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Congressional and federal pension review : hearings before the Subcommittee on Post Office and Civil Service of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, first session, May 15, 1995 ... May 22 and June 19, 1995 ... online

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Online LibraryUnited States. Congress. Senate. Committee on GoveCongressional and federal pension review : hearings before the Subcommittee on Post Office and Civil Service of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, first session, May 15, 1995 ... May 22 and June 19, 1995 ... → online text (page 1 of 40)
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S. Hrg. 104-293

CONGRESSIONAL AND FEDERAL PENSION REVIEW



Y 4.G 74/9: S. HRG. 104-293

Congressional and Federal Pension R...

TARINGS

BEFORE THE

SUBCOMMITTEE ON POST OFFICE AND
CIVIL SERVICE

OF THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION



MAY 15, 1995
CONGRESSIONAL PENSION REVIEW

MAY 22 AND JUNE 19, 1995
FEDERAL PENSION REVIEW



Printed for the use of the Committee on Governmental Affairs




«-s.^



U.S. GOVERNMENT PRINTING OFFICE
91-055 cc WASHINGTON : 1996

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-052183-1



\

S. Hrg. 104-293

CONGRESSIONAL AND FEDERAL PENSION REVIEW

4. G 74/9: S. HRG. 104-293

nqressional and Federal Pension R...

TARINGS

BEFORE THE

SUBCOMMITTEE ON POST OFFICE AND
CIVIL SERVICE

OF THE

COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION



MAY 15, 1995
CONGRESSIONAL PENSION REVIEW

MAY 22 AND JUNE 19, 1995
FEDERAL PENSION REVIEW



Printed for the use of the Committee on Governmental Affairs







w w J



U.S. GOVERNMENT PRINTING OFFICE
91-055 cc WASHINGTON : 1996



For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-052183-1



COMMITTEE ON GOVERNMENTAL AFFAIRS

WILLIAM V. ROTH, Jr., Delaware, Chairman
TED STEVENS, Alaska JOHN GLENN, Ohio

WILLIAM S. COHEN, Maine SAM NUNN, Georgia

FRED THOMPSON, Tennessee CARL LEVIN, Michigan

THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas

CHARLES E. GRASSLEY, Iowa JOSEPH I. LIEBERMAN, Connecticut

JOHN McCAIN, Arizona DANIEL K. AKAKA, Hawaii

BOB SMITH, New Hampshire BYRON L. DORGAN, North Dakota

Franklin G. Polk, Staff Director and Chief Counsel
Leonard Weiss, Minority Staff Director
Michal Sue Prosser, Chief Clerk



SUBCOMMITTEE ON POST OFFICE AND CIVIL SERVICE

TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas

JOHN McCAIN, Arizona DANIEL K. AKAKA, Hawaii

BOB SMITH, New Hampshire BYRON L. DORGAN, North Dakota

Patricia A. Raymond, Staff Director
Kimberly Weaver, Minority Staff Director
Nancy Langley, Chief Clerk

(ID



CONTENTS



Opening statements: Pa e e

Senator Stevens L 3J> 71

Senator Pryor 11. 7°

Senator Akaka 39, 78

Senator Dorgan 79

WITNESSES

Monday, May 15, 1995

Hon. Richard H. Bryan, U.S. Senator from the State of Nevada 2

Hon. James P. Moran, Representative in Congress from the State of Virginia . 13
William E. Flynn, III, Associate Director for Retirement and Insurance, U.S.

Office of Personnel Management 18

Johnny C. Finch, Assistant Comptroller General, General Government Pro-
grams, U.S. General Accounting Office; accompanied by Robert Shelton,
Assistant Division Director for Human Resource Management Issues, Gen-
eral Government Division 24

Monday, May 22, 1995

Carolyn L. Merck, Specialist in Social Legislation, Education and Welfare
Division, Congressional Research Service 33

Johnny C. Finch, Assistant Comptroller General, General Government Pro-
grams, General Accounting Office; accompanied by Bob Shelton, Assistant
Division Director, Federal Human Resource Management Issues, General
Government Division 40

Monday, June 19, 1995

Louis J. Freeh, Director, Federal Bureau of Investigation 72

Stephen H. Greene, Deputy Administrator, Drug Enforcement Administra-
tion 74

John Sturdivant, National President, American Federation of Government

Employees, AFL-CIO 85

Robert M. Tobias, National President, National Treasury Employees Union .... 87
Sonya Constantine, Acting National President, National Federation of Federal

