STATEMENT OF HONORABLE DONALD J. DEVINE DIRECTOR OFFICE OF PERSONNEL MANAGEMENT BEFORE THE SUBCOMMITTEE ON CIVIL SERVICE POST OFFICE AND GENERAL SERVICES COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ON CIVIL SERVICE RETIREMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B01152R001001360014-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 5
• Document Creation Date: December 21, 2016
• Document Release Date: March 11, 2008
• Sequence Number: 14
• Publication Date: September 14, 1983
• Content Type: REPORT

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STATEMENT OF
HONORABLE DONALD J. DEVINE
DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT,
SUBCOMMITTEE ON CIVIL SERVICE, POST OFFICE, AND GENERAL SERVICES
COMMITTEE. ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
CIVIL SERVICE RETIREMENT COVERAGE FOR FEDERAL EMPLOYEES
WHO WILL BECOME COVERED BY SOCIAL SECURITY AFTER DECEMBER 31, 1983
SEPTEMBER 14, 1983
MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
I APPRECIATE THE OPPORTUNITY TO APPEAR THIS MORNING TO DISCUSS THE PROBLEM
OF DOUBLE COVERAGE OF NEW FEDERAL EMPLOYEES UNDER BOTH THE SOCIAL SECURITY
AND CIVIL SERVICE RETIREMENT SYSTEMS. I AM ACCOMPANIED BY JAMES MORRISON,
OUR ASSOCIATE DIRECTOR FORM COMPENSATION, AND JEAN BARBER, ASSISTANT DIRECTOR
FOR FINANCIAL CONTROL AND MANAGEMENT.
FEDERAL EMPLOYEES FIRST HIRED AFTER DECEMBER 31, 1983, AND CERTAIN CATEGORIES
OF EMPLOYEES HIRED BY THE GOVERNMENT BEFORE THAT DATE, WILL BE COVERED UNDER
SOCIAL SECURITY AS A RESULT OF THE 1983 SOCIAL SECURITY AMENDMENTS. WHEN
THOSE AMENDMENTS WERE ENACTED., IT WAS RECOGNIZED BY ALL. INVOLVED THAT
THE CONGRESS WOULD HAVE TO ESTABLISH A NEW RETIREMENT SYSTEM FOR THOSE EM-
PLOYEES IN ORDER TO SUPPLEMENT THE SOCIAL SECURITY BENEFITS THAT THEY WILL
BE EARNING. LEGISLATION WILL NOT BE ENACTED BY JANUARY TO ESTABLISH A NEW
SUPPLEMENTAL RETIREMENT PLAN. THEREFORE, THESE EMPLOYEES WILL END UP BEING
COVERED UNDER AND PAYING FOR BOTH THE VERY EXPENSIVE EXISTING CIVIL SERVICE
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RETIREMENT SYSTEM AND SOCIAL SECURITY. AS A RESULT, THEY WILL HAVE TO PAY
A TOTAL OF 14 PERCENT OF THEIR SALARIES FOR EXPENSIVE, INAPPROPRIATE AND
DUAL RETIREMENT COVERAGE.
IT IS IMPORTANT THAT THE PRESENT LAW BE AMENDED TO CORRECT POTENTIAL DUAL
RETIREMENT DEDUCTIONS AND COVERAGE. IT WOULD BE INAPPROPRIATE TO PROVIDE
FULL, PRESENT CIVIL SERVICE RETIREMENT COVERAGE--EVEN TEMPORARILY-TO FEDERAL
EMPLOYEES WHO ARE ALSO COVERED UNDER SOCIAL SECURITY. THIS IS PARTICULARLY
TRUE IF WE REMIND OURSELVES THAT THE CIVIL SERVICE RETIREMENT SYSTEM IS AN
EXTRAORDINARILY GENEROUS SYSTEM. THE EXCESSIVE RETIREMENT COVERAGE THAT WOULD
BE PROVIDED BY CONCURRENTLY PLACING EMPLOYEES UNDER SOCIAL SECURITY AND FULL
CIVIL SERVICE RETIREMENT CAN ONLY CONFUSE AND DEMORALIZE THOSE EMPLOYEES BY
CREATING FALSE EXPECTATIONS REGARDING THEIR FUTURE BENEFITS.
