LETTER TO WILLIAM J. CASEY FROM WILLIAM D. FORD

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88G00186R001201590011-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 12
• Document Creation Date: December 23, 2016
• Document Release Date: July 18, 2011
• Sequence Number: 11
• Publication Date: March 19, 1985
• Content Type: LETTER

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TO.tr110NE 225-10R~
March 19, 1985
The Honorable William J. Casey
Director
Central Intelligence Agency
Washington, D.C. 20505
Dear Mr. Casey:
The Committee on Post Office and Civil Service is
continuing its hearings on the development of a supplemental
retirement system for those Federal employees who are covered
by social security. Hearings on April 2, 3, and 23 will focus
on specific design issues (see enclosure). A hearing planned
for April 25 will consider how the supplemental plan should
treat unique employment categories such as law enforcement
officers, fire fighters, air traffic controllers, Central
Intelligence Agency officers, and the Foreign Service. The
Agency's views at the April 25 hearing would be helpful.
Under existing law, employees in these unique categories
generally may retire without penalty at earlier ages than other
civil service employees. Usually, these employees may retire
with unreduced benefits at age 50 if they have served 20 years.
Other civil service employees may not retire without penalty
prior to age 55, and then only if they have served 30 years.
Employees in these unique categories are also generally subject
to mandatory retirement provisions.
In designing the supplemental system, the Committee must
consider whether special treatment .for these unique categories
s'nould be continued and, if it should, in what form. Should
the current age and service requirements be continued? Is
there still a need for mandatory retirement provisions? If
early retirement is continued, should we somehow compensate
early retirees for the fact that social security benefits wil].~
not begin until age 62? These are questions which must be
addressed.
Legislative jurisdiction over the Central Intelligence
Agency Retirement and Disability System (CIARDS) resides in the
Select Committee on Intelligence. Regardless, however, of
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The Honorable William J. Casey
Page two
March 19, 1985
whether changes in the CIARDS are specifically legislated,
changes in this System may be required administratively as a
result of section 292 of the Central Intelligence Agency
Retirement Act which provides for compatibility between the
civil service and Foreign Service retirement systems. Thus
legislative changes limited solely to the civil service system
may have ramifications for the Foreign Service, and it is
important that we have the Agency's views.
The hearing will begin at 10 a.m. and will be held in
room 311 of the Cannon House Office Building. One hundred
copies of your prepared testimony should be delivered to room
309 Cannon no later than Friday, April 19. Questions may be
directed to Pierce Myers of the Committee staff at 225-4054.
With kind regards,
WILLIAM D. FORD
Chairman
Enclosures
cc: The Honorable Lee H. Hamilton
Chair man
Select Committee on Intelligence
The Honorable Bob Stump
Ranking Minority Member
Select Committee on Intelligence
WDF:pmp
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March 8, 1985
Issues to be Considered in April 1985 Retirement Hearings
Committee on Post Office and Civil Service
Cost
The Congressional Research Service (CRS) estimates the
employer cost of the Civil Service Retirement System (CSRS) is
24.7 percent of pay, and the Government's cost for Federal
employees covered by social security is 6.1 percent of pay.
(See, enclosed CRS report, pp. 73-75, 285-297). What should
the normal cost of the new supplemental system be? (Note
normal cost estimates are extremely sensitive to changes in
economic and demographic assumptions, and different actuaries
will develop different estimates of normal cost. During its
deliberations, the Committee intends to use the computer model
developed by CRS to measure and compare the normal cost of
various options under consideration. Use of the CRS computer
model is the only method available by which timely estimates of
normal cost and replacement rates can be produced to permit the
Committee to determine the relative cost and generosity of
various retirement proposals.)
Sbcial security "tilt"
"The current CSRS replaces the same percentage of
preretirement dollars for workers at all income levels who
retire with the same number of years of service. Social
security replaces a higher proportion of earnings for persons
with lower career average wages. This tilt must be taken into
consideration when designing a Federal pension for workers
who will be covered by social security." (CRS report, p. 123).
How much, if any, of the social security tilt should be offset
by the new supplemental plan? (See, CSR report, pp. 20-23,
111-117, 123-133).
