Thousands of federal employees who have been placed in the wrong retirement plans since 1984 would be offered a legislative fix under a bill being drafted by the Office of Personnel Management and members of a House subcommittee.
Rep. John Mica, R-Fla., chairman of the House Government Reform and Oversight Committee's civil service subcommittee, said Tuesday night the subcommittee's staff would work with OPM to prepare a bill to be introduced in the House by Oct. 15. Rep. Connie Morella, R-Md., and Rep. Elijah Cummings, D-Md., agreed to co-sponsor the bill.
In a hearing last month before Mica's subcommittee, four federal employees described the financial hardship they have endured because their agencies placed them in the wrong retirement plan. The fix permitted under current law leaves employees with lower retirement incomes than they had planned for and requires them to make substantial additional contributions out of their weekly paychecks to make up for time they lost while enrolled in the wrong plan.
The problem began when Congress closed off the Civil Service Retirement System to new enrollees on Jan. 1, 1984. From then until the end of 1986, new hires were supposed to be enrolled in a special interim retirement plan, now called the CSRS Offset, which was a hybrid of Social Security and the civil service pension plan. Starting on Jan. 1, 1987, new employees were supposed to be enrolled in the Federal Employees Retirement System, a plan that combines a modest pension with Social Security and the Thrift Savings Plan, the government's version of a 401(K) investment program.
In the confusion of the transition, which was compounded by complex rules governing new hires who had previously served in government, thousands of employees were placed in either the CSRS or the CSRS Offset plans when they should have been placed in the FERS plan. Though there is no precise estimate of the number of federal employees affected by the problem, OPM estimates that 5,000 employees have discovered the mistake and had it corrected, and that up to 5,000 more have been enrolled in the wrong plan but have not yet learned of the error. OPM Associate Director William Flynn III said most of the people who were placed in the wrong plan are now GS-5 through GS-9 employees.
In some cases, employees have found out they were enrolled in the wrong plan only when they retired. Under current rules, those employees have been forced to switch into the FERS plan. Because they were not given the opportunity to invest in the Thrift Savings Plan, their pensions end up being smaller than they had planned for.
Under OPM's proposal, employees who were placed in the CSRS plan or the CSRS Offset for three or more years after Jan. 1, 1987, would be given a new option of being placed in or of remaining in the CSRS Offset, rather than being automatically shifted to FERS.
Employees who have already discovered the error would have an 18-month window following enactment of new regulations to choose between the CSRS Offset and FERS plans. Employees who discover the error after the legislation is enacted would have six months from the time they discovered the error to make a decision. Retirees and survivors would have an 18-month window to decide between the two plans.
In addition, employees who have faced financial hardship because of the error would be able to work with OPM to obtain a settlement from the government.
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