Employees 89

Moe Biller, President, American Postal Workers Union, AFL-CIO 96

Vince Palladino, President, National Association of Postal Supervisors 99

Ted Carrico, Secretary-Treasurer, National Association of Postmasters of the

United States 100

Roger W. Moreland, Vice President, National Rural Letter Carriers' Associa-
tion 102

William P. Brennan, President, National League of Postmasters 103

Bruce L. Moyer, Executive Director, Federal Managers Association 109

Robert S. Duncan, Past President, National Council, Social Security Manage-
ment Associations 110

Carol A. Bonosaro, President, Senior Executives Association 112

Helene A. Benson, President, Professional Managers Association 114

Charles R. Jackson, President, National Association of Retired Federal Em-
ployees 117

Robert T. Mansker, Congressional Employee 120



(III)



IV

Page

Alphabetical List of Witnesses

Benson, Helene A.:

Testimony 114

Prepared statement 262

Biller, Moe:

Testimony 96

Prepared statement 239

Bonosaro, Carol A.:

Testimony 112

Prepared statement 257

Brennan, William P.:

Testimony 103

Prepared statement 247

Bryan, Hon. Richard H.:

Testimony 2

Prepared statement 125

Carrico, Ted:

Testimony 100

Prepared statement 243

Constantine, Sonya:

Testimony 89

Prepared statement 237

Duncan, Robert S.:

Testimony 110

Prepared statement 253

Finch, Johnny C:

Testimony 24, 40

Prepared statement 129, 184

Flynn, William E. Ill:

Testimony 18

Prepared statement 127

Freeh, Louis J.:

Testimony 72

Prepared statement (with attachments) 203

Greene, Stephen H.:

Testimony 74

Prepared statement 211

Jackson, Charles R.:

Testimony 117

Prepared statement 264

Mansker, Robert T.:

Testimony 120

Prepared statement 268

Merck, Carolyn L.:

Testimony 33

Prepared statement 178

Moran, Hon. James P.:

Testimony 13

Moreland, Roger W.:

Testimony 102

Prepared statement 245

Moyer, Bruce L.:

Testimony 109

Prepared statement 248

Palladino, Vince:

Testimony 99

Prepared statement 242

Sturdivant, John:

Testimony 85

Prepared statement 212

Tobias, Robert M.:

Testimony 87

Prepared statement 234



V

Page

APPENDIX

Prepared statements of witnesses in order of appearance 125

Hon. Alan K. Simpson, a U.S. Senator from the State of Wyoming, prepared

statement 127

Federal Retirement — Benefits for Members of Congress, Congressional
Staff, and Other Employees, May 1995— GAO Report No. GAO GGD-

95-78 135

GAO questions and answers submitted by Mr. Finch from Senator Stevens . 194

Report on Congressional Pensions submitted by Mr. Finch 270

William H. Quinn, National President, National Postal Mail Handlers

Union 345

Judge William A. Pope, II, President of the Federal Administrative Law

Judges Conference 345

Gerald W. McEntee, International President, and William Lucy, Inter-
national Secretary-Treasurer of the AFSCME 349

Kenneth T. Lyons, National President, National Association of Government

Employees 349

Questions and answers from William E. Flynn, III, in letter to Senator
Stevens, dated July 19, 1995 350



CONGRESSIONAL PENSION REVIEW



MONDAY, MAY 15, 1995

U.S. Senate,
Subcommittee on Post Office and Civil Service,

of the Committee on Governmental Affairs,

Washington, DC.

The Subcommittee met, pursuant to notice, at 2:08 p.m., in room
SD-342, Dirksen Senate Office Building, Hon. Ted Stevens, Chair-
man of the Subcommittee, presiding.

Present: Senators Stevens, Pryor, and Dorgan.

OPENING STATEMENT OF SENATOR STEVENS

Senator Stevens. Good afternoon. Today and next Monday, this
Subcommittee will be taking a first look at the important topic of
Federal employee pension plans. Today's hearing will focus on the
mechanics of Federal pension plans, looking at the Congressional
features of the Federal pension plans and contemplating whether
there should be a modification to those Congressional features. The
focus at next Monday's hearing will be on Federal pension plans
generally, how they compare to private sector pension plans, and
whether Congress should be looking at any Legislative initiatives
to modify any of those plans.

We have also set aside June 19 to hear from representatives of
Federal employees, as well as Federal retiree representatives.

Now, let me say at the outset that many of us are aware that
there has been considerable media coverage recently regarding pen-
sions of former Members of Congress who retired voluntarily or
were involuntarily retired by their constituents last November. I
emphasize that they all retired under the old system, the Civil
Service Retirement System, and not the system that I helped au-
thor, the Federal Employees Retirement System.

