Retirement Security:

Retirement Contribution Requirements for New Federal Employees

Published: Sep 20, 1983. Publicly Released: Sep 20, 1983.

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Testimony was given on the effects of temporarily requiring new Federal employees to contribute to both the social security and the civil service retirement systems. GAO has been concerned that the extra contributions would place the Government at a competitive disadvantage in recruiting and retaining employees because they would result in a substantial reduction in take-home pay. Federal employees will be contributing a total of about 14 percent of their salary to the programs until a new retirement system to supplement social security is established. The Office of Personnel Management estimates that few of the new employees will receive any civil service benefits from their contributions. Rehired employees could be eligible for more benefits because of their prior Federal service. GAO evaluated several alternatives that could resolve this situation. A temporary tax credit would alleviate the impact during the 2-year period and bills have been introduced to permit such credits. Since the proposed bills do not change the refund provisions of the civil service system, employees could receive not only the tax credit but also a refund of their contributions if they left Government service. Granting no civil service coverage would avoid duplicating benefits and the administrative burden of refunds, but would provide lower disability and death benefits, especially for rehired employees. A social security offset would ensure comparable disability and death benefit coverage at a lower cost; however, it would create an administrative burden. Voluntary participation would give participating employees more coverage than that provided employees hired prior to 1984, but it would be very costly for the limited additional coverage that most employees would receive.

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