Retirement Reversal

December 22, 1997

DAILY BRIEFING

Retirement Reversal

President Clinton has reversed himself on a controversial measure that would allow federal employees to switch retirement systems, according to a report in The Washington Post.

Administration officials now say the President did not have the authority to use the line-item veto on a measure that would have created a new open season during which employees in the Civil Service Retirement System could switch to the potentially more lucrative Federal Employees Retirement System.

Sen. Ted Stevens, R-Alaska, inserted the measure as a last-minute addition to a spending bill that passed Congress in early October. But President Clinton used his line-item veto to kill the measure, saying that Congress had not properly debated it and that it would cost too much money at a time of belt-tightening and budget balancing.

The National Treasury Employees Union promptly filed suit in federal court challenging the constitutionality of the line-item veto law. According to the Post, the administration's reversal of position is expected to be part of a negotiated settlement with NTEU on its challenge of the law.

NTEU President Robert Tobias argued that the retirement measure was not included under the President's "discretionary budget authority," as defined by the line-item veto law. Rather, he argued, federal retirement programs should be treated like Social Security and Medicaid benefits, which are not subject to line-item vetoes. Administration sources were apparently convinced by his reasoning.

The decision will likely lead to a new open season next year in which more than 1 million federal employees have the opportunity to switch from CSRS, which is a fairly traditional pension plan, into FERS, which offers participants the opportunity to invest in the stock market. The only previous opportunity CSRS employees had to switch was in 1987.

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