THE COMPTROLLER GENERAL HAS IDENTIFIED FOUR POSSIBLE APPROACHES TO THE
DOUBLE COVERAGE PROBLEM. ONE OPTION IS THAT FEDERAL EMPLOYEES COVERED
BY BOTH SOCIAL SECURITY AND CIVIL SERVICE RETIREMENT MIGHT BE GIVEN A
TEMPORARY TAX CREDIT FOR THE AMOUNT OF THEIR CIVIL SERVICE RETIREMENT
CONTRIBUTIONS. A SECOND OPTION WOULD BE TO COVER EMPLOYEES UNDER CIVIL
SERVICE RETIREMENT, BUT RELIEVE THEM OF.THE OBLIGATION TO FINANCIALLY
CONTRIBUTE TO THE CSRS. THIRD, PARTICIPATION IN THE CIVIL SERVICE
RETIREMENT SYSTEM MIGHT BE MADE VOLUNTARY UNTIL A NEW SUPPLEMENTAL
RETIREMENT PLAN IS ENACTED. FINALLY, EMPLOYEES COULD BE COVERED
SOLELY UNDER SOCIAL SECURITY WHILE A NEW PLAN IS BEING DELIBERATED.
THE ADMINISTRATION STRONGLY OPPOSES GRANTING FEDERAL EMPLOYEES A SPECIAL
TAX CREDIT FOR THE AMOUNT OF THEIR RETIREMENT CONTRIBUTIONS. SUCH A TAX
CREDIT HAS NO PARALLEL IN THE TREATMENT OF PRIVATE SECTOR EMPLOYEES'
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RETIREMENT CONTRIBUTIONS. AS A MATTER OF EQUITY, WE OBJECT TO PREFEREN-
TIAL TAX TREATMENT FOR FEDERAL EMPLOYEES. ALSO, AS THE COMPTROLLER GENERAL
POINTS OUT, THIS OPTION WOULD UNFAIRLY ENABLE EMPLOYEES TO RECEIVE BOTH A
TAX CREDIT FOR THEIR CIVIL SERVICE RETIREMENT CONTRIBUTIONS AND A REFUND OF
THOSE CONTRIBUTIONS, SHOULD THEY LEAVE THE GOVERNMENT. FINALLY, THIS ALTER-
NATIVE WOULD PROVIDE IMMEDIATE RELIEF FROM DOUBLE COVERAGE ONLY IF EMPLOYEES
ADJUSTED THEIR SALARY WITHHOLDINGS FOR INCOME TAX.
WE ALSO FIND THE SECOND OPTION OBJECTIONABLE. THIS REMEDY WOULD PROVIDE
CIVIL SERVICE RETIREMENT COVERAGE, BUT WITH NO EMPLOYEE CONTRIBUTION, AND
WOULD REQUIRE THE INDIVIDUAL'S CIVIL SERVICE RETIREMENT BENEFITS TO BE
OFFSET BY HIS OR HER ENTIRE SOCIAL SECURITY BENEFIT. SINCE THE SUPPLE-
MENTAL RETIREMENT SYSTEM THAT MAY EVENTUALLY BE ENACTED IS LIKELY TO DIFFER
SUBSTANTIALLY FROM THE CURRENT CIVIL SERVICE RETIREMENT SYSTEM, TEMPORARY
CIVIL SERVICE RETIREMEfNT COVERAGE WOULD BE OF QUESTIONABLE VALUE TO NEW
THE THIRD OPTION THE COMPTROLLER GENERAL MENTIONED--VOLUNTARY PARTICIPA-
TION IN THE CIVIL SERVICE RETIREMENT SYSTEM--WOULD BE ATTRACTIVE ONLY TO
EMPLOYEES WITH HIGH INCOMES. CIVIL SERVICE RETIREMENT COVERAGE WOULD BE
OF ONLY LIMITED VALUE DURING THIS TRANSITION PERIOD. DOUBLE CONTRIBU-
TIONS WOULD DISCOURAGE PARTICIPATION BY LOWER-INCOME EMPLOYEES, WHO ARE
LIKELY TO BE RELATIVELY YOUNG AND LESS CONCERNED ABOUT PREPARING FOR THEIR
FINANCIAL SECURITY IN RETIREMENT.
