SENATE PLAN FOR FEDERAL RETIREMENT SYSTEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000900080006-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: March 29, 2011
• Sequence Number: 6
• Publication Date: December 14, 1984
• Content Type: LETTER

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-0 0 0"
OLL 84-4787
14 December 1984
MEMORANDUM FOR: See Distribution
VIA:
FROM:
SUBJECT:
Chief, Liaison Division, OLL ~-.
Senate Plan for Federal Retirement System
1. Attached hereto is Senator Ted Stevens'
(R., AK) draft proposal for a Supplemental Retirement Plan
for all Federal Employees hired after 31 December 1983.
(Senator Stevens will continue to chair the Post Office and
Civil Service Subcommittee of the Governmental Affairs
Committee), Employees who were on the government rolls
prior to 1984 and covered by the current civil service
retirement system would have the option of transferring into
the Stevens plan with credit for service under the old
system.
2. This proposal is being reviewed by the
Administration and selected Federal employee unions. So
far, reactions have been favorable with one exception: the
Administration is highly critical of the "401 K Plan"
because of the cost to the government. The contributions
(92 from government for every $1 contributed by employee up
to 4.percent of employee basic pay) would be paid out
immediately, rather than only when benefits are paid out.
Other concerns include: Who would appoint/approve/control
the group that manages the fund; how do you deal with the
potential for market manipulation, or bad investments; how
do you make investment decisions? These and other issues
will be discussed during the next several weeks and
modifications to the draft plan will be made before it is
introduced.
3. Senator Stevens, who plans to try again for the
leadership position in 1986, wants the success of having his
proposal enacted. He plans to introduce legislation in
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January, hold several hearings through February, have markup
and vote the bill out of Subcommittee/Committee in Spring,
and to bring it to the floor for debate and Senate approval
next Summer. All of my Senate contacts are saying
confidentially that this will happen.
4. Senator Stevens wants one retirement system for all
Federal employees. He is opposed to separate plans for
,special retirement classes, including employees of the CIA.
Stevens wants to include all groups which have early out
provisions (CIA, law enforcement, park police, Secret
Service, air traffic-controllers and Foreign Service
Officers) under a section for "all special retirement
classes." For CIA, he would include a provision whereby the
Agency would administer its own program (because of cover
considerations). To date, only the law enforcement people
and CIA (the undersigned) are in contact with Stevens' staff.
5. Senator Stevens believes that these "special
retirement classes" should retain a relative early out
advantage; as the age for the rest of the Federal workforce
is raised, the retirement age for the early out groups will
be raised.
6. Senator Stevens' principal aide on retirement
(saes cpttan, _Subcoasitt*e- chief Counsel) advises that the""'
M-.e'ioato tak ,t . ', r
gratietl~r.,~t the fraf to s
Goverpment Affairs Committ.e.r& A less desirable method for
CIA to get coverage is through the amendment process which
would lead to floor discussion. (Note: We are talking
about CIA employees who are hired after 31 December 1983 and
who would have been candidates for CIARDS. Stevens now is
400 ooking at changes to any existing retirement systems,
including Civil Service and CIARDS.)
7. The retirement options that CIA managers are
currently considering have not been disclosed to Senate or
House Staffers. It is quite clear, however, that the Senate
staffers who are working the retirement issue are
that would differ
markedly from the retirement system being considered for
other Federal employees, and against a CIA system that would
cover all CIA employees.
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8. Insofar as the House position on this "separate
versus equal" issue, it is too soon to say. The Post Office
and Civil Service Committee is moving much more slowly than
the Senate and has not made detailed decisions on design or
participation. The House, unlike the Senate, is looking at
the entire package of Federal employee entitlements,
including pay and health insurance, and is expected to
propose a retirement package that will be viewed by
employees as relatively very generous.
9. The Administration is expected to push for an
austere supplemental retirement package for employees hired
after 1 January 1984, and for changes in the current Civil
Service Retirement System. Few details are known regarding
the Administration's plans for the supplemental package.
Insofar as changes to the current system, we have been
hearing about them for three years:
Change high 3 to high 5
Increase employee contributions from 7 to 9 percent
Adjust (or-freeze) COLA
Raise minimum retirement age from 55 to 62 or 65
10. The Senate and.House would oppose all changes to
the existing Civil Service system if it is treated as a
discrete issue; support is more likely, however, if cuts in
Civil Service entitlements are included in a larger
deficit-cutting package. For example if the Social Security
COLA is cut or frozen; it is highly likely that the COLA for
Civil Service retirees will be modified.
