Pension Losses of Contractor Employees at Federal Institutions Can Be Reduced

HRD-81-102: Published: Sep 3, 1981. Publicly Released: Sep 3, 1981.

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In response to congressional concern about the pensions of employees working on Government service contracts and the fringe benefits of service contract employees, GAO reviewed the benefits in question.

There is no Government-wide policy regarding whether, or to what extent, Federal agencies should attempt to protect the pension benefits of contractor employees working at Federal installations. Although most workers on Federal service contracts that GAO reviewed were covered by pension plans, many had lost pension benefits because their employers had changed even though their jobs had not. Most service contract employees were not working for the same employer long enough to become vested employees with a nonforfeitable right to pension benefits. Earlier or immediate vesting could help improve employees' pension benefits. However, reducing the time required to vest would increase costs and reduce benefits to long-term employees. Further, this would not necessarily assure retirement benefits because employers may pay terminating employees a lump-sum equivalent of future pension benefits, and such payments may be spent rather than saved for retirement. For the major operating contracts that GAO reviewed, in most cases, the same contractors had been operating the facilities for long periods of time. Even when the contractors changed, employees' pensions were protected.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: It is highly unlikely that Congress will act on this recommendation.

    Matter: If Congress determines that the pension benefits of contractor employees who work for long periods of time at Federal installations should be protected, it is recommended that Congress direct the Administrator for Federal Procurement Policy to establish a Government-wide policy and implementing regulations to help ensure such protection.

  2. Status: Closed - Not Implemented

    Comments: It is highly unlikely that Congress will act on this recommendation.

    Matter: The Department of Energy's pension protection arrangements, which emphasize pension portability and discourage lump-sum payments in lieu of future retirement benefits, provide a good model for a Government-wide policy. To minimize administrative problems, if a Government-wide policy is established, it should be limited to relatively large negotiated contracts where a long-term need for future services is forseen.

  3. Status: Closed - Not Implemented

    Comments: It is highly unlikely that Congress will act on this recommendation.

    Matter: To ensure that any policy and regulations developed are consistent with congressional intent, the Congress could establish oversight provisions.

 

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