[House Report 111-58, Part 2]
[From the U.S. Government Publishing Office]
111th Congress Rept. 111-58
HOUSE OF REPRESENTATIVES
1st Session Part 2
======================================================================
FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT
_______
March 26, 2009.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Towns, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 1256]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom was
referred the bill (H.R. 1256) to protect the public health by
providing the Food and Drug Administration with certain
authority to regulate tobacco products, having considered the
same, report favorably thereon with amendments and recommend
that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 4
Background and Need for Legislation.............................. 4
Legislative History.............................................. 6
Section-by-Section............................................... 6
Explanation Of Amendments........................................ 10
Committee Consideration.......................................... 12
Roll Call Votes.................................................. 12
Application Of Law To The Legislative Branch..................... 12
Statement Of Oversight Findings And Recommendations Of The
Committee...................................................... 12
Statement Of General Performance Goals And Objectives............ 13
Constitutional Authority Statement............................... 13
Federal Advisory Committee Act................................... 13
Unfunded Mandate Statement....................................... 13
Earmark Identification........................................... 13
Committee Estimate............................................... 13
Budget Authority And Congressional Budget Office Cost Estimate... 13
Changes In Existing Law Made By The Bill As Reported............. 26
Additional Views................................................. 35
The amendments are as follows:
Add at the end the following:
SEC. 408. EXEMPTION OF CERTAIN REPAYMENTS UNDER THE CIVIL SERVICE
RETIREMENT SYSTEM FROM THE REQUIREMENT THAT THEY BE
MADE WITH INTEREST.
(a) In General.--Section 8334(d)(1) of title 5, United States Code,
is amended--
(1) by striking ``(d)(1)'' and inserting ``(d)(1)(A)''; and
(2) by adding at the end the following:
``(B) No interest under subparagraph (A) shall be required in the
case of any deposit to the extent that it represents the amount of any
refund that was made to an employee or Member during the period
beginning on October 1, 1990, and ending on February 28, 1991.''.
(b) Applicability.--The amendments made by subsection (a) shall be
effective with respect to any annuity, entitlement to which is based on
a separation from service occurring on or after the date of enactment
of this Act.
Page 197, strike lines 7 through 10 and insert the following:
``(E)(i) Subject to clause (ii), sections 8351(a)(1), 8440a(a)(1),
8440b(a)(1), 8440c(a)(1), 8440d(a)(1), and 8440e(a)(1) shall be applied
in a manner consistent with the purposes of this paragraph.
``(ii) The Secretary concerned may, with respect to members of the
uniformed services under the authority of such Secretary, establish
such special rules as such Secretary considers necessary for the
administration of this subparagraph, including rules in accordance with
which such Secretary may--
``(I) provide for delayed automatic enrollment; or
``(II) preclude or suspend the application of automatic
enrollment.''.
Add at the end the following:
SEC. 409. COMPUTATION OF CERTAIN ANNUITIES BASED ON PART-TIME SERVICE.
(a) In General.--Section 8339(p) of title 5, United States Code, is
amended by adding at the end the following:
``(3) In the administration of paragraph (1)--
``(A) subparagraph (A) of such paragraph shall apply with
respect to service performed before, on, or after April 7,
1986; and
``(B) subparagraph (B) of such paragraph--
``(i) shall apply with respect to that portion of any
annuity which is attributable to service performed on
or after April 7, 1986; and
``(ii) shall not apply with respect to that portion
of any annuity which is attributable to service
performed before April 7, 1986.''.
(b) Applicability.--The amendment made by subsection (a) shall be
effective with respect to any annuity, entitlement to which is based on
a separation from service occurring on or after the date of enactment
of this Act.
Add at the end the following:
SEC. 410. TREATMENT OF MEMBERS OF THE UNIFORMED SERVICES UNDER THE
THRIFT SAVINGS PLAN.
(a) Sense of Congress.--It is the sense of Congress that--
(1) members of the uniformed services should have a
retirement system that is at least as generous as the one which
is available to Federal civilian employees; and
(2) Federal civilian employees receive matching contributions
from their employing agencies for their contributions to the
Thrift Savings Fund, but the costs of requiring such a matching
contribution from the Department of Defense could be
significant.
(b) Reporting Requirement.--Not later than 180 days after the date of
the enactment of this Act, the Secretary of Defense shall report to
Congress on--
(1) the cost to the Department of Defense of providing a
matching payment with respect to contributions made to the
Thrift Savings Fund by members of the armed forces;
(2) the effect that requiring such a matching payment would
have on recruitment and retention; and
(3) any other information that the Secretary of Defense
considers appropriate.
Add at the end the following:
SEC. 411. AUTHORITY TO DEPOSIT REFUNDS UNDER FERS.
(a) Deposit Authority.--Section 8422 of title 5, United States Code,
is amended by adding at the end the following:
``(i)(1) Each employee or Member who has received a refund of
retirement deductions under this or any other retirement system
established for employees of the Government covering service for which
such employee or Member may be allowed credit under this chapter may
deposit the amount received, with interest. Credit may not be allowed
for the service covered by the refund until the deposit is made.
``(2) Interest under this subsection shall be computed in accordance
with paragraphs (2) and (3) of section 8334(e) and regulations
prescribed by the Office. The option under the third sentence of
section 8334(e)(2) to make a deposit in one or more installments shall
apply to deposits under this subsection.
``(3) For the purpose of survivor annuities, deposits authorized by
this subsection may also be made by a survivor of an employee or
Member.''.
(b) Technical and Conforming Amendments.--
(1) Definitional amendment.--Section 8401(19)(C) of title 5,
United States Code, is amended by striking ``8411(f);'' and
inserting ``8411(f) or 8422(i);''.
(2) Crediting of deposits.--Section 8422(c) of title 5,
United States Code, is amended by adding at the end the
following: ``Deposits made by an employee, Member, or survivor
also shall be credited to the Fund.''.
(3) Section heading.--(A) The heading for section 8422 of
title 5, United States Code, is amended to read as follows:
``Sec. 8422. Deductions from pay; contributions for other service;
deposits''.
(B) The analysis for chapter 84 of title 5, United States
Code, is amended by striking the item relating to section 8422
and inserting the following:
``8422. Deductions from pay; contributions for other service;
deposits.''.
(4) Restoration of annuity rights.--The last sentence of
section 8424(a) of title 5, United States Code, is amended by
striking ``based.'' and inserting ``based, until the employee
or Member is reemployed in the service subject to this
chapter.''.
Add at the end the following:
TITLE V--RETIREMENT CREDIT FOR SERVICE OF CERTAIN EMPLOYEES TRANSFERRED
FROM DISTRICT OF COLUMBIA SERVICE TO FEDERAL SERVICE
SEC. 501. SHORT TITLE.
This title may be cited as the ``District of Columbia Court, Offender
Supervision, Parole, and Public Defender Employees Equity Act of
2009''.
SEC. 502. RETIREMENT CREDIT FOR SERVICE OF CERTAIN EMPLOYEES
TRANSFERRED FROM DISTRICT OF COLUMBIA SERVICE TO
FEDERAL SERVICE.
(a) In General.--Any individual who is treated as an employee of the
Federal government for purposes of chapter 83 or chapter 84 of title 5,
United States Code, on or after the date of enactment of this Act who
performed qualifying District of Columbia service shall be entitled to
have such service included in calculating the individual's creditable
service under sections 8332 or 8411 of title 5, United States Code, but
only for purposes of the following provisions of such title:
(1) Sections 8333 and 8410 (relating to eligibility for
annuity).
(2) Sections 8336 (other than subsections (d), (h), and (p)
thereof) and 8412 (relating to immediate retirement).
(3) Sections 8338 and 8413 (relating to deferred retirement).
(4) Sections 8336(d), 8336(h), 8336(p), and 8414 (relating to
early retirement).
(5) Section 8341 and subchapter IV of chapter 84 (relating to
survivor annuities).
(6) Section 8337 and subchapter V of chapter 84 (relating to
disability benefits).
(b) Treatment of Detention Officer Service as Law Enforcement Officer
Service.--Any portion of an individual's qualifying District of
Columbia service which consisted of service as a detention officer
under section 2604(2) of the District of Columbia Government
Comprehensive Merit Personnel Act of 1978 (sec. 1--626.04(2), D.C.
Official Code) shall be treated as service as a law enforcement officer
under sections 8331(20) or 8401(17) of title 5, United States Code, for
purposes of applying subsection (a) with respect to the individual.
(c) Service Not Included in Computing Amount of Any Annuity.--
Qualifying District of Columbia service shall not be taken into account
for purposes of computing the amount of any benefit payable out of the
Civil Service Retirement and Disability Fund.
SEC. 503. QUALIFYING DISTRICT OF COLUMBIA SERVICE DEFINED.
In this title, ``qualifying District of Columbia service'' means any
of the following:
(1) Service performed by an individual as a nonjudicial
employee of the District of Columbia courts--
(A) which was performed prior to the effective date
of the amendments made by section 11246(b) of the
Balanced Budget Act of 1997; and
(B) for which the individual did not ever receive
credit under the provisions of subchapter III of
chapter 83 or chapter 84 of title 5, United States Code
(other than by virtue of section 8331(1)(iv) of such
title).
(2) Service performed by an individual as an employee of an
entity of the District of Columbia government whose functions
were transferred to the Pretrial Services, Parole, Adult
Supervision, and Offender Supervision Trustee under section
11232 of the Balanced Budget Act of 1997--
(A) which was performed prior to the effective date
of the individual's coverage as an employee of the
Federal Government under section 11232(f) of such Act;
and
(B) for which the individual did not ever receive
credit under the provisions of subchapter III of
chapter 83 or chapter 84 of title 5, United States Code
(other than by virtue of section 8331(1)(iv) of such
title).
