[Senate Report 106-344]
[From the U.S. Government Publishing Office]
106th Congress
2d Session SENATE Report
106-344
_______________________________________________________________________
Calendar No. 685
LONG-TERM CARE SECURITY ACT
__________
R E P O R T
of the
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNTED STATES SENATE
to accompany
S. 2420
TO AMEND TITLE 5, UNITED STATES CODE, TO PROVIDE FOR THE ESTABLISHMENT
OF A PROGRAM UNDER WHICH LONG-TERM CARE INSURANCE IS MADE AVAILABLE TO
FEDERAL EMPLOYEES, MEMBERS OF THE UNIFORMED SERVICES, AND CIVILIAN AND
MILITARY RETIREES, AND FOR OTHER PURPOSES
July 14, 2000.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
GEORGE VOINOVICH, Ohio RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
Hannah S. Sistare, Staff Director and Counsel
Dan G. Blair, Senior Counsel
Michael L. Loesch, Counsel,
International Security, Proliferation, and Federal Services
Subcommittee
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Lawrence B. Novey, Minority Counsel
Nanci E. Langley, Minority Deputy Staff Director,
International Security, Proliferation, and Federal Services
Subcommittee
Darla D. Cassell, Chief Clerk
C O N T E N T S
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Page
I. Purpose.........................................................17
II. Background......................................................17
III. Legislative History.............................................22
IV. Section-by-Section Analysis.....................................23
V. Regulatory Impact Statement.....................................28
VI. CBO Cost Estimate...............................................29
VII. Executive Communications........................................37
VIII.Changes to Existing Law.........................................38
Calendar No. 685
106th Congress Report
SENATE
2d Session 106-344
======================================================================
LONG-TERM CARE SECURITY ACT
_______
July 14, 2000.--Ordered to be printed
_______
Mr. Thompson, from the Committee on Governmental Affairs, submitted the
following
R E P O R T
[To accompany S. 2420]
The Committee on Governmental Affairs, to which was
referred the bill (S. 2420) to amend title 5, United States
Code, to provide for the establishment of a program under which
long-term care insurance is made available to Federal
employees, members of the uniformed services, and civilian and
military retirees, and for other purposes, having considered
the same, reports favorably thereon with an amendment in the
nature of a substitute and recommends by voice vote that the
bill, as amended, do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
TITLE I--FEDERAL LONG-TERM CARE INSURANCE
SEC. 1001. SHORT TITLE.
This title may be cited as the ``Long-Term Care Security Act''.
SEC. 1002. LONG-TERM CARE INSURANCE.
(a) In General.--Subpart G of part III of title 5, United States
Code, is amended by adding at the end the following:
``CHAPTER 90--LONG-TERM CARE INSURANCE
``Sec.
``9001. Definitions.
``9002. Availability of insurance.
``9003. Contracting authority.
``9004. Financing.
``9005. Preemption.
``9006. Studies, reports, and audits.
``9007. Jurisdiction of courts.
``9008. Administrative functions.
``9009. Cost accounting standards.
``Sec. 9001. Definitions
For purposes of this chapter:
``(1) Employee.--The term `employee' means--
``(A) an employee as defined by section 8901(1); and
``(B) an individual described in section 2105(e), but
does not include an individual employed by the
government of the District of Columbia.
``(2) Annuitant.--The term `annuitant' has the meaning such
term would have under paragraph (3) of section 8901 if, for
purposes of such paragraph, the term `employee' were considered
to have the meaning given to it under paragraph (1) of this
subsection.
``(3) Member of the uniformed services.--The term `member of
the uniformed services' means a member of the uniformed
services, other than a retired member of the uniformed
services, who is--
``(A) on active duty or full-time National Guard duty
for a period of more than 30 days; and
``(B) a member of the Selected Reserve.
``(4) Retired member of the uniformed services.--The term
`retired member of the uniformed services' means a member or
former member of the uniformed services entitled to retired or
retainer pay, including a member or former member retired under
chapter 1223 of title 10 who has attained the age of 60 and who
satisfies such eligibility requirements as the Office of
Personnel Management prescribes under section 9008.
``(5) Qualified relative.--The term `qualified relative'
means each of the following:
``(A) The spouse of an individual described in
paragraph (1), (2), (3), or (4).
``(B) A parent, stepparent, or parent-in-law of an
individual described in paragraph (1) or (3).
``(C) A child (including an adopted child, a
stepchild, or, to the extent the Office of Personnel
Management by regulation provides, a foster child) of
an individual described in paragraph (1), (2), (3), or
(4), if such child is at least 18 years of age.
``(D) An individual having such other relationship to
an individual described in paragraph (1), (2), (3), or
(4) as the Office may by regulation prescribe.
``(6) Eligible individual.--The term `eligible individual'
refers to an individual described in paragraph (1), (2), (3),
(4), or (5).
``(7) Qualified carrier.--The term `qualified carrier' means
an insurance company (or consortium of insurance companies)
that is licensed to issue long-term care insurance in all
States, taking any subsidiaries of such a company into account
(and, in the case of a consortium, considering the member
companies and any subsidiaries thereof, collectively).
``(8) State.--The term `State' includes the District of
Columbia.
``(9) Qualified long-term care insurance contract.--The term
`qualified long-term care insurance contract' has the meaning
given such term by section 7702B of the Internal Revenue Code
of 1986.
``(10) Appropriate secretary.--The term `appropriate
Secretary' means--
``(A) except as otherwise provided in this paragraph,
the Secretary of Defense;
``(B) with respect to the Coast Guard when it is not
operating as a service of the Navy, the Secretary of
Transportation;
``(C) with respect to the commissioned corps of the
National Oceanic and Atmospheric Administration, the
Secretary of Commerce; and
``(D) with respect to the commissioned corps of the
Public Health Service, the Secretary of Health and
Human Services.
``Sec. 9002. Availability of insurance
``(a) In General.--The Office of Personnel Management shall
establish and, in consultation with the appropriate Secretaries,
administer a program through which an individual described in paragraph
(1), (2), (3), (4), or (5) of section 9001 may obtain long-term care
insurance coverage under this chapter for such individual.
``(b) General Requirements.--Long-term care insurance may not be
offered under this chapter unless--
``(1) the only coverage provided is under qualified long-term
care insurance contracts; and
``(2) each insurance contract under which any such coverage
is provided is issued by a qualified carrier.