~~Empl~ee contributions
Under the CSRS, employees pay 7 percent of pay into the
retirement fund, Under social security, employees now pay a
5.7 percent contribution. The social security contribution
will increase to 6.2 percent by 1990. Under both systems,
employees pay an additional 1.35 percent to medicare. The
social security and medicare contributions are based on
earnings only up to a certain level -- now $39,600, estimated
to increase to $50,700 by 1990. The CSRS contributions, on
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the other hand, are based on entire salary. Should employees
under the new supplemental plan be required to pay.retir~inent
contributions, and, if so, what level of contribution should be
required?
Fundin _and financier
Under the CSRS, employees contribute 7 percent of pay to
the fund, and this contribution is matched by employin
agencies. The system is further funded through paymen~s from
off-budget agencies, such as the United States Postal Service,
and interest earned. A substantial portion of the funding,
however, comes directly from the United States Treasury. (See,
CRS report, pp. 269-273; see also "Civil Service Retirement:
Financing and Costs", Congressional Budget Office, May 1981).
Should the new supplemental system be fully funded? If
it is fully funded, should the funding come from agency
appropriations or from the Treasury?
Vesting
"It has been argued that different work force management
goals are served by vesting periods of different lengths, with
long vesting periods tending to discourage turnover (and reduce
employer costs) and to provide an incentive for employees to
remain with one employer for long periods of time. An example
of a long vesting requirement is the military, which requires
20 years of service before any retirement benefits are payable.
However, employees may then retire and draw an immediate
pension. )`4ost private employers adopted the ERISA 10-year
vesting schedule. In the Federal civil service, employees are
vested after five years." (CRS report, p. 251). What should
be the vesting requirement under the new supplemental
plan?
Unique employment categories
Existing law contains retirement provisions for certain
groups which are more advantageous than those normally
applicable. Such groups include law enforcement officers, fire
fighters, air traffic controllers, and the foreign service.
How should employees in these unique categories be treated
under the new supplemental plan?
Enclosure
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OfNtst0ll
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The Honorable Charles MeC. Mathias, Jr.
Chairman, Subcommittee on Governmental Efficiency
and the District of Columbia
Committee on Governmental Affairs
United States Senate
The Honorable Ted Stevens
Chairman, Subcommittee on Civil Service,
Post Office, and General Services
Committee on Governmental Affairs
United States Senate
The Honorable Thomas F. Eagleton
Ranking Minority Member
Subcommittee on Governmental Efficiency
and the District of Columbia
Committee on Governmental Affairs
United States Senate
The Honorable Jeff Bingaman
Ranking Minority Member
Subcommittee on Civil Service,
Post Office, and General Services
Committee on Governmental Affairs
United States Senate
JANUARY 7, i 985
Subject: Options to Consider for Certain Employee Groups in
Designing the New Civil Service Retirement Program
(GAO/GGD-85-22)
This report responds to your June 25, 1984, letter about the
issues associated with District of Columbia employees in design-
ing the new federal civil service retirement system to supplement
social security benefits. The majority of District employees now
participate in the current federal civil service system; however,
the Social Security Amendments of 1983, which require all new
federal employees to be covered by social security, did not apply
to District employees. Thus, you asked us to develop options for
addressing this situation in the design of the new retirement
program.
(966195)
UNITED STATES GENERJIL ACCOUNTING OFFlCE
WASHINGTON. O.C. 20T4a
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You also requested us to develop options for addressing the
future status of certain federal law enforcement personnel who
are now covered by a District retirement program in the design of
the new civil service retirement program. New employees in this
group are covered by social security but must retire before the'
age when social security benefits will be available to them.
As later agreed with your offices, we expanded the scope of our
study to (1) include all federal civilian employee groups who are
eligible for retirement benefits without penalty at ages earlier
than general civil service employeesl and (2) provide
information about employees, like those in the District, who are
covered by the civil service retirement system but are not
federal employees.
In January 1978, we reported on our review of issues
associated with District employees participating in the civil
service retirement system and some federal personnel covered by
the District retirement system.2 We concluded at that time that
the District should establish a separate retirement system for
its employees and that new federal employees in positions covered
by the District's program should be placed in a federal
retirement system. Moreover, in an earlier report we questioned
the need for special early retirement provisions for federal law
enforcement and firefighter personnel and recommended that the
Congress reevaluate the need for such benefits.3 The Congress
took no action on these reports.
