Legislative Proposals

Dear Mr. President:

The Office of Personnel Management (OPM) submits the enclosed legislative proposal entitled the "Federal Employees' Benefits Equity Act of 1999." This proposal would eliminate two inequities under current provisions of the Civil Service Retirement System (CSRS) and the Federal Employees' Retirement System (FERS). In addition, it would correct an inequity created by recent court decisions affecting benefits for survivors of law enforcement officers and firefighters who die as Federal employees.

Under current CSRS and FERS law, an employee who has completed 20 years of service as a law enforcement officer, firefighter, nuclear materials courier, or member of the Capitol Police qualifies for an immediate annuity with an enhanced computation if separated from service after reaching age 50. Under FERS only, such employees may retire at any age with at least 25 years of such service. Both CSRS and FERS also provide that immediate retirement with enhanced benefits is available to air traffic controllers who are at least 50 years of age and have completed 20 years of air traffic controller service, or who are any age with at least 25 years of such service.

During service as a law enforcement officer, firefighter, or nuclear materials courier under CSRS and FERS, and as an air traffic controller under FERS, employees have retirement deductions withheld from their pay which are 0.5 percent higher than what employees generally contribute. This additional contribution by the employee partially offsets the additional Government cost of providing the enhanced benefits, which is about 15 percent of basic pay under CSRS and about 13 percent under FERS.

The first inequitable element of current law relates to individuals who have completed the 20-year service requirement but who are prematurely separated from service through no fault of their own due to a reduction in force or disability. If an employee in one of these categories is forced to retire by disability or involuntary separation (not for cause) before age 50, the employee may qualify for an annuity but, even if he or she has already completed 20 years of service, loses entitlement to the benefit enhancement that would have been payable if he or she had been able to remain employed until age 50. The law should be amended to permit application of the special computation formula in such situations.

The second element of current law that creates an inequity involves retirement system employee payroll deductions for employees in special categories. If an employee does not meet the age and service requirements for retirement under the special enhanced provisions, the employee's benefit is computed under the regular CSRS or FERS formula. In this situation, the employee does not under current law receive a refund of the additional 0.5 percent deductions, which are held in the retirement fund. The law should be amended to provide that an employee who retires under the regular formula will receive a refund of the additional 0.5 percent deductions that may have been withheld during service that did not qualify him or her for enhanced retirement benefits.

The third inequity involves survivor benefits ordered in the case of Wassenaar v. OPM, 21 F. 3d 1090 (Fed. Cir., 1994), and in the case of Moore v. OPM, 113 F.3d 216 (Fed. Cir., 1997), by the U.S. Court of Appeals for the Federal Circuit. In Wassenaar, the court's resolution of a perceived statutory ambiguity was based on a misunderstanding of the legislative history of the relevant provisions and contradicted decades of consistent administrative interpretation. In Moore, the court ordered OPM to pay certain survivors a pro rata enhanced benefit that was never intended by Congress and which creates a further inequity.

When a former employee dies after retirement, the CSRS survivor benefit is 55 percent (50 percent under FERS) of the benefit payable to the retiree. In death-in-service cases, the long-standing and consistent interpretation of applicable law by OPM (and previously by the Civil Service Commission) was that the survivor annuity for the surviving spouse was based on the benefit that would have been available to the decedent upon retirement at the time of death.

In this regard, it has been axiomatic that the survivor benefits available upon the death of a retiree should not be less than the benefits that would have been available if the same individual had instead died while still employed, apart from any special benefits payable if death is caused by an on-the-job injury. Not only would such a result be inequitable, it would be irrational as a matter of personnel policy. It could, for example, result in encouraging a dying employee to refrain from voluntarily applying for disability retirement, even after exhausting leave benefits, because to do so would reduce benefits to the employee's surviving spouse.

Notwithstanding these considerations, in Wassenaar the court created just such an anomaly. The court determined that, if the employee dies before retiring, the enhanced benefit would be payable to the survivor even though it would not have been available to the employee upon retirement at that time. The court reasoned that the age and service requirements applicable to the employee should not apply in a case of a death prior to retirement. Rather, the court said, the employee's category at death should govern whether the special benefits are applicable, not whether the employee had qualified for the enhanced benefits.

The situation of two identically-situated law enforcement officers under age 50 who are injured while on vacation illustrates the absurd and inequitable results of the Wassenaar decision. Let's assume that one of these individuals dies outright as a result of the injury, while the other is forced to retire on disability and then dies shortly thereafter. Under the Wassenaar decision, the first individual's survivor receives an enhanced survivor benefit, while the latter's survivor does not. However, under the long-standing interpretation of OPM and its predecessor the Civil Service Commission, the two survivors in this example would receive identical benefits.

