The Reagan Administration yesterday endorsed a Senate GOP plan to set up a new pension program for the 300,000 U.S. workers hired since January 1984, but balked at allowing employes to shelter parts of their income from taxes or increase their annuities by getting credit for unused sick leave.
Constance Horner, the new director of the Office of Personnel Management, said the administration generally favors legislation creating a supplementary retirement system. If approved, the new system would be mandatory for post-1983 federal employes, and optional for workers hired before then.
The legislation has been introduced by Sens. William V. Roth (R-Del.) and Ted Stevens (R-Alaska). It is designed to set up a modified civil service retirement system for new workers who are under Social Security.
Congress has until the end of this year to come up with a new pension plan. If it fails to do so, those hired after 1983 will have to contribute more than 14 percent of salary to the civil service retirement fund and Social Security, beginning in January.
Horner, a former Office of Management and Budget official who succeeded OPM Director Donald J. Devine, urged the Senate not to include tax-deferred investment benefits for federal workers at a time when the president is seeking to eliminate them for private sector workers as part of his tax reform.
She also objects to extending the "anomalous and illogical" benefit in the current civil service pension program that allows employes to get retirement credit for sick leave.
Under that system set up by Congress to curb sick leave abuse, U.S. workers (who earn 13 days sick leave per year) can count their unused sick leave as work time increasing substantially, in come cases, their pensions.
The Stevens-Roth bill would have the government make all contributions to the new civil service plan. Employes would pay the Social Security tax. They would have to work until age 62 to get unreduced benefits. Federal workers can now retire at age 55, with 30 years service, without any penalty.
It also would provide for a tax-deferred investment program -- similar to 401(k) programs in the private sector, permitting workers to shelter some of their salary from taxes until they retire.
The plan also would let employes put up to 10 percent of salary into thrift plans, matched with contributions of up to 5 percent from the government.
Retirement benefits for U.S. workers under the new system would be based on civil service benefits, Social Security plus earnings from thrift or savings plans.
Federal and postal union leaders said the new system should provide basic benefits equal to those already promised longtime civil servants.
The union leaders are concerned that the proposed thrift or investment plans mainly would benefit middle and upper income employes who have more money to invest.
They want the basic civil service package improved to protect lower-income workers and also to guarantee future retirees cost-of-living raises that are fully linked to inflation.
The unions said they fear the proposal would make long-term service less attractive to all but the highest-paid executives, and rob the taxpayers of the expertise and institutional member of middle and lower income workers who -- because of the current retirement program -- now find government service attractive.