the correction of retirement coverage errors for federal employees
assigned to the wrong retirement system; immediate eligibility for federal employees to
participate in the Thrift Savings Plan (TSP); improved portability of pension benefits; and
repeal of the temporary increase in employee retirement contributions that was mandated
by the Balanced Budget Act of 1997. Other bills would expand TSP eligibility to include
members of the armed services; improve pension coverage for temporary and part-time
federal employees; and designate several categories of federal employees as lawenforcement officers for purposes of determining their retirement benefits. This report
will be updated periodically.
Correcting Retirement Coverage Errors
Under the terms of the “Federal Employees Retirement System Act of 1986" (P.L.
99-335), all federal employees initially hired after 1983 are covered by the Federal
Employees Retirement System (FERS). FERS has three components: Social Security, a
basic retirement annuity, and the Thrift Saving Plan (TSP). Federal employees hired
before 1984 are covered by the Civil Service Retirement System (CSRS) unless they
elected to switch to FERS during “open seasons” held in 1987 and 1998. During the late
1980s and early 1990s, several thousand federal employees were assigned to the wrong
retirement system by their employing agencies.
Under current law, when retirement coverage errors are discovered, the Office of
Personnel Management (OPM) is required to convert the employee to the appropriate
retirement system. As a result of these mandatory corrections, many employees will
receive substantially smaller retirement annuities than they would have received if they
were permitted to remain in the system to which they had been erroneously assigned.
Employees erroneously assigned to CSRS and then corrected to FERS face the greatest
potential financial hardship. They will receive smaller retirement annuities than they would
have received under CSRS; they may be subject to substantial Social Security taxes
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retroactively; and they have not had the opportunity to receive government matching
payments on contributions to the TSP.
H.R. 416 (Scarborough), the “Federal
Retirement Coverage Corrections Act,” was passed by the House of Representatives on
March 23, 1999. H.R. 416 would permit employees erroneously assigned to CSRS to be
covered by “CSRS-Offset,” which provides combined pension and Social Security benefits
equivalent to a CSRS annuity. Employees who elect to be corrected to FERS would be
eligible for lump-sum contributions to the TSP from their employing agencies equal to the
sum of missed contributions and lost investment gains.
S. 1232 (Cochran) was passed by the Senate (as amended by Senate Amendment
2508) on November 3, 1999. It, too, would allow employees who were assigned to the
wrong retirement system to elect coverage under FERS or the CSRS-Offset plan. The
two bills differ in their treatment of employees who were unable to participate fully in the
Thrift Savings Plan (TSP) as a result of a retirement coverage error. H.R. 416 would
require the employing agency to make a lump-sum contribution to the TSP to make up for
employee contributions that were missed as a result of the error, missed agency automatic
contributions, missed agency matching contributions, and lost investment gains. S. 1232
would give the employee an opportunity to make retroactive contributions to the TSP for
the period of the coverage error. The employing agency would be required to pay into the
TSP an amount equal to missed agency automatic contributions, agency matching
contributions, and lost investment gains on these retroactive employee contributions.
On November 18, S. 1232 was returned to the Senate pursuant to H.Res. 394, which
states that in the opinion of the House S. 1232 contravenes Section 7 of Article I of the
Constitution, requiring all revenue bills to originate in the House. On June 14, 2000 the
Senate Committee on Governmental Affairs ordered S. 2420 (Grassley) to be reported
with an amendment comprising the elements of S. 1232 to which the House stated no
objection in H.Res. 394. (S. 2420 would establish a system of long-term care insurance
for civilian federal employees, U.S. military personnel, and civilian and military reirees).
Participation in the Thrift Saving Plan
The Thrift Saving Plan (TSP) is a retirement savings plan for federal employees. In
2000, employees covered by the Federal Employees Retirement System (FERS) can
contribute the lesser of 10% of pay or $10,500 to the TSP on a on a tax-deferred basis.
Whether or not an employee covered by FERS contributes to the TSP, his or her
employing agency contributes an amount equal to 1% of pay to the TSP. The employing
agency also provides a 1% match on the first 3% of pay that an employee contributes to
the TSP and 0.5% on the next 2% of pay for a maximum agency contribution equal to 5%
of pay. Employees covered by CSRS may contribute up to 5% of pay to the TSP, but they
are not eligible for agency matching contributions.