In conducting this study, we obtained information on
retirement provisions and retiree demographics from the Office of
Personnel Management (OPM), Department of State, Department of
the Interior, Federal Aviation Administration, Central
Intelligence Agency, Secret Service, and the District of
Columbia. Except for OPM, certain employees of each of these
organizations may retire without penalty at earlier ages than can
general civil service employees. OPM has overall responsibility
for managing the civil service retirement system. We considered
the views of officials of each of .these organizations in
developing the options we are presenting.
1General employees are all employees not covered by special
provisions of the retirement system.
2Federal and District of Columbia Employees Need to
be
in
.Separate Pay and Benefit Systems (FPCD-77-71
Jan
12
1978
,
.
,
).
3Special Retirement Policy for Federal Law Enforcement and
Firefighter Personnel Needs Reevaluation (FPCD-76-97, Feb. 24,
1977).
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EMPLOYEES PARTICIPATING IN THE
CIVIL SERVICE RETIREMENT SYSTEM
WITHOUT SOCIAL SECURITY COVERAGE ~ ~-
We identified two employee groups who are continuing to
participate in the civil service system but are not federal
employees and do not have social security coverage. These groups
are employees of the District of Columbia and employees of the
Washington Metropolitan Area Transit Commission.
In contrast, another employee group which did not have
social security coverage stopped entering the civil service
system on January 1, 1984. State Department officials recognized
that a new civil service retirement system which supplements
social security would be inappropriate for its foreign national
employees who are not covered by social security and, in January
1984, discontinued entering new foreign employees in the civil
service system. These employees are being placed in programs in
their respective countries.
Qptions we identified which the Congress may want to
consider for those employee groups not covered by social security
are:
1. Allow the employees to continue entering the current
civil service system. If this option is taken, these
nonfederal employees will eventually be the only
participants in the current system. In this case, the
employees' or employers' contributions could be increased
to cover the full accruing costs of retirement benefits.
OPM estimates these to be an additional 22.5 percent~of
pay.
2. Close the current system to all new entrants, in which
case, civil service retirement coverage for such
employees could be terminated and replaced with a new
program established by their employers.
We did not consider the option of social security coverage
for District employees because the Congress has not required any
state or local government employees to participate in the social
security program and the District has not elected such coverage
for its employees. .
SPECIAL RETIREMENT ELIGIBILITY PROVISIONS
Certain groups of federal employees are covered by special
provisions which permit them to retire without penalty at earlier
ages than employees covered by the general civil service
retirement provisions. These employees, if they have 20 years of
service, are eligible for full benefits at age 50 or younger. By
contrast, the earliest point at which most federal employees can
opt to retire without penalty is age 55 with 30 yeacs of service.
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The table below identifies groups of employees with
provisions, their retirement eligibility provisions,,and
retirement system which covers them.
Employee group
Law enforcement
officers/
firefighters
Air traffic
controllers
Foreign Service
officers
Central
intelligence
officers
Park Police
Retirement
eligibility provisions
Age 50 and 20 years'
service as law enforce-
ment officer or fire-
fighter. With some
exceptions, mandatory
retirement is at age 55
or 20 years' service
whichever is later.
Age 50 with 20 years'
service as an air
traffic controller, or
any age and 25 years'
service as an air
traffic controller.
With some exceptions,
mandatory retirement is
at age 56.
Age 50 and 20 years'
service. With some
exceptions, mandatory
retirement is at age 65.
Same. as Foreign Service
system except mandatory
retirement is at age 60.
Any age and 20 years'
service. Mandatory
retirement is at age 60.
Uniformed Division Same as Park Police.
of the Secret
Service
Secret Service
agentsa
Same as Park Police.
special
the
Retirement
s stem
Civil service
Civil service
Foreign Service
Central
Intelligence
Agency
District of
Columbia
District of
Columbia
District of
Columbia
aSpecial agents assigned to protect the president and other
government officials.
4
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The special eligibility provisions are reflected in the
actual retirement experiences of the various employee groups.
