Current federal workers would be encouraged to convert to a new pension system combining a modified civil service retirement plan with Social Security and a voluntary investment program under legislation by the Senate's assistant majority leader.
Under that same legislation, future federal workers would have to be covered by Social Security and the retirement-investment program.
Any federal employe covered by Social Security would pay 6.7 percent of salary (on amounts up to $32,000) into the Social Security fund like most other American workers.
The complex bill, S. 2905, by Sen. Ted Stevens (R-Alaska) is considered a pension dream plan by its backers and a potential nightmare by many federal and postal unions. Stevens' proposal will be taken up next year by Congress.
In lieu of the current federal pension system (into which workers and the government each contribute 7 percent of gross salary), future workers would be shifted to a basic pension plan paid for entirely by the government. Uncle Sam each year would contribute 9 percent of an employe's salary up to $20,000 in the new fund. Government also would contribute 16 percent for every salary dollar over $20,000.
Employes also could elect to join a "thrift plan." They would put anywhere from 1 to 3 percent of salary in it, matched by the government. Both the new basic retirement fund and thrift plan would be invested in government and private securities.
Current employes could elect to stay in the civil service retirement system. Those who wanted to come into the new combined plan would have two options:
1. The government would match any contributions an employe already had made into the civil service fund, add 5 percent compound interest for each year of service, and put that amount into the new fund.
2. Or, the worker would be "entitled to the present value of his accumulated benefits adjusted by a 6 percent inflation factor."
Either way, those employes would be removed from the present civil service retirement system. They would then pay into Social Security, and be part of the new noncontributory plan, and eligible for the thrift plan as well.
After five years in the new system, employes could leave government -- either retire or quit -- and take out all monies in their accounts, both amounts they contributed and amounts the government contributed plus the investment earnings, if any. Currently, employes who leave government have the option of drawing out money they have contributed to the fund, but do not get any government contribution or interest.
The new system would not guarantee any minimum benefit. Workers would get an annual statement of their account, and, based on assumptions of growth of the fund, they could estimate future retirement benefits, Stevens aides say.
Opponents of the Stevens plan -- that is most federal and postal unions -- argue that it would hurt federal workers (who can retire earlier than persons under Social Security and still get immediate benefits). They say it is a plan with defined contributions but no defined payouts.
Stevens believes his system -- based on a major pension plan set up for some teachers -- provides the potential for greater employe benefits. He also thinks the plan would be better protected from future congressional attempts to cut back benefits.
Stevens feels the tie-in with Social Security would defuse much of the current political opposition to an independent federal retirement program. Federal employes (including members of Congress) and some state government workers are the only major groups of American workers still outside Social Security.
The Stevens proposal could be one of the hottest items in the next Congress. Backers and opponents will try to rally public support, or opposition, to the proposed complex changes.
The first major salvo was fired Sunday evening. CBS' 60 Minutes program did a major feature on the federal retirement program. It was called "Give Back The Money!" On the show, two prominent pensioners -- John W. Macy, Civil Service Commission Chairman under Presidents Kennedy and Johnson, and former congressman Hastings Keith -- said the present system gives too many retirees, themselves included, benefits that are too high.