THIS BRINGS US TO THE LAST OF THE FOUR POSSIBILITIES DISCUSSED BY THE COMP-
TROLLER GENERAL: COVERING POST-1983 EMPLOYEES SOLELY UNDER SOCIAL SECURITY
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UNTIL THE NEW SUPPLEMENTAL PLAN IS IN PLACE. EXCLUDING THE AFFECTED EMPLOY-
EES FROM CIVIL SERVICE RETIREMENT COVERAGE AND COVERING THEM UNDER SOCIAL
SECURITY ALONE WOULD NOT SIGNIFICANTLY ENDANGER THEIR FINANCIAL SECURITY
IN THE INTERIM PERIOD BEFORE ESTABLISHMENT OF THE NEW SUPPLEMENTAL RETIRE-
MENT PLAN. THIS IS TRUE BECAUSE, EVEN IF THEY WERE COVERED UNDER THE CIVIL
SERVICE RETIREMENT SYSTEM, FORMER EMPLOYEES REHIRED BY THE GOVERNMENT AFTER
A BREAK IN SERVICE WOULD HAVE TO WORK FOR AT LEAST A YEAR BEFORE THEY WOULD
BE ENTITLED TO A NORMAL ANNUITY BASED ON THEIR PREVIOUS SERVICE. NEW EMPLOY-
EES WOULD HAVE TO WORK FOR AT LEAST 5 YEARS BEFORE GAINING TITLE TO AN ANNUITY.
EVEN NEW EMPLOYEES WOULD HAVE TO WORK AT LEAST 18 MONTHS BEFORE THEIR SPOUSES
WOULD BE ENTITLED-TO SURVIVOR ANNUITIES BASED ON THE EMPLOYEES' DEATH IN
SERVICE. IN ANY EVENT, WHEN A SUPPLEMENTAL PLAN IS CREATED, WE WOULD HOPE
AND RECOMMEND THAT EMPLOYEES BE ALLOWED TO PURCHASE RETROACTIVE CREDIT FOR
THE PERIOD PRECEDING ENACTMENT OF THE SUPPLEMENTAL PLAN.
WE RECOGNIZE THAT THIS OPTION MAY CREATE SOME CONCERN THAT THE LOSS OF IN-
COME TO THE CIVIL SERVICE RETIREMENT FUND FROM NEW EMPLOYEES WOULD CREATE
FINANCIAL PROBLEMS IN THE FUTURE FOR THE FUND. FRANKLY WE THINK THIS CON-
CERN IS MISDIRECTED, SINCE ANY FINANCIAL PROBLEM FOR THE FUND WOULD
ARISE ONLY MANY YEARS IN THE FUTURE. NEVERTHELESS, WE WOULD BE WILLING TO
CONSIDER A REQUIREMENT THAT THE GOVERNMENT CONTINUE TO MAKE CONTRIBUTIONS
TO THE CIVIL SERVICE RETIREMENT FUND DURING THE TRANSITION PERIOD IN THE
SAME AMOUNT IT WOULD HAVE MADE HAD THE NEW EMPLOYEES BEEN COVERED.
CONCERNS HAVE ALSO BEEN RAISED THAT EMPLOYEES MIGHT BE DENIED CERTAIN BENEFITS,
SUCH AS DISABILITY ANNUITIES AND SURVIVOR ANNUITIES FOR THEMSELVES OR THEIR
DEPENDENTS, WHICH THEY MIGHT OTHERWISE BE ELIGIBLE FOR DURING THE PERIOD WHILE
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THE NEW PLAN IS BEING DEVELOPED. HERE AGAIN, WE WOULD BE WILLING TO
CONSIDER SOMEARRANGEMENT TO ENSURE PROTECTION FOR THESE INDIVIDUALS.
IN 'SUMMARY, WE BELIEVE THAT EXCLUSION FROM CIVIL SERVICE RETIREMENT
COVERAGE OF FEDERAL EMPLOYEES WHO WILL BE COVERED BY SOCIAL SECURITY
IS THE MOST APPROPRIATE SOLUTION TO THE DOUBLE COVERAGE PROBLEM. WE
ARE HOPEFUL THAT A NEW SUPPLEMENTAL RETIREMENT SYSTEM WILL BE ENACTED
SOON FOR THOSE FEDERAL EMPLOYEES WHO WILL BE COVERED BY SOCIAL SECURITY
STARTING IN 1984. THE ADMINISTRATION HOPES THAT THIS NEW SUPPLEMENTAL
RETIREMENT PLAN BE IN PLACE BY 1985. WE ARE EAGER TO ASSIST THE MEMBERS
AND COMMITTEES OF CONGRESS WITH TECHNICAL SUPPORT FOR LEGISLATION TO
REFORM THIS IMPORTANT ITEM OF PUBLIC BUSINESS.
THANK YOU FOR THE OPPORTUNITY TO DISCUSS THIS PROBLEM. I WILL BE HAPPY
TO ANSWER YOUR QUESTIONS.
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