TESTIMONY ON DEVELOPMENT OF A SUPPLEMENTAL CIVIL SERVICE RETIREMENT PLAN BEFORE COMMITTEE ON POST OFFICE AND CIVIL SERVICE CHAIRMAN WILLIAM D. FORD BY DAVID S. BURCKMAN PRESIDENT SENIOR EXECUTIVES ASSOCIATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000300120004-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 14
• Document Creation Date: December 22, 2016
• Document Release Date: February 28, 2011
• Sequence Number: 4
• Publication Date: March 13, 1984
• Content Type: MISC

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TESTIMONY
ON
DEVELOPMENT OF A SUPPLEMENTAL
CIVIL SERVICE RETIREMENT PLAN
BEFORE
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
DAVID S. BURCKMAN
PRESIDENT
SENIOR EXECUTIVES ASSOCIATION
13 MARCH 1984
P.O. BOX 7610 ? BEN FRANKLIN STATION ? WASHINGTON, D.C. 20044
Telephone [phone]
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Chairman and members of the House Post Office and Civil
Service Committee, thank you for the opportunity to present the
views of the Senior Executives Association on this important
subject of the design of a new retirement system for federal
employees. I would like to first thank you Chairman Ford for
your concern about and careful consideration of this subject.
The ~esign of a new retirement system for federal employees is
the most significant matter affecting federal employment.
We appreciate your cautious consideration of this subject and
urge that you continue to move carefully in this important area.
This subject is of keen interest to our members who are
greatly concerned about the effectiveness, productivity and
efficiency of the government. The Federal Government's
attraction for potential and current employees has historically
been based on a pay system comparable to that of the private
sector, a fair and equitable retirement program, and a public
image of service to our country. In recent years, however, all
these important aspects of public service have been eroded. As
one California NASA executive related to me recently, "We are
doing the most exciting work in the world, and I can't hire
high calibre engineers to work for us."
Pay, as compared to large corporations with which the
government must compete for employees, is 20 percent below
comparable private sector salaries. The image of government
employees today is probably best characterized by the
"bureaucrat doll", to which top government officials have
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alluded, The doll, made of red tape, sits on top of paper.
Contrast this to what former President Kennedy told the nation
in his first State of the Union message; "Let the public service
be a proud and lively career, challenging those who would cling
to malicious stereotypes concerning government workers....and
let every man and woman who works in any area of our national
government, in any branch, at any level, be able to say with
pride and honor in future years: I served the United States
Government in that hour of our nation's needs."
Now even the current retirement system is being chipped
away. It is essential that, for the Federal Government to be a
credible employer in the eyes of its employees and prospective
employees, its pay, benefits and image need a revitalization.
Consideration of the new retirement system must be viewed
within this context. If the new retirement system is less
attactive than the current one, then pay must be increased to
offset the loss. Other important principles we believe must be
considered in drawing up a new retirement system are as follows:
Any studies and comparisions to retirement plans in the
private sector should be with large Fortune 20U companies.
The Federal Government draws from the same labor pool as these
large companies and its compensation and benefit packages must
therefore be comparable. For example, most major corporations
provide benefits that the Federal Government does not. At a
minimum, they provide free medical and life insurance for their
retirees.
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We request that, in undertaking studies on private sector
retirement plans, comparisons be made of features these plans
have for executives and top management officials. Such features
should be comparable for our executives and managers for the new
federal retirement program.
The government must not make the mistake of allowing its
current fiscal problems to dictate the design of a new
retirement program. Payouts for the new system are 20-35 years
off, and it would be shortsighted to adopt a new system designed
to achieve short term cost savings which would damage the long
term hiring ability of the government.
We would like to see a study on the change in earning
needs for people when they retire. Because of the change in
lifestyle and financial needs during retirement, it is generally
accepted that people need a smaller income to maintain their
standard of living. What this replacement income average should
be is vague. It would seem that determination of this
replacement income need and its relationship to Social Security
would be a logical first step in designing a new federal
retirement system.
We would also recommend that a non-partisian federal
retirement board be established which would be responsible for
the management of the retirement system. An executive director
would be appointed to serve under the direction of the board.
