STATEMENT OF JOHN STURDIVANT EXECUTIVE VICE PRESIDENT AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES (AFL-CIO) BEFORE THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE U.S. HOUSE OF REPRESENTATIVES ON DUAL RETIREMENT CONTRIBUTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B01152R001001360036-0
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: December 14, 2007
• Sequence Number: 36
• Publication Date: September 20, 1983
• Content Type: REPORT

Approved For Release 2007/12/14: CIA-RDP85BO1152RO01001360036-0
E-Z 7 _r 171.2- -T
A F G 'E
) .L. ' I\ AFFILIATED WITH THE AFL.CIO
.oc~ IwMJ,r+t r+vati IS AVE., N.W. WASHINGTON, D. C. 20005
Telephone: [phone]
STATEMENT OF
AMERICAN. FEDERATION OF
GOVERNMENT EMPLOYEES
JOHN STURDIVANT
EXECUTIVE VICE PRESIDENT
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
(AFL-CIO)
BEFORE THE-
ON
DUAL RETIREMENT CONTRIBUTIONS
SEPTEMBER 20, 1983
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
U.S. HOUSE OF REPRESENTATIVES
Approved For Release 2007/12/14: CIA-RDP85BO1152RO01001360036-0 ,
 Approved For Release 2007/12/14: CIA-RDP85B0l 152R001001360036-0
I he American Federation ot''Government Employees:.(AFGE),
AFL-CIO, is pleased to have the opportunity to testify before the
the Post ,Office and Civil Service-Committee. AFGE represents
over 700,000 employees throughout the Executive branch of
government. _
We- are pleased to see this Committee address the rather
absurd situation brought about by the passage of.H.R. 1900, the
Social Security Reform -Bill . On January 1 , 1984, new federal
employees will be (barring any change in current law)
contributing 14% for retirement purposes -- 7% to the Civil
Service Retirement System, 5.7% to Social Security and 1-.3% to
Medicare. (For 1984, .3% of the Social Security contribution
would be allowed as a taxAcredit for income tax purposes.) The
new employees will be contributing this 14% of their salary
without having any clear idea what: their ultimate retirement
benefits will be since there currently is no supplemental
retirement plan in place for these employees.
Below we illustrate the size of the annual retirement
contribution, at current pay, for each of the GS levels, 1
through 12:
Approved For Release 2007/12/14: CIA-RDP85B0l 152R001001360036-0
 Approved For Release 2007/12/14: CIA-RDP85B01152R001001360036-0
GS LEVEL STEP
ANNUAL PAY
ANNUAL RETIREMENT CONTRIBUTION
1
5
$ 9,831
$1,376-
2
10,303
1,498
5
12 ,065
1,689
5
13,541
1,896
5
15,153
2,121
5
16,889
2,364
5
18,767
2,627
5
20,783
2,910
5
22,956
3,214
5
25,283
3,539
5
27,776
-3,889
5
31,332
4,386
Of course, one would have to deduct health insurance,
federal, state, and local income taxes before one could estimate
the take home pay for these federal workers.
As the General Accounting Office stresses in its report and
the above table indicates, the ability of the federal government
to recruit and retain quality employees will be severely reduced
given this level of retirement contribution. We cannot but add
at this point that the pay caps, retirement benefit reductions,
increases in the health premiums, deterioration of working
conditions, and constant belittlement of the worth of federal
employees has also affected the governments' ability to attract
top notch workers. These retirement contributions will make
Approved For Release 2007/12/14: CIA-RDP85B01152R001001360036-0
 Approved For Release 2007/12/14: CIA-RDP85B01152RO01001360036-0
worse' the already existing entry level pay gaps between the
private sector and the federal sector. (See attachment.);
The members are well.aware that this union opposed bringing
new federal, employees under Social S'e'Curity. Our opposition was
shared by virtually all federal employees. However we_were not
able to prevail on this issue.
When it became clear that'new employees were to be brought
under Social Security, we supported and were happy to see the
Senate pass the amendment offered by Senator Russell L-ong (D-LA)
to H.R. 1900 which would have delayed coverage of new federal
employees until a supplemental retirement system was in place.
Unfortunately,. the Senate was not able to prevail in Conference
with the House on the Long admendment. If the Long admendment
had prevailed we would not be facing the current abysmal
situation.
Although we recognize the political difficulties in passing
a provision similar to the Long admendment, we still believe
that removing new employees from Social Security until a
supplemental retirement system is in place is the best answer to
the current problems.
Without this favored solution, it 'becomes very difficult to
find an appropriate solution to the current situation. This
difficulty stems from the fact that we are trying to remedy the
contribution aspect of the retirement system for new employees
without having any clear idea what the benefit structure will
eventually be. The GAO Report states, "... we assumed the new
3
Approved For Release 2007/12/14: CIA-RDP85B01152RO01001360036-0
 Approved For Release 2007/12/14: CIA-RDP85B01152RO01001360036-0
supplemental retirement system will retroactively cover all
periods of service by new employees subsequent to January 1,
1984." New employees, considering the track record of promises
made to federal employees, may very well wonder whether this
"assumption" is valid.