(3) Service performed by an individual as an employee of the
District of Columbia Public Defender Service--
(A) which was performed prior to the effective date
of the amendments made by section 7(e) of the District
of Columbia Courts and Justice Technical Corrections
Act of 1998; and
(B) for which the individual did not ever receive
credit under the provisions of subchapter III of
chapter 83 or chapter 84 of title 5, United States Code
(other than by virtue of section 8331(1)(iv) of such
title).
(4) In the case of an individual who was an employee of the
District of Columbia Department of Corrections who was
separated from service as a result of the closing of the Lorton
Correctional Complex and who was appointed to a position with
the Bureau of Prisons, the District of Columbia courts, the
Pretrial Services, Parole, Adult Supervision, and Offender
Supervision Trustee, the United States Parole Commission, or
the District of Columbia Public Defender Service, service
performed by the individual as an employee of the District of
Columbia Department of Corrections--
(A) which was performed prior to the effective date
of the individual's coverage as an employee of the
Federal Government; and
(B) for which the individual did not ever receive
credit under the provisions of subchapter III of
chapter 83 or chapter 84 of title 5, United States Code
(other than by virtue of section 8331(1)(iv) of such
title).
SEC. 504. CERTIFICATION OF SERVICE.
The Office of Personnel Management shall accept the certification of
the appropriate personnel official of the government of the District of
Columbia or other independent employing entity concerning whether an
individual performed qualifying District of Columbia service and the
length of the period of such service the individual performed.
Conform table of contents in section 1(b) accordingly.
Purpose and Summary
H.R. 1256, the Family Smoking Prevention and Tobacco
Control Act, was introduced by Rep. Waxman on March 3, 2009.
The legislation includes provisions that fall within the
jurisdiction of the Committee on Oversight and Government
Reform. Specifically, Title IV of H.R. 1256, the Thrift Savings
Plan Enhancement Act of 2009, makes several changes to
modernize and enhance the Thrift Savings Plan (TSP) and
provides for other changes to federal employee retirement
benefits.
Background and Need for Legislation
In general, TSP was designed to play an important role in
employees' retirement income and participation should be
strongly encouraged. The bill requires the Federal Retirement
Thrift Investment Board (Board) to automatically enroll newly
hired federal and military employees in the Thrift Savings Plan
(TSP). Currently, 14% of eligible federal civilian employees
and 75% of uniformed service members are not participating in
TSP and are therefore less likely than participants to be
financially self-sufficient in retirement. For civilian
employees in the Federal Employee Retirement System (FERS), TSP
represents one part of a three part system, the other parts
being Social Security and the FERS annuity.
The bill also requires the establishment of a qualified
Roth contribution option for the TSP. This option, which has
been in use in the private sector for a number of years,
permits employees to contribute money to their TSP account
after paying taxes on the contribution and to withdraw money
tax-free upon retirement. This option could be attractive to
federal employees at both the lower and upper ends of the wage
scale.
The bill would authorize the Board to create additional
self-directed investment options, including additional index
funds, provided that the costs of such options are borne solely
by the participants who use such options and after consultation
with affected employee organizations.
The Committee believes the authority to add self-directed
investment options under the Thrift Savings Plan will enable
the Board to serve the best interests of participants by making
available low-cost index funds that offer important
diversification benefits. Since it is unlikely any fixed asset
allocation or fixed set of asset classes will satisfy the
requirements of every investor, the authority to add
appropriate self-directed investment options may enable
participants to access the full set of core asset classes
optimal in their own financial circumstances.
The Committee recognizes some investors today have
sophisticated or specialized investment needs. Participants may
want added diversity by investing in funds comprised of real
estate investment trusts, emerging markets, or inflation-
protected bonds. Other participants may want to align their
portfolio with their personal convictions by investing in
socially responsible funds. The self-directed investment
options are intended to provide a vehicle for meeting these
needs of plan participants without complicating the basic
structure of the Thrift Savings Plan.
Finally, the bill amends FERS by crediting retiring federal
employees with unused sick leave when determining the amount of
their FERS annuity, as is currently the case for participants
in the CSRS. This would allow FERS employees to include unused
sick leave in determining their total years of service as part
of the annuity computation. Total years of service is one part
of the formula used to calculate annuities under the FERS
system. Unused sick leave would not be a factor in determining
an employee's average pay or their eligibility for a FERS
annuity. The change would reduce the incentive for employees to
use excess sick leave as they approach retirement. The Office
of Personnel Management (OPM) has found that FERS employees who
are approaching retirement use significantly more sick leave
than their CSRS counterparts. OPM estimates that this results
in $68 million in lost productivity each year. The change is
intended to address the related problems of absenteeism and
lost productivity in federal agencies that result from the
current ``use it or lose it'' approach to sick leave under the
FERS system.
Legislative History
On April 29, 2008, the Subcommittee on Federal Workforce,
Postal Service, and the District of Columbia held a hearing on
legislative proposals by the Board to provide for automatic
enrollment and another provision not included in H.R. 1256. The
witnesses were Greg Long, Executive Director, Federal
Retirement Thrift Investment Board and Richard Brown, Vice
Chair, Employee Thrift Advisory Council.
On July 10, 2008, the Subcommittee held a hearing on,
``Investing in the Future: Minority Opportunities and the
Thrift Savings Plan.'' The witnesses were Greg Long, Executive
Director, Federal Retirement Thrift Investment Board; Michael
Sobel, Managing Director & Head of U.S. Equity Trading,
Barclays Global Investors; Mr. Edward Swan, Jr., President,
Fiduciary Investment Solutions Group; Mr. Jarvis Hollingsworth,
Partner, Bracewell & Giuliani, L.L.P; Mr. Thurman White, Chief
Executive Officer, Progress Investment Management; Ms. Mellody
Hobson, President, Ariel Capital Management, Inc.; and Mr.
Jessie Brown, President, Krystal Investments. This hearing
examined ways to increase minority participation in the
management of TSP and explored why the federal government uses
passive management strategies versus active management of TSP
funds.
H.R. 6500, the Thrift Savings Plan Enhancement Act of 2008,
was introduced by then-Chairman Waxman, together with then-
Ranking Member Tom Davis and then-Subcommittee Chairman Danny
Davis, on July 15, 2008, and referred to the Committee on
Oversight and Government Reform. Title IV of H.R. 1256 is
similar to H.R. 6500. The Committee passed H.R. 6500 by voice
vote on July 16, 2008. One amendment to the bill was offered by
Rep. Danny Davis, and adopted by the Committee. The amendment,
which added an additional reporting requirement, is now
included in the text of Title IV of H.R. 1256.
H.R. 1108 (110th Congress), the Family Smoking Prevention
and Tobacco Control Act, passed the House by a 326-102 vote on
July 30, 2008. Title IV of H.R. 1256 is similar to the
provisions included and passed by the House in H.R. 1108.
Section-by-Section
TITLE IV--THRIFT SAVINGS PLAN ENHANCEMENT
Section 401: Short title; table of contents
Section 1 specifies that the bill may be cited as the
``Thrift Savings Plan Enhancement Act of 2009'' and provides a
table of contents.
Section 402: Automatic enrollments
Subsection (a) of this section strikes paragraphs 2 through
4 of section 8432(b) of title 5, United States Code and inserts
a new paragraph 2. The new subparagraph 2(A) requires the
Board, by regulation, to provide for new participants to be
automatically enrolled in the TSP at the default percentage of
basic pay. Subparagraph 2(B) provides that the default
percentage of basic pay shall be equal to 3%, or such other
percentage not less than 2% or more than 5% as the Board may
prescribe by regulation. Subparagraph 2(C) makes clear that the
regulations required under 2(A) shall include provisions under
which individuals who would otherwise be automatically enrolled
may modify the percentage of basic pay contributed or decline
enrollment in the TSP altogether. Subparagraph 2(D) defines the
term ``new participant'' for purposes of paragraph 2 to mean
any individual participating in the TSP pursuant to an
appointment or election which occurs after any regulations
required by subparagraph (A) first take effect. Subparagraph
2(E) provides that various sections of title 5 shall be applied
in a manner consistent with the purposes of paragraph 2. Those
sections apply to federal employees subject to the Civil
Service Retirement System, justices and judges, bankruptcy and
magistrate judges, Court of Federal Claims judges, judges of
the United States Court of Appeals for Veterans Claims, and
members of the uniformed services. In the case of members of
the uniformed services, the Secretary concerned may issue
special rules for such members, including by providing for
delayed automatic enrollment or suspending or precluding the
application of automatic enrollment.
Section 403: Qualified Roth contribution program
This section amends title 5 by inserting a new section
8432d. The new section requires the Board to include by
regulation in the TSP a qualified Roth contribution program
under such terms and conditions as the Board may prescribe. The
term ``qualified Roth contribution program'' means a program
described in paragraph (1) of section 402A(b) of the Internal
Revenue Code of 1986. The Committee understands this to be a
program under which employee contributions to the TSP would be
included as taxable income and withdrawals at retirement would
be not be considered taxable income.
Section 404: Authority to establish self-directed investment window
This section amends section 8438 of title 5 to give the
Board the authority to add a self-directed investment window
under the TSP, if the Board determines such an addition would
be in the best interests of the participants. Such addition
shall be limited to (1) low-cost, passively-managed index funds
that offer diversification benefits and (2) other investment
options, if the Board determines the options to be appropriate
retirement investment vehicles. The Board is required to ensure
that any administrative expenses related to the self-directed
investment window are borne solely by the participants using
such window and consult with the Employee Thrift Advisory
Council before establishing any such window. The Board may also
establish such terms and conditions for the self-directed
investment window as it considers appropriate to protect the
interests of participants.