As we are all too acutely aware, the question of retirement
reform and the handling and investment of retirement system
funds, a difficult undertaking under any situation, has become
complicated by politics.
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In terms of the current Civil Service Retirement System,
we strongly support continuation of the current system without
any changes. We support passage of a provision requiring the
Federal Government to maintain adequate funds in the trust fund
to assure future payments to annuitants. I would also like to
call upon responsible elected officials to stop referring to the
CSRS as an "overly generous" retirement system. The current
retirement system is a fair and equitable system which pays
benefits comparable to those of top private sector firms. It
would be portrayed in this light.
In terms of the actual design of the new system, we would
like to point out what is the most common private sector
pension scheme. This system might well be the best avenue for
the Federal Government to follow.
Such a system has three tiers. First is Social
Security. The second tier is a defined benefit plan to provide
a salary replacement in the range of 70-80 percent at age 65
with 40 years of service. This replacement income would be
offset b;y Social Security. There would be reduced benefits for
early retirement, such as the current 56$ at age 55 with 30
years. Similarly, there would be reduced benefits at retirement
at age 60 with 10 years. Employees are vested in these sytems
after 5 :years. These systems are fully employer funded and use
private sector investment to maintain their income flow.
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A voluntary investment incentive plan would be the third
tier. This plan would allow tax deferred employee contributions
of up to 15 percent of salary with the government matching up to
a certain percent of the employee's contribution. This thrift
plan should be invested in the private sector, and controlled by
an independent Federal Retirement Board.
Thank you for the opportunity to testify. Again, we both
appreciate and congratulate your efforts on this important issue.
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FEDERAL MANAGERS' ASSOCIATION
President Executive Director
Michael E. Minahan = ~ - Bun B. Bray, Jr.
257 Stowe Avenue ~ ~ , 2300 South 9th Street
Troy, NY 12180 Arlington, VA 22204
(518- 274-4572 X703) 892-4408
STATIIKEi~Tr by BUN B. BRAY, JR.
EXDCUZ'IVE DIRECTOR - FIDERAL MANAGERS ASSOCIATION
for
HOUSE POST OFFICE AND CIVIL SERVICE COMMITTEE
THE HONORAL~t,E WILLIAM FORD, CBAIRMAN
DESIGN for a SOPP'LIIKENTAL CIVIL SERVICE RETIREMEt~ SYSTEM
MARCH 13, 1984
Mr. Chairman and Members of the Co~ranittee, the members of the Federal
Managers Association appreciate this opportunity to indicate to you our
concern relative to the Civil Service Retirement System.
First, Mr. Chairman, I want to emphasize .strongly the feeling of our
federal employees, most especially our thousands- of federal
supervisors/managers wham we represent, as to their retirement. During my 35
years working with and for federal employees here in Washington I have never
seen a mere emotional, driving concern, and at all age and pay levels.
EMPLOYEE MORALE
During mid-February, I spoke to some 20 different groups of federal
managers, representing some 3,000 people, from San Francisco to San Diego.
The number one item, without a doubt, was retirement to be followed in order
by: Beeping Work In House instead of use of contractors, Pay and Health
Insurance.
In fact, 450 federal managers on a Saturday, February 18th, attended a
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luncheon at Long Beach, California to hear Dr. Don Devine, Dir. of OPM. P_e
timidly avoided the retirement issue. The audience wanted explanations as to
the Ac~ninistration's proposal to erode .their Civil Service Retirement System.
They are still awaiting answers to their questions. Here is a typical
question by a group of federal managers for Congress, for President Reagan,
for Dr. Devine, and even for the Grace Commission. "Why should a system that
is self supporting, providing a retirement annuity to those who dedicated
their lives to the U.S. Government, which they had no choice but to accept,
be tampered with when it is adequate for all concerned?
Mr. Reagan's proposal to erode the Civil Service Retirement System is
"Sad hews" to 35 million Federal employees and merely depresses even more the
morale of our federal workforce..
And, the ironic aspect of all this is the fact that we at this time
should be working to improve the productivity of our federal workforce.
