With less than three months left to create a new federal pension plan, Senate and House conferees have one major obstacle on which to compromise -- a $2 billion- a-year difference in what both sides think the plan should cost.
Congress has already decided that new federal workers will be placed under a private-sector type pension plan that combines government benefits with Social Security and a savings program. Now the issue is what the government should spend on it.
Since Congress put federal and postal workers under Social Security a year ago, more than 300,000 employes have been hired. Congress originally planned to have a new retirement system set up for them last month, but extended the deadline to May.
Those employes are now covered by Social Security and the current civil service retirement system. They pay the full Social Security tax but make only a token contribution to the civil service retirement system.
Workers hired before 1984 contribute 7 percent of their salaries to the civil service pension plan and pay only the Medicare portion of Social Security. Their status will not be changed by any new retirement plan.
The Senate has approved two retirement options, and those hired since 1984 would have to select one of them. Employes hired before 1984 could choose the status quo or come into one of the two options.
The House has approved a single plan for new workers that would not be available to employes hired before 1984.
All three proposals (two from the Senate, one from the House) provide retirement benefits to workers from Social Security and a modified version of the civil service plan. All three give workers the opportunity to invest in tax-deferred thrift plans similar to 401(k) plans available in the private sector.
Each of the Senate plans is estimated to amount to 21.8 percent of the payroll. That means the additional cost of retirement benefits is equal to 21.8 percent of each employe's salary.
The current federal retirement program is estimated at 25 percent of payroll. The House plan, which retains many features of the current retirement system, would cost an estimated 25.3 percent of payroll.
Although the percentage difference in the Senate and House plans doesn't seem like much, it is the key issue before the conferees because each percentage point increase adds $600 million a year to the cost of operating the federal pension program.
Staffers of the Senate Governmental Affairs Committee and the House Post Office-Civil Service Committee hope to lay the groundwork for a new supplemental retirement system before Senate-House conferees meet.