The federal employees in the District's retirement system have
retired the earliest--years before social security benefits would
be available at age 62. The table below shows the experiences of
the employee groups for fiscal year 1983 which agency officials
considered typical of recent historical experience. Data on
general civil service employees is shown for comparison purposes.
Average age
Average years
Employee group
at retirement
of service
Secret Service Uniformed Division
46
25
Secret Service agents
not available
not available
Park Police
48a
23.4a
Air traffic controllers
51.7
30.7
Central intelligence officers
52.8
29.3
Law enforcement officers/
firefighters
54.1
26.4
Foreign Service officers
55,7
27.0
General civil service
employees
60.9
28.6
aAverage of last 10 years.
Options for employees covered by
special early retirement provisions
In designing the new retirement system to supplement social
security benefits, the Congress may decide to treat new employees
currently covered by special early retirement provisions like
general civil service employees, in which case no special provi-
sions would be needed. On the other hand, if the Congress wishes
to continue early retirement eligibility for these new employees,
a means of providing higher benefit levels at earlier ages than
allowed for other .employees must be incorporated into the new
system. Alternative benefit formula designs for these special
provisions are:
1. Provide the same benefit accrual rate as for general
civil service employees but with no reduction for early
retirement age. In our report on the features of
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nonfederal retirement programs,4 we reported that most
pension plans permit employees to retire at~reduced
benefits before they fulfill the requirements--necessary
for the payment of full benefits. The Congress could
provide benefits without reductions at earlier ages for
the employees covered by special provisions.
2. Provide a higher benefit accrual rate than that provided
general employees. Under this alternative, the benefit
formula for these employees would have a higher accrual
rate for each year of service than the rate used to com-
pute benefits for regular civil service employees. This
would provide greater benefits at earlier ages for the
covered employees.
3. Provide supplemental benefit payments in addition to
civil service benefits until age 62 when social security
benefits are available. In our report on the features
of nonfederal retirement programs, we reported this is
provided for in many nonfederal pension plans.
4. Provide a more generous thrift (~savings~ plan than the
plan available to general civil service employees. This
alternative assumes that the design of the new retire-
ment program will include a thrift plan. A capital
accumulation plan, such as a thrift plan, is a typical
part of nonfederal retirement programs. Under thrift
plans, employers help employees save for retirement or
other needs by matching some portion of the employees'
contributions. A majority of employers with thrift
plans match at least 50 percent of employee
contributions up to a specified level. For employees
covered by special retirement provisions, the thrift
plan could provide a higher rate of employer matching
than the rate for regular civil service employees
thereby enabling them to accumulate a sufficient amount
to afford earlier retirement. If the thrift plan is
authorized under section 401(k) of the Internal Revenue
Code, the burden of employee contributions would be'
reduced by deferring taxes on them.
We did not consider the alternative of withdrawing these
employees from social security .in view of the Congress' decision
in enacting the 1983 Social Security Amendments that all new
federal employees would be covered.
4Features of Nonfederal Retirement Programs (GAO/OCG-84-2, June
26, 1984).
6
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As requested by your offices, we did not obtain agency
comments on this report. We are sending copies of this report to
the Directors of OPM, the Central Intelligence Agency, and the
Secret Service; the Secretaries of the Interioc, Treasury, and
Transportation; the Administrator of the Federal Aviation
Administration; and the Mayor, District of Columbia. We will
also send copies to other interested parties and make copies
available to others upon request.
2J. ~ . 0....&~+~a~..~.
William J. Anderson
Director
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lath CanRrexx I
2d Sexxtun
COMMI7TBE: PRINT
' COMMI1Tgg
PRINT 9l1-17
DESIGNING A RETIREMENT SYSTEM FOR
FEDERAL WORKERS COVERED
BY SOCIAL SECURITY
(PREPARED BY THE CONGRESSIONAL RESEARCH
SERVICE)
COMMITTEE ON
POST OFFICE AND CIVIL SERVICE
HOUSE OF REPRESENTATIVES
Printed for the use of the Committee on Post Once and Civil Service
U.S. GOVERNMENT PRINTING OPFICE
WASHINGTON : 1985
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