Instead, we as managers are daily faced with a workforce that feels it is
being used and I mean "USID" by the Administration.
Mr. Chairman, you know and I know, that one of the soundest, fairest ways
to improve our creditability, our image with the public is to show a more
efficient and effective workforce.
With daily comments, reports of overpaid, underworked Civil Service
personnel, just waiting for fat retirement annuities, you quickly recognize
the problems of federal managers to improve productivity.
~~T, MANGERS' ~~,QNS
For a few n:cments let's hear from some federal managers on this issue of
retirement.
"Our system - CSRS - is presently solvent, but it requires input from new
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employees to maintain that solvency. I reconaraend that waste, fraud and abuse
be eliminated from Social Security to save it from itself and that our
retirement payments be paid into our own fund".
"It has become too easy for the federal government to take pot shots at
the federal employees. We are frankly getting tired of being the first ones
to pay for everyone else's mistakes".
From the Washington area, "Retirement benefits are adequate under the
present system. Additional fringe benefits are not required. The emphasis
should be on protection of existing benefits".
Another group of managers in Oklahoma told us: "We in the Civil Service
community have not asked for expansion or increases to the retirement system.
We have simply asked to leave it status quo. It became most apparent that
our request was ignored when all new Civil Service employees were placed
under the ailing Social Security system effective 1 January 1984. The end
result of this action meant a lack of perpetuation for our previously sound
retirement system. Our concern lies with the government employee with less
than 10 years service. They must be wondering what retirement will offer
them. To imiarove the confidence level of all Civil Service employees, the
supplemental retirement system must be tied to the present system. Without
at least some funds coming into the system it cannot survive and we would all
feel that our government would simply be waiting for us to expire and relieve
them of their liability."
RF.~NITION (~F ~ D_I~'FF~SY~T~~
Mr. Chairman, in your opening statement, February 23rd, you stated two
paramount principles in the development of a supplemental plan; namely,
first, no plan which will threaten the integrity of the existing Federal
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retirement system; and, secondly the supplemental plan must be compatible
Wlth existing Systems".
The Federal Managers Association strongly endorses your principles. And,
we too, agree with Dr. Devine that you are to be commended for starting early
an analysis of the many intriguing, crm~plex and conflicting issues relating
to the Federal Government Retirement and Social Security.
As we approach these two systems we must keep solidly in mind a statement
by former Virginia Congressman, Joseph Fisher; "The two systems, Federal
Retirement and Social Security, were established to fill different
objectives, ane a retirement income or pension for government staff, the
other a minimum protection for elderly persons".
Mr. Chairman, as we review the hundreds of documents analyzing every
possible aspect of Social Security and a blend into Civil Service Retirement
or vice versa, there is always chat major difference which is underlying
every move. We appear to want to submerge these basic .differences between an
actual retirement program and a program to guarantee a degree of fiscal
existence.
~~ ~ACZ~SOCIAL $ 7F2TTY 413`. ~]AS~~
May I stop here a moment and also emphasize the fact that our higher
grade federal personnel are fully knowledgeable; that the more you earn under
Social 5ecuri.ty the less the return. They do not need to be reminded that
with the same amount of service, now under Social Security, the lower-paid
employee receives 40$ of pay but the higher-paid receives 19$ or less.
We are indeed glad to see that the Administration is flexible at this
time - so Dr. Devine has stated - relative to the relationship of a new
retirement plan and Social Security, the age range for certain special groups
of Federal employees such as Firefighters and Air Traffic Controllers and
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coverage.
In turn, as I stated earlier, we cannot support the. Administration's
current proposals; Reagan Budget for '85 as to a change in the annuity
formula, high 3 years to a high 5 years, an increase in contributions or
reducing the COLA.
(~ONFLICTj,~,. ~~,jQ~
As we study the OPM rationale for changes to the present Civil Service
Retirement System we are both amused and disturbed. Why? Simply because
there are studies and studies that support either side of these controversial
arguments.
OPM officials say we have a huge unfunded liability of $515 billion.
.Tomorrow's citizens will have to pay a major portion of cost of service being
received from today's federal employees.
