Bill on long-term care, retirement errors advances

A bill that would let the federal government use its purchasing power to negotiate discounts on long-term care insurance for federal employees won approval by the Senate Governmental Affairs Committee Wednesday.

The bill, S. 2420, which has strong bipartisan support and passed easily by voice vote, would create a benefit program in which one or more insurance carriers would offer private long-term care coverage to federal workers, active-duty military personnel and both civilian and military retirees. It also permits policyholders to extend coverage to their spouses and children, including adopted children, stepchildren and stepparents.

As in a similar noncontroversial House bill, H.R. 4040, which passed the House on a rules suspension May 9, federal workers would pay the full premium and the insurance would be fully portable.

On a voice vote, the committee adopted an amendment offered by Sen. Thad Cochran, R-Miss., that essentially added the text of the proposed Federal Erroneous Retirement Coverage Corrections Act, S. 1232, a bill providing relief to federal employees and their families who, through no fault of their own, became victims of retirement coverage mistakes.

The corrections bill, which had passed the full Senate last Nov. 3, addresses problems that arose after the federal government made a transition from the Civil Service Retirement System (CSRS) to the Federal Employees Retirement System (FERS) in 1984.

"As government agencies carried out the complex job of applying two sets of transition rules, errors occurred, and thousands of employees were placed in the wrong retirement system-many learning that their pensions would be less than expected," a Senate committee report on S. 1232 said.

In addition, since most of the retirement coverage errors have involved employees wrongfully placed in the CSRS or a third retirement system called the CSRS-Offset system, employees whose coverage is corrected often have not participated in the Thrift Savings Plan, part of the three-tiered FERS that allows employee contributions similar to those made to 401 (k) plans in the private sector. Current law requiring the automatic correction of a retirement coverage error can have a harmful impact on an employee's financial ability to plan for retirement, the Senate report said.

The Senate committee's addition of the corrections bill is expected to give victims of the retirement errors the chance to maintain their expected level of retirement benefits without a change in their retirement savings and planning. For employees who do not have the financial resources to make the retroactive savings plan contributions necessary to maintain their expected level of retirement benefits under FERS, the legislation would give them equitable relief, according to the committee. These workers would have the option of remaining in the CSRS-Offset system and receiving the retirement benefits they expected.

In addition, the legislation would provide certain employees who missed an opportunity to contribute to the Thrift Savings Plan due to a coverage error the opportunity to receive interest on their TSP make-up contributions.

The provisions for long-term care coverage call for the Office of Personnel Management to negotiate with insurance carriers in a competitive bidding process, with group discounts expected to come from that competition and the huge scale of the anticipated seven-year contracts.

Sen. Charles Grassley, R-Iowa, introduced the long-term care bill in April as part of a legislative campaign to help consumers cope with the cost of long-term care. Committee documents assert that federal workers want the option to buy long-term care insurance, citing a "random survey" by OPM in 1997 showing that 86 percent of workers surveyed were interest in obtaining long-term care coverage.