I anticipate that these retired Members' benefits are extreme ex-
amples of Congressional pension coverage. The average Member of
Congress and Congressional employees are not nearly as fortunate
as those who retired after so many years of service. I would also
point out that when it comes to Federal employees other than
Members of Congress, I do believe that as Members we have an ob-
ligation to the taxpayers to do our best to attract the best qualified
people and to cultivate their talents in the Federal system at a rea-
sonable cost.

Part of the attractiveness of employment, whether it is Federal
or in the private sector, is what kind of a future an individual can
build toward. This future has as its foundation a retirement pro-
gram. When people are attracted to the Federal service, I believe

(l)



we owe it to them to provide a retirement system that is adequate
for their retiring years and competitive with that provided in the
private sector.

I hope that this hearing today will review Congressional pension
coverage for Members and Congressional staff, and help draw some
conclusions as to the appropriateness of the Federal pension cov-
erage.

I am pleased that you are here today, Senator Bryan. You were
the one to make the first comments on the floor concerning the
Federal pension system. It was pursuant to your suggestion that
Senator Dole indicated that we would hold this hearing and we are
holding the hearing to follow up on the Majority Leader's commit-
ment to you.

Following Senator Bryan, we will hear from Congressman Jim
Moran, of Virginia. Following Congressman Moran's testimony, we
will hear from Ed Flynn, Associate Director for Retirement and In-
surance of the Office of Personnel Management. Our final witness
will be Johnny Finch, the Assistant Comptroller General for the
Government Accounting Division, and accompanying Mr. Finch will
be Bob Shelton, the Assistant Division Director for Resource Man-
agement Issues of the General Government Division of GAO.

That said, Senator, we are happy to hear your statement.

I might ask if my friend, Senator Dorgan, has an opening state-
ment of any kind.

Senator Dorgan. No, Mr. Chairman. I am anxious to hear Sen-
ator Bryan, and I appreciate your calling this hearing.

TESTIMONY OF HON. RICHARD H. BRYAN, 1 U.S. SENATOR
FROM THE STATE OF NEVADA

Senator Bryan. Mr. Chairman, let me just preface my comments
by expressing my appreciation to you for convening this hearing.

By way of background, I became involved in this issue about a
year ago at a town hall meeting. A constituent rose to say, look,
why is the pension system that Members of Congress — why is it so
much more generous than other Federal civil service employees.
My initial response was that I did not know that that was the case,
but that if it were, I would introduce legislation to provide some
compatibility and equity between those positions.

So it is with that background, Mr. Chairman, that I have intro-
duced Senate bill 228, which is designed to restore equity in the
Congressional pension system. To accomplish this objective, Con-
gressional retirement benefits are placed on a parity with the pen-
sions of other Federal civil servants.

Under current practice, Members of Congress and their staffs re-
ceive a more generous retirement benefit which, in my view is not
defensible and it is not acceptable. Under the present retirement
system, Members of Congress pay slightly more into their Federal
pension plans than do other Federal workers, but even taking con-
sideration the additional contribution that is made, the retirement
benefit which Members of Congress receive is substantially more
beneficial than others that are part of the retirement system.



•The prepared statement of Senator Bryan appears on page 125.



This is true, Mr. Chairman, whether one is under the old system,
the Civil Service Retirement System, or under the new system, the
Federal Employees Retirement System, and I would acknowledge,
as you, Mr. Chairman, pointed out, that the new system is consid-
erably less generous than the old. The CSRS, or the Civil Service
Retirement System, covers Members of Congress and Federal em-
ployees who were employed prior to January 1, 1984. The new sys-
tem, FERS, as you and Senator Dorgan both know, is designed to
cover Members and employees thereafter.

I have constructed a chart there that I think makes the case. The
system differs in two substantial ways in terms of the way Mem-
bers of Congress and their staffs are treated versus other Federal
employees. The accrual rate — that is, the amount that one would
receive annually — in CSRS for Members of Congress is 2.5 percent
a year. So a Member who had 10 years of service under the old sys-
tem would get 25 percent of his or her average the top 3 years in
Congress. Other Federal employees under the old system make a
contribution — the accrual rate is 1.5 percent for years 1 through 5,
1.7 percent years 6 through 10, and 2 percent after 10 years of
service.

Under the FERS, the Federal Employees Retirement System, the
accrual rate is 1.7 percent for years 1 through 20. So in a 10-year
period of time, a Member of Congress or his or her staff would get
a 17-percent pension of the average high 3 years. The Federal Em-
ployees Retirement System accrual rate for those who are part of
the civil service under the FERS system is 1 percent under age 62,
which under the hypothetical I have just given would be 10 per-
cent, as opposed to 17 percent.