The Wassenaar decision also could extend to other categories of employees, including air traffic controllers. In addition to the anomaly of the distinction between death-in-service survivors and survivors of deceased retirees, the decision could result in payment of identical survivor benefits to survivors of air traffic controllers with very different circumstances. Under the interpretive criteria set out in Wassenaar, the survivor of an air traffic controller who dies in service with 18 months of service could receive the same annuity as the survivor of an air traffic controller with 25 years of service under CSRS.

The enclosed legislative proposal would eliminate the ambiguity perceived by the court and remedy the inequities resulting from its misinterpretation of existing law governing CSRS and FERS survivor benefits. Our proposal would extend the special retirement computation to individuals (or their survivors) who have completed the service requirement for the enhanced computation but who are separated from service prior to age 50 due to an involuntary separation (not for cause), disability, or death. Finally, it would provide a refund of the higher employee retirement deductions in the cases where enhanced benefits do not become payable.

In addition, the proposal rewords the existing provisions of 5 U.S.C. 8415(d) to clarify that only service as a law enforcement officer, firefighter, Capitol Police officers, air traffic controller or nuclear materials courier may be credited at the higher rate of 1.7 percent per year in the annuity computation. This corrects a confusing situation, applicable only when individuals with special retirement coverage under CSRS elect to come under FERS and seek computation at the higher rate for periods of FERS service not performed as a law enforcement officer, firefighter, Capitol Police officer, air traffic controller, or nuclear materials courier.

It is noteworthy that many significant aspects of this proposal were applied to the Foreign Service Retirement and Disability System by legislation enacted last November, Public Law 105-382, the "Department of State Special Agents Retirement Act of 1998". The law's stated purpose was to "amend the Foreign Service Act of 1980 to provide that the annuities of certain special agents and security personnel of the Department of State be computed in the same way as applies generally with respect to Federal law enforcement officers, and for other purposes." Under P.L. 105-382, the special retirement benefit computation is applied in the case of special agents under age 50 with 20 years of special service who retire involuntarily or on disability before age 50, or who die in service.

While intended to provide parity between the Foreign Service Retirement and Disability System and CSRS and FERS, enactment of P.L. 105-382 inadvertently created a new inconsistency between them, because our similar proposal in the 105^th Congress was not enacted. CSRS and FERS law enforcement officers (and other employees under similar special retirement classifications) under age 50 with 20 years of special service who retire involuntarily or on disability, or who die in service, are not eligible for the more liberal computation provisions.

The differential inadvertently created by the enactment of P.L. 105-382 makes early enactment of this proposal important to provide equitable treatment of similarly situated employees.

We urge Congress to give this proposal early consideration. The Office of Management and Budget advises that there is no objection to the submission of this proposal from the standpoint of the Administration's program.

A similar letter is being sent to the Speaker of the House of Representatives, The Honorable J. Dennis Hastert.

Janice R. Lachance
Director

A BILL

"To eliminate certain inequities in the Civil Service Retirement System and the Federal Employees' Retirement System with respect to the computation of benefits for law enforcement officers, firefighters, air traffic controllers, nuclear materials couriers, and their survivors, and for other purposes."

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Federal Employees' Benefits Equity Act of 1999."

CIVIL SERVICE RETIREMENT SYSTEM

Sec. 2. (a) Section 8339 of title 5, United States Code, is amended--

(1) in subsection (d)(1)--

(A) by striking "(d)(1)" and inserting "(d)(1)(A)";

(B) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii), respectively; and

(C) by adding at the end the following new subparagraph:

"(B) If, at any age and after completing 20 years of service as a law enforcement officer, firefighter, or nuclear materials courier, or any combination of such service totaling at least 20 years, an employee retires under section 8336(d)(1) or 8337, the annuity of such employee shall be computed under subparagraph (A).";

(2) in subsection (e)--

(A) by striking "(e)" and inserting "(e)(1)"; and (B) by adding at the end the following new paragraph:

"(2) If, at any age and after completing 20 years of service as an air traffic controller, an employee retires under section 8336(d)(1) or 8337, paragraph (1) shall be applied in computing the annuity of such employee."; and

(3) in subsection (q)--

(A) by striking "(q)" and inserting "(q)(1)";

(B) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; and

(C) by adding at the end the following new paragraph:

"(2) If, at any age and after completing 20 years of service as a member of the Capitol Police or as a law enforcement officer (or any combination of such service totaling at least 20 years), a member or former member of the Capitol Police retires under section 8336(d)(1) or 8337, the annuity of such member or former member shall be computed under paragraph (1).".