Section 405: Reporting requirements
This section requires the Board to submit an annual report
to Congress by March 31st of each year on the operations of the
TSP during the previous calendar year. The report will include
information on the number of participants, the median balance
in participants' accounts, demographic information on
participants, the percentage of funds allocated among
investment funds or options, the status of the development and
implementation of the self-directed investment window, the
diversity demographics of any company, investment advisor or
other entity retained to invest and manage the assets of the
Thrift Savings Fund, and any other information the Board
considers appropriate. A copy of the report shall be made
available to the public on the internet.
The section also requires the Board to include in the
periodic statements provided to participants the amount of
investment management fees, administrative fees, and any other
fees or expenses paid with respect to each investment fund or
option under TSP.
Section 406: Acknowledgement of risk
This section amends section 8439(d) of title 5 to require
participants to sign an acknowledgement of risk whenever they
elect to invest sums in any fund or option other than the
Government Securities Investment Fund. The section further
amends section 8477(e) of title 5 to make clear that
fiduciaries shall not be liable for providing for automatic
enrollment, for enrolling participants under a default
investment fund, for allowing a participant to invest through
the self-directed investment window, or for establishing
restrictions applicable to participants' ability to invest
through the self-directed investment window.
Section 407: Credit for unused sick leave
This section amends section 8415 of title 5 to allow the
total service of an employee who retires on an immediate
annuity, or who dies leaving a survivor or survivors entitled
to annuity, to include the days of unused sick leave when
computing the employee's FERS annuity. Unused sick leave will
not be counted in determining average pay or annuity
eligibility under the FERS system. The amendments made by this
section shall apply to annuities computed based on separations
occurring on or after the date of enactment of the Act.
Section 408: Exemption of certain repayments under the Civil Service
retirement system
This section amends section 8334 of title 5 to provide that
no interest under subparagraph (A) of section 8334 shall be
required in the case of any deposit made under such section to
the extent that it represents the amount of any refund that was
made to an employee or Member during the period beginning on
October 1, 1990, and ending on February 28, 1991.
Section 409: Part-time annuity calculation for some CSRS employees
This section amends section 8339 of title 5 to make
applicable the current CSRS post-1986 part-time annuity
calculation to years of service performed before, on, or after
April 7, 1986.
Section 410: Treatment of members of the uniformed services under the
Thrift Savings Plan
This section states that it is the sense of the Congress
that members of the uniformed services should have a retirement
system that is at least as generous as the one which is
available to federal civilian employees. It recognizes that
federal civilian employees receive a matching TSP contribution
from their agency, and acknowledges that the cost of providing
a similar matching contribution for members of the uniformed
services would be significant.
The section further requires the Secretary of Defense to
report to Congress on the cost of providing a matching payment
to members of the armed services, the effect that requiring
such a matching payment would have on recruitment and
retention, and any other information the Secretary considers
appropriate within 180 days.
Section 411: Authority to deposit refunds under FERS
This section amends section 8422 of title 5 to allow
employees or Members who have received a refund of retirement
deductions under FERS to deposit the amount received, with
interest. Credit for the years of service covered by such
refund may not be allowed until the deposit is made. For the
purpose of survivor annuities, deposits authorized by this
section may also be made by a survivor of an employee or
Member. The section makes further technical and conforming
amendments to title 5.
TITLE V--RETIREMENT CREDIT FOR SERVICE OF CERTAIN EMPLOYEES TRANSFERRED
FROM DISTRICT OF COLUMBIA SERVICE TO FEDERAL SERVICE
Section 501: Short title.
This title may be cited as the ``District of Columbia
Court, Offender Supervision, Parole, and Public Defender
Employees Equity Act of 2009.''
Section 502: Retirement credit for service of certain employees
transferred from District of Columbia service to federal
service
This section permits certain federal employees who
performed ``qualifying District of Columbia service'' to be
entitled to have such service included in calculating the
individual's creditable service under the FERS system. The
section further provides that any portion of an individual's
qualifying District of Columbia service which consisted of
service as a detention officer under section 2604(2) of the
District of Columbia Government Comprehensive Merit Personnel
Act of 1978 shall be treated as service as a law enforcement
officer under the FERS system. Qualifying District of Columbia
service under this section shall not be taken into account for
purposes of computing the amount of any benefit payable out of
the Civil Service Retirement and Disability Fund.
Section 503: Qualifying District of Columbia service defined
This section defines ``qualifying District of Columbia
Service'' to include certain service performed by an individual
as a non-judicial employee of the District of Columbia courts,
certain service performed by an individual as an employee of an
entity of the District of Columbia government whose functions
were transferred to the Pretrial Services, Parole, Adult
Supervision, and Offender Supervision Trustee, certain service
performed by an individual as an employee of the District of
Columbia Public Defender Service, and the service of certain
employees of the District of Columbia Department of
Corrections.
Section 504: Certification of service
This section requires the Office of Personnel Management to
accept the certification of the appropriate personnel official
of the government of the District of Columbia or other
independent employing entity concerning whether an individual
performed qualifying District of Columbia service and the
length of the period of such service the individual performed.
Explanation of Amendments
The following amendments were adopted in Committee:
Rep. Van Hollen offered an amendment to the bill, which was
considered and passed by the Committee on a voice vote. The
amendment would correct an unintended consequence that followed
the enactment of the Omnibus Reconciliation Act of 1990 (Public
Law 101-508) on November 5, 1990, and provide relief for
federal employees who were adversely affected by that
enactment. The Omnibus Reconciliation Act of 1990 made
retroactive changes to the rules related to separating federal
employees. While the rules were made retroactive to October 1,
1990, the implementing regulations were not promulgated until
February 1991. This four month period between the enactment of
the law and the promulgation of the implementing regulations
has adversely affected any federal employee who withdrew their
retirement contributions during this period. The amendment
would provide relief to the employees affected by this
situation.
Rep. Issa offered an amendment to the bill, which was
considered and passed by the Committee on a voice vote. The
amendment modifies section 402, dealing with automatic
enrollments in the TSP program, to allow the Secretaries of the
military departments greater discretion in determining if
automatic enrollment is appropriate and in the best interests
of members of the uniformed services. Under this amendment, the
Secretary concerned may provide for delayed automatic
enrollment for service members, or preclude or suspend
automatic enrollment in the TSP.
Rep. Lynch offered an amendment to the bill, which was
considered and passed by the Committee on a voice vote. The
amendment would correct an inequitable annuity reduction that
currently occurs if certain federal employees work part-time at
the end of their career. This inequity can create personnel
problems in federal agencies and can cause individuals who are
eligible to retire, or who will shortly be eligible to retire,
to avoid working on a part-time basis, even if it would
otherwise be in the government's interest.
The amendment would permit the use of high-three average
salary computations for full-and part-time work, whether the
work was performed before or after 1986. This eliminates the
adverse effect of performing part-time service late in an
employee's career and provides a simplified annuity computation
in cases involving part-time service. On August 31, 2007, the
Subcommittee on Federal Workforce, Postal Service, and the
District of Columbia held a hearing on H.R. 2780, legislation
identical to the amendment proposed by Rep. Lynch. The
Committee held a business meeting on March 13, 2008, to
consider H.R. 2780 and ordered the bill to be reported
favorably on a voice vote. (See House Committee on Oversight
and Government Reform, Clarifying the Method for Computing
Certain Annuities Under the Civil Service Retirement System
Based on Part-Time Service, 110th Congress (2008) (H. Rept.
110-770).
Rep. Issa offered an amendment to the bill, which was
considered and passed by the Committee on a voice vote. The
amendment states the sense of Congress that members of the
uniformed services should have a retirement system that is at
least as generous as the one which is available to Federal
civilian employees. The sense of Congress further recognizes
that federal civilian employees under the FERS system receive
matching contributions from their employing agencies (CSRS and
military personnel do not). However, the costs of requiring
such a matching contribution from the Department of Defense for
members of the uniformed services could be significant.
The retirement benefits offered to military and civil
service personnel are not intended to be identical. Although
civil service employees receive matching contributions from
agencies to their TSP fund, military service members receive a
significantly higher percentage of pay upon becoming eligible
for a pension. However, the Committee recognizes that members
of the uniformed services who do not serve long enough to be
eligible for a military pension are also not provided with
matching TSP contributions, and are left with only the
individual contributions made to a TSP fund when they leave the
service. Recognizing the complex budgetary, personnel,
recruitment, and retention issues at stake, the amendment
requires the Secretary of Defense to report to Congress on the
cost of providing matching contributions to uniformed services
personnel and how such a system would affect existing
recruitment and retention programs.
Rep. Norton offered an amendment to the bill, which was
considered and passed by the Committee on a voice vote. The
amendment adds the ``District of Columbia Court, Offender
Supervision, Parole, and Public Defender Employees Equity Act
of 2009'' as Title V of the legislation. This amendment would
correct a long-standing limitation on retirement eligibility
for some non-judicial employees of the DC Courts, the Court
Services and Offender Supervision Agency (CSOSA), the DC Public
Defender Service (PDS), and former DC Department of Corrections
employees who were appointed to positions with the Federal
Bureau of Prisons or other related federal agencies.
Under the 1997 National Capital Revitalization and Self-
Government Improvement Act of 1997, the federal government took
over the operation of the District of Columbia Courts and
related services, making the non-judicial employees of the DC
Courts and the employees of CSOSA federal employees. In 1998,
employees of PDS were similarly transferred as part of the
District of Columbia Courts and Justice Technical Collections
Act. As federal employees, these court, CSOSA, and PDS
employees were brought under the FERS retirement system.
However, for the employees transferred in 1997 and 1998, the
calculation of their ``creditable service'' for the purposes of
determining when they would be eligible to retire and the
amount of annuity they would be entitled to under FERS only
began from the date of the transfer. That is, the 1997 and 1998
laws made no provision for treating their years of service as
court and related services employees (in many cases, in
identical positions) prior to passage of these laws as
creditable service for determining retirement eligibility.
