OPM PROPOSED REPORT ON H.R. 2300 THE CIVIL SERVICE SPOUSE RETIREMENT EQUITY ACT.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00338R000300440006-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 7
• Document Creation Date: December 21, 2016
• Document Release Date: August 28, 2008
• Sequence Number: 6
• Publication Date: March 27, 1984
• Content Type: MEMO

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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 2O O!
March 27, 1984
LEGISLATIVE FAM11RAL I~ in r
TO: Legislative Liaison Officer
Department of Defense
Department of State
Central Intelligence Agency
SUBJECT: OPM proposed report on H.R. 2300, the "Civil Service
Spouse Retirement Equity Act."
The Office of Management and Budget requests the views of your
agency on the above subject before advising on its relationship to
the program of the President, in accordance with OMB Circular A-19.
A response to this request for your views is needed no later than
April 20, 1984.
Questions should be referred to Elaine Rideout
(395-6156 ) or to Hilda Schreiber
the legislative analyst in this office.
461.01 / 0 6 C- 4 0P y// p le-N "7.d-ems - _ lases
Assistant Director for
Enclosures f sislaA [
( 395-4650 )
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STAT
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United States
Office of
Personnel Management
Honorable William D. Ford
Chairman
Committee on Post Office
and Civil Service
U.S. House of Representatives
Washington, D.C. 20515
Washington, D.C. 20415
This is in reply to your request for the views of the Office of Personnel
Management on H.R. 2300, the "Civil Service Spouse Retirement Equity Act."
Section 3 of H.R. 2300 would automatically entitle a former spouse (defined
as one who had been married to a Federal employee for at least ten years
during the employee's Government service) to a pro rata share of half of
the employee's Civil-Service Retirement annuity, unless a court order or
spousal agreement provides otherwise. The pro rata share would equal the
ratio of (1) the number of years of Federal service during which the for-
mer spouse and the employee were married to (2) the total number of years
of the employee's Federal service. The former spouse's right to this
annuity would terminate if the former spouse remarried before age 60.
The retired employee's annuity would be reduced by the annuity paid to
the former spouse, but this reduction would be disregarded in calculating
any survivor annuity. If a disability annuitant became reemployed by the
Government, payment of annuity to his or her former spouse would continue,
but the employee's pay would be reduced by the amount of the former spouse's
annuity, and the employing agency would reimburse the Retirement Fund for
the cost of the payments to the former spouse.
The former spouse would also be entitled to the same pro rata share of the
survivor annuity that is payable based on the employee's Federal service,
unless otherwise provided by-a,-court order or spousal agreement. Any part
of the survivor annuity not pdid*to a former spouse would be available for
a surviving spouse, but the sum of the survivor annuities could not exceed
55 percent of the retiree's annuity. The right to a survivor annuity would
terminate upon remarriage before age 60 but would be reinstated if the
remarriage later ended. The retiree's annuity would be reduced to provide
the survivor annuity. This reduction would be' eliminated if the former
spouse's right to a survivor annuity terminated because of death or
remarriage._ However, the retiree could elect to continue the reduction in
order to inrease the amount of the survivor annuity available to a subse-
quent spouse. ? No change would be made with respect to any survivor annuity
to the retiree's surviving spouse if a former spouse's survivor annuity is
terminated after the retiree's death.
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Honorable William D. Ford 2
A retiring employee who is married and/or has a former spouse would
automatically have his or her annuity reduced to provide a survivor
annuity for the spouse and/or former spouse. The survivor annuity
could be waived or reduced by a joint election of the employee and
the spouse or former spouse. The employee could make such an elec-
tion alone if he or she could establish to OPM's satisfaction that
the whereabouts of the former spouse could not be determined. OPM
would be required, "to the maximum extent practicable," to inform
spouses and former spouses of their rights to Civil Service Retire-
ment benefits.
If a retiree has a former spouse who is entitled to a survivor annuity,
the retiree could elect to provide an additional survivor annuity for
his or her current spouse and/or any other former spouse. The total
amount of additional annuities with respect to one retiree could not
exceed 55 percent of the retiree's annuity. The retiree would have
to pay for the entire actuarial value of the additional annuity, and
could elect to provide such an annuity only if in good health. No
cost-of-living adjustments would apply to additional survivor
annuities unless authorized by OPM regulations. Section 8345(f) of
title 5, United States Code, which establishes a floor on Civil
Service annuities, would not apply to additional survivor annuities.
Section 3 of the bill would also entitle a former spouse to a pro rata
share of half of an employee's lump-sum retirement credit in case the
employee separates from the service and takes a refund of his or her
retirement contributions, or the unexpended balance to the employee's
or annuitant's credit in the Fund in case he or she dies.