``(c) Documentation Requirement.--As a condition for obtaining
long-term care insurance coverage under this chapter based on one's
status as a qualified relative, an applicant shall provide
documentation to demonstrate the relationship, as prescribed by the
Office.
``(d) Underwriting Standards.--
``(1) Disqualifying condition.--Nothing in this chapter shall
be considered to require that long-term care insurance coverage
be made available in the case of any individual who would be
eligible for benefits immediately.
``(2) Spousal parity.--For the purpose of underwriting
standards, a spouse of an individual described in paragraph
(1), (2), (3), or (4) of section 9001 shall, as nearly as
practicable, be treated like that individual.
``(3) Guaranteed issue.--Nothing in this chapter shall be
considered to require that long-term care insurance coverage be
guaranteed to an eligible individual.
``(4) Requirement that contract be fully insured.--In
addition to the requirements otherwise applicable under section
9001(9), in order to be considered a qualified long-term care
insurance contract for purposes of this chapter, a contract
must be fully insured, whether through reinsurance with other
companies or otherwise.
``(5) Higher standards allowable.--Nothing in this chapter
shall, in the case of an individual applying for long-term care
insurance coverage under this chapter after the expiration of
such individual's first opportunity to enroll, preclude the
application of underwriting standards more stringent than those
that would have applied if that opportunity had not yet
expired.
``(e) Guaranteed Renewability.--The benefits and coverage made
available to eligible individuals under any insurance contract under
this chapter shall be guaranteed renewable (as defined by section 7A(2)
of the model regulations described in section 7702B(g)(2) of the
Internal Revenue Code of 1986), including the right to have insurance
remain in effect so long as premiums continue to be timely made.
However, the authority to revise premiums under this chapter shall be
available only on a class basis and only to the extent otherwise
allowable under section 9003(b).
``Sec. 9003. Contracting authority
``(a) In General.--The Office of Personnel Management shall,
without regard to section 5 of title 41 or any other statute requiring
competitive bidding, contract with one or more qualified carriers for a
policy or policies of long-term care insurance. The Office shall ensure
that each resulting contract (hereafter in this chapter referred to as
a `master contract') is awarded on the basis of contractor
qualifications, price, and reasonable competition.
``(b) Terms and Conditions.--
``(1) In general.--Each master contract under this chapter
shall contain--
``(A) a detailed statement of the benefits offered
(including any maximums, limitations, exclusions, and
other definitions of benefits);
``(B) the premiums charged (including any limitations
or other conditions on their subsequent adjustment);
``(C) the terms of the enrollment period; and
``(D) such other terms and conditions as may be
mutually agreed to by the Office and the carrier
involved, consistent with the requirements of this
chapter.
``(2) Premiums.--Premiums charged under each master contract
entered into under this section shall reasonably and equitably
reflect the cost of the benefits provided, as determined by the
Office. The premiums shall not be adjusted during the term of
the contract unless mutually agreed to by the Office and the
carrier.
``(3) Nonrenewability.--Master contracts under this chapter
may not be made automatically renewable.
``(c) Payment of Required Benefits; Dispute Resolution.--
``(1) In general.--Each master contract under this chapter
shall require the carrier to agree--
``(A) to provide payments or benefits to an eligible
individual if such individual is entitled thereto under
the terms of the contract; and
``(B) with respect to disputes regarding claims for
payments or benefits under the terms of the contract--
``(i) to establish internal procedures
designed to expeditiously resolve such
disputes; and
``(ii) to establish, for disputes not
resolved through procedures under clause (i),
procedures for one or more alternative means of
dispute resolution involving independent third-
party review under appropriate circumstances by
entities mutually acceptable to the Office and
the carrier.
``(2) Eligibility.--A carrier's determination as to whether
or not a particular individual is eligible to obtain long-term
care insurance coverage under this chapter shall be subject to
review only to the extent and in the manner provided in the
applicable master contract.
``(3) Other claims.--For purposes of applying the Contract
Disputes Act of 1978 to disputes arising under this chapter
between a carrier and the Office--
``(A) the agency board having jurisdiction to decide
an appeal relative to such a dispute shall be such
board of contract appeals as the Director of the Office
of Personnel Management shall specify in writing (after
appropriate arrangements, as described in section 8(c)
of such Act); and
``(B) the district courts of the United States shall
have original jurisdiction, concurrent with the United
States Court of Federal Claims, of any action described
in section 10(a)(1) of such Act relative to such a
dispute.
``(4) Rule of construction.--Nothing in this chapter shall be
considered to grant authority for the Office or a third-party
reviewer to change the terms of any contract under this
chapter.
``(d) Duration.--
``(1) In general.--Each master contract under this chapter
shall be for a term of 7 years, unless terminated earlier by
the Office in accordance with the terms of such contract.
However, the rights and responsibilities of the enrolled
individual, the insurer, and the Office (or duly designated
third-party administrator) under such contract shall continue
with respect to such individual until the termination of
coverage of the enrolled individual or the effective date of a
successor contract thereto.
``(2) Exception.--
``(A) Shorter duration.--In the case of a master
contract entered into before the end of the period
described in subparagraph (B), paragraph (1) shall be
applied by substituting `ending on the last day of the
7-year period described in paragraph (2)(B)' for `of 7
years'.
``(B) Definition.--The period described in this
subparagraph is the 7-year period beginning on the
earliest date as of which any long-term care insurance
coverage under this chapter becomes effective.
``(3) Congressional notification.--No later than 180 days
after receiving the second report required under section
9006(c), the President (or his designee) shall submit to the
Committees on Government Reform and on Armed Services of the
House of Representatives and the Committees on Governmental
Affairs and on Armed Services of the Senate, a written
recommendation as to whether the program under this chapter
should be continued without modification, terminated, or
restructured. During the 180-day period following the date on
which the President (or his designee) submits the
recommendation required under the preceding sentence, the
Office of Personnel Management may not take any steps to rebid
or otherwise contract for any coverage to be available at any
time following the expiration of the 7-year period described in
paragraph (2)(B).
``(4) Full portability.--Each master contract under this
chapter shall include such provisions as may be necessary to
ensure that, once an individual becomes duly enrolled, long-
term care insurance coverage obtained by such individual
pursuant to that enrollment shall not be terminated due to any
change in status (such as separation from Government service or
the uniformed services) or ceasing to meet the requirements for
being considered a qualified relative (whether as a result of
dissolution of marriage or otherwise).