H.R. 208 (Morella) was passed by the House of Representatives on April 20, 1999.
The bill would allow “rollover distributions” into the TSP from other tax-qualified
retirement savings plans, such as those authorized for private for-profit firms under
Section 401(k) of the tax code and private non-profit organizations under Section 403(b).
Consequently, workers joining the federal government from private-sector employment
could move their accumulated retirement savings from these plans into the TSP. H.R.
208 also would allow employees to make tax-deferred contribution to the TSP
immediately upon becoming employed by the federal government. Employees would
continue to be ineligible for a government match on their contributions to the TSP until
6 to 12 months after the date of hire. H.R. 208 would increase government contributions
for FERS retirement coverage by 1/100%, the amount that the Congressional Budget
Office has estimated would be needed to offset the tax revenue that would be lost as a
result of greater tax-deferred contributions to the TSP.
Employees in the private sector who participate in a 401(k) or 403(b) retirement
savings plan can contribute up to $10,500 to their retirement plan on a tax-deferred basis
in 2000. Federal employees can contribute the lesser of 10% of pay or $10,500 to the
TSP. H.R. 483 (Morella) would eliminate the 10% limit on contributions to the TSP by
federal employees so that all could contribute up to the maximum amount authorized by
Section 402(g) of the Internal Revenue Code, ($10,500 in 2000). H.R. 483 also contains
the same provisions as H.R. 208 allowing rollover distributions to the TSP and immediate
employee contributions to the TSP by newly hired federal workers.
Civilian federal employees covered by FERS can contribute up to 10% of pay to the
Thrift Savings Plan (TSP) and are eligible for employer matching contributions equal to
5% of pay. Employees covered by CSRS can contribute 5% of pay to the TSP, but they
are not eligible for matching contributions. Members of the armed services are covered
by a separate retirement system. S. 297 (Shelby) and H.R. 556 (Mica) would make
members of the armed services eligible to participate in the TSP. S. 297 would permit
members of the armed services with less than 5 years of service to contribute up to 5% of
basic pay to the TSP, while those with more than 5 years of service could contribute 10%
of basic pay. The first 5% of pay contributed by eligible individuals would be matched by
agency contributions. H.R. 556 would allow eligible members of the armed services to
contribute a maximum of 5% of basic pay to the TSP, which would not be eligible for
agency matching contributions. The FY2000 Defense Authorization Act (P.L. 106-65)
would allow members of the uniformed services on active duty and members of the Ready
Reserve to participate in the TSP, provided that during the second session of the 106th
Congress legislation is enacted to offset the resulting loss in tax revenue. H.R. 4173
(Kuykendall) would allow uniformed military personnel to participate in the TSP under
the same terms and conditions as civilian federal employees.
Pension Portability for Employees of the Federal Reserve Board
On March 16, 1999, the House of Representatives passed H.R. 807 (Scarborough),
the “Federal Reserve Board Retirement Portability Act.” This bill would facilitate
employment mobility of employees of the Federal Reserve Board who wish to work in the
executive, legislative, or judicial branches by including as creditable service under the
Federal Employees Retirement System (FERS) a period of service that was creditable
under the “Bank Plan,” the benefit structure in which employees of the Board of
Governors of the Federal Reserve System appointed on or after January 1, 1984
participate. Service would be credited under FERS, provided that the employee waives
credit for such service under the Bank Plan and makes a payment to the Thrift Savings
Fund equal to the amount that would have been deducted from pay had the employee been
subject to FERS during that period of service (together with interest on such amount). S.
1232 (Cochran) contains provisions similar to those in H.R. 807.