11. In addition to Senator Stevens, the following
Senators likely will influence retirement legislation:
Thomas .F. Eagleton (D., MO)
Charles McC Mathias (R., MD)
Dave Durenberger (R., MN)
Lawton Chiles (D., FL)
January.
Developments in the House will be reported in early
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Distribution:
Original - DDA w/att
1 - D/OP w/att
1 - DD/OP w/att
1 - DD/EB&S/OP w/att
1 - DD/PA&E/OP w/att
1 - D/OLL w/att
1 - DD/OLL w/att
1 - C/OLL/LD w/att
1 - DC/OLL/LD w/att
1 - C/OLL/SL w/att
1 - C OLL HL w/att
1 - Subject w/att
1 - Chrono w/o att
1 - OLL Record w/att
- oLL-qhrono w/o att
OLL:LDI aw (14 December 1984)
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Stevens' Retirement Plan
Participation-
All those covered by Social Security System on or
after January 1, 1984 with the exception of employees who
were participants in CSRS on December 31, 1983. All those
who are currently subject to CSRS and who elect to join.
Basic Plan-
- .85% x high 5 years of salary x years of service
- 2% per year reduction of annuity under age 62
- Can retire with immediate annuity at age 62 with
10 years of service; age 55 with 30 years of
service.
- Involuntary retirement age 50 with 20 years of
service, any age and 25 years of service.
All special retirement classes
1) Law enforcement, firefighters and air traffic
controllers.
Age 55 with 25 years of service
Age 62 with 10 years of service
No reduction under 62
Retirement Supplement under 62
401 k plan
Participant may contribute to the fund any amount not
exceeding 16 percent of basic pay. Agency shall contribute
$2 for every $1 contributed by employee up to 4% of. employee
basic pay. Thus, maximum agency contribution will be 8%
of pay.
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! Vests phased in over'S years
At retirement may withdraw, rollover in IRA, draw an
annuity or defer.
Annuity-
OPM pays annuity.
Must provide life annuity and joint and survivor annuity
and any other annuity form OPM desires as long as actuarially
equivalent. Also an annuity that woula increase from year to
year.
Employee may choose to transform 401 k account into an
annuity which would be added to annuity of basic pension.
The basic pension is adjusted annually - January - for
75% of-the change in the CPI from September - September. The
401 k account would-be adjusted actuarially and if in the
case of a variable annuity for changes in the market.
Deferred retirement-
One who leaves government prior to eligibility for an
immediate annuity from basic pension and who is vested for
401 k plan may leave account in the fund or may roll it over
into an IRA or a subsequent employer's fund.
Funding
Agencies shall contribute entry age normal cost of
employees to CSR fund for basic pension. Any supplemental
liabilities to be amortized from Treasury over 30 year
period.
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Agencies shall contribute toward 401 k plan at specified
rate in a new fund.
Fund for basic pension will be the same as that for CSRS.
Investments
401 k
1st year - all monies invested in federal securities.
2nd year and beyond - each year an additional 1% in-
crement of first employee money and then agency money to be
invested by Board of Trustees in any federal, state, local
or private interest bearing securities, equities, real estate
etc. Agency money to be invested in 1% increments beginning
in year 6. After year 4 all employee money to be invested
by board.
Transition provisions
For current employees to join new system - two options.
1) employee contributions to current system will be
matched by government money plus 7% interest from CSRS and
transferred to 401 k account of employee. Additionally, credit
under current program will be transferred to credit under new
basic pension.
2) credit in current program will freeze and employee
may accrue new credit in new program. Service in new program
will count towards-eligibility to retire in old. Salary in
new will count towards high 3 in old. However, service in
new program will not accrue for old. Service in old program
will count towards eligibility to retire in new but will not
accrue in new.
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r-
3) Employees hired during interim period will be given
credit for service in new system plus 1.31 contribution will
be matched 2 for I and put in 401 k.
Board of Trustees.
Off budget agency.
7 trustees.
Appointed by President, confirmed by Senate.
One of appointments - Executive Director - substantial
experience, training or expertise in the management of financial
investments.
All trustees have 7 year appointments except first few
to be graduated.
Employee covered by CSRS prior to January 1, 1984 and
covered by Social Security pursuant to Social Security Amend-
ments of 1983.
Contributes difference between OASDI contribution and
normal CSRS contribution to CSRS fund. Entitled to full CSRS
benefit until begins receiving Social Security payment.
