Retirement fix bill would cost $121 million, CBO says

The Congressional Budget Office estimates that a bill to fix retirement errors for nearly 20,000 federal employees would cost agencies about $121 million over five years, an estimate likely to deter federal lawmakers.

The Federal Retirement Coverage Correction Act (H.R. 3249) would correct retirement plan snafus for thousands of civil service employees, as well as foreign service employees and intelligence agency personnel. The bill would also increase the government's direct spending by $152 million, according to CBO estimates.

The problem began more than a decade ago, when Congress created the Federal Employees Retirement System, which features a stock investment plan and a scaled-back pension benefit. On January 1, 1984 the old Civil Service Retirement System was closed to new enrollees. Those employed after this date were supposed to be placed in FERS, but some were not.

As many as 18,000 employees were put in the wrong system. Employees lost retirement benefits, owed back taxes, and were denied the opportunity to invest in stock funds. About 10,000 of the mistakes have already been corrected. The most common types of coverage errors involve employees who should be in FERS but were accidentally put in CSRS, and employees with prior service who returned to government service and were misplaced in either FERS or CSRS offset.

Under the proposed correction bill, agencies would be responsible for incurring all the costs of adjusting affected employees' pension benefits, Social Security benefits and TSP contributions so that employees placed in the wrong retirement system receive the full retirement benefits the employees thought they would get.

CBO estimates that TSP makeup contributions would cost agencies $75 million in discretionary appropriations. Agency makeup payments to employee Civil Service Retirement and Disability Funds would cost $23 million.

The Office of Personnel Management opposes the bill, which was drafted by the House Government Reform and Oversight Committee Subcommittee on the Civil Service. OPM's less costly version of the retirement fix bill has been introduced in the Senate (S. 1710).