``Sec. 9004. Financing
``(a) In General.--Each eligible individual obtaining long-term
care insurance coverage under this chapter shall be responsible for 100
percent of the premiums for such coverage.
``(b) Withholdings.--
``(1) In general.--The amount necessary to pay the premiums
for enrollment may--
``(A) in the case of an employee, be withheld from
the pay of such employee;
``(B) in the case of an annuitant, be withheld from
the annuity of such annuitant;
``(C) in the case of a member of the uniformed
services described in section 9001(3), be withheld from
the pay of such member; and
``(D) in the case of a retired member of the
uniformed services described in section 9001(4), be
withheld from the retired pay or retainer pay payable
to such member.
``(2) Voluntary withholdings for qualified relatives.--
Withholdings to pay the premiums for enrollment of a qualified
relative may, upon election of the appropriate eligible
individual (described in section 9001(1)*09(4)), be withheld
under paragraph (1) to the same extent and in the same manner
as if enrollment were for such individual.
``(c) Direct Payments.--All amounts withheld under this section
shall be paid directly to the carrier.
``(d) Other Forms of Payment.--Any enrollee who does not elect to
have premiums withheld under subsection (b) or whose pay, annuity, or
retired or retainer pay (as referred to in subsection (b)(1)) is
insufficient to cover the withholding required for enrollment (or who
is not receiving any regular amounts from the Government, as referred
to in subsection (b)(1), from which any such withholdings may be made,
and whose premiums are not otherwise being provided for under
subsection (b)(2)) shall pay an amount equal to the full amount of
those charges directly to the carrier.
``(e) Separate Accounting Requirement.--Each carrier participating
under this chapter shall maintain records that permit it to account for
all amounts received under this chapter (including investment earnings
on those amounts) separate and apart from all other funds.
``(f) Reimbursements.--
``(1) Reasonable initial costs.--
``(A) In general.--The Employees' Life Insurance Fund
is available, without fiscal year limitation, for
reasonable expenses incurred by the Office of Personnel
Management in administering this chapter before the
start of the 7-year period described in section
9003(d)(2)(B), including reasonable implementation
costs.
``(B) Reimbursement requirement.--Such Fund shall be
reimbursed, before the end of the first year of that 7-
year period, for all amounts obligated or expended
under subparagraph (A) (including lost investment
income). Such reimbursement shall be made by carriers,
on a pro rata basis, in accordance with appropriate
provisions which shall be included in master contracts
under this chapter.
``(2) Subsequent costs.--
``(A) In general.--There is hereby established in the
Employees' Life Insurance Fund a Long-Term Care
Administrative Account, which shall be available to the
Office, without fiscal year limitation, to defray
reasonable expenses incurred by the Office in
administering this chapter after the start of the 7-
year period described in section 9003(d)(2)(B).
``(B) Reimbursement requirement.--Each master
contract under this chapter shall include appropriate
provisions under which the carrier involved shall,
during each year, make such periodic contributions to
the Long-Term Care Administrative Account as necessary
to ensure that the reasonable anticipated expenses of
the Office in administering this chapter during such
year (adjusted to reconcile for any earlier
overestimates or underestimates under this
subparagraph) are defrayed.
``Sec. 9005. Preemption
``The terms of any contract under this chapter which relate to the
nature, provision, or extent of coverage or benefits (including
payments with respect to benefits) shall supersede and preempt any
State or local law, or any regulation issued thereunder, which relates
to long-term care insurance or contracts.
``Sec. 9006. Studies, reports, and audits
``(a) Provisions Relating to Carriers.--Each master contract under
this chapter shall contain provisions requiring the carrier--
``(1) to furnish such reasonable reports as the Office of
Personnel Management determines to be necessary to enable it to
carry out its functions under this chapter; and
``(2) to permit the Office and representatives of the General
Accounting Office to examine such records of the carrier as may
be necessary to carry out the purposes of this chapter.
``(b) Provisions Relating to Federal Agencies.--Each Federal agency
shall keep such records, make such certifications, and furnish the
Office, the carrier, or both, with such information and reports as the
Office may require.
``(c) Reports by the General Accounting Office.--The General
Accounting Office shall prepare and submit to the President, the Office
of Personnel Management, and each House of Congress, before the end of
the third and fifth years during which the program under this chapter
is in effect, a written report evaluating such program. Each such
report shall include an analysis of the competitiveness of the program,
as compared to both group and individual coverage generally available
to individuals in the private insurance market. The Office shall
cooperate with the General Accounting Office to provide periodic
evaluations of the program.
``Sec. 9007. Jurisdiction of courts
``The district courts of the United States have original
jurisdiction of a civil action or claim described in paragraph (1) or
(2) of section 9003(c), after such administrative remedies as required
under such paragraph (1) or (2) (as applicable) have been exhausted,
but only to the extent judicial review is not precluded by any dispute
resolution or other remedy under this chapter.
``Sec. 9008. Administrative functions
``(a) In General.--The Office of Personnel Management shall
prescribe regulations necessary to carry out this chapter.
``(b) Enrollment Periods.--The Office shall provide for periodic
coordinated enrollment, promotion, and education efforts in
consultation with the carriers.
``(c) Consultation.--Any regulations necessary to effect the
application and operation of this chapter with respect to an eligible
individual described in paragraph (3) or (4) of section 9001, or a
qualified relative thereof, shall be prescribed by the Office in
consultation with the appropriate Secretary.
``(d) Informed Decisionmaking.--The Office shall ensure that each
eligible individual applying for long-term care insurance under this
chapter is furnished the information necessary to enable that
individual to evaluate the advantages and disadvantages of obtaining
long-term care insurance under this chapter, including the following:
``(1) The principal long-term care benefits and coverage
available under this chapter, and how those benefits and
coverage compare to the range of long-term care benefits and
coverage otherwise generally available.
``(2) Representative examples of the cost of long-term
care,and the sufficiency of the benefits available under this chapter
relative to those costs. The information under this paragraph shall
also include--
``(A) the projected effect of inflation on the value
of those benefits; and
``(B) a comparison of the inflation-adjusted value of
those benefits to the projected future costs of long-
term care.