The amendment requires that the time served by these
employees before 1997 be counted towards the employees' overall
federal retirement eligibility as ``creditable service.'' In
addition, because the employees are still entitled to their DC
retirement benefits (based upon their work status up until
1997), the amendment does not count the pre-1997 years spent as
DC government employees towards the amount of federal
retirement annuity an employee is eligible to receive. The
amendment allows these employees to retire without penalty
after they have given 20 years of service or more, as with
other federal employees under the FERS system.
Rep. Connolly offered an amendment to the bill, which was
considered and passed by the Committee on a voice vote. The
amendment would allow individuals who left the federal
government, and received a refund of their Federal Employees
Retirement System (FERS) contributions, to re-enter government
service without losing their accrued annuity. Instead of
forfeiting credit earned during their prior service, returning
employees would be able to redeposit their cashed out annuity,
with interest, upon re-employment. This benefit is already
available to federal employees who are registered under the
older Civil Service Retirement System (CSRS). It ensures that
former federal employees are not penalized if they wish to
return to government service.
Committee Consideration
The Committee met on March 18, 2009, to consider Title IV
of H.R. 1256 and ordered the bill, as amended, to be reported
favorably by a voice vote.
Roll Call Votes
There were no roll call votes held on the bill.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations. The
bill provides for improvements to the federal employee TSP for
which legislative branch employees are eligible participants.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the descriptive portions of
this report, including the need to modernize and improve the
TSP.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report, and include improving the operations of the
TSP.
Constitutional Authority Statement
Under clause 3(d)(1) of rule XIII of the Rules of the House
of Representatives, the Committee must include a statement
citing the specific powers granted to Congress to enact the law
proposed by Titles IV and V of H.R. 1256. Article I, Section 8,
Clause 18 of the Constitution of the United States grants the
Congress the power to enact this law.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandate Reform Act, P.L. 104-4) requires a statement whether
the provisions of the report include unfunded mandates. In
compliance with this requirement, the Committee has received a
letter from the Congressional Budget Office included herein.
Earmark Identification
Titles IV and V of H.R. 1256 do not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
Titles IV and V of H.R. 1256. However, clause 3(d)(3)(B) of
that rule provides that this requirement does not apply when
the Committee has included in its report a timely submitted
cost estimate of the bill prepared by the Director of the
Congressional Budget Office under section 402 of the
Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 1256 from the Director of
the Congressional Budget Office:
U.S. Congress
Congressional Budget Office
Washington, DC, March 24, 2009.
Hon. Edolphus Towns,
Chairman, Committee on Oversight and Government Reform
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed estimate for H.R. 1256, the Family
Smoking Prevention and Tobacco Control Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Julia
Christensen and Amber Marcellino.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure.
H.R. 1256--Family Smoking Prevention and Tobacco Control Act
Summary: H.R. 1256 would authorize the Food and Drug
Administration (FDA) to regulate tobacco products, and would
require the agency to assess fees on manufacturers and
importers of tobacco products to cover the cost of FDA's new
regulatory activities authorized by the bill. Such fees could
be collected and made available for obligation only to the
extent and in the amounts provided in advance in appropriation
acts. The bill also contains provisions that affect direct
spending and revenues associated with the retirement benefits
of federal employees.
CBO estimates that:
Implementing the bill would increase spending
subject to appropriation, on net, by about $0.1 billion over
the 2010-2014 period and by $0.8 billion over the 2010-2019
period, assuming annual appropriation actions consistent with
the bill;
Enacting H.R. 1256 would increase direct spending
by $0.2 billion over the 2010-2014 period and by $0.6 billion
over the 2010-2019 period;
Federal revenues would increase by $0.3 billion
over the 2010-2014 period and by $1.3 billion over the 2010-
2019 period; and
Considering both the revenue and direct spending
effects, enacting the bill would reduce budget deficits by a
total of $0.1 billion over the 2010-2014 period and by $0.7
billion over the 2010-2019 period. (Those amounts exclude the
effects that are subject to appropriation action.)
The legislation's effects on direct spending and revenues
over the 2009-2013 and 2009-2018 periods are relevant for
enforcing pay-as-you-go rules under the current budget
resolution. CBO estimates that enacting H.R. 1256 would
increase direct spending by $0.1 billion over the 2009-2013
period and by $0.5 billion over the 2009-2018 period. Enacting
the bill also would increase revenues by $0.2 billion over the
2009-2013 period and by $1.0 billion over the 2009-2018 period.
Together, those changes would yield net pay-as-you-go savings
of $0.1 billion over five years and $0.5 billion over 10 years.
H.R. 1256 contains intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) because it would
preempt certain state laws governing tobacco products and
require tribal governments that manufacture or distribute
tobacco products to comply with new federal regulations. CBO
estimates that the costs to state, local, and tribal
governments to comply with the mandates in the bill would not
exceed the threshold established in UMRA ($69 million in 2009,
adjusted annually for inflation).
CBO also expects that the federal regulations authorized by
this bill would result in lower consumption of tobacco products
and thus would reduce the amount of tax revenues and settlement
funds collected by state and local governments. However, those
declines in revenues, estimated to total over $1 billion during
the 2010-2014 period, would not result from intergovernmental
mandates.
H.R 1256 would impose a number of mandates on private-
sector entities. Among other things, the bill would assess a
fee on companies that manufacture or import tobacco products,
impose new restrictions on the sale, distribution and marketing
of tobacco products, mandate disclosure of product information
and grant FDA authority to regulate tobacco products. CBO
estimates that the aggregate direct cost of complying with
those mandates would exceed the threshold established by UMRA
for private-sector mandates ($139 million in 2009, adjusted
annually for inflation) in each year, beginning with 2010.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1256 is shown in the following table.
The costs of this legislation fall primarily within budget
functions 550 (health) and 600 (income security).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------------------------------
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010-2014 2010-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Food and Drug Administration (FDA)
Collection of New Tobacco Fees:
Authorization Level............. -235 -450 -477 -505 -534 -566 -599 -635 -672 -712 -2,201 -5,385
Estimated Outlays............... -235 -450 -477 -505 -534 -566 -599 -635 -672 -712 -2,201 -5,385
Spending of Fees by FDA to Regulate
Tobacco Products:
Authorization Level............. 235 450 477 505 534 566 599 635 672 712 2,201 5,385
Estimated Outlays............... 50 275 498 610 619 627 629 631 668 708 2,052 5,315
Net Effect on FDA Spending:
Authorization Level............. 0 0 0 0 0 0 0 0 0 0 0 0
Estimated Outlays............... -185 -175 21 105 85 61 30 -4 -4 -4 -149 -70
Thrift Savings Plan Enhancement:
Estimated Authorization Level... 14 49 62 76 89 102 112 121 130 139 290 894
Estimated Outlays............... 13 47 62 75 88 101 111 121 130 139 285 887
Total Changes:\1\
Estimated Authorization 14 49 62 76 89 102 112 121 130 139 290 894
Level......................
Estimated Outlays........... -172 -128 83 180 173 162 141 117 126 135 136 817
CHANGES IN DIRECT SPENDING
Sick Leave Retirement Credit:
Estimated Budget Authority...... 8 17 27 37 48 60 72 86 100 114 137 569
Estimated Outlays............... 8 17 27 37 48 60 72 86 100 114 137 569
Other Retirement Provisions:
Estimated Budget Authority...... 8 6 7 10 11 12 12 13 13 14 42 106
Estimated Outlays............... 8 6 7 10 11 12 12 13 13 14 42 106
Medicaid: Tobacco Provisions:
Estimated Budget Authority...... -1 -2 -4 -6 -9 -11 -13 -15 -18 -20 -22 -99
Estimated Outlays............... -1 -2 -4 -6 -9 -11 -13 -15 -18 -20 -22 -99
Total Changes:
Estimated Budget Authority.. 15 21 30 41 50 61 71 84 95 108 157 576
Estimated Outlays........... 15 21 30 41 50 61 71 84 95 108 157 576
CHANGES IN REVENUES
Thrift Savings Plan Enhancement..... 50 79 98 122 155 198 255 330 426 550 504 2,263
Tobacco Excise Taxes and Fines...... -13 -29 -40 -55 -73 -94 -117 -145 -177 -212 -210 -955
-------------------------------------------------------------------------------------------------------------------
Total Changes in Revenues....... 37 50 58 67 82 107 138 185 249 338 294 1,308
NET IMPACT ON THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Estimated Deficit Impact\2\ -22 -29 -28 -26 -32 -43 -67 -101 -154 -230 -137 -732
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\In addition, H.R. 1256 would require the Government Accountability Office to conduct a study on cross-border trade in tobacco products. CBO estimates
that study would cost about $1 million, assuming the availability of appropriated funds.
\2\Negative numbers indicate a reduction in the deficit.
Basis of estimate: For this estimate, CBO assumes that H.R.
1256 will be enacted near the start of fiscal year 2010, that
the full amounts authorized will be collected (starting in
fiscal year 2010) to fund FDA's regulatory activities
authorized under the bill, and that outlays will follow
historical patterns for similar activities.
H.R. 1256 would authorize FDA to regulate tobacco products.
Such authority would include:
Setting national standards for tobacco
products, including a ban on cigarettes that contain
certain additives or flavors (other than tobacco or
menthol) that are a characterizing flavor of the
tobacco product or tobacco smoke;
Implementing new restrictions on the sale,
distribution, and marketing of tobacco products;
Requiring manufacturers of certain tobacco
products to submit a marketing application to FDA and
requiring manufacturers of certain products that are
``substantially equivalent'' to ones already on the
market before a particular date to notify FDA by
submitting a report with specified information before
entering the market;
Directing manufacturers and importers of
tobacco products to adhere to new labeling requirements
and to submit specific information, including health-
related research, to the FDA about their products;
Mandating the annual registration of all
establishments that manufacture, prepare, compound, or
process tobacco products and specifying certain
inspection, record-keeping and reporting requirement
for manufacturers and importers; and
Enforcing compliance with requirements
specified in the bill.