Michael Nave, former President of NARFE, has stated, "CSRS funds assets
totaled in 1982, $96.6 billion and interest on fund investments amounted to
$8.2 billion; whereas, outlays in that year were $19.6 billion". In turn Mr.
Nave shows that CSRS funds are borrowed by the government at below market
rates, an actual savings to the government of billions of dollars.
Tom Tinsley, former head of Retirement and Insurance in OPM and for years
in the Civil Service Commission, has often stated, "finder current operating
conditions the Civil Service Retirement System is absolutely fiscally sound
for the next 100 years".
In a recent statement, Mr. Nave, after reviewing the handling of CSRS
disbursements against only employee contributions, without considering the
government's matching contribution or interest earned from CSRS investments
stated: "It seems obvious that budget cutters in the Administration and in
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Congress are taking aim at federal retirement benefits, not because of
funding needs, as in the case of Social Security, but as a matter of
political expediency for budget purposes".
And, Mr. Chairman, as a side remark, the Grace Commission material will
heat up the "political expediency".
In another area of mystism, Mr. James Cowen, Staff Director of Senator
Steven`s Government Affairs Subcommittee is quoted in a recent newspaper
story, Federal Times, as saying: "The current system's financial condition
does not degend upon new entrants. Its soundness is secured solely by
continued government appropriations into the retirement trust fund".
Then Mr. Kenneth Shapiro of Hay, Huggins Inc. testified before the
Committee February 23rd. "The employees hired before January 1, 1984 and
annuitants are understandably concerned about the financing of the current
system. The current CSRS financing was constructed in 1969 to provide enough
income on a going concern bases. P~ long as new employees enter the system,
the payments will be sufficient to cover future benefits. However, if the
current system is closed, this flow of fresh money will cease and the funds
will disappear before all of the promised benefits are paid".
Right here my dear Congressmen and Congress ladies is the crux to much of
the worry, the fear, of our 3.5 million federal employees. They know you are
mandated to d.o something about the new employees coming into the federal
government but they are very skeptical as to what will be the end results!
~~~
Mr. Chairman, M~t~bers of the Committee, in summary the Federal Managers
Association's current position on this key issue, new federal employees and
6'
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the Civil Service Retirement System is as follows: 1. Federal employee
morale is at the lowest level in four decades and a significant reason
relates to a fear of either losing retirement benefits which has already
occurred or the Administration's current proposals. 2. The Medicare tax and
then bringing new federal employees into Social Security were opposed by FMA.
We regard such actions as back-door entrances for all federal employees into
Social Security and/or the erosion of the Civil Service Retirement System.
3. Congress, the current Administration and the American people must
recognize the basic differences between a social insurance program and a
model retirement system. 4. Current information regarding Social Security
and the Civil Service Retirement system can be used to justify most any
position a person wishes to take. This includes funding issues, early
retirement, costrof-living adjustments and disability. 5. The Members of
Federal Managers Association are adamant to retain their present retirement
benefits and urge Congress to move very carefully into any supplemental
system for new employees.
In final analysis, the Federal Managers Association recommends
legislation t.o remove new federal employees from Social Security.
Mr. Chairman, Me[ibers of the Post Office and Civil. Service Conanittee, the
creation of the Civil Service Retirement System in 1920 and the gradual
improvements, especially the 1969 funding concepts, reflect a significant
philosophy of government during the past four decades, and I am proud to have
played a minor role. We believe the federal government should be the model
for the rest of America; be it state, county or local governments or the
private sector in all phases of personnel management. This certainly
included training, promotional criteria, compensation, leave and retirement.
It is my humble opinion that without the federal government's leadership
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in these personnel management areas, state and local governments,, as well as
much of the private sector, would not be nearly as advanced as they are today
in such areas as retirement, leave, training and classification and
Compensation.
This Nation's first-class leadership represents the capabilities,
dedication and energies of a first-class workforce. We, you and I, owe it to
them to continue a first-class personnel program which must necessarily
include a fiscally sound, fair and attractive retirement program.
Our thousands of dedicated federal managers ask the simple question, "Why
change"?
Ladies and Gentlemen, I too ask the same question.
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