The provisions of H.R. 2300 would take effect 120 days after enactment
and, with certain exceptions, would apply in cases where divorce, annul-
ment, or legal separation occurred after the effective date. In cases
where the marriage dissolved before the effective date, a survivor
annuity would be provided to the former spouse only if a court order or
spousal agreement so provides. Court orders and spousal agreements
could be made at any time before retirement, in the case of current
employees, and within whatever period after the effective date that
OPM prescribes, in the case of current retirees. If the employee or
former employee is married on the effective date and has been married
for more than one,-year, his or her current spouse would have to con-
cur in an election to provide a survivor annuity for a former spouse.
Finally, H.R. 2300 would provide a survivor annuity to the former
spouse of a retiree who died before the effective date, if the retiree
was married to the former spouse at the time of retirement, failed to
elect not'tY provide a survivor annuity, subsequently became divorced,
and did not leave a surviving spouse who was entitled to a Civil Service
survivor annuity.
The Office of Personnel Management opposes enactment of H.R. 2300.
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Honorable William D. Ford 3
Current law (5 U.S.C. 8345(j)) already enables OPM to recognize State
court orders awarding some or all of an employee's annuity to a former
spouse, and we believe this is an adequate protection of the rights of
former spouses with respect to the employee's annuity, since it recog-
nizes the primary responsibility of State courts to determine, on a
case-by-case basis, a former spouse's entitlement to a portion of the
employee's retirement benefits as a part of the courts' decision on all
aspects of the divorce. Creating a statutory assumption of automatic
entitlement by the former spouse regardless of the circumstances of a
particular case, as H.R. 2300 would do, could foster new inequities in
some cases.
H.R. 2300 resembles provisions of the Foreign Service Act of 1980 and
the Intelligence Authorization Act for Fiscal Year 1983, providing
benefits for former spouses of Foreign Service officers and CIA em-
ployees serving overseas, respectively. The Congressional considera-
tion of the relevant portions of these two statutes focused in large
part on the effects on a former spouse that follow from the unique
nature of employment in the Foreign Service and overseas employment
with the CIA--residence in foreign countries, frequent relocations,
the spouse's involvement with the employee's duties, and the conse-
quent likelihood that a spouse is unable to pursue his or her own
career and establish separate retirement benefits. These conditions
do not characterize the careers of most employees covered under the
Civil Service Retirement System.
Although this bill is designed to benefit former spouses who were
completely financially dependent on their Federally-employed spouses
throughout long-term marriages, it would also impose an unreasonable
and inequitable burden on many Government employees whose former
spouses' incomes are equal to or greater than their own. H.R. 2300
implicitly recognizes this potential inequity by providing that the
automatic provision of benefits to a divorced spouse may be superseded
by a court order or spousal agreement. We agree that variables must
be considered in individual cases, such as the financial status of both
parties, property settlements, children involved, and the reasons for
the divorce. Thus, we do not see a reason to abandon the present law,
which simply provides for disposition of Civil Service Retirement bene-
fits by State courts on a case-by-case basis.
We also note that new costs would be incurred by the Retirement System,
largely because of the bill's retroactivity. The reduction in the em-
ployee's annuity to provide for a survivor annuity (21/2percent of the
first $360p,;plus 10 percent of the remainder) falls far short of the
true cost.of the survivor annuity. We estimate that the annuity reduc-
tion pays only one-third of the cost of the survivor's benefit. Because
H.R. 2300 would require survivor annuities to be paid in many cases where
none would be paid under current law (either because the employee never
remarried after being.divorced.or elected not to provide a survivor
annuity for his or her-spouse at the time of retirement), it would increase
the cost to the Retirement System of providing survivor benefits. While it
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Honorable William D. Ford - 4
is impossible for us to know how many former spouses would become entitled
to benefits if H.R. 2300 were enacted, the number could be significant,
particularly because the bill would provide survivor annuities to former
spouses of employees who have been retired or dead for several years.
Each one-percent increase in the number of survivor annuities payable
would cost about $50 million a year. In cases where the retiree died
before the bill's effective date, the reduction in the retiree's annuity
to provide a survivor annuity presumably would have been eliminated at
the time of divorce, further increasing the cost to the Government of
providing the annuity.
