Just three weeks after President Clinton used his line-item veto power to cancel a provision in the Treasury-Postal appropriations bill that would have allowed about 800,000 federal employees to switch retirement plans, Civil Service Subcommittee Chairman John Mica, R-Fla., brought the issue back into the spotlight this week on Capitol Hill.
At a hearing Tuesday, Mica said the President's veto of the provision was "not well thought out," and added that an open season deserves "serious deliberation."
"It is my hope that this hearing can shed light on the wisdom or folly of closing the door to long-term federal employees who have been left in a bankrupt, costly and outdated retirement program," Mica said.
Agency representatives at the hearing, though, expressed concerns about the costs of an open season.
The provision being debated would allow federal employees enrolled in the Civil Service Retirement System (CSRS) to switch into the Federal Employees Retirement System (FERS) during an open season from July 1, 1998 to Dec. 31, 1998. The last time CSRS employees had the opportunity to join FERS was when FERS went into operation in 1987.
William Flynn, associate director of the the Office of Personnel Management for retirement and insurance, testified that another open season could prove harmful, because it would make agency efforts to reshape the workforce more difficult.
"In any event, the emergence of this issue may have detrimental impacts on the effectiveness of agency buyout and early retirement programs underway now, as well as those which may occur over the next several years," Flynn said.
Office of Management and Budget deputy director Jacob Lew said that the open season would "substantially" increase the cost of retirement benefits over time.
"The President's cancellation will reduce near-term deficits and increase future surpluses," Lew said. "The cancellation of this provision will reduce agency costs in the short term, freeing resources to fund inflation increases in pay and other priorities."
Paul Van de Water, assistant director for budget analysis at the Congressional Budget Office, said the question of whether a new open season would increase or decrease federal costs in the long run is uncertain, because it would depend on the characteristics of the workers who changed retirement plans.
Van de Water said two groups of employees would cost the government more if they switched to FERS than if they remained is CSRS: workers who have earned the maximum CSRS benefit and workers who could escape Social Security's government pension offset by working for five years under FERS.
"The long-run federal cost of a new open season depends on the relative sizes of those groups of employees and the accuracy of their retirement planning," he said. "On balance, however, it seems likely that federal costs would rise, primarily because of higher Social Security benefits."
Michael Brostek, associate director of federal management and workforce issues at the General Accounting Office, said GAO had some difficulty examining the potential impact of a new open season, because of difficulty predicting which eligible employees would switch. In 1987 about 4 percent of employees eligible to move into FERS opted to do so.
Brostek said that assuming 10 percent of eligible employees switched and that those who did so were earning relatively higher salaries, agency costs would total $332 million. Some agencies, he said, might find their share of those costs difficult to absorb.
"Regardless of the size of the increases in costs, under the budget process discretionary spending is capped," Brostek said. "And Congress may choose not to provide agencies extra funding to cover their increased retirement costs."
Congress has not yet considered a "disapproval bill," which would nullify the president's open season veto. That bill, in turn, could be vetoed by the president and the cancellation would stand unless it was overridden by a two-thirds congressional majority.
The National Treasury Employees Union has filed suit in U.S. District Court alleging that the Line Item Veto Act is unconstitutional and that the president exceeded the authority the act gives him when he vetoed the retirement provision.
"NTEU believes the president acted without statutory authority," union President Robert M. Tobias said. "and, as a result, his veto of the open season is invalid."
The terms of the Line Item Veto Act call for expedited federal court proceedings, including an appeal to the U.S. Supreme Court.
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