Temporary Employment; Part-Time Work; Survivor Annuities
H.R. 1606 (Kanjorski) and S. 1881 (Dodd) would permit federal employees who
had temporary appointments at any time between December 31, 1988 and January 1, 1999
and who subsequently became full-time employees to receive service credit under FERS
for their period(s) of service. To receive such credit, eligible employees would be required
to make a deposit to the Civil Service trust fund equal to 1.3% of basic pay for the period
of temporary service, plus interest if applicable. S. 772 (Robb) and H.R. 4569 (Moran,
VA) would clarify the process by which part-time service is credited toward retirement
annuities under CSRS. Both specify that the pro-ration of retirement annuities for parttime service is to be applied only to the period of service that was performed on a parttime basis.
Under current law, a retired employee who remarries and wishes to designate his or
her spouse for a survivor annuity, must do so within 2 years of remarriage or the death of
the previous spouse, whichever comes later. S. 948 (Robb) would permit the Office of
Personnel Management to waive the 2-year limit on such designations.
Employees who work for a non-appropriated fund instrumentality (NAFI), such as
the post exchanges on military bases, do not participate in the Civil Service Retirement
System. H.R. 2686 (Davis/VA) would allow federal employees with at least 5 years of
service to receive credit under CSRS for employment at a NAFI between 1966 and 1986,
provided that the employee makes a deposit to the Civil Service Retirement and Disability
Fund of the amount that would have been withheld under CSRS.
Classification of Federal Employees as Law-Enforcement Officers
Workers in the executive branch who are covered by the Federal Employee
Retirement System (FERS) become eligible for an immediate, unreduced annuity at age
55 if they have completed at least 30 years of service.1 In recognition of the unique
demands faced by law enforcement personnel in the performance of their duties, Congress
has provided for individuals employed in this capacity by the federal government to
become eligible to retire at younger ages and with fewer years of service. Federal law
enforcement officers can retire with an immediate, unreduced annuity at age 50 with 20
years of service, or at any age with 25 years of service. In addition, federal law
enforcement personnel accrue benefits at a faster rate than other federal employees (1.7%
per year rather than 1.0%) and, once retired, they receive annual cost-of-living adjustments
regardless of age.2 Federal law enforcement personnel also are subject to mandatory
retirement at age 57 or after 20 years of service, if that date occurs later.
Workers with 10 or more years of service are eligible for a reduced annuity beginning at age
55. For workers with fewer than 30 years of service who retire before age 62, the retirement
annuity is permanently reduced by 5% for each year between the worker’s age at retirement and
age 62. A worker retiring at age 55 with 20 years of service under FERS will be eligible for
an annuity equal to 13% of his or her high-3 average pay: (20 x .01 x (1 - (.05 x 7)) = .13).
Law enforcement personnel have an additional 0.5% withheld from their pay in recognition
of their faster accrual of benefits. Most federal annuitants covered by FERS receive COLAs
only at age 62 and older. Exceptions are disabled annuitants and survivor annuitants.
For purposes of retirement benefits, federal law defines a law enforcement officer as
an individual whose duties “are primarily the investigation, apprehension, or detention of
individuals suspected or convicted of offenses against the criminal laws of the United
States.”3 In general, positions are designated as those of a law enforcement officer by the
heads of federal agencies under the guidance of regulations published by the Office of
Personnel Management.4 Congress has designated in statute some specific classes of
federal employees as law enforcement officers under the federal retirement systems. H.R.
583 (Davis/VA) would amend 5 U.S.C. §§ 8331(20) and 8401(17) to include assistant
United States Attorneys among the statutorily defined categories of law enforcement
officers. H.R. 1228 (Filner) would amend Title 5 to designate as law enforcement
officers certain employees of the Immigration and Naturalization Service (INS), the
Internal Revenue Service (IRS), the U.S. Customs Service, the Department of Defense,
the Bureau of Engraving and Printing, the Postal Service, the Secret Service, and the Drug
Enforcement Administration. S. 718 (Mikulski) would designate as law enforcement
officers certain employees of the INS, the IRS, and the U.S. Customs Service.
Several bills introduced in the 106th Congress would affect the computation of
retirement annuities or the age of retirement for federal law enforcement officers or
firefighters. H.R. 1769 (Cummings) would amend Title 5 to ensure that law enforcement
officers with 20 or more years of service who retire through an involuntary separation
(other than for misbehavior) or for reasons of disability receive an annuity computed
according to the benefit formula applicable to law enforcement officers who retire at he
normal retirement age. H.R. 424 (Traficant) would raise the age of mandatory retirement
for members of the United States Capitol Police from 57 to 60. H.R. 1748 (Mink) would
raise the mandatory retirement age for all federal law enforcement officers from 57 to 60.
