STATEMENT OF KENNETH T. BLAYLOCK NATIONAL PRESIDENT AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES AFL-CIO AND PUBLIC EMPLOYEE DEPARTMENT, AFL-CIO BEFORE THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE HOUSE OF REPRESENTATIVES ON DEVELOPMENT OF

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000100080027-7
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: April 23, 2010
• Sequence Number: 27
• Publication Date: March 6, 1984
• Content Type: OPEN SOURCE

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AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
Affiliated with AFL-CIO
1325 Massachusetts Avenue, N.W., Washington, D. C. 20005
KENNETH T. BLAYLOCK
NATIONAL PRESIDENT
AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES
AFL-CIO
AND
PUBLIC EMPLOYEE DEPARTMENT, AFL-CIO
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
HOUSE OF REPRESENTATIVES
DEVELOPMENT OF A SUPPLEMENTAL
FEDERAL CIVIL SERVICE RETIREMENT PLAN
MARCH 6, 1984
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Mr. Chairman, I appear here today in my dual role as the
President of the Public Employee Department, AFL-CIO, and as the
National President of the American Federation of Government
Employees, which represents over 700,000 federal employees
nationwide.
The members of this Committee are well aware that federal
employee unions opposed bringing new federal employees under
Social Security. Our opposition was shared by virtually all
federal employees. However we were not able to prevail on this
issue.
I think underlying all of our opposition, was the concern
that once two classes of federal employees were created in regard
to retirement, their retirement plans would be picked off one-by-one,
with one group of employees pitted against the other. The end
result would be lower retirement :~enefits for all employees.
Virtually all Congressional members indicated that that was not the
intent of the Social Security Amendments. We hope that is the
case.
With the design of the supplemental retirement system, the
assurances federal employees were given will be put to a test.
On September 20, we came before this Committee to testify on
the problem of dual contributions for new employees. At that
time we stated the principle which continues to guide us in this
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process of defining a supplemental retirement system: "Overall,
the supplemental system (when combined with Social Security)
should provide comparable levels of benefits as the current
system with the same level of contributions from the employee.
We continue to believe that this should be the guiding light in
the difficult and complex problems of the design of the
supplemental system.
This principle should supersede any comparisons with the
private sector retirement plans. Retirement is part of a
compensation package. At a time when all unbiased observers (for
instance, the Congressional Budget Office and the Congressional
Research Service) find that federal compensation is below private
sector compensation, there is absolutely no reason to set
federal retirement benefits solely on the basis of private sector
practice. Of course, this does not mean that private sector
retirement plans should not be surveyed to investigate innovative
plan designs, relevant integration formulas, types of benefits,
etc.
Aside from the level of benefits, there is the issue of a
defined benefit plan (like the current Civil Service Retirement
System) or a defined contribution plan. From a worker's point of
view, retirement plans serve one basic function -- to provide
financial security in their elder years. Although we recognize
certain benefits from defined contribution plans (e.g. portability),
they do not fulfill the prime function of providing this security.
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In the private sector, defined contribution plans essentially
shift the risk from the employer to the employees. Some employees
will gain; some will lose, but when the goal is security this is
not a zero-sum game. The fact that one retiree "has made it big"
does not help the individual who's retirement income is insufficient
to pay his or her bills.
From a personnel management perspective, a defined contribution
plan by increasing portability would work against the employer's
need to maintain a stable, skilled workforce.
Given the security needs of retirees we strongly favor a plan
based on a defined benefit base.
This need for income security in retirement also leads us to
unconditionally back full COLA protection for benefits paid under
the supplemental plan. Retirees, whether on Social Security or
Civil Service Retirement are some of those least able to bear the
burden of inflation. In fact, given this commonality of interest
and need, we would strongly recommend that Congress legislatively
link the COLA adjustment in the supplemental plan to the COLA
adjustment in Social Security.
Given a defined benefit plan based on the aforementioned
principles, we would be happy to work with the Committee in
establishing a "defined contribution" or thrift plan as an
addition to the basic plan to provide increased flexibility for
employees.
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This increased flexibility would be especially helpful for
federal employees in the higher grades who have the discretionary
income to participate in individual retirement plans. Individuals
in lower grades, in general, do not have this option. This is even
more relevant given the seemingly endless stream of pay caps and the
resulting every-widening comparability gap. It is for this reason,
we favor keeping at least part of the Social Security tilt toward
lower income groups in the integrated system.