The contribution rate does differ, as I have indicated. CSRS for
Members of Congress is 8 percent. For other Federal employees
other than Members of Congress and their staffs, it is 7 percent.
The FERS contribution rate for Members of Congress and their
staffs is 1.3 percent; for other civil service employees, 0.8 percent.
But even with that additional contribution made by Members of
Congress and their staffs, the system is still substantially more
generous.

Two examples, if I might cite them, just to illustrate the point.
If a Member of Congress retires in 1996, assuming no increase in
salary for Members of Congress in 1996, the average high-3 salary
would be $133,600. That means that a Member of Congress en-
rolled with the Civil Service Retirement System with 20 years of
experience would receive a pension in 1997 of $66,800. That same
civil service employee under the old system would receive for the
same number of years of service a retirement benefit of $48,764 on
an annual basis.

Mr. Chairman, I am going to be brief because I know your time
is pressing and I do respect the fact that you have other witnesses.
To make the point again with respect to the FERS system which
has been in effect since 1984, a Member of Congress who would
have 20 years of service would receive a pension of $45,424. That
same retirement benefit for other civil service employees with the
same 20 years of service would be $26,720. So the difference under
the new system, less pronounced than under the old, is still the dif-
ference between $45,424 and $26,720.



For me, Mr. Chairman and Members of this Subcommittee, it is
simply a matter of fairness. Members of Congress should not re-
ceive greater retirement pensions than other civilian Federal em-
ployees. Whether a person works in Congress, the Department of
Transportation, or the Department of Health and Human Services,
all should be treated equally under the system, and my bill is de-
signed to accomplish that purpose.

The bill does three things. First, it provides a retirement cap so
that no Member of Congress will receive a retirement benefit that
is higher than the Member's final rate of pay before his or her re-
tirement.

Second, it changes the accrual formula under CSRS and FERS
so that benefits paid are the same for all Federal employees, in-
cluding Congress, and let me emphasize that change would be pro-
spective only. Under the provisions of our legislation, that would
take place in 1997, there being some question as to whether or not
the recent constitutional amendment that was ratified — whether or
not it is possible to make a change during any one session of the
Congress, and so that is why the January 1997 date.

Third, it changes the percentage contribution paid by Members
of Congress into the retirement so that it is equal to all other em-
ployees.

Mr. Chairman and Members of this Subcommittee, I believe it is
essential to show that Members of Congress are receiving the same
treatment as other Federal employees. Earlier in this session of
Congress, with bipartisan support, as a carryover from legislation
that was introduced in the last session, we enacted the Congres-
sional Accountability Act, which I think makes that declaration of
principle. I support that, and I believe that in a similar vein we
should have a retirement system that is no more generous than
others who are part of the civil service system.

Mr. Chairman, with that, I thank the Chair for indulging me,
and I will be happy to respond to any questions.

Senator Stevens. Well, I just have a few questions. I do expect
we are going to have a vote here pretty soon.

It is my understanding that there is a provision here that will
limit future compensation of retirees to the final annual rate of
pay. Is that right?

Senator BRYAN. That is correct, Mr. Chairman, so that a Member
who retires in a given year — presently, $133,600, I believe, is the
number. Prospectively, even with the Cost of Living Adjustments,
you would never receive a higher pension than was your average —
or, actually, the last year in which you were a Member of Congress.
So the Chair is correct.

Senator Stevens. That is prospective only now.

Senator Bryan. That is prospective.

Senator Stevens. Would it cover those who have already retired?

Senator Bryan. No. This would be designed prospectively. In
fact, I think there might be some constitutional — I don't represent
myself as a constitutional scholar, Mr. Chairman, but I think retro-
actively there would be some question.

Senator Stevens. I agree with you. That was the basis for FERS.

Senator BRYAN. Right.



Senator Stevens. And we have made that applicable to those
who came into Government after 1983 or those who voluntarily
went into FERS.

Now, your bill is prospective in nature all the way through, is it
not?

Senator Bryan. Yes, that is correct. All of us that are currently
in the Congress have at least — those of us, at least, who have been
here for one Congress have accrued benefits. Under the system
which I have described, nothing would change with respect to those
years that we have accrued. The change would be prospective and,
Mr. Chairman, would begin in January of 1997 if this legislation,
or a piece of legislation similarly designed, is enacted.