H.R. 460 (Gallegly) would establish a mandatory retirement age for federal firefighters
at the age which applies to federal law enforcement officers (age 57 or after 20 years of
service, if later).
Civil Service Retirement and Disability Fund
H.R. 82 (Bilirakis) would take the CSRDF “off budget.” Receipts and
disbursements of the fund would not be included in the budgetary totals of the President’s
budget proposals or in Congressional budget resolutions. H.R. 633 (Bartlett) would
direct the CSRDF and other federal trust funds to invest the assets of the funds in the
common stocks of private corporations.5 Under current law, the CSRDF is required to
use any excess of receipts over disbursements to purchase U.S. Treasury securities.
Retirement for Members of Congress
5 U.S.C. §§ 8331(20) and 8401(17).
5 C.F.R. §§ 831.901-831.911 and §§ 842.801-842.809.
For a discussion of the budgetary and accounting issues relevant to taking the CSRDF offbudget and to investing the assets of the fund in private-sector financial instruments, see CRS
Report RL30023, Civil Service Retirement Programs: Financing and Budget Status, by Pat
H.R. 95 (Coble) would make members of Congress ineligible to participate in the
Federal Employees Retirement System. Members who have become vested in a FERS
retirement annuity under 5 U.S.C. § 8410 would continue to be eligible to receive an
annuity. H.Con.Res. 3 (Coble) is a concurrent resolution that would express the sense
of the Congress that retirement benefits for Members of Congress should not be subject
to cost-of-living adjustments. S. 1326 (Frist) would make members of Congress ineligible
to participate in CSRS or FERS, except that each would be allowed to participate in the
Thrift Savings Plan during the 12 years beginning on the date his or her first term begins
Repeal of Temporary Increase in Retirement Contributions
The Balanced Budget Act of 1997 (P.L. 105-33) mandated a temporary increase of
0.5% in employee contributions under both CSRS and FERS, which is to be phased in
over 3 years. Employee contributions are to increase by 0.25% on January 1, 1999; by
a further 0.15% on January 1, 2000; and by 0.1% on January 1, 2001. Employee
contributions will revert to their previous levels on January 1, 2003. The higher
contributions will not increase the benefit accruals of federal employees under either CSRS
or FERS. H.R. 2631 (Davis/VA) and S. 1472 (Sarbanes) would repeal the increases in
employee contributions that were mandated by the Balanced Budget Act. The President’s
proposed budget for FY2001 includes a legislative initiative to repeal the increase in
employee contributions required by the BBA.
Other Bills that Would Affect Civil Service Retirement Programs
H.R. 207 (Morella) would amend the definition of basic pay used for computing a
retirement annuity for government physicians to include comparability allowances (as
defined at 5 U.S.C. § 5948) paid to such physicians. S. 940 (Specter) would provide the
Department of Veterans Affairs with temporary authority to offer voluntary separation
incentives to reduce and restructure staff levels. The separation incentives would be in the
form of lump-sum payments not to exceed $25,000 for each eligible employee.
Civil Service Retirement for Military Reserve Technicians
Military reserve technicians are civilian federal employees who work full-time in
support of the reserve components of the military. They are covered by CSRS or FERS.
In most cases, reserve technicians also must be members of a military reserve unit.
Discharge from the military reserves usually results in termination as a reserve technician.
The FY2000 Defense Authorization Act (P.L. 106-65) makes reserve technicians who
were hired on or before February 10, 1996 eligible for an immediate retirement annuity at
age 50 after completing 25 years of service. Reserve technicians hired after that date will
be eligible for an immediate retirement annuity at age 50 after completing 20 years of
service or at any age after completing 25 years of service. S. 1883 (Bingaman) would
make military reserve technicians eligible for an immediate retirement annuity under either
CSRS or FERS at age 50 after completing 20 years of service or at any age after
completing 25 years of service in the event the technician is discharged from the military.