H.R. 1256 would establish the Center for Tobacco Products
within the FDA. It also would require FDA to reinstate certain
regulations issued in 1996 intended to limit tobacco sales and
marketing, especially to children. (The Supreme Court ruled in
2000 that the FDA did not have the authority to issue such
regulations.) The bill explicitly would prohibit FDA from
banning certain tobacco products or requiring the reduction of
nicotine yields of tobacco products to zero. The legislation
also would require FDA to issue new regulations relating to the
testing and reporting of tobacco product information.(Such
regulations could also include requirements for public
disclosure of that information.) Among other things, H.R. 1256
would require the Secretary of Health and Human Services (HHS)
to publish a list of the amounts of harmful and potentially
harmful constituents of each tobacco product.
Use of tobacco products in the United States
At least partly as a result of efforts by the federal
government, state governments, and the public health community,
cigarette smoking has declined substantially over the past
decade: in 2005, about 21 percent of adults in the United
States were smokers, compared to about 25 percent in 1995. The
recent increase in the federal excise tax on cigarettes as a
result of the Children's Health Insurance Program
Reauthorization Act (Public Law 111-3)--from $0.39 to $1.01 per
pack--is likely to contribute to a continuing decline in
smoking. CBO expects that consumption of tobacco products in
the United States would further decline as a result of enacting
H.R. 1256.
The effect of regulatory activities authorized under the
bill on the use of tobacco products is uncertain because
ongoing initiatives to reduce the use of tobacco products are
expected to continue under current law. In particular, public
heath efforts by federal, state, and local governments and by
private entities have contributed to a substantial reduction in
underage smoking in recent years. For example, the proportion
of 17-year-olds who smoke declined from 19 percent in 1995 to
10 percent in 2005. Significant efforts to reduce underage
smoking (the group most directly targeted by many of the
interventions envisioned under the bill) have been taken as a
result of the Master Settlement Agreement (MSA) in 1998 between
major tobacco manufacturers and settling states. States and
localities also continue to pursue public health initiatives
independent of the MSA to reduce smoking and to limit health
risks to the public associated with smoking. (However, funding
for such activities is subject to the fiscal constraints of
state and local budgets.) Public health efforts funded by
federal programs and coverage of smoking cessation therapies
(including those offered under certain public programs) also
aim to reduce the use of tobacco under current law.
The expected impact of the legislation on the use of
tobacco products stems from a combination of regulatory and
economic factors. The regulatory changes with the largest
potential to reduce smoking include: restricting access to
tobacco by youths, requiring an increase in the size of warning
labels on certain tobacco packaging (and authorizing the
Secretary of HHS to mandate further changes to enhance warning
labels), limiting certain marketing and advertising activities
(especially those that target youths), and requiring FDA
permission before manufacturers can market tobacco products
that suggest reduced health risks or exposure to particular
substances.\1\ In addition, tobacco consumption would decline
because the assessment of new fees on manufacturers and
importers of tobacco products would probably result in higher
prices of tobacco products.
---------------------------------------------------------------------------
\1\For example, pursuant to a timeline specified in the bill,
descriptors on a tobacco product such as ``low,'' ``light,'' or
``mild'' would be prohibited and certain health-related claims not
allowed unless manufacturers receive FDA's permission to market the
product with that claim.
---------------------------------------------------------------------------
Based on information from academic and other researchers,
CBO estimates that H.R. 1256 would result in a further
reduction in the number of underage tobacco users of 11 percent
by 2019. CBO also estimates that implementing H.R. 1256 would
lead to a further decline in smoking by adults by about 2
percent after 10 years. CBO has incorporated these projected
changes in U.S. tobacco consumption into its estimates of the
impact of the bill on Medicaid spending and on receipts from
excise taxes on tobacco products.
Spending subject to appropriation
CBO estimates that implementing H.R. 1256 would increase
spending subject to appropriation, on net, by $0.1 billion over
the 2010-2014 period and by $0.8 billion over the 2010-2019
period, assuming the appropriation action consistent with the
bill. The effect on discretionary spending by federal programs
reflects the authorized funding relating to the federal
regulation of tobacco products and federal agency costs
associated with changes to the Thrift Savings Plan (TSP)
specified in the bill.
The costs for FDA to administer the new regulatory
activities authorized under the legislation--$2.1 billion over
the 2010-2014 period and $5.3 billion over the 2010-2019
period--would be covered by fees assessed on manufacturers and
importers of tobacco products, resulting in a very small net
impact on discretionary spending over the next 10 years (and no
net impact over time). CBO estimates that automatic enrollment,
under the bill, of new TSP participants would increase the cost
for federal civilian agencies relating to their matching
contributions for employees. The estimated TSP costs would sum
to $0.9 billion over the 2010-2019 period, assuming the
appropriation of the necessary amounts.
Collection of New Fees. H.R. 1256 would establish a program
to assess fees to fund FDA's administrative costs for new
regulatory activities relating to tobacco products authorized
by the bill. The legislation would authorize the quarterly
assessment of fees on manufacturers and importers of such
products. It would authorize the appropriation of assessments
equal to $85 million in 2009, $235 million in 2010, $450
million in 2011, $477 million in 2012, $505 million in 2013,
$534 million in 2014, $566 million in 2015, $599 million in
2016, $635 million in 2017, $672 million in 2018, and $712
million in 2019 and each subsequent year.
Fees authorized by the bill would be collected and made
available for obligation only to the extent and in the amounts
provided in advance in appropriation acts. As a result, those
collections would be credited as an offset to discretionary
spending.
Spending of Fees by FDA to Regulate Tobacco Products.
Spending of the new fees assessed by FDA to regulate tobacco
products also would be classified as discretionary spending
because the authorized amounts would be available for
obligation subject to appropriation action. Amounts collected
would be available to cover FDA's administrative costs to
regulate tobacco products at any point in the future.
Given the uncertainty surrounding how the FDA would
implement such a large expansion of its regulatory activities,
it is difficult to estimate the resources necessary--
particularly in the early years--to implement the bill. We
anticipate that, over the initial five-year period after
enactment, FDA would actively develop the necessary
infrastructure to operate the new tobacco program and that its
ability to enter into obligations and disburse funds would grow
rapidly. The legislation would limit the budget for the new
program to the aggregate amount of fees collected for such
purpose, and there would likely be some lag (at least
initially) between when fees are collected and when they are
spent.
Assuming appropriation action consistent with the bill, CBO
estimates that implementing the program to assess fees to cover
new FDA costs associated with regulating tobacco would reduce
net discretionary outlays by $149 million over the 2010-2014
period and by $70 million over the 2010-2019 period, because
the spending of fees would lag behind their collection.
Thrift Savings Plan. The bill would require that newly
hired federal employees who are eligible for the TSP be
automatically enrolled in that program. The automatic
enrollment of participants in TSP would increase the matching
contributions of the civilian agencies that employ them (which
are paid from personnel budgets and are usually considered
spending subject to appropriation) by creating a greater and
earlier participation rate of employees in the program.
According to data from a 2006 survey conducted by the Federal
Thrift Retirement Investment Board, 52 percent of employees
enrolled in the Federal Employees Retirement System (FERS)
voluntarily contribute to the TSP in their first year of
eligibility, but 86 percent contribute by their sixth year.
(Although federal employees covered by the Civil Service
Retirement System (CSRS) are also eligible to participate in
the TSP, they would not be affected by automatic enrollment.)
Using information from that survey, CBO expects that under
automatic enrollment more than 90 percent of eligible new
entrants would contribute to the TSP in their first year and
that a similar proportion would continue to contribute by their
10th year (some would opt out in the beginning and others would
likely change their status in the future).
For the uniformed services, the characteristics of
potential participants differ. The current average rate for
voluntary participation of new enlistees is approximately 25
percent, and unlike civilian employees, the uniformed services
do not currently contribute on behalf of their members. Based
on lower voluntary enrollment rates and the lack of agency
contributions, CBO expects that under automatic enrollment more
than 40 percent of eligible new entrants would contribute.
Assuming that the bill becomes effective in October 2009
and that civilian agencies would not begin matching
contributions for an additional six months, participants would
receive an increase in matching agency contributions of 3
percent of their basic pay for the third quarter of fiscal year
2010 and 3 percent per year thereafter. CBO estimates that
enacting H.R. 1256 would increase agency contributions by
nearly $0.9 billion over the 2010-2019 period.
Federal Trade Commission (FTC). The bill would authorize
the FTC to enforce provisions in the bill relating to
advertising that would be considered unfair or deceptive trade
practices under the Federal Trade Commission Act. Currently,
the FTC enforces certain laws governing warnings printed on
labels of cigarettes and smokeless tobacco, among other things.
Based on information from the FTC, CBO expects that the FTC's
new enforcement activities under H.R. 1256 would replace some
of its current enforcement activities that would be transferred
to FDA under the bill. CBO estimates that any additional costs
to the FTC would be insignificant.
Other Provisions. H.R. 1256 would require the Government
Accountability Office to conduct a study on cross-border trade
in tobacco products. CBO estimates that conducting the study
would cost about $1 million, assuming the availability of the
necessary funds. CBO also anticipates that any additional costs
for other federal agencies that might assist FDA with
implementing certain requirements relating to the regulation of
tobacco specified in the bill would not be significant.
Direct spending
CBO estimates that enacting H.R. 1256 would increase direct
spending, on net, by $0.2 billion over the 2010-2014 period and
by $0.6 billion over the 2010-2019 period. That estimate
primarily reflects two effects of the bill:
Authorizing FDA regulation of tobacco
products and changes relating to such products required
by the bill would lower consumption of tobacco and
would generate savings to the Medicaid program; and
Changing the calculation of federal
retirement benefits under the Federal Employees
Retirement System to reflect accrued sick leave hours
would raise average retirement benefits paid to
individuals.
