The cost of benefits

Why do so many proposals for better federal pay and benefits get introduced in Congress year after year after year, but never go anywhere? There's a simple answer: They cost money. Take, for example, bills to reduce the government pension offset, a provision of Social Security law that reduces retirement checks for Civil Service Retirement System retirees whose spouses earned Social Security benefits. Retirees have been lobbying against the pension offset for years. In the past four Congresses, lawmakers have introduced bills to eliminate the offset for low-income retirees. The Congressional Budget Office last year estimated that the proposal would cost $200 million in 2001, $1.9 billion over five years and $4.9 billion over 10 years. The Social Security Administration estimated the cost at $2.3 billion over five years and $5.9 billion over 10 years. Despite the cost projections, Rep. William Jefferson, D-La., introduced a bill (H.R. 664), to eliminate the offset for low-income retirees earlier this month. Sen. Barbara Mikulski, D-Md., followed suit this week with a bill of her own (S. 611). At a time when policymakers are trying to figure out how to extend the life of the Social Security trust fund, it's been difficult for retirees to drum up support for a proposal that would increase Social Security costs. Another bill whose price tag is costing it support is the Assistant United States Attorneys Retirement Benefit Equity Act (H.R. 1090), introduced in the last three Congresses by Rep. Tom Davis, R-Va. The bill would increase retirement benefits for the attorneys by designating them as law enforcement officers for the purposes of retirement. The Congressional Budget Office estimated the bill would cost $650 million over five years, hurting the bill's chances last year. The National Association of U.S. Attorneys, which has been pushing the bill, hopes that CBO will change its cost estimate to show that the bill would cost around $300 million. The association says that the demographic data that CBO used to develop its cost estimate is incorrect. Meanwhile, federal parents appreciate the efforts of Rep. Carolyn Maloney, D-N.Y., to provide paid maternity and paternity leave for civil servants who give birth, adopt or foster a child. Maloney introduced the bill (H.R. 4567) in the last Congress but not yet this year. Current law gives new parents 12 weeks of unpaid leave and the ability to use up accrued sick leave and vacation time during that period. Maloney's bill would let federal workers take six weeks' worth of paid parental leave, without dipping into their sick leave or vacation time. But CBO estimated Maloney's bill would cost $95 million in 2001, and $1 billion over five years. So the pension offset, attorneys' retirement and parental leave proposals alone would cost as much as $4 billion over five years, and they are just three of the dozens of bills in the past two Congresses that have proposed better pay and benefits for federal workers. The price tag is a major reason each of these proposals are likely to continue into the 108th Congress as bills rather than laws. Pay Parity Push While high-priced benefits bills can be tough for Congress to support, lawmakers have a long history of making sure civilian federal workers get the same pay raise each year as military personnel. In 17 of the last 20 years, military and average civilian pay increases have been the same (though civilian raises vary from locality to locality). For 2002, President Bush has proposed a 4.6 percent pay raise for military personnel, but Bush's Office of Management and Budget has instructed agencies to assume only a 3.6 percent raise for civilians in their budget plans. Sen. Paul Sarbanes, D-Md., is urging Senate Budget Committee Chairman Pete Domenici, R-N.M., to make sure the congressional budget resolution assumes a 4.6 percent raise for both military and civilian personnel. "The disparate treatment of civilian and military pay goes against longstanding policy of parity for all those who have chosen to serve our nation--whether that service be in the civilian workforce or in the armed services," Sarbanes wrote in a March 15 letter to Domenici. The House passed its version of the budget resolution, which calls for a 4.6 percent raise for both the military and civilians, on Wednesday. Now the Senate will take up the resolution. TSP Administrative Expenses A Pay and Benefits Watch reader wants to know how much the Thrift Savings Plan's administrative expenses are and how participants' accounts are affected by them. The Federal Retirement Thrift Investment Board explains that "expenses of the TSP include the operating and development costs of the record keeper's computer system, the TSP Service Office, and the printing and mailing of publications and participant statements." Because the TSP does not receive annual appropriations, the board must cover all of the plan's expenses. Before the board passes costs on to active investors, the board collects forfeited money from employees who leave federal service before they are vested. Non-vested employees lose the 1 percent agency automatic contributions to their accounts when they leave the government. The TSP board uses that forfeited money to help cover expenses. Any further expenses are passed on to active investors. Expenses are divided among the three TSP funds, the C, F and G funds. Individual investors' shares of the expenses each month are based on the size of their accounts. In 1999, for example, the C Fund expense ratio was 0.06 percent. For every $1,000 an investor had in the C Fund in 1999, they paid 60 cents in administrative expenses. As the table below shows, TSP administrative expenses have declined substantially since 1988, when all three funds became available. Investors can look at their account balances each month and determine how much they paid in expenses.