As our previous comments indicate the design of the supplemental
system is a difficult and technically complex process. We fully
approve and commend the deliberative process which this committee has
undertaken in constructing what will eventually become the largest
retirement system in this country.
The supplemental plan will, of course, have great impact, not
only on the ability of federal retirees to live in dignity in their
old age, but also on the personnel management, recruitment, and
retention of federal employees. The existing Civil Service Retirement
System has allowed the federal government to maintain continuity in
federal employment as well as providing the flexibility to provide
the needed infusion of new blood and fresh personnel into the federal
civilian workforce.
The function of a retirement plan as a personnel policy has
played a special role in regard to positions such as law enforcement
officers and federal fire fighters whi-h will have to be addressed in
the supplemental plan as well.
On the question of the organizational structure, we believe that
the new employees' supplemental retirement plan should remain part of
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the existing Civil Service Retirement System. Dual systems would
require dual administrative expenses, dual reporting requirements,
etc. In addition, all federal employees should have a common
interest in a common retirement system. By keeping both groups in
the Civil Service Retirement System, it aids in the financing of
both plans. This would also facilitate providing current employees
with the option to transfer into the supplemental system if they so
desire.
We would recommend that a Board of Trustees for the Civil
Service Retirement System be set up with representatives from federal
employee unions, the private sector, Congress and the Executive
Branch. This Board would be responsible for general policy, adminis-
tration, and oversight. One of the major reasons for the recommenda-
tion of such a broad based board is to restore credibility to the
system. There are currently so many myths, distortions, and
confusion about the Civil Service Retirement System that neither the
employees or the general public understands it or has any
confidence in the program. This state of misinformation has left
the Civil Service Retirement System vulnerable to demagogic attacks
and propaganda. This Board could also investigate and develop
alternative investment. strategies o other financial arrangements which
could strengthen the existing and future retirement systems.
A key concern for federal employees is the cloud of uncertainty
hovering over their retirement years. We encourage this Committee
to investigate any and all means of insulating from the political
process the financing and benefits of retirement system for federal
employees. As long as retirement systems are outside a collective
bargaining framework it is not fair to federal employees to have the
i
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retirement benefits they have earned come under attack every time this
country runs into economic difficulties.
SUMMARY
The first task for Congress in the development of the new staff
retirement plan is to clarify the purposes and functions the plan is
intended to fulfill. Equity between current and future federal
employees, the need for the federal government to attract and retain
top quality personnel, the necessity of addressing the unique retire-
ment needs of law enforcement personnel, federal fire fighters and
other unique jobs, and comparability between federal and private
sector compensation are just some of the criteria which need to be
weighed in this process.
Our recommendations on these issues are as follows:
1. The supplemental system (when combined with Social
Security) should provide comparable levels of benefits
as the current system with the same level of contributions
from the employee. This includes maintaining the existing
age and service requirements under the Civil Service
Retirement System.
2. Comparisons with the private sector should, take into
account the fact that retirement is only one part of a
compensation package and that federal employees are
significantly behind the private sector in the areas of
pay, health benefits and other anciliary benefits.
3. The Retirement Plan should be a three tier system with
the first two tiers composed of Social Security and the
j supplemental retirement plan. These first two tiers
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should provide benefits and contributions at comparable
levels to the existing system. The third tier should
provide for a voluntary defined benefit or thrift plan,
which would be an addition to the first two tiers.
4. The first two tiers of the supplemental system should be
on a defined benefit basis.
5. Full COLA protection should be provided for the benefits
of the first two tiers. This COLA adjustment should be
legislatively linked to the COLA adjustment in Social
Security.
6. At least part of the Social Security tilt toward lower
income groups should be maintained in the integrated system.
7. The supplemental plan should provide current employees
the option of transferring into the new system if they
so desire.
8. A Board of Trustees for the Civil Service Retirement
System should be established with representation from
federal employee unions, the private sector, Congress and
the Executive Branch with general policy, administrative,
and oversight responsibilities
9. The supplemental retirement plan should remain part of the
- existing-Civil Service Retirement System.
I thank you for the opportunity to appear before your Committee
to testify on this important subject.
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