Impact of FDA Regulation of Tobacco on Medicaid. CBO
anticipates that FDA's regulation of tobacco products will lead
to a decline in smoking among pregnant women. That decline will
reduce health care spending on pregnancies because women who
refrain from smoking during pregnancy are less likely to give
birth to children with low birth weights--such children have
relatively high costs both at birth and afterwards--or
experience other complications during pregnancy. Part of the
savings from reduced complications is offset by costs
associated with the additional live births resulting from a
decline in miscarriages. CBO estimates federal spending for
Medicaid would decrease by $0.1 billion over the 2010-2019
period. (That savings is an estimated increment above savings
previously estimated and credited to Public Law 111-3, which
contains an increase in federal excise taxes on tobacco
products.)
A decline in smoking could affect health care spending for
many other medical conditions. An individual who stops smoking
is less likely to suffer a heart attack or stroke over a given
period of time compared to one who continues to smoke, so a
potential reduction in utilization of acute care services for
those or other conditions could lead to cost savings. The
magnitude and timing of such savings are uncertain, however.
Also, a reduction in smoking may add to costs in many cases by
increasing the lifespans of persons who would incur health care
costs over longer periods. In those cases, government spending
for other benefits such as Social Security, Medicare, and from
other retirement and mandatory spending programs would also
increase. CBO continues to examine the impact of smoking
related legislation on public and private payers. This cost
estimate does not include potential effects on federal spending
other than the estimated impact on Medicaid of reduced smoking
levels on pregnancies.
Effects on Civil Service Retirement. Currently, the
retirement benefit calculation for federal employees in FERS
does not incorporate any accrued sick leave hours. Under H.R.
1256, eligible federal employees who retire after enactment
would add 100 percent of their remaining sick leave hours to
their total years of service when calculating the retirement
benefit owed. CBO estimates that an average of about three
months would be added to employees' length of service as a
result of including sick leave hours. That addition is
estimated to boost the average retirement benefit by about $150
per year, increasing direct spending over the 2010-2019 period
by $0.6 billion.
H.R. 1256 contains several other provisions that would
affect federal retirement benefits for certain employees. Such
provisions include: allowing FERS employees who reenter
government service after an absence to ``buy back'' the credit
towards federal retirement benefits for their prior government
service (for those employees who had received a refund of their
employee contributions toward retirement when they left
government service); altering the formula for calculating
retirement benefits for CSRS employees with part-time service;
adjusting retirement eligibility calculations for certain FERS
employees with qualifying pre-1997 service in the District of
Columbia; and exempting certain CSRS employees from paying
interest on repaid contributions towards retirement benefits.
In total, CBO estimates those provisions would increase direct
spending by $0.1 billion over the 2010-2019 period.
Other Effects on Direct Spending. Under H.R. 1256, FDA
would have the discretion to impose criminal fines on entities
convicted of violating certain new requirements established by
the bill. Collections of criminal fines are recorded in the
budget as revenues, deposited in the Crime Victims Fund, and
later spent. Such expenditures are classified as direct
spending. CBO expects that relatively few cases would result in
such criminal fines. Therefore, CBO estimates that enacting
H.R. 1256 would not have a significant effect on revenues or
direct spending from the collection of criminal fines over the
2010-2019 period.
Revenues
CBO estimates that enacting H.R. 1256 would increase
federal revenues, on net, by $0.3 billion over the 2010-2014
period and by $1.3 billion over the 2010-2019 period. That
estimate primarily reflects two effects of the bill:
Authorizing FDA oversight of tobacco
products and changes relating to such products required
by the bill would lower consumption of tobacco and
reduce receipts of federal excise taxes on those
products, and
Establishing a Roth contribution program
would increase tax revenues because of the tax
treatment of employee's contributions.
In addition, revenues may increase slightly from the
collection of fines associated with violations of new
requirements imposed by the bill.
Excise Taxes. As noted earlier, CBO expects that enacting
H.R. 1256 would reduce the consumption of tobacco products in
the United States, which in turn would reduce the collection of
federal excise taxes. As a result, CBO estimates that the
legislation would reduce federal revenues, by $0.2 billion over
the 2010-2014 period and $1.0 billion over the 2010-2019
period, net of changes to income and payroll taxes. Over the
10-year period, the reduction in receipts would amount to less
than 1 percent of receipts from excise taxes on tobacco
expected under current law.
Effects of TSP Changes on Revenues. Enacting H.R. 1256
would increase revenues by an estimated $2.3 billion over the
2010-2019 period. Establishing a Roth contribution program (in
which contributions to the retirement accounts would be made on
an aftertax basis) would result in some TSP participants
electing to contribute after-tax income to their retirement
plan rather than contributing pre-tax amounts, thereby boosting
income tax revenues by an estimated $3.3 billion over the 10-
year period. However, because income taxes are deferred on
regular TSP contributions, the anticipated increase in
participants' contributions from automatic enrollment would
offset part of the revenue increase, reducing receipts by $1.0
billion over the 2010-2019 period.
Collection of Fines. The effects on federal revenues also
include relatively small effects from provisions that would
allow the Secretary of HHS to levy fines against sponsors of
misbranded and adulterated tobacco products, sellers of tobacco
to underage individuals, and for other violations. The FTC
would also be authorized to assess fines for certain violations
of tobacco-related requirements enforced by the commission. We
estimate that revenues associated with the collection of civil
fines authorized under H.R. 1256 would be roughly $1 million
annually.
Estimated impact on state, local, and tribal governments:
H.R. 1256 contains intergovernmental mandates as defined in
UMRA. CBO estimates that the costs of those mandates to state,
local, and tribal governments would be small and would not
exceed the threshold established in UMRA ($69 million in 2009,
adjusted annually for inflation).
The bill would preempt state laws governing tobacco
products that are different from or in addition to the federal
regulations authorized by the bill, including laws governing:
Product standards,
Premarket review,
Adulteration,
Misbranding,
Labeling,
Registration,
Good manufacturing standards, or
Modified-risk tobacco products.
That preemption would be an intergovernmental mandate as
defined in UMRA. However, because the preemption would simply
limit the application of state and local laws, CBO estimates
that it would not impose significant costs on state or local
governments.
H.R. 1256 would require tobacco manufacturers to register
annually with the FDA and pay fees assessed by the agency. The
bill would require both tobacco manufacturers and distributors
of tobacco products to comply with federal regulations relating
to the content, labeling, and marketing of tobacco products.
CBO has identified two tribal governments that manufacture and
distribute tobacco products. Because those governments would be
required to comply with federal regulations authorized by the
bill, they would face intergovernmental mandates as defined in
UMRA. Based on information from tribal and federal officials,
CBO estimates that the costs to tribal governments to comply
with the bill would be small and would not exceed the UMRA
threshold for intergovernmental mandates.
Other impacts
CBO also estimates that the amount of tax revenues and
settlement funds collected by state and local governments would
decline as a result of the federal regulations authorized by
this bill because of lower consumption of tobacco products.
However, those declines in revenues, estimated to total over $1
billion during the 2010-2014 period, would not result from
intergovernmental mandates. Rather, the decline in revenues
would be an indirect effect on state and local governments
resulting from the new federal regulations imposed on companies
that manufacture or import tobacco products.
In 2008, state and local governments collected about $19
billion in revenues from excise and general sales taxes levied
on tobacco products. CBO estimates that this bill would lower
consumption of those products and that excise taxes collected
by state and local governments would fall by about $20 million
in 2010, with that reduction growing to over $330 million in
2014. Similarly, CBO estimates that state and local governments
would see a decline in sales-tax revenues of about $170 million
over the 2010-2014 period.
Forty-six states, the District of Columbia, and five U.S.
territories receive annual payments from tobacco manufacturers
that are parties to the tobacco Master Settlement Agreement
(MSA). In 2008, those payments totaled over $8 billion. Under
the terms of the MSA, those payments are adjusted annually to
account for changes in the volume of cigarette sales in the
United States of participating manufacturers. Because CBO
estimates that enacting this legislation would result in lower
consumption of tobacco products, CBO estimates that the annual
payments to states under the MSA also would decline by over
$160 million over the 2010-2014 period.
A decline in smoking among pregnant individuals is expected
to result in a reduction of low-weight births. As a result,
state spending for Medicaid would decrease by an estimated $17
million over the 2010-2014 period, with additional savings in
subsequent years.
Estimated impact on the private sector: H.R. 1256 would
impose a number of private-sector mandates, as defined in UMRA,
on companies that manufacture or import tobacco products. CBO
estimates that the total direct cost of these mandates would
exceed the threshold established by UMRA ($139 million in 2009,
adjusted annually for inflation) in each year, beginning with
2010.
The bill would assess a fee on manufacturers and importers
of tobacco products to cover the cost to FDA of regulating
those products. The aggregate payments would sum to $235
million in 2010, and rise to more than $500 million a year by
2013.
The bill would impose new requirements related to the
labeling and advertising of cigarette and smokeless tobacco
products. New warnings on packaging and advertisements would
have to be larger. The bill would also prohibit cigarettes or
any of their component parts from containing certain additives
or flavors (other than tobacco or menthol) that are a
characterizing flavor of the tobacco product or tobacco smoke.
CBO has not been able to determine whether the direct cost of
these provisions would be significant.
The bill would require that FDA publish a final rule on
tobacco products that would be similar to part 897 of the
tobacco regulations promulgated by the Secretary of HHS in 1996
and subsequently invalidated by the Supreme Court. Certain
restrictions that would be in that rule already exist under
current federal and state law or are included in the 1998
Master Settlement Agreement between major tobacco manufacturers
and settling states. As a result, and based on information from
industry sources, CBO estimates that the incremental direct
cost of these restrictions to manufacturers and importers of
tobacco products would be small.