(b) Section 8341(d) of title 5, United States Code, is amended--

(1) by inserting the following immediately after the first sentence: "For purposes of the preceding sentence, subsections (b)-(e) and (q) of section 8339 may be considered as applying with respect to the employee or Member only if the employee or Member satisfied the age and service requirements for application of such subsections to the employee or Member at the date of death. For this purpose, the decedent shall be deemed to have been disabled for purposes of retirement under section 8337 at the time of death."; and

(2) by striking "Notwithstanding the preceding sentence" and inserting "Notwithstanding the first sentence of this subsection".

(c) Section 8342 of title 5, United States Code, is amended by adding at the end the following new subsection:

"(k) When an employee--

"(1) has service as a law enforcement officer, firefighter, nuclear materials courier, or member of the Capitol Police for which retirement deductions were withheld under section 8334(a) or deposited under section 8334(c) at a higher percentage rate than that applicable to employees generally; and

"(2)(A) begins to receive an annuity which is not computed under section 8339(d) or (q) and, in the case of a member of the Capitol Police, also does not have his or her service as a member of the Capitol Police credited in the computation of an annuity under section 8339(b) or (c); or

"(B) dies before retiring under this subchapter but who leaves a survivor entitled to an annuity under section 8341 based on the deceased employee's service, provided that--

"(i) such survivor annuity is not based on an employee annuity computed under section 8339(d) or (q); and

"(ii) where the decedent was a member or former member of the Capitol Police, such survivor annuity is not based on an annuity computed under section 8339(b) or (c) which includes credit for service as a member of the Capitol Police--

the difference between the employee deductions for such service at the higher percentage rate and the employee deductions that would have been withheld at the rate applicable to employees generally under section 8334(a)(1), together with interest computed in accordance with paragraphs (2) and (3) of section 8334(e) and applicable regulations prescribed by the Office, shall be paid to the annuitant or, in the case of a deceased employee, to the individual entitled to a lump-sum benefit under subsection (c).".

Sec. 3. (a) Section 8415(d) of title 5, United States Code, is amended to read as follows--

"(d)(1) The annuity of an employee retiring under subsection (d) or (e) of section 8412 or under subsection (a), (b), or (c) of section 8425 is--

"(A) 1 7/10 percent of that individual's average pay multiplied by so much of such individual's total service as a law enforcement officer, firefighter, member of the Capitol Police, nuclear materials courier, or air traffic controller as does not exceed 20 years; plus

"(B) 1 percent of that individual's average pay multiplied by the remainder of such individual's total service.

"(2) If, at any age and after completing 20 years of service as a law enforcement officer, firefighter, member of the Capitol Police, or nuclear materials courier, or any combination of such service totaling at least 20 years, an employee retires under section 8414(b)(1)(A) or 8451, the annuity of such employee shall be computed under paragraph (1).

"(3) If, at any age and after completing 20 years of service as an air traffic controller, an employee retires under section 8414(b)(1)(A) or 8451, the annuity of such employee shall be computed under paragraph (1).".

(b) Section 8424 of title 5, United States Code, is amended by adding at the end the following new subsection:

"(i) When an employee--

"(1) has service as a law enforcement officer, firefighter, member of the Capitol Police, air traffic controller, or nuclear materials courier for which retirement deductions were withheld under section 8422(a) at a higher percentage rate than that applicable to employees generally; and

"(2)(A) begins to receive an annuity which is not computed under section 8415(d) and, in the case of a member of the Capitol Police, also does not have his or her service as a member of the Capitol Police credited in the computation of an annuity under section 8415(b) or (c); or

"(B) dies before having retired under this chapter but who leaves a survivor entitled to an annuity under subchapter IV based on the deceased employee's service, provided that--

"(i) such survivor annuity is not based on an employee annuity computed under section 8415(d); and

"(ii) where the decedent was a member or former member of the Capitol Police, such survivor annuity is not based on an annuity computed under section 8415(b) or (c) which includes service as a member of the Capitol Police--

the difference between the employee deductions for such service at the higher percentage rate and the employee deductions that would have been withheld at the rate applicable to employees generally under section 8422(a)(2), together with interest computed in accordance with paragraphs (2) and (3) of section 8334(e) and applicable regulations prescribed by the Office, shall be paid to the annuitant or, in the case of a deceased employee, to the individual entitled to a lump-sum benefit under subsection (d).".