Section 3(b) of H.R. 2300 concerns service credit under 5 U.S.C. 8332(k)
and 8334(d). The former requires that employees on leave-without-pay
while serving full-time with an employee organization must make retire-
ment contributions for such periods after July 17, 1966, in order to
receive credit for those periods. For such periods before July 18, 1966,
a maximum of 6 months in a calendar year may be credited if the employee
fails to make a deposit. Section 8334(d) requires an employee who has
received a refund of Civil Service Retirement contributions to redeposit
the refund, with interest, in order to receive credit for the period of
service covered by the refund. Under section 3(b) of H.R. 2300, these
periods could be used in computing annuities for former spouses, even
if they were not covered by retirement contributions of the employee.
This provision is unreasonable and inequitable, since it would allow
a former spouse to receive credit for periods for which neither the
employee nor the employee's surviving spouse could receive credit.
Accordingly, this provision could enable the former spouse to receive
more than a pro rata share of the employee's annuity and the survivor
annuity.
Finally, it should be noted that the provision concerning additional
survivor annuities is impractical and unrealistic. The employee would
have to pay the full actuarial value of such an annuity, which would
already have been reduced by 21/2 percent of the first $3600 and 10
percent of the remainder in order to provide the basic survivor
annuity. Moreover, it is likely that the employee's annuity will
have been apportioned between the employee and the former spouse.
From this already reduced annuity, yet a further reduction would be
required to provide the second spouse with an additional survivor
annuity, and even where the employee and second spouse are the same
age, this reduction would have to be approximately 20 percent of the
employee's unreduced annuity. Thus, few employees would be willing
or financially able to-provide an additional benefit for the second
spouse.
In addition to these substantive objections to H.R. 2300, we would
like to point out the following technical deficiencies in the bill's
provisions' 1.
(1) The use of a capital letter in denoting a section ("8341A") is
inconsistent with the style used throughout title 5, U.S. Code.
"8341a" should be used instead.
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Honorable William D. Ford 5
(2) The definition of "court" should stipulate whether or not
territorial courts are included.
(3) Proposed section 8341A(c)(3)(C) of title 5, U.S.Code, should
be amended by inserting "or spouse" after "If a former spouse".
This change is needed in order to reflect that an additional
survivor annuity may be provided either for a former spouse or
a current spouse. Similarly, in section 8341A(c)(4), "spouse's
or" should be inserted before "former spouse's death".
(4) Proposed section 8341A(c)(3)(C) provides that, if a former spouse
predeceases the employee or remarries before age 60, the annuity
reduction or salary allotment by which the employee is providing
for an additional survivor annuity will be terminated and what-
ever contributions the employee has made for this purpose will
be refunded, but only to the extent that the employee's contri-
butions have exceeded the actuarial cost of providing additional
survivor benefits for the period such benefits were provided.
The latter clause is confusing. There is no actuarial cost of
providing an additional survivor annuity unless such an annuity
is actually paid. If such an annuity has been paid, the retiree
must be deceased, so it is unclear to whom his or her contribu-
tions would be refunded. In any event, this kind of payment
should never be refunded, since it, in essence, amounts to a
purchase of insurance.
(5) In the proposed new 5 U.S.C. 8339(j)(4)(B), as added by section
4(a) of the bill, "or" should be changed to "and".
(6) Section 6(d) of the bill refers erroneously to 5 U.S.C. 8339(b)(2).
This should be changed to 5 U.S.C. 8339(j)(2).
Although the Office of Personnel Management cannot support H.R. 2300
for the reasons we have cited, there are two defects in the Civil
Service Retirement System with respect to survivor benefits which we
strongly believe should be corrected. One of these defects is that,
although the Civil Service Retirement law since 1980 has required
retiring employees who waive survivor benefits to inform their spouses
of the waiver, spousal consent to the waiver is not required. The
President's proposed Pension,Equity Act'(H.R. 4032) would require such
consent under private pension plans, and we favor amending the Civil
Service Retirement law to impose a similar requirement under the Civil
Service Retirement System.
Second, while current law allows us to'apport.ion a retired employee's
annuity to a_former'spouse, subject to a court order, there is no
authority under which we can pay a survivor annuity to a former spouse.
The Office-of Personnel Management would support an amendment author-
izing payment of survivor benefits to former spouses pursuant to a
court order ia.the same way we can pay a portion of a retired employee's
annuity to a former spouse. Such a provision would conform to the re-
quirements the President's proposed Pension Equity Act would impose on
private-sector pension plans.
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Honorable William D. Ford 6
We believe these changes would significantly enhance the equity of the
Retirement System with respect to spouses and former spouses of Federal
employees, and we would be pleased to work with the Committee on
drafting such changes.
The Office of Management and Budget advises that there is no objection to
the submission of this report from the standpoint of the Administration's
program.
Sincerely,
Donald J. Devine
Director
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