Statement of Administration Policy: S. 1527 - Federal Retirement Reform Act of 1985

(Senate)
(Stevens (R) Alaska and Roth (R) Delaware)

• The Administration strongly supports the three tier approach to a retirement system taken by S. 1527.
• The cost of S. 1527 as reported out of Committee is considerably more expensive than the vast majority of private sector retirement plans, and is at the uppermost limit that the Administration is prepared to accept.
• We have strong objections to two specific provisions that make the bill more costly and more generous than typical private sector retirement plans:

— Fully indexed cost-of-living increases on top of fully indexed COLAs for Social Security, a benefit enjoyed by very few private sector employees.

— Full retirement benefits as early as 55, compared to 65 under most private sector plans. In addition, such early retirement is poor personnel policy because it provides an incentive for good employees to leave Government service at the peak of their careers.

• In addition, the extension of tax deferred capital accumulation (401(k)) plans to Federal employees is inconsistent with the President's tax reform proposals. Instead the Administration proposes an after tax capital accumulation plan with an employer match.
• Of particular concern to the Administration is the seriously flawed, objectionable provision that would establish a Thrift Investment Board within the Executive branch to manage employee and Government contributions, combined with an unacceptable provision for social investing. We propose instead an investment provision that permits individual employee investment in qualified private sector investment firms, to give employees free choice of where their money goes.