``(3) Any rights individuals under this chapter may have to
cancel coverage, and to receive a total or partial refund of
premiums. The information under this paragraph shall also
include--
``(A) the projected number or percentage of
individuals likely to fail to maintain their coverage
(determined based on lapse rates experienced under
similar group long-term care insurance programs and,
when available, this chapter); and
``(B)(i) a summary description of how and when
premiums for long-term care insurance under this
chapter may be raised;
``(ii) the premium history during the last 10 years
for each qualified carrier offering long-term care
insurance under this chapter; and
``(iii) if cost increases are anticipated, the
projected premiums for a typical insured individual at
various ages.
``(4) The advantages and disadvantages of long-term care
insurance generally, relative to other means of accumulating or
otherwise acquiring the assets that may be needed to meet the
costs of long-term care, such as through tax-qualified
retirement programs or other investment vehicles.
``Sec. 9009. Cost accounting standards
``The cost accounting standards issued pursuant to section 26(f) of
the Office of Federal Procurement Policy Act (41 U.S.C. 422(f)) shall
not apply with respect to a long-term care insurance contract under
this chapter.''.
(b) Conforming Amendment.--The analysis for part III of title 5,
United States Code, is amended by adding at the end of subpart G the
following:
``90. Long-Term Care Insurance.............................. 9001.''.
SEC. 1003. EFFECTIVE DATE.
The Office of Personnel Management shall take such measures as may
be necessary to ensure that long-term care insurance coverage under
title 5, United States Code, as amended by this title, may be obtained
in time to take effect not later than the first day of the first
applicable pay period of the first fiscal year which begins after the
end of the 18-month period beginning on the date of the enactment of
this Act.
TITLE II--FEDERAL RETIREMENT COVERAGE ERRORS CORRECTION
SEC. 2001. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This title may be cited as the ``Federal
Erroneous Retirement Coverage Corrections Act''.
(b) Table of Contents.--The table of contents for this title is as
follows:
TITLE II--FEDERAL RETIREMENT COVERAGE ERRORS CORRECTION
Sec. 2001. Short title; table of contents.
Sec. 2002. Definitions.
Sec. 2003. Applicability.
Sec. 2004. Irrevocability of elections.
Subtitle A--Description of Retirement Coverage Errors to Which This
Title Applies and Measures for Their Rectification
CHAPTER 1--EMPLOYEES AND ANNUITANTS WHO SHOULD HAVE BEEN FERS COVERED,
BUT WHO WERE ERRONEOUSLY CSRS COVERED OR CSRS-OFFSET COVERED INSTEAD,
AND SURVIVORS OF SUCH EMPLOYEES AND ANNUITANTS
Sec. 2101. Employees.
Sec. 2102. Annuitants and survivors.
CHAPTER 2--EMPLOYEE WHO SHOULD HAVE BEEN FERS COVERED, CSRS-OFFSET
COVERED, OR CSRS COVERED, BUT WHO WAS ERRONEOUSLY SOCIAL SECURITY-ONLY
COVERED INSTEAD
Sec. 2111. Applicability.
Sec. 2112. Correction mandatory.
CHAPTER 3--EMPLOYEE WHO SHOULD OR COULD HAVE BEEN SOCIAL SECURITY-ONLY
COVERED BUT WHO WAS ERRONEOUSLY CSRS-OFFSET COVERED OR CSRS COVERED
INSTEAD
Sec. 2121. Employee who should be Social Security-Only covered, but
who is erroneously CSRS or CSRS-Offset covered instead.
CHAPTER 4--EMPLOYEE WHO WAS ERRONEOUSLY FERS COVERED
Sec. 2131. Employee who should be Social Security-Only covered, CSRS
covered, or CSRS-Offset covered and is not FERS-Eligible, but who is
erroneously FERS covered instead.
Sec. 2132. FERS-Eligible employee who should have been CSRS covered,
CSRS-Offset covered, or Social Security-Only covered, but who was
erroneously FERS covered instead without an election.
Sec. 2133. Retroactive effect.
CHAPTER 5--EMPLOYEE WHO SHOULD HAVE BEEN CSRS-OFFSET COVERED, BUT WHO
WAS ERRONEOUSLY CSRS COVERED INSTEAD
Sec. 2141. Applicability.
Sec. 2142. Correction mandatory.
CHAPTER 6--EMPLOYEE WHO SHOULD HAVE BEEN CSRS COVERED, BUT WHO WAS
ERRONEOUSLY CSRS-OFFSET COVERED INSTEAD
Sec. 2151. Applicability.
Sec. 2152. Correction mandatory.
Subtitle B--General Provisions
Sec. 2201. Identification and notification requirements.
Sec. 2202. Information to be furnished to and by authorities
administering this title.
Sec. 2203. Service credit deposits.
Sec. 2204. Provisions related to Social Security coverage of
misclassified employees.
Sec. 2205. Thrift Savings Plan treatment for certain individuals.
Sec. 2206. Certain agency amounts to be paid into or remain in the
CSRDF.
Sec. 2207. CSRS coverage determinations to be approved by OPM.
Sec. 2208. Discretionary actions by Director.
Sec. 2209. Regulations.
Subtitle C--Other Provisions
Sec. 2301. Provisions to authorize continued conformity of other
Federal retirement systems.
Sec. 2302. Authorization of payments.
Sec. 2303. Individual right of action preserved for amounts not
otherwise provided for under this title.
Subtitle D--Effective Date
Sec. 2401. Effective date.
SEC. 2002. DEFINITIONS.
For purposes of this title:
(1) Annuitant.--The term ``annuitant'' has the meaning given
such term under section 8331(9) or 8401(2) of title 5, United
States Code.
(2) CSRS.--The term ``CSRS'' means the Civil Service
Retirement System.
(3) CSRDF.--The term ``CSRDF'' means the Civil Service
Retirement and Disability Fund.
(4) CSRS covered.--The term ``CSRS covered'', with respect to
any service, means service that is subject to the provisions of
subchapter III of chapter 83 of title 5, United States Code,
other than service subject to section 8334(k) of such title.
(5) CSRS-offset covered.--The term ``CSRS-Offset covered'',
with respect to any service, means service that is subject to
the provisions of subchapter III of chapter 83 of title 5,
United States Code, and to section 8334(k) of such title.
