Legislation that would create a new retirement program for government workers hired after 1983 will be introduced shortly by Sen. Ted Stevens (R-Alaska).
Stevens last year proposed a new retirement plan that would cover the same group and also be open to other federal and postal employes who elected to join it. The proposal featured tax-sheltered income deferral options.
But Stevens withdrew that proposal earlier this year, citing either opposition or indifference from federal and postal workers unions. The Office of Personnel Management has tentatively proposed a new retirement system that would have allowed employes to invest up to $10,000 in "super" individual retirement accounts. But unions feel that the plan would primarily benefit high-income workers who could afford to take advantage of thrift plan savings features.
Congress needs to do something -- this year -- about the retirement status of more than 300,000 employes who have been hired since January 1984. Because they, unlike other civil servants, are under Social Security, the so-called "new" employes pay full Social Security taxes on their income and put only a token amount of their salaries into the federal retirement fund.
Persons hired for the federal work force before January 1984 contribute 7 percent of their salary to the civil service pension program and pay only for their Medicare coverage. They are not under the Social Security program.
When Congress put new federal workers under Social Security it anticipated that a new program for them -- combining Social Security and civil service benefits -- would be in place by the start of next year. Unless a new program is set up, those employes will be required to start making the full contribution to the civil service retirement plan next year, plus pay the full Social Security tax. That would mean a bite of more than 14 percent from their salaries.
Details of Stevens' new plan are being kept secret. But it will contain several levels of tax-deferred options and will be open to longtime civil servants who chose to buy into it.