CSRS benefit recomputed and reduced by the amount of the Social
Security benefit attributable to service performed while
employee of federal government. Applies to normal benefit,
disability and survivor benefits.
DISABILITY
18 months for vesting
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Ifs eligible for Social Security:
1) From onset of.disability to age 62, 60% of high S
minus 100% of Social Security benefit.
2) After age 62 accrued benefit based on actual service
plus projected service through age 62. Must have 10 years
of actual and projected service.
If ineligible for Social Security:
1) Definition tightened resulting in placement of disabled
employee in any job in commuting area for which qualified within
2 grades of current position.
2) 1st year - 60% of high 5
3) After 1st year - 30% of high 5 or accrued benefit
based on projected service through age 62, whichever is lower.
4) After age 62 accrued benefit based on actual service
plus projected service through age 62. Must have 10 years of
actual and proj'ected service.
SURVIVOR ANNUITY PLAN
I. Preretirement survivor benefits:
A. Benefits payable immediately if the deceased had
at least 18 months service
B. Survivor gets the higher of:
1. 50 percent of the accrued annuity (computed as
if the worker had retired the day before death,
with any applicable early retirement reductions,
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but without the reduction for survivor benefits)
plus any social security payable,
or
2. 30 percent of the worker's high-five average
salary minus any social security payable.
II. Postretirement survivor benefits:
A. Annuity to married retiree automatically reduced
actuarially as in a 50 percent joint-and-survivor
plan to provide a spouse survivor annuity - waived
with consent of spouse.
1. Survivors age 60 or over with no children under
age 16 get 50 percent of the unreduced annuity
(except for early retirement reduction) / plus
any social security payable.
2. Survivors under age 60 with no children of the
retiree under age 16 get the full annuity that
was payable to the retiree (after reductions for
early retirement and survivor benefits) until age
60, when they will get 50 percent of the accrued
annuity after early retirement reductions.
3. Survivors under age 60 with child(ren) of the
retiree under age 16 get 50 percent of the
unreduced annuity / plus any social security.
III. Survivors benefits to widows and widowers cease if they
remarry before age 55 (this reflects the provision in the
new Civil Service Retirement Spouse Equity Act of 1984).
IV. Child survivor benefits: none from plan, social security
nnly
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Subject: FY86 Budget Proposals for Civil Service
January 11, 1985 (expected, but not final)
1. Federal pay: pay cut of 5% effective October 1, 1985
2. Health benefits: re-introduce voucher but delete provisions
requiring USPS and DC to pay agency share of retiree health
premium
COLA. One year freeze on January 1986 COLA. Thereafter,
COLA would be lesser of change in CPI or GS pay increase.
That "reference amount" would be applied to the first
$10,000 of pension income. Amounts above $10,000 would
be adjusted by 55% of the reference amount. $10K base indexed
to CPI each year.
Retirement age. Administration would change retirement age from
55 to 65. Penalty of 5% per year under age 65 would be phased in
over 10 years. Those under 55 at time of enactment would take
penalty of 1/2% times number of years under age 55 at time of
enactment; then that number times years under age 65 at time
of retirement. Example: someone age 48 at time of enactment
who later retires at age 55 would take a cut of 35% in the
annuity [(55-48) x 1/2% x (65-55)).
Benefit eligibility. Administration would no longer permit unused
sick leave to be credited toward years of service. This proposal
would be phased in over 5 years (in FY86, employee could use 80%
of unused sick leave, FY87, 60%, etc.)
Benefit calculation. Administration would change salary base
from high-3 to high-S salary years. Effective. in three years,
this proposal would not affect current eligibles.
Misc. benefit changes. Minimum benefit and adult student benefit
would be terminated for new eligibles beginning in FY86. Current
recipients would not be affected. Proposal is consistent with prior
prior security changes. ?
Survivor benefits. Administration would change death-in-service
benefit for surviving spouse consistent with social security.
Under current law, survivor gets 55% of annuity deceased employee
eligible for or, lesser of 40% of pay or 55% of potential
annuity projecting service to age 60 regardless of age
or presence of children. Under social security, benefit
granted only where there are children under age 16, and expires
when children become 16.
Contributions. Administration proposes to raise employer contribution
of USPS and DC to full normal cost by 2% per year over 10 years.
Note: NO increase in employee contributions proposed since Admin-
istration wants to cut federal pay by 5 percent.
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