President Clinton Thursday used his line-item veto power to cancel a provision that would have allowed federal employees to switch retirement plans to take advantage of the government's high-performing Thrift Savings Plan.
"This line-item veto will save $854 million over five years by preventing a hastily-conceived, undebated provision from becoming law," Clinton said.
The provision, which would have allowed federal employees enrolled in the Civil Service Retirement System (CSRS) to switch into the Federal Employees Retirement System (FERS), was inserted into the Treasury-General Government appropriations bill in conference by Sen. Ted Stevens, R-Alaska. The provision would have created an open season next year during which federal employees could make the switch.
Stevens said federal employees had told him they wanted the opportunity to switch into FERS to take full advantage of the Thrift Savings Plan, the government's 401(K)-style stock investment plan, which has performed very well in recent years.
White House press secretary Mike McCurry said the President "highly values the professional service rendered by employees of the federal government, but at the same time, we have a generous package of benefits that have been structured."
More than 800,000 federal employees and 300,000 Postal Service workers would have been eligible to switch, although few were expected to move, according to the White House. The Office of Management and Budget estimates that the provision would have cost $8 million in 1998 and $854 million over five years, and would have required agencies to reallocate an additional $1.3 billion to cover increased retirement costs.
The White House also speculated that the measure would have discouraged people from retiring early and "could slow federal downsizing efforts."
John Raffetto, a Senate Appropriations Committee spokesman, said he questioned the White House's contention that the provision would have been costly.
"There was an expectation that another open season would actually generate savings," Raffetto said. "The president's action is a loss to any federal employee who wished they had joined FERS back in 1984."
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