Within the next two months, Congress is expected to approve a sweeping change in the nation's largest staff retirement program, the one covering 2.6 million federal and postal workers, diplomats -- and members of Congress.
The new system would be mandatory for the 300,000 government employes hired since 1984 and optional for those workers already covered by the current civil service pension plan.
The Senate is expected next week to approve a plan proposed by Sens. Ted Stevens (R-Alaska) and William Roth (R-Del.). It would give new workers the option of choosing between two plans with benefits based on Social Security, scaled-down civil service benefits and tax-deferred investment programs.
All post-1983 hires would be required to go into one of the two new options. Workers hired before 1984 could stay under the current system or elect to go into one of the two new options.
Next week the House Post Office-Civil Service Committee will hold expedited hearings on a single new retirement option worked up by Chairman William Ford (D-Mich.) and Rep. Mary Rose Oakar (D-Ohio). Once the House approves its bill, a Senate-House conference will come up with a final retirement package before the end of the session.
One of the Senate options would set the age for retirement on unreduced benefits at age 62. Workers would pay the full Social Security tax, but would not contribute to the civil service retirement program.
The other Senate option would allow employes to retire at age 55 (after 30 years of service), provided they contributed 1.3 percent of salary to the retirement fund. Both options would allow federal workers to participate in thrift plans that are more generous than the so-called "401(k)" tax-deferred investment programs available to most private-sector workers.
Both Senate options offer civil service benefits that are less generous than those of the current system. Both would reduce cost-of-living raises for future retirees, and would base retirement benefits on the employes' highest five-year average salary.
The House proposal (a single option) would require employes to contribute to the retirement fund, but would protect their option to retire on unreduced benefits at age 55 with 30 years' service, or at age 60 with 20 years' service or age 62 with five years' service.
Like the Senate plan, the House proposal would base benefits on civil service, Social Security and a tax-deferred voluntary thrift plan. Unlike the Senate proposal, it would continue to base employe retirement benefits on their highest three-year salary average.
Federal and postal unions prefer the House option. It offers better basic civil service benefits and keeps the current retirement age intact.
Unions contend that the Senate plans -- with their more generous tax-deferred investment options -- are designed for upper income federal workers (and political appointees) since lower-paid workers would be less likely, or able, to make the investments.
It is possible that Senate-House conferees will come up with two options, one aimed at higher-income employes and one designed for lower-level workers. Current benefits and retirement ages for employes in the existing civil service system would be protected regardless of what changes are made for newer workers.