Senator Stevens. The reason that some of the retirees were able
to reach the point where they were receiving more money than
they received on the last day that they were employed by the Con-
gress was that for a number of years Congress refused to give itself
the Cost of Living Adjustments, but it never failed to give it to the
retirees. That meant that while the Congressional salary was
standing still, the retirees' salaries were being increased every year
by the addition of the COLA's.

I would like to explore with you a basic fairness issue with re-
gard to retirement income. Regarding capping Members retirement
pensions, I note that you do not propose that a similar prohibition
be placed upon Federal retirees in general.

Senator Bryan. I do not.

Senator Stevens. So it would only be Members of Congress and
their Congressional employees that would be subject to that limit?

Senator Bryan. Yes.

Senator Stevens. I have got to tell you I am going to be forced
to question that judgment. If we are going to have equality, we
ought to have equality, period.

Senator Bryan. That is something that certainly ought to be con-
sidered, Mr. Chairman. I agree.

Senator Stevens. Now, Federal service performed before the en-
actment of your legislation would be computed under the Civil
Service Retirement System or the Federal Employees Retirement
System as we currently know them, and additional service would
be computed, according to your bill, after its effective date?

Senator Bryan. That is correct, Mr. Chairman.

Senator Stevens. I think the contribution rates will then change
on the effective date, also.

Senator Bryan. That is correct, so that they would be har-
monized with what Federal civil service currently pays either
under the old system or the new system, depending upon which
one the Member is a part of.

Senator Stevens. And the Civil Service Retirement System ac-
crual rates of Members and Congressional staff would shift down-
ward for new employees, but not for the older employees. Under
their pension plan, they will continue, is that right?

Senator Bryan. Mr. Chairman, they would be entitled to every-
thing that would be accrued, but after January 1997 they would be
subject to the new accrual rates.

Senator Stevens. Right, but it is not retroactive.

Senator Bryan. It is not retroactive.



Senator Stevens. I am just trying to make sure that we are in
agreement about this. The Federal Employees Retirement System
contribution rate would drop in the defined benefit plan. There are
three tiers to FERS — Social Security, the pension plan, and the
Thrift Savings Plan — from 1.3 percent for Members and Congres-
sional staff to 0.8 percent, as it is for all Federal employees, cor-
rect?

Senator Bryan. Yes, that is correct, for those who are part of the
FERS system, Mr. Chairman. For those who are part of the CSRS
system, it would be reduced from 8 percent to 7 percent prospec-
tively.

Senator Stevens. Right. Now, there is a reduction in Members'
benefits under the Civil Service Retirement System if they retire
before 60 which does not apply to any other Federal employee. Are
you familiar with that?

Senator BRYAN. Mr. Chairman, I am not, and obviously if there
is an inequity as a consequence of that, I would be willing to take
a look at that as well.

Senator Stevens. I would like to give consideration to eliminat-
ing the benefit reductions Members must take if they retire before
the age of 60, if we are going to be consistent. Again, if there is
a playing field, there should be a level playing field.

Are you considering making these future benefit changes apply
to the Federal judiciary, as well as the Executive and Congres-
sional branches.

Senator Bryan. Mr. Chairman, I had not, and that is not the
scope of the bill. I had not given consideration to that.

Senator Stevens. Well, let me just ask you one — and I know it
is sort of unfair, in a way, but I am going to ask the same thing
of Congressman Moran. Do you think there is merit in recognizing
the jeopardy of Congressional employees or Members of Congress
themselves in terms of their length of service?

There is no protection, as there is in other Federal service em-
ployment, for Congressional employees. In order to attract the
quality of Congressional employee that we have sought in the past,
we did provide an incentive. Albeit, they have to contribute more,
but commensurately they do receive more when they retire.

Are you of the opinion that we should develop a career plan for
Congressional staff that would restore the incentive if your bill is
enacted?

Senator BRYAN. Mr. Chairman, it is my view that whatever the
argument may have been historically about the security of tenure
with Government employment, whether we are talking about the
local level, the State level, or the Federal level, I believe, with all
due respect, that can no longer be argued because we have seen in
the past year or two — and, indeed, in the budgets that are being
contemplated we are going to have a dramatic reduction in the size
of the Federal workforce in terms of Federal civil service employ-
ees.

So although historically I think Government employees generally
had a reasonable right, so long as they were performing satisfac-



Online LibraryUnited States. Congress. Senate. Committee on GoveCongressional and federal pension review : hearings before the Subcommittee on Post Office and Civil Service of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, first session, May 15, 1995 ... May 22 and June 19, 1995 ... → online text (page 1 of 40)