Senate Majority Whip Ted Stevens (R-Alaska) has decided not to reintroduce his controversial bill to revamp the civil service (CS) retirement system until employe unions get behind his revolutionary plan to blend the CS program with Social Security and a voluntary investment plan.
When the bill was first introduced last year, federal and postal workers ranked it only below herpes on the list of things they did not want to get in 1983.
But Stevens feels that it may not be long before U.S. worker unions--now unanimously opposed to his bill--embrace the plan as the only way to keep the federal retirement program from being gobbled up by the financially starving Social Security system.
U.S. employes now have their own retirement system. It is financed in part by employes and government with each contributing 7 percent of gross salary into the CS annuity fund. Feds are not subject to the full Social Security tax of 6.7 percent of salary on amounts up to $35,700. But starting this month they began paying the 1.3 percent Medicare portion of Social Security.
Because the civil service retirement plan is based on salary and service, benefits (which are taxed) are typically two to three times higher than welfare-oriented social security payments, which are tax free. In addition federal workers can begin drawing lifetime annuities (reduced for persons retiring before age 55) anywhere from seven to 10 years sooner than persons covered by Social Security.
Stevens' plan would allow present federal workers to stay in the CS retirement system unless they elected to go into the new plan. Workers hired after enactment would be put into a new three-tier system that would look like this:
* Level one would be Social Security. New government employes (or those who converted to the new system) would pay the full Social Security tax and get benefits when eligible from Social Security.
* Level two would be a modified CS retirement plan. Employes would not pay anything into the CS retirement fund. Contributions would come from government, based on 9 percent of the first $20,000 of an employe's salary, plus 16 percent for each dollar above that amount.
* Level three would be a voluntary thrift plan. Workers who so choose could put a portion of their salary into the plan. Monies would be invested in government and private markets with each employe having a separate account. Uncle Sam would match employe contributions to this fund up to 3 percent of gross salary.
Although present feds could remain outside the new system they would be offered financial inducements to join. That includes "buyouts" based on their time in government and contributions to the CS systemthat would be deposited into their new accounts in the new system.
Opponents say the Stevens plan does not have defined benefits, making it difficult for workers to see their future retirement benefits would be.
Stevens says that test runs show the average employe would get a better retirement income from his plan than under the present system. He also says his plan would be a boon to workers who do not make a full career of government. They would be allowed to withdraw their accounts--with interest--when they left government, or arrange for immediate annuities similar to programs offered by life insurance annuity plans.
The Stevens bill is complicated stuff. And although it includes Social Security, the senator doesn't want his bill linked to any attempts to mandate extending Social Security coverage to feds.
If it seems likely that feds are headed for Social Security coverage, Stevens hopes union leaders and the administration will compromise on his bill as the best way to accomplish coverage without gutting the CS retirement program.