The House last night killed a proposal to bring government workers under Social Security, phase out their existing pension system and reconstruct it as a supplemental benefit plan. The vote was 386 to 38.
The motion to strip from the Social Security financing bill compulsory coverage for 2.5 million employees and also about 4 million state and local government and nonprofit employees was made by Rep. Joseph L. Fisher (D-Va.), who has a large number of federal workers in his district.
The House then went on to other sections of the bill, which would increase Social Security taxes sharply over the next 20 years, beginning Jan. 1.
Similar legislation is pending in the Senate Finance Committee, and Comgress could pass s Social Security financing bill before it goes home this year.
Federal employees contribute more to their retirement system but their benefits are much higher than those under Social Security - sometimes three or four times the Social Security maximum benefit (which is $460 monthly for a worker retiring at the end of this year).
Although proponents of universal coverage said federal employees would end up with just about the same benefits as now from the proposed new Social Security coverage and the planned supplemental benefit system, many federal workers feared that when the new system was eventually constructed they would have ended up worse off. Their unions labbied vigorously to kill the mandatory coverage provision, which would have been effective Jan. 1 1982, under the bill as approved by the ways and Means Committee.
Fisher argued that no mandatory coverage should be adopted until the whole problem of how to meld benefits and costs without loss to the federal employees had been throughly studies and a comprehensive plan drawn up that would allay their fears. His amendment called for a two-year study. The universal coverage provision killed by Fisher's amendment did not specify how the new system should be set up.
Fisher said opposition of federal employees was so strong that "there's serious doubt that the bill can pass" unless federal employee coverage was struck out.
The HOuse Democratic leadership agreed with him and endorsed his amendment as did the Department of Health, Education and Welfare and the CIvil Service Commision.
Proponents of mandatory coverage for federal state and local government workers (including members of Congress) said it would satisfy the public that everyone is being treated on an equal basis.
Perhaps more important, however, it would bring in about $3 billion to $4 billion on a year n extra revenues to the hard-pressed Social Security system, and would eventually eliminate the "double dip." This is a situation in which over 450,000 retired federal pensioners are also drawing Social Security benefits by virtue of having also non-government jobs, worked in some cases for only short time.
Sam M. Gibbons (D-Fla.), citing an extreme example of the "double dip," said it was theoretically possible for a retired federal or state employee to draw the statutory minimal Social Security benefits of $114 a month after having paid only $111 in Social Security taxes over his whole lifetime.
Social Security officials in the House gallaries said this would be possible where someone worked at the minimum Social Security wage of $30 per quarter for 40 quarters, carning $2,000 on which $100 to $150 in payroll taxes might have been paid. This worker would then be eligible for the minimum of $114 a month on reaching 65.
At present a worker pays 5.85 per cent on the first $16,500 of his annual salary, a maximum of $965, and his boss pays the same on his behalf.
Taxes and the maximum taxable wage were already scheduled to rise next year and in future years. But the House financing bill with additional taxes to make up for losses from adoption of the Fisher amendment jumps them much faster, with very heavy increases falling upon hte highest-income workers.
The tax rate under the bill would be 6.05 per cent from 1978 to 1981 but would rise to 6.55 per cent in 1981, 6.85 per cent in 1983, 7 per cent in 1986 and 7.55 per cent from 1990 on.
The maximum taxable wage would jumps to $19,900 next year, $22.900 in 1979, $25,900 in 1980 and $29,000 in 1981. Then it would rise in stage to $42,600 by 1987 and continue to rise in proportion to wage rises throughout the economy after that.
This means that the taxes for a worker whose wages are low would go up only a modest amount. For example, a worker at $10,000 who [WORD ILLEGIBLE] pays $585 would pay $700 by [WORD ILLEGIBLE] his salary stays the same. But [WORD ILLEGIBLE] one making $42,600 who is [WORD ILLEGIBLE] $965 this year would face a [WORD ILLEGIBLE] tax of $2,982 in 1987 because of the huge rise in the maximum taxable salary.