(6) Employee.--The term ``employee'' has the meaning given
such term under section 8331(1) or 8401(11) of title 5, United
States Code.
(7) Executive director.--The term ``Executive Director of the
Federal Retirement Thrift Investment Board'' or ``Executive
Director'' means the Executive Director appointed under section
8474 of title 5, United States Code.
(8) FERS.--The term ``FERS'' means the Federal Employees''
Retirement System.
(9) FERS covered.--The term ``FERS covered'', with respect to
any service, means service that is subject to chapter 84 of
title 5, United States Code.
(10) Former employee.--The term ``former employee'' means an
individual who was an employee, but who is not an annuitant.
(11) OASDI taxes.--The term ``OASDI taxes'' means the OASDI
employee tax and the OASDI employer tax.
(12) OASDI employee tax.--The term ``OASDI employee tax''
means the tax imposed under section 3101(a) of the Internal
Revenue Code of 1986 (relating to Old-Age, Survivors and
Disability Insurance).
(13) OASDI employer tax.--The term ``OASDI employer tax''
means the tax imposed under section 3111(a) of the Internal
Revenue Code of 1986 (relating to Old-Age, Survivors and
Disability Insurance).
(14) OASDI trust funds.--The term ``OASDI trust funds'' means
the Federal Old-Age and Survivors Insurance Trust Fund and the
Federal Disability Insurance Trust Fund.
(15) Office.--The term ``Office'' means the Office of
Personnel Management.
(16) Retirement coverage determination.--The term
``retirement coverage determination'' means a determination by
an employee or agent of the Government as to whether a
particular type of Government service is CSRS covered, CSRS-
Offset covered, FERS covered, or Social Security-Only covered.
(17) Retirement coverage error.--The term ``retirement
coverage error'' means an erroneous retirement coverage
determination that was in effect for a minimum period of 3
years of service after December 31, 1986.
(18) Social security-only covered.--The term ``Social
Security-Only covered'', with respect to any service, means
Government service that--
(A) constitutes employment under section 210 of the
Social Security Act (42 U.S.C. 410); and
(B)(i) is subject to OASDI taxes; but
(ii) is not subject to CSRS or FERS.
(19) Survivor.--The term ``survivor'' has the meaning given
such term under section 8331(10) or 8401(28) of title 5, United
States Code.
(20) Thrift savings fund.--The term ``Thrift Savings Fund''
means the Thrift Savings Fund established under section 8437 of
title 5, United States Code.
SEC. 2003. APPLICABILITY.
(a) In General.--This title shall apply with respect to retirement
coverage errors that occur before, on, or after the date of enactment
of this Act.
(b) Limitation.--Except as otherwise provided in this title, this
title shall not apply to any erroneous retirement coverage
determination that was in effect for a period of less than 3 years of
service after December 31, 1986.
SEC. 2004. IRREVOCABILITY OF ELECTIONS.
Any election made (or deemed to have been made) by an employee or
any other individual under this title shall be irrevocable.
Subtitle A--Description of Retirement Coverage Errors to Which This
Title Applies and Measures for Their Rectification
CHAPTER 1--EMPLOYEES AND ANNUITANTS WHO SHOULD HAVE BEEN FERS COVERED,
BUT WHO WERE ERRONEOUSLY CSRS COVERED OR CSRS-OFFSET COVERED INSTEAD,
AND SURVIVORS OF SUCH EMPLOYEES AND ANNUITANTS
SEC. 2101. EMPLOYEES.
(a) Applicability.--This section shall apply in the case of any
employee or former employee who should be (or should have been) FERS
covered but, as a result of a retirement coverage error, is (or was)
CSRS covered or CSRS-Offset covered instead.
(b) Uncorrected Error.--
(1) Applicability.--This subsection applies if the retirement
coverage error has not been corrected before the effective date
of the regulations described under paragraph (3). As soon as
practicable after discovery of the error, and subject to the
right of an election under paragraph (2), if CSRS covered or
CSRS-Offset covered, such individual shall be treated as CSRS-
Offset covered, retroactive to the date of the retirement
coverage error.
(2) Coverage.--
(A) Election.--Upon written notice of a retirement
coverage error, an individual may elect to be CSRS-
Offset covered or FERS covered, effective as of the
date of the retirement coverage error. Such election
shall be made not later than 180 days after the date of
receipt of such notice.
(B) Nonelection.--If the individual does not make an
election by the date provided under subparagraph (A), a
CSRS-Offset covered individual shall remain CSRS-Offset
covered and a CSRS covered individual shall be treated
as CSRS-Offset covered.
(3) Regulations.--The Office shall prescribe regulations to
carry out this subsection.
(c) Corrected Error.--
(1) Applicability.--This subsection applies if the retirement
coverage error was corrected before the effective date of the
regulations described under subsection (b).
(2) Coverage.--
(A) Election.--
(i) CSRS-offset covered.--Not later than 180
days after the date of enactment of this Act,
the Office shall prescribe regulations
authorizing individuals to elect, during the
18-month period immediately following the
effective date of such regulations, to be CSRS-
Offset covered, effective as of the date of the
retirement coverage error.
(ii) Thrift savings fund contributions.--If
under this section an individual elects to be
CSRS-Offset covered, all employee contributions
to the Thrift Savings Fund made during the
period of FERS coverage (and earnings on such
contributions) may remain in the Thrift Savings
Fund in accordance with regulations prescribed
by the Executive Director, notwithstanding any
limit that would otherwise be applicable.
(B) Previous settlement payment.--An individual who
previously received a payment ordered by a court or
provided as a settlement of claim for losses resulting
from a retirement coverage error shall not be entitled
to make an election under this subsection unless that
amount is waived in whole or in part under section
2208, and any amount not waived is repaid.
(C) Ineligibility for election.--An individual who,
subsequent to correction of the retirement coverage
error, received a refund of retirement deductions under
section 8424 of title 5, United States Code, or a
distribution under section 8433 (b), (c), or (h)(1)(A)
of title 5, United States Code, may not make an
election under this subsection.
(3) Corrective action to remain in effect.--If an individual
is ineligible to make an election or does not make an election
under paragraph (2) before the end of any time limitation under
this subsection, the corrective action taken before such time
limitation shall remain in effect.
SEC. 2102. ANNUITANTS AND SURVIVORS.