In addition, the bill would give FDA the authority to
regulate the sale, distribution, advertising, promotion and use
of tobacco products if such actions would be in the interest of
the public health. FDA would also have the authority to set
product standards that reduce quantities of nicotine and other
harmful constituents allowed in tobacco products or otherwise
alter the composition and testing of such products. CBO cannot
estimate the potential cost of these provisions because the
cost would depend on future actions by the Secretary of HHS.
Finally, the bill would require companies that manufacture
or import tobacco products to disclose information about those
products to the Secretary of HHS. That information, among other
things, would include a listing of all ingredients and
additives, a description of nicotine content, delivery, and
form, and a listing of all potentially harmful constituents
found in the tobacco product. At the discretion of the
Secretary of HHS, those companies would also be required to
disclose any or all documents regarding research on risks to
health of tobacco products, methods for reducing those risks,
and the effectiveness of marketing practices used by companies
that manufacture or distribute tobacco products. Such
information would include both research activities and the
findings associated with that research. CBO estimates that the
direct cost of complying with these requirements would be
small.
Previous CBO estimate: On March 16, 2009, CBO transmitted a
cost estimate for H.R. 1256 as ordered reported by the House
Committee on Energy and Commerce on March 4, 2009. This version
is nearly identical to the earlier legislation, except for the
addition of provisions that affect retirement benefits for
certain employees of the federal government. The version of
H.R. 1256 approved by the Committee on Oversight and Government
Reform reflects changes that would add $106 million in
estimated direct spending over the 2010-2019 period, as
compared to the version of the bill approved by the Committee
on Energy and Commerce.
Estimate prepared by: Federal Spending: Food and Drug
Administration--Julia Christensen, Medicaid--Ellen Werble and
Colin Baker, Federal Retirement--Amber Marcellino, Thrift
Savings Plan--Jared Brewster, Federal Trade Commission--Susan
Willie; Federal Revenues: Grant Driessen and Barbara Edwards;
Impact on State, Local, and Tribal Governments: Lisa Ramirez-
Branum; Impact on the Private Sector: Patrick Bernhardt.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
titles IV and V of the bill, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
SUBPART G--INSURANCE AND ANNUITIES
* * * * * * *
CHAPTER 83--RETIREMENT
* * * * * * *
SUBCHAPTER III--CIVIL SERVICE RETIREMENT
* * * * * * *
Sec. 8334. Deductions, contributions, and deposits
(a) * * *
* * * * * * *
(d)(1)(A) Each employee or Member who has received a refund
of retirement deductions under this or any other retirement
system established for employees of the Government covering
service for which he may be allowed credit under this
subchapter may deposit the amount received, with interest.
Credit may not be allowed for the service covered by the refund
until the deposit is made.
(B) No interest under subparagraph (A) shall be required in
the case of any deposit to the extent that it represents the
amount of any refund that was made to an employee or Member
during the period beginning on October 1, 1990, and ending on
February 28, 1991.
* * * * * * *
Sec. 8339. Computation of annuity
(a) * * *
* * * * * * *
(p)(1) * * *
* * * * * * *
(3) In the administration of paragraph (1)--
(A) subparagraph (A) of such paragraph shall apply
with respect to service performed before, on, or after
April 7, 1986; and
(B) subparagraph (B) of such paragraph--
(i) shall apply with respect to that portion
of any annuity which is attributable to service
performed on or after April 7, 1986; and
(ii) shall not apply with respect to that
portion of any annuity which is attributable to
service performed before April 7, 1986.
* * * * * * *
CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM
SUBCHAPTER I--GENERAL PROVISIONS
Sec
8401. Definitions.
* * * * * * *
SUBCHAPTER II--BASIC ANNUITY
* * * * * * *
[8422. Deductions from pay; contributions for other service.]
8422. Deductions from pay; contributions for other service; deposits.
* * * * * * *
SUBCHAPTER III--THRIFT SAVINGS PLAN
* * * * * * *
8432d. Qualified Roth contribution program.
SUBCHAPTER I--GENERAL PROVISIONS
Sec. 8401. Definitions
For the purpose of this chapter--
(1) * * *
* * * * * * *
(19) the term ``lump-sum credit'' means the
unrefunded amount consisting of--
(A) * * *
* * * * * * *
(C) amounts deposited by an employee, Member,
or survivor under section [8411(f);] 8411(f) or
8422(i); and
* * * * * * *
SUBCHAPTER II--BASIC ANNUITY
* * * * * * *
Sec. 8415. Computation of basic annuity
(a) * * *
* * * * * * *
[(k) In computing] (l)(1) In computing an annuity under this
subchapter, the total service of an employee who retires from
the position of a registered nurse with the Veterans Health
Administration on an immediate annuity, or dies while employed
in that position leaving any survivor entitled to an annuity,
includes the days of unused sick leave to the credit of that
employee under a formal leave system, except that such days
shall not be counted in determining average pay or annuity
eligibility under this subchapter.
(2) Except as provided in paragraph (1), in computing an
annuity under this subchapter, the total service of an employee
who retires on an immediate annuity or who dies leaving a
survivor or survivors entitled to annuity includes the days of
unused sick leave to his credit under a formal leave system,
except that these days will not be counted in determining
average pay or annuity eligibility under this subchapter. For
purposes of this subsection, in the case of any such employee
who is excepted from subchapter I of chapter 63 under section
6301(2)(x)-(xiii), the days of unused sick leave to his credit
include any unused sick leave standing to his credit when he
was excepted from such subchapter.
[(l)] (m) In the case of any annuity computation under this
section that includes, in the aggregate, at least 2 months of
credit under section 8411(d) for any period while receiving
benefits under subchapter I of chapter 81, the percentage
otherwise applicable under this section for that period so
credited shall be increased by 1 percentage point.
* * * * * * *
[Sec. 8422. Deductions from pay; contributions for other service]
Sec. 8422. Deductions from pay; contributions for other service;
deposits
(a) * * *
* * * * * * *
(c) The amounts deducted and withheld under this section
shall be deposited in the Treasury of the United States to the
credit of the Fund under such procedures as the Secretary of
the Treasury may prescribe. Deposits made by an employee,
Member, or survivor also shall be credited to the Fund.
(d)(1) * * *
(2) Deposit may not be required for days of unused sick leave
credited under [section 8415(k)] paragraph (1) or (2) of
section 8415(l) .
* * * * * * *
(i)(1) Each employee or Member who has received a refund of
retirement deductions under this or any other retirement system
established for employees of the Government covering service
for which such employee or Member may be allowed credit under
this chapter may deposit the amount received, with interest.
Credit may not be allowed for the service covered by the refund
until the deposit is made.
(2) Interest under this subsection shall be computed in
accordance with paragraphs (2) and (3) of section 8334(e) and
regulations prescribed by the Office. The option under the
third sentence of section 8334(e)(2) to make a deposit in one
or more installments shall apply to deposits under this
subsection.
(3) For the purpose of survivor annuities, deposits
authorized by this subsection may also be made by a survivor of
an employee or Member.
* * * * * * *
Sec. 8424. Lump-sum benefits; designation of beneficiary; order of
precedence
(a) Subject to subsection (b), an employee or Member who--
(1) * * *
* * * * * * *
is entitled to be paid the lump-sum credit. Except as provided
in section 8420a, payment of the lump-sum credit to an employee
or Member voids all annuity rights under this subchapter, and
subchapters IV and V of this chapter, based on the service on
which the lump-sum credit is [based.] based, until the employee
or Member is reemployed in the service subject to this chapter.
* * * * * * *
SUBCHAPTER III--THRIFT SAVINGS PLAN
* * * * * * *
Sec. 8432. Contributions
(a) * * *
(b)(1)(A) * * *
(B) The amount to be contributed pursuant to an election
under subparagraph (A) [(or any election allowable by virtue of
paragraph (4))] shall be the percentage of basic pay or amount
designated by the employee or Member.
[(2) Under the regulations--
[(A) an employee or Member who has not previously
been eligible to make an election under this subsection
shall not become so eligible until the date (described
in paragraph (1)) beginning after the date of
commencing service as an employee or Member;
[(B) an employee or Member whose appointment or
election to a position or office in the Federal
Government follows a previous period of service during
which that individual met the requirements of
subparagraph (A) shall be eligible to make an election
under this subsection notwithstanding any period of
separation;
[(C) an employee or Member who elects under
subparagraph (D) to terminate contributions shall not
again become eligible to make an election under this
subsection until the date (described in paragraph (1))
commencing after the election to terminate; and
[(D) an election to terminate may be made under this
subparagraph at any time as provided under paragraph
(1).
[(3) An employee or Member who elects to become subject to
this chapter under section 301 of the Federal Employees'
Retirement System Act of 1986 may make the first election for
the purpose of subsection (a) during the period prescribed for
such purpose by the Executive Director. The period prescribed
by the Executive Director shall commence on the date on which
the employee or Member makes the election to become subject to
this chapter.
[(4) The Executive Director shall prescribe such regulations
as may be necessary to carry out the following:
[(A) Notwithstanding subparagraph (A) of paragraph
(2), an employee or Member described in such
subparagraph shall be afforded a reasonable opportunity
to first make an election under this subsection
beginning on the date of commencing service or, if that
is not administratively feasible, beginning on the
earliest date thereafter that such an election becomes
administratively feasible, as determined by the
Executive Director.
[(B) An employee or Member described in subparagraph
(B) of paragraph (2) shall be afforded a reasonable
opportunity to first make an election under this
subsection (based on the appointment or election
described in such subparagraph) beginning on the date
of commencing service pursuant to such appointment or
election or, if that is not administratively feasible,
beginning on the earliest date thereafter that such an
election becomes administratively feasible, as
determined by the Executive Director.
