House and Senate negotiators are considering a plan that would suspend the popular lump-sum pension payment for federal employees but allow certain members of Congress who are defeated at the polls to retain the option.
The Bush administration has told the Senate Governmental Affairs Committee and the House Post Office and Civil Service Committee, which have jurisdiction over the lump-sum payment option, that it opposes what it referred to as "a new golden parachute" loophole that protects defeated members of Congress and their staffs.
Budget summit conferees proposed saving $8.1 billion over five years by eliminating the lump-sum option, which allows employees to collect two payments -- one shortly after they retire and the second a year later -- equal to the amount they have contributed to the pension plan.
Although 85 to 95 percent of the payment is taxable, nearly 70 percent of all retirees have chosen to take the lump-sum payment, which for many is the largest chunk of money they have ever received.
Personnel managers have said they expect an exodus of employees if the option is suspended.
Under the latest proposal being discussed as part of the budget reconciliation process, the lump-sum option would be suspended for five years, although employees would have until Nov. 30 to retire and still qualify to receive the payment, which has averaged about $32,000 for employees in the Washington area.
The proposal also includes several exemptions that allow certain individuals to collect the lump-sum payments even after Nov. 30. The exemptions include:
Persons "involuntarily separated" from the civil service. This applies to employees who are laid off through reduction-in-force (RIF) procedures, whose entire agency or office is dissolved or incumbents who are not reelected.
This exemption applies only to persons who are 62 years old and have at least five years of government service; are 50 years old and have at least 20 years of service or have been in the government for 25 years regardless of age.
Employees who are critically ill. The administration opposes this provision because it "undermines the actuarial balance of the retirement program," according to an Office of Management and Budget statement given to the committees.
Employees participating in Operation Desert Shield in the Persian Gulf region. They would be given an extra year to retire and still qualify, although they must be eligible for retirement before Dec. 1.
The administration also opposes these changes to the original summit agreement because they would reduce by $1.3 billion the savings the budget summit negotiators estimated would be made if the lump-sum option were eliminated without any exemptions.