(a) In General.--This section shall apply in the case of an
individual who is--
(1) an annuitant who should have been FERS covered but, as a
result of a retirement coverage error, was CSRS covered or
CSRS-Offset covered instead; or
(2) a survivor of an employee who should have been FERS
covered but, as a result of a retirement coverage error, was
CSRS covered or CSRS-Offset covered instead.
(b) Coverage.--
(1) Election.--Not later than 180 days after the date of
enactment of this Act, the Office shall prescribe regulations
authorizing an individual described under subsection (a) to
elect CSRS-Offset coverage or FERS coverage, effective as of
the date of the retirement coverage error.
(2) Time limitation.--An election under this subsection shall
be made not later than 18 months after the effective date of
the regulations prescribed under paragraph (1).
(3) Reduced annuity.--
(A) Amount in account.--If the individual elects
CSRS-Offset coverage, the amount in the employee's
Thrift Savings Fund account under subchapter III of
chapter 84 of title 5, United States Code, on the date
of retirement that represents the Government's
contributions and earnings on those contributions
(whether or not such amount was subsequently
distributed from the Thrift Savings Fund) will form the
basis for a reduction in the individual's annuity,
under regulations prescribed by the Office.
(B) Reduction.--The reduced annuity to which the
individual is entitled shall be equal to an amount
which, when taken together with the amount referred to
in subparagraph (A), would result in the present value
of the total being actuarially equivalent to the
present value of an unreduced CSRS-Offset annuity that
would have been provided the individual.
(4) Reduced benefit.--If--
(A) a surviving spouse elects CSRS-Offset benefits;
and
(B) a FERS basic employee death benefit under section
8442(b) of title 5, United States Code, was previously
paid;
then the survivor's CSRS-Offset benefit shall be subject to a
reduction, under regulations prescribed by the Office. The
reduced annuity to which the individual is entitled shall be
equal to an amount which, when taken together with the amount
of the payment referred to under subparagraph (B) would result
in the present value of the total being actuarially equivalent
to the present value of an unreduced CSRS-Offset annuity that
would have been provided the individual.
(5) Previous settlement payment.--An individual who
previously received a payment ordered by a court or provided as
a settlement of claim for losses resulting from a retirement
coverage error may not make an election under this subsection
unless repayment of that amount is waived in whole or in part
under section 2208, and any amount not waived is repaid.
(c) Nonelection.--If the individual does not make an election under
subsection (b) before any time limitation under this section, the
retirement coverage shall be subject to the following rules:
(1) Corrective action previously taken.--If corrective action
was taken before the end of any time limitation under this
section, that corrective action shall remain in effect.
(2) Corrective action not previously taken.--If corrective
action was not taken before such time limitation, the employee
shall be CSRS-Offset covered, retroactive to the date of the
retirement coverage error.
CHAPTER 2--EMPLOYEE WHO SHOULD HAVE BEEN FERS COVERED, CSRS-OFFSET
COVERED, OR CSRS COVERED, BUT WHO WAS ERRONEOUSLY SOCIAL SECURITY-ONLY
COVERED INSTEAD
SEC. 2111. APPLICABILITY.
This chapter shall apply in the case of any employee who--
(1) should be (or should have been) FERS covered but, as a
result of a retirement coverage error, is (or was) Social
Security-Only covered instead;
(2) should be (or should have been) CSRS-Offset covered but,
as a result of a retirement coverage error, is (or was) Social
Security-Only covered instead; or
(3) should be (or should have been) CSRS covered but, as a
result of a retirement coverage error, is (or was) Social
Security-Only covered instead.
SEC. 2112. CORRECTION MANDATORY.
(a) Uncorrected Error.--If the retirement coverage error has not
been corrected, as soon as practicable after discovery of the error,
such individual shall be covered under the correct retirement coverage,
effective as of the date of the retirement coverage error.
(b) Corrected Error.--If the retirement coverage error has been
corrected, the corrective action previously taken shall remain in
effect.
CHAPTER 3--EMPLOYEE WHO SHOULD OR COULD HAVE BEEN SOCIAL SECURITY-ONLY
COVERED BUT WHO WAS ERRONEOUSLY CSRS-OFFSET COVERED OR CSRS COVERED
INSTEAD
SEC. 2121. EMPLOYEE WHO SHOULD BE SOCIAL SECURITY-ONLY COVERED, BUT WHO
IS ERRONEOUSLY CSRS OR CSRS-OFFSET COVERED INSTEAD.
(a) Applicability.--This section applies in the case of a
retirement coverage error in which a Social Security-Only covered
employee was erroneously CSRS covered or CSRS-Offset covered.
(b) Uncorrected Error.--
(1) Applicability.--This subsection applies if the retirement
coverage error has not been corrected before the effective date
of the regulations described in paragraph (3).
(2) Coverage.--In the case of an individual who is
erroneously CSRS covered, as soon as practicable after
discovery of the error, and subject to the right of an election
under paragraph (3), such individual shall be CSRS-Offset
covered, effective as of the date of the retirement coverage
error.
(3) Election.--
(A) In general.--Upon written notice of a retirement
coverage error, an individual may elect to be CSRS-
Offset covered or Social Security-Only covered,
effective as of the date of the retirement coverage
error. Such election shall be made not later than 180
days after the date of receipt of such notice.
(B) Nonelection.--If the individual does not make an
election before the date provided under subparagraph
(A), the individual shall remain CSRS-Offset covered.
(C) Regulations.--The Office shall prescribe
regulations to carry out this paragraph.
(c) Corrected Error.--
(1) Applicability.--This subsection applies if the retirement
coverage error was corrected before the effective date of the
regulations described under subsection (b)(3).
(2) Election.--Not later than 180 days after the date of
enactment of this Act, the Office shall prescribe regulations
authorizing individuals to elect, during the 18-month period
immediately following the effective date of such regulations,
to be CSRS-Offset covered or Social Security-Only covered,
effective as of the date of the retirement coverage error.
(3) Nonelection.--If an eligible individual does not make an
election under paragraph (2) before the end of any time
limitation under this subsection, the corrective action taken
before such time limitation shall remain in effect.
CHAPTER 4--EMPLOYEE WHO WAS ERRONEOUSLY FERS COVERED
SEC. 2131. EMPLOYEE WHO SHOULD BE SOCIAL SECURITY-ONLY COVERED, CSRS
COVERED, OR CSRS-OFFSET COVERED AND IS NOT FERS-
ELIGIBLE, BUT WHO IS ERRONEOUSLY FERS COVERED
INSTEAD.