[(C)(i) Notwithstanding the preceding provisions of
this paragraph, contributions under paragraphs (1) and
(2) of subsection (c) shall not be payable with respect
to any pay period before the earliest pay period for
which such contributions would otherwise be allowable
under this subsection if this paragraph had not been
enacted.
[(ii) Notwithstanding subparagraph (A) or (B),
contributions under paragraphs (1) and (2) of
subsection (c) shall not begin to be made with respect
to an employee or Member described under paragraph
(2)(A) or (B) until the date that such contributions
would have begun to be made in accordance with this
paragraph as administered on the date preceding the
date of enactment of the Thrift Savings Plan Open
Elections Act of 2004.
[(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2),
8440c(a)(2), and 8440d(a)(2) shall be applied in a
manner consistent with the purposes of subparagraphs
(A) and (B), to the extent those subparagraphs can be
applied with respect thereto.
[(E) Nothing in this paragraph shall affect paragraph
(3).]
(2)(A) The Board shall by regulation provide for an eligible
individual to be automatically enrolled to make contributions
under subsection (a) at the default percentage of basic pay.
(B) For purposes of this paragraph, the default percentage
shall be equal to 3 percent or such other percentage, not less
than 2 percent nor more than 5 percent, as the Board may by
regulation prescribe.
(C) The regulations shall include provisions under which any
individual who would otherwise be automatically enrolled in
accordance with subparagraph (A) may--
(i) modify the percentage or amount to be contributed
pursuant to automatic enrollment, effective from the
start of such enrollment; or
(ii) decline automatic enrollment altogether.
(D) For purposes of this paragraph, the term ``eligible
individual'' means any individual who, after any regulations
under subparagraph (A) first take effect, is appointed,
transferred, or reappointed to a position in which that
individual is eligible to contribute to the Thrift Savings
Fund.
(E)(i) Subject to clause (ii), sections 8351(a)(1),
8440a(a)(1), 8440b(a)(1), 8440c(a)(1), 8440d(a)(1), and
8440e(a)(1) shall be applied in a manner consistent with the
purposes of this paragraph.
(ii) The Secretary concerned may, with respect to members of
the uniformed services under the authority of such Secretary,
establish such special rules as such Secretary considers
necessary for the administration of this subparagraph,
including rules in accordance with which such Secretary may--
(I) provide for delayed automatic enrollment; or
(II) preclude or suspend the application of automatic
enrollment.
* * * * * * *
Sec. 8432d. Qualified Roth contribution program
(a) Definitions.--For purposes of this section--
(1) the term ``qualified Roth contribution program''
means a program described in paragraph (1) of section
402A(b) of the Internal Revenue Code of 1986 which
meets the requirements of paragraph (2) of such
section; and
(2) the terms ``designated Roth contribution'' and
``elective deferral'' have the meanings given such
terms in section 402A of the Internal Revenue Code of
1986.
(b) Authority To Establish.--The Board shall by regulation
provide for the inclusion in the Thrift Savings Plan of a
qualified Roth contribution program, under such terms and
conditions as the Board may prescribe.
(c) Required Provisions.--The regulations under subsection
(b) shall include--
(1) provisions under which an election to make
designated Roth contributions may be made--
(A) by any individual who is eligible to make
contributions under section 8351, 8432(a),
8440a, 8440b, 8440c, 8440d, or 8440e; and
(B) by any individual, not described in
subparagraph (A), who is otherwise eligible to
make elective deferrals under the Thrift
Savings Plan;
(2) any provisions which may, as a result of
enactment of this section, be necessary in order to
clarify the meaning of any reference to an ``account''
made in section 8432(f), 8433, 8434(d), 8435, 8437, or
any other provision of law; and
(3) any other provisions which may be necessary to
carry out this section.
* * * * * * *
Sec. 8438. Investment of Thrift Savings Fund
(a) * * *
(b)(1) The Board shall establish--
(A) * * *
* * * * * * *
(D) a Small Capitalization Stock Index Investment
Fund as provided in paragraph (3); [and]
(E) an International Stock Index Investment Fund as
provided in paragraph (4)[.]; and
(F) a self-directed investment window, if the Board
authorizes such window under paragraph (5).
* * * * * * *
(5)(A) The Board may authorize the addition of a self-
directed investment window under the Thrift Savings Plan if the
Board determines that such addition would be in the best
interests of participants.
(B) The self-directed investment window shall be limited to--
(i) low-cost, passively-managed index funds that
offer diversification benefits; and
(ii) other investment options, if the Board
determines the options to be appropriate retirement
investment vehicles for participants.
(C) The Board shall ensure that any administrative expenses
related to use of the self-directed investment window are borne
solely by the participants who use such window.
(D) The Board may establish such other terms and conditions
for the self-directed investment window as the Board considers
appropriate to protect the interests of participants, including
requirements relating to risk disclosure.
(E) The Board shall consult with the Employee Thrift Advisory
Council (established under section 8473) before establishing
any self-directed investment window.
* * * * * * *
Sec. 8439. Accounting and information
(a) * * *
* * * * * * *
[(d)] (d)(1) Each employee, Member, former employee, or
former Member who elects to invest in [the Common Stock Index
Investment Fund, the Fixed Income Investment Fund, the
International Stock Index Investment Fund, or the Small
Capitalization Stock Index Investment Fund, defined in
paragraphs (1), (3), (5), and (10), respectively, of section
8438(a) of this title] any investment fund or option under this
chapter, other than the Government Securities Investment Fund,
shall sign an acknowledgement prescribed by the Executive
Director which states that the employee, Member, former
employee, or former Member understands that an investment in
[either such Fund] any such fund or option is made at the
employee's, Member's, former employee's, or former Member's
risk, that the employee, Member, former employee, or former
Member is not protected by the Government against any loss on
such investment, and that a return on such investment is not
guaranteed by the Government.
(2)(A) In the case of an investment made under section
8438(c)(2) in any fund or option to which paragraph (1) would
otherwise apply, the participant involved shall, for purposes
of this subsection, be deemed--
(i) to have elected to invest in such fund or
option; and
(ii) to have executed the acknowledgement
required under paragraph (1).
(B)(i) The Executive Director shall prescribe regulations
under which written notice shall be provided to a participant
whenever an investment is made under section 8438(c)(2)(B) on
behalf of such participant in the absence of an affirmative
election described in section 8438(c)(1).
(ii) The regulations shall ensure that any such notice shall
be provided to the participant within 7 calendar days after the
effective date of the default election.
(C) For purposes of this paragraph, the term ``participant''
has the meaning given such term by section 8471(3).
* * * * * * *
SUBCHAPTER VII--FEDERAL RETIREMENT THRIFT INVESTMENT MANAGEMENT SYSTEM
* * * * * * *
Sec. 8477. Fiduciary responsibilities; liability and penalties
(a) * * *
* * * * * * *
(e)(1)(A) * * *
* * * * * * *
(C)(i) A fiduciary shall not be liable under subparagraph (A)
with respect to a breach of fiduciary duty under subsection (b)
committed before becoming a fiduciary or after ceasing to be a
fiduciary.
(ii) A fiduciary shall not be liable under subparagraph (A),
and no civil action may be brought against a fiduciary--
(I) for providing for the automatic enrollment of a
participant in accordance with section 8432(b)(2)(A);
(II) for enrolling a participant in a default
investment fund in accordance with section
8438(c)(2)(B); or
(III) for allowing a participant to invest through
the self-directed investment window or for establishing
restrictions applicable to participants' ability to
invest through the self-directed investment window.
* * * * * * *
ADDITIONAL VIEWS
----------
Additional Views of Ranking Member Darrell Issa
There is a great deal of urgency in the Majority to move
this bill through the Committee, since it raises money to be
used on tobacco programs unrelated to federal retirement. Given
the recent and dramatic decline in the stock market and the
significant impact this has had on individuals' retirement
accounts, our first priority should be helping people save more
for retirement and not using the federal Thrift Savings Program
(TSP) to pay for Members pet projects.
Instead, the Majority has set its sights on the portion of
the bill before us (Title IV), as a way to fund expanded
government programs, and targeted fixes for favorite
constituencies. But I cannot support funding expanded
government programs on revenues raised by a federal retirement
program.
This Committee reported similar legislation last Congress.
Since that time, the financial markets have declined and
Congress is funding multiple bailouts. Although this Committee
has a new Chairman, and new Ranking Member, and nine new
members, we did not have the benefit of a hearing on this
legislation this year.
As the Majority considers new ways to spend the millions of
dollars raised by this legislation, we should take this
opportunity to ensure our military personnel have the soundest
retirement program available. I offered two amendments in an
effort to improve this bill.
One amendment provides a sense of Congress regarding the
importance of a match for military personnel. Currently,
military participants contribute pre-tax dollars to the TSP but
do not receive a contribution match. Federal civilian employees
receive a generous government match for their contributions
under the TSP. In addition, military pensions vest only after a
participant serves twenty years, and those who serve less
receive nothing. Civilian federal employees under Federal
Employees Retirement System (FERS) vest after five years, and
are guaranteed a pension once they reach age 62. For military
personnel who serve fewer than twenty years, the TSP account
may be the only retirement they receive, other than social
security.
Congress should make a match for military personnel a
priority. Instead, the Majority has elected to fund a number of
special fixes for select groups in this legislation, and they
are directing the bulk of the revenue raised by this bill to
fund tobacco legislation from another Committee.
My second amendment modifies the automatic enrollment
provision for military personnel. As originally drafted, the
bill provided for automatic enrollment of participants and
required those who do not wish to participate to opt-out. Newly
enlisted military personnel have to make many decisions in a
short period of time. We should encourage participation but
allow them to take the time to affirmatively decide if a
retirement contribution makes sense. This amendment would give
the service Secretaries the option of (1) not participating in
automatic enrollment, (2) establishing delayed enrollment, and
(3) establishing special rules for reserve personnel. It will
provide some flexibility reflecting the unique nature of
military service.
Darrell Issa.