(c) Section 8442 of title 5, United States Code, is amended--

(1) in subsection (b)(1) by adding at the end the following:

"For purposes of the preceding sentence, section 8415(b)-(d) and (g) may be considered as applying with respect to the employee or Member only if the employee or Member satisfied the age and service requirements for application of such subsections to the employee or Member at the date of death. For this purpose, the decedent shall be deemed to have been disabled for purposes of retirement under section 8451 at the time of death."; and

(2) in subsection (c)(2)(A)(i) by striking "section 8415" and inserting "section 8415, but without regard to subsection (d) of such section,".

EFFECTIVE DATES

Sec. 4. (a)(1) Except as provided in paragraph (2), the amendments made by sections 2(a) and 3(a) shall take effect on the date of enactment of this Act and shall apply only with respect to individuals who separate from the service on or after such date of enactment.

(2) Notwithstanding paragraph (1), a survivor annuity based on the service of a law enforcement officer who died as an employee after October 19, 1969, or a firefighter who died as an employee after August 13, 1972, shall be computed as if the amendments made by section 2(a)(1) had been in effect as of the commencing date of such survivor annuity. However, any such survivor annuity commencing before the date of enactment of this Act shall be adjusted, retroactive to the commencing date of annuity, only upon application by the survivor annuitant.

(b) The amendments made by section 2(b) shall take effect on the date of enactment of this Act, and also, in the case of an individual whose death occurred prior to such date of enactment, shall apply effective at the commencing date of the annuity to any annuity payable under section 8341(d) of title 5, United States Code, or similar predecessor provisions of law applicable to survivor annuities based on the service of employees or Members who died before retiring.

(c) The amendments made by sections 2(c) and 3(b) shall take effect on the date of enactment of this Act and shall apply only with respect to individuals who separate from the service or die in service on or after such date of enactment.

(d) The amendments made by section (3)(c) shall take effect on January 1, 1987.

SECTION-BY-SECTION ANALYSIS
To accompany a draft bill

"To eliminate certain inequities in the Civil Service Retirement System and the Federal Employees' Retirement System with respect to the computation of benefits for law enforcement officers, firefighters, air traffic controllers, nuclear materials couriers and their survivors, and for other purposes."

The first section provides the bill's short title, the "Federal Employees' Benefits Equity Act of 1999."

Section 2 amends the Civil Service Retirement law (subchapter III of chapter 83 of title 5, United States Code) to eliminate inequities with respect to the computation of certain retirement and survivor annuities.

Subsection (a) amends 5 U.S.C. 8339, concerning the computation of annuities under the Civil Service Retirement System (CSRS).

Paragraph (1) of subsection (a) amends subsection (d)(1) of section 8339, which provides a special annuity computation formula for employees who retire after reaching age 50 and completing 20 years of service as a law enforcement officer, firefighter, or nuclear materials courier. The proposed amendment would extend the special computation to employees who meet this service requirement but are not yet age 50, if they are eligible to retire based on an involuntary separation from service (not for cause) or because of disability.

Paragraph (2) of subsection (a) amends subsection (e) of 5 U.S.C. 8339, which provides a guaranteed minimum annuity computation for employees who retire at age 50 with 20 years of service as an air traffic controller, or at any age with at least 25 years of service as an air traffic controller. The proposed amendment would extend this guaranteed minimum computation to employees who have completed at least 20 years of service as an air traffic controller but have not yet reached age 50, provided the employee is eligible to retire based on an involuntary separation (not for cause) or because of disability.

Paragraph (3) of subsection (a) amends subsection (q) of 5 U.S.C. 8339, which provides a special annuity computation formula for employees who retire after reaching age 50 and completing 20 years of service as a member of the Capitol Police force. The proposed amendment would extend the special computation to employees who meet this service requirement but are not yet age 50, if they are eligible to retire based on an involuntary separation from service (not for cause) or because of disability.

Subsection (b) of section 2 amends 5 U.S.C. 8341(d), which provides survivor annuities to the widows and widowers of employees who die while still employed who have completed at least 18 months of service.

Paragraph (1) of subsection (b) makes clear that, when used as the basis for a survivor annuity under section 8341(d), the employee's annuity is to be computed using the special formula for law enforcement officers, firefighters, air traffic controllers, nuclear materials couriers, Capitol Police officers, Members of Congress, or Congressional employees -- as the case may be -- only if the employee had fulfilled the age and service requirements for the special computation at the time of death.

Paragraph (2) of subsection (b) makes a conforming editorial amendment necessitated by the amendment made by paragraph (1).