THE PROPOSALS EXAMINED BY GAO
The criteria offered by GAO for the four proposals it
considers is "alternatives which would alleviate adverse impacts
on recruiting and retention". We believe that there is another
consideration which should be taken into account in attempting to
alleviate the dual contribution problem -- namely that equality
between current and future employees be maintained. When the
supplemental retirement program is under consideration AFGE.will
be guided.by the following principle:
The supplemental system (when combined with Social Security)
should provide the same level of benefits as the current
system with the same level of contributions from the
employee.
In light of this principle, AFGE cannot endorse any of the
retirement contribution proposals as currently fashioned by GAO.
The first proposal, to provide new employees with a tax
credit for their contribution to*the Civil Service Retirement
System, would place new hires in a relatively priviledged
position when compared to current employees. For example
consider the hypothetical case of two employees (one current
employee and one newly hired 1984 employee) both earning $40,000
Approved For Release 2007/12/14: CIA-RDP85BO1152RO01001360036-0
 Approved For Release 2007/12/14: CIA-RDP85BOl 152RO01001360036-0
and paying
30% in federal income tax. In this case under this
alternative, the current employee. would pay $2,800 to the .Civil
Service Retirement System, $495 for,Medicare, and $12,000 in
federal income tax for a take home:Hpay of $24,705. The new
employee on the other hand would pay..$2,,800 to the Civil Service
Retirement System, $2,172 to Social Security, $495 for Medicare,
and $9200 in federal income tax (taking into account the tax
credit for theCivil Service Retirement System contribution).
His take-home pay would be $25,333 -- a full $628 more than the
current employee. In addition, new employees could also receive
a refund of their Civil Service Retirement contribution if they
leave government service.
The second option o-f.noiCivil Service Retirement coverage,
thus no employee or employer contribution to the Civil Service
Retirement System, also 'is flawed. The new employee would have
Social Security coverage but would have no defined stake in a
supplementary retirement system. The resulting increased
insecurity would, again, have adverse impact in the government's
recruitment ability. There would also. be fairness problems in
disability and death situations. It would also have an adverse
impact on the finances of the Civil Service Retirement Fund.
The fourth option, of voluntary participation in the Civil
Service Retirement System, is merely allowing employees to. choose
between the current situation which is, as these hearings attest,
recognized to be unsatisfactory and the second GAO option which,
as we have already argued, is also unsatisfactory. An option to
Approved For Release 2007/12/14: CIA-RDP85BOl 152RO01001360036-0
 Approved For Release 2007/12/14: CIA-RDP85B0l 152R001001360036-0
choose between two unsatisfactory situations is itself obviously
--unsatisfactory.
Option three, requiring agency contributions but no employee
contributions, also has some problems. By not requiring any
contribution from new employees it fails to show new employees
that they have a stake in a supplementary retirement system. If
they are guaranteed credit for the years of service in- this
interim period, it is not equitable to current employees who will
be contributing'at a higher rate than these new workers or future
employees who may be required to contribute to the supplemental
retirement plan. It does have the advantage of providing
increased coverage to new employees in situations of disability
or death. It also aids in the financial status of the Civil
Service Retirement Fund, compared to GAO option two, by providing
for agency contributions.
AFGE RECOMMENDATIONS
If it is-considered impossible to delay Social Security
coverage of new employees until a supplemental retirement system
is in.place, then AFGE would recommend that GAO option three be
modified to provide for a 1.3% employee contribution to the Civil
Service Retirement System because:
It would achieve a parity of contribution between new and
current employees for retirement purposes.
It would assure new employees that they would have full
Approved For Release 2007/12/14: CIA-RDP85B0l 152R001001360036-0
 Approved For Release 2007/12/14: CIA-RDP85B0l 152R001001360036-0
credit of their years of service toward a supplemental
retirement plan in this interim period.
It would provide the Civil Service Retirement Fund with some
additional funding.
It would provide new employees with coverage for disability
and death benefits comparable with pre-1984 federal
employees.
Provisions should, also, be made for the refund or-addition-
al contribution in the case where the supplemental system
requires a contribution rate that is different than 1.3%. There
already exists a precedent for this approach in the way Congress
has chosen to handle the post-1956 military service for Civil
Service Retirement. We are, not persuaded by the protests made by
GAO in regard to the administrative complexity of such' an
approach. We fully recognize that their are some potential
administrative problems in this approach but we strongly believe
that such problems are secondary to the principles of equity and
fairness to federal employees, both current and potential.
We want to thank the Chairman and the Committee for
examining this situation and look forward to working with the
Committee and its staff to resolve. the problem.
Approved For Release 2007/12/14: CIA-RDP85B0l 152R001001360036-0
 Approved For Release 2007/12/14: CIA-RDP85B01152R001001360036-0
ATTACHMENT
Based on March 31, 1983 data supplied by OPM, the-relative
differences in entry level pay between similarly matched jobs in
the private sector vis the federal sector has become alarming.
For example:
ENTRY LEVEL DIFFERENCES IN PAY
OCCUPATION
PRIVATE SALARY
FEDERAL SALARY
% DIFFERENCE
ACCOUNTANTS
$19,519
$14,098
38.45%
ATTORNEYS
28,119
-20,591
36.55
CHEMISTS
21,365
13,628
56.77
ENGINEERS
25,556
17,431
46.61
Approved For Release 2007/12/14: CIA-RDP85B01152R001001360036-0