(a) Applicability.--This section applies in the case of a
retirement coverage error in which a Social Security-Only covered, CSRS
covered, or CSRS-Offset covered employee not eligible to elect FERS
coverage under authority of section 8402(c) of title 5, United States
Code, was erroneously FERS covered.
(b) Uncorrected Error.--
(1) Applicability.--This subsection applies if the retirement
coverage error has not been corrected before the effective date
of the regulations described in paragraph (2).
(2) Coverage.--
(A) Election.--
(i) In general.--Upon written notice of a
retirement coverage error, an individual may
elect to remain FERS covered or to be Social
Security-Only covered, CSRS covered, or CSRS-
Offset covered, as would have applied in the
absence of the erroneous retirement coverage
determination, effective as of the date of the
retirement coverage error. Such election shall
be made not later than 180 days after the date
of receipt of such notice.
(ii) Treatment of fers election.--An election
of FERS coverage under this subsection is
deemed to be an election under section 301 of
the Federal Employees Retirement System Act of
1986 (5 U.S.C. 8331 note; Public Law 99-09335;
100 Stat. 599).
(B) Nonelection.--If the individual does not make an
election before the date provided under subparagraph
(A), the individual shall remain FERS covered,
effective as of the date of the retirement coverage
error.
(3) Employee contributions in thrift savings fund.--If under
this section, an individual elects to be Social Security-Only
covered, CSRS covered, or CSRS-Offset covered, all employee
contributions to the Thrift Savings Fund made during the period
of erroneous FERS coverage (and all earnings on such
contributions) may remain in the Thrift Savings Fund in
accordance with regulations prescribed by the Executive
Director, notwithstanding any limit under section 8351 or 8432
of title 5, United States Code.
(4) Regulations.--Except as provided under paragraph (3), the
Office shall prescribe regulations to carry out this
subsection.
(c) Corrected Error.--
(1) Applicability.--This subsection applies if the retirement
coverage error was corrected before the effective date of the
regulations described under paragraph (2).
(2) Election.--Not later than 180 days after the date of
enactment of this Act, the Office shall prescribe regulations
authorizing individuals to elect, during the 18-month period
immediately following the effective date of such regulations to
remain Social Security-Only covered, CSRS covered, or CSRS-
Offset covered, or to be FERS covered, effective as of the date
of the retirement coverage error.
(3) Nonelection.--If an eligible individual does not make an
election under paragraph (2), the corrective action taken
before the end of any time limitation under this subsection
shall remain in effect.
(4) Treatment of fers election.--An election of FERS coverage
under this subsection is deemed to be an election under section
301 of the Federal Employees Retirement System Act of 1986 (5
U.S.C. 8331 note; Public Law 99-09335; 100 Stat. 599).
SEC. 2132. FERS-ELIGIBLE EMPLOYEE WHO SHOULD HAVE BEEN CSRS COVERED,
CSRS-OFFSET COVERED, OR SOCIAL SECURITY-ONLY
COVERED, BUT WHO WAS ERRONEOUSLY FERS COVERED
INSTEAD WITHOUT AN ELECTION.
(a) In General.--
(1) FERS election prevented.--If an individual was prevented
from electing FERS coverage because the individual was
erroneously FERS covered during the period when the individual
was eligible to elect FERS under title III of the Federal
Employees Retirement System Act or the Federal Employees'
Retirement System Open Enrollment Act of 1997 (Public Law 105-
0961; 111 Stat. 1318 et seq.), the individual--
(A) is deemed to have elected FERS coverage; and
(B) shall remain covered by FERS, unless the
individual declines, under regulations prescribed by
the Office, to be FERS covered.
(2) Declining fers coverage.--If an individual described
under paragraph (1)(B) declines to be FERS covered, such
individual shall be CSRS covered, CSRS-Offset covered, or
Social Security-Only covered, as would apply in the absence of
a FERS election, effective as of the date of the erroneous
retirement coverage determination.
(b) Employee Contributions in Thrift Savings Fund.--If under this
section, an individual declines to be FERS covered and instead is
Social Security-Only covered, CSRS covered, or CSRS-Offset covered, as
would apply in the absence of a FERS election, all employee
contributions to the Thrift Savings Fund made during the period of
erroneous FERS coverage (and all earnings on such contributions) may
remain in the Thrift Savings Fund in accordance with regulations
prescribed by the Executive Director, notwithstanding any limit that
would otherwise be applicable.
(c) Inapplicability of Duration of Erroneous Coverage.--This
section shall apply regardless of the length of time the erroneous
coverage determination remained in effect.
SEC. 2133. RETROACTIVE EFFECT.
This chapter shall be effective as of January 1, 1987, except that
section 2132 shall not apply to individuals who made or were deemed to
have made elections similar to those provided in this section under
regulations prescribed by the Office before the effective date of this
title.
CHAPTER 5--EMPLOYEE WHO SHOULD HAVE BEEN CSRS-OFFSET COVERED, BUT WHO
WAS ERRONEOUSLY CSRS COVERED INSTEAD
SEC. 2141. APPLICABILITY.
This chapter shall apply in the case of any employee who should be
(or should have been) CSRS-Offset covered but, as a result of a
retirement coverage error, is (or was) CSRS covered instead.
SEC. 2142. CORRECTION MANDATORY.
(a) Uncorrected Error.--If the retirement coverage error has not
been corrected, as soon as practicable after discovery of the error,
such individual shall be covered under the correct retirement coverage,
effective as of the date of the retirement coverage error.
(b) Corrected Error.--If the retirement coverage error has been
corrected before the effective date of this title, the corrective
action taken before such date shall remain in effect.
CHAPTER 6--EMPLOYEE WHO SHOULD HAVE BEEN CSRS COVERED, BUT WHO WAS
ERRONEOUSLY CSRS-OFFSET COVERED INSTEAD
SEC. 2151. APPLICABILITY.
This chapter shall apply in the case of any employee who should be
(or should have been) CSRS covered but, as a result of a retirement
coverage error, is (or was) CSRS-Offset covered instead.
SEC. 2152. CORRECTION MANDATORY.