Subsection (c) of section 2 amends 5 U.S.C. 8342 to provide that, where an employee retires or dies without attaining eligibility for an enhanced annuity based on service as a law enforcement officer, firefighter, nuclear materials courier, or Capitol Police officer, but after having completed service during which retirement deductions were withheld from the employee's pay at the higher rate applicable to such officers and firefighters, a refund of the additional withholdings, with interest, is payable to the employee or the employee's survivor, as the case may be.

Section 3 amends the Federal Employees' Retirement law (chapter 84 of title 5, United States Code) in the same ways that section 2 amends the Civil Service Retirement law.

Subsection (a) amends 5 U.S.C. 8415(d), and adds two new paragraphs to it regarding the special retirement benefit computation provided under the Federal Employees' Retirement System (FERS) to qualifying law enforcement officers, firefighters, Capitol Police officers, air traffic controllers, and nuclear materials couriers who have 25 years of such service or who have reached age 50 and completed 20 years of such service. The amendments would extend the special computation to employees who have completed 20 years of the required service but who are not yet 50 years old, if they are separated for disability or involuntarily (not for cause).

The amendments to the existing provisions of 5 U.S.C. 8415(d) clarify that only service as a law enforcement officer, firefighter, Capitol Police officers, air traffic controller or nuclear materials courier may be credited at the higher rate of 1.7% per year in the annuity computation. This corrects a confusing situation, applicable only when individuals with special retirement coverage under CSRS elect to come under FERS and seek computation at the higher rate for periods of FERS service not performed as a law enforcement officer, firefighter, Capitol Police officers, air traffic controller or nuclear materials courier.

Subsection (b) of section 3 amends 5 U.S.C. 8424, concerning refunds of retirement contributions withheld from employees' pay, to provide for a refund of excess deductions that were withheld from the pay of a law enforcement officer, firefighter, nuclear materials courier or Capitol Police officer who retires or dies before becoming entitled to an enhanced retirement benefit computation based on such service.

Subsection (c) of section 3 amends 5 U.S.C. 8442, concerning FERS survivor benefits.

Paragraph (1) of subsection (c) amends section 8442(b), which provides for annuities to survivors of individuals who die while still employed. The amendment makes clear that the survivor annuity can be based on the special retirement computation formula for law enforcement officers, firefighters, Capitol Police officers, air traffic controllers, nuclear materials couriers, Members of Congress, and Congressional employees only if the employee met the age and service requirements for the enhanced computation at the time of death.

Paragraph (2) amends 5 U.S.C. 8442(c)(2)(A)(i), regarding a benefit available under FERS to certain widows and widowers of former employees or Members of Congress who die with title to a deferred annuity, but were not eligible for immediate retirement at the time of their death. The amendment would make clear that the special computation formula for law enforcement officers, firefighters, Capitol Police officers, nuclear materials couriers, and air traffic controllers does not apply in these cases.

Section 4 specifies when the amendments made by sections 2 and 3 take effect and to whom they will apply.

Subsection (a) provides that, in general, the amendments made by sections 2(a) and 3(a) -- providing that employees who retire due to disability or reduction in force, after meeting the service requirement but before meeting the age requirement for an enhanced annuity computation, may receive the enhanced computation -- take effect on the date of enactment. The amendments apply only with respect to individuals who retire on or after enactment.

However, a CSRS survivor annuity based on the service of a law enforcement officer who--while still employed by the Government--died after October 19, 1969, or a firefighter who died after August 13, 1972, will be computed as if the amendments made by section 2(a)(1) were in effect when the employee died. The recomputation, retroactive to the commencing date of the survivor annuity, will be carried out, only if the affected survivor annuitant requests the recomputation. Section 4(a)(2) is designed to ensure that the CSRS survivor annuitants who have benefited from the court decision in the Wassenaar case will not lose any benefits as a result of the enactment of this bill.

Subsection (b) of section 4 provides that the amendments made by section 2(b) -- clarifying that the enhanced computations are applicable to survivor annuities based on an employee's death in service only if the decedent qualified for one of the enhanced computations at the time of death -- are effective upon enactment and apply in all death-in-service cases, regardless of when the survivor annuity began.

Subsection (c) provides that the amendments made by sections 2(c) and 3(b) -- authorizing a refund of excess retirement deductions in the case of a law enforcement officer, firefighter, nuclear materials courier or Capitol Police officer who retires or dies before becoming eligible for retirement benefits based on the enhanced annuity computation -- applies only with respect to employees who separate from Federal employment or die on or after the date of enactment.

Subsection (d) provides that the amendments made by section 3(c) -- concerning FERS survivor annuities in death-in-service cases -- will take effect on January 1, 1987, the date FERS was created.

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Created 30 June 1999