(a) Uncorrected Error.--If the retirement coverage error has not
been corrected, as soon as practicable after discovery of the error,
such individual shall be covered under the correct retirement coverage,
effective as of the date of the retirement coverage error.
(b) Corrected Error.--If the retirement coverage error has been
corrected before the effective date of this title, the corrective
action taken before such date shall remain in effect.
Subtitle B--General Provisions
SEC. 2201. IDENTIFICATION AND NOTIFICATION REQUIREMENTS.
Government agencies shall take all such measures as may be
reasonable and appropriate to promptly identify and notify individuals
who are (or have been) affected by a retirement coverage error of their
rights under this title.
SEC. 2202. INFORMATION TO BE FURNISHED TO AND BY AUTHORITIES
ADMINISTERING THIS TITLE.
(a) Applicability.--The authorities identified in this subsection
are--
(1) the Director of the Office of Personnel Management;
(2) the Commissioner of Social Security; and
(3) the Executive Director of the Federal Retirement Thrift
Investment Board.
(b) Authority To Obtain Information.--Each authority identified in
subsection (a) may secure directly from any department or agency of the
United States information necessary to enable such authority to carry
out its responsibilities under this title. Upon request of the
authority involved, the head of the department or agency involved shall
furnish that information to the requesting authority.
(c) Authority To Provide Information.--Each authority identified in
subsection (a) may provide directly to any department or agency of the
United States all information such authority believes necessary to
enable the department or agency to carry out its responsibilities under
this title.
(d) Limitation; Safeguards.--Each of the respective authorities
under subsection (a) shall--
(1) request or provide only such information as that
authority considers necessary; and
(2) establish, by regulation or otherwise, appropriate
safeguards to ensure that any information obtained under this
section shall be used only for the purpose authorized.
SEC. 2203. SERVICE CREDIT DEPOSITS.
(a) CSRS Deposit.--In the case of a retirement coverage error in
which--
(1) a FERS covered employee was erroneously CSRS covered or
CSRS-Offset covered;
(2) the employee made a service credit deposit under the CSRS
rules; and
(3) there is a subsequent retroactive change to FERS
coverage;
the excess of the amount of the CSRS civilian or military service
credit deposit over the FERS civilian or military service credit
deposit, together with interest computed in accordance with paragraphs
(2) and (3) of section 8334(e) of title 5, United States Code, and
regulations prescribed by the Office, shall be paid to the employee,
the annuitant or, in the case of a deceased employee, to the individual
entitled to lump-sum benefits under section 8424(d) of title 5, United
States Code.
(b) FERS Deposit.--
(1) Applicability.--This subsection applies in the case of an
erroneous retirement coverage determination in which--
(A) the employee owed a service credit deposit under
section 8411(f) of title 5, United States Code; and
(B)(i) there is a subsequent retroactive change to
CSRS or CSRS-Offset coverage; or
(ii) the service becomes creditable under chapter 83
of title 5, United States Code.
(2) Reduced annuity.--
(A) In general.--If at the time of commencement of an
annuity there is remaining unpaid CSRS civilian or
military service credit deposit for service described
under paragraph (1), the annuity shall be reduced based
upon the amount unpaid together with interest computed
in accordance with section 8334(e) (2) and (3) of title
5, United States Code, and regulations prescribed by
the Office.
(B) Amount.--The reduced annuity to which the
individual is entitled shall be equal to an amount
that, when taken together with the amount referred to
under subparagraph (A), would result in the present
value of the total being actuarially equivalent to the
present value of the unreduced annuity benefit that
would have been provided the individual.
(3) Survivor annuity.--
(A) In general.--If at the time of commencement of a
survivor annuity, there is remaining unpaid any CSRS
service credit deposit described under paragraph (1),
and there has been no actuarial reduction in an annuity
under paragraph (2), the survivor annuity shall be
reduced based upon the amount unpaid together with
interest computed in accordance with section 8334(e)
(2) and (3) of title 5, United States Code, and
regulations prescribed by the Office.
(B) Amount.--The reduced survivor annuity to which
the individual is entitled shall be equal to an amount
that, when taken together with the amount referred to
under subparagraph (A), would result in the present
value of the total being actuarially equivalent to the
present value of an unreduced survivor annuity benefit
that would have been provided the individual.
SEC. 2204. PROVISIONS RELATED TO SOCIAL SECURITY COVERAGE OF
MISCLASSIFIED EMPLOYEES.
(a) Definitions.--In this section, the term--
(1) ``covered individual'' means any employee, former
employee, or annuitant who--
(A) is or was employed erroneously subject to CSRS
coverage as a result of a retirement coverage error;
and
(B) is or was retroactively converted to CSRS-offset
coverage, FERS coverage, or Social Security-only
coverage; and
(2) ``excess CSRS deduction amount'' means an amount
equal to the difference between the CSRS deductions
withheld and the CSRS-Offset or FERS deductions, if
any, due with respect to a covered individual during
the entire period the individual was erroneously
subject to CSRS coverage as a result of a retirement
coverage error.
(b) Reports to Commissioner of Social Security.--
(1) In general.--In order to carry out the Commissioner of
Social Security's responsibilities under title II of the Social
Security Act, the Commissioner may request the head of each
agency that employs or employed a covered individual to report
(in coordination with the Office of Personnel Management) in
such form and within such timeframe as the Commissioner may
specify, any or all of--
(A) the total wages (as defined in section 3121(a) of
the Internal Revenue Code of 1986) paid to such
individual during each year of the entire period of the
erroneous CSRS coverage; and
(B) such additional information as the Commissioner
may require for the purpose of carrying out the
Commissioner's responsibilities under title II of the
Social Security Act (42 U.S.C. 401 et seq.).
(2) Compliance.--The head of an agency or the Office shall
comply with a request from the Commissioner under paragraph
(1).
(3) Wages.--For purposes of section 201 of the Social
Security Act (42 U.S.C. 401), wages reported under this
subsection shall be deemed to be wages reported to the
Secretary of the Treasury or the Secretary's delegates pursuant
to subtitle F of the Internal Revenue Code of 1986.
(c) Payment Relating to OASDI Employee Taxes.--
(1) In general.--The Office shall transfer from the Civil
Service Retirement and Disability Fund to the General Fund of
the Treasury an amount equal to the lesser of the excess CSRS
deduction amount or the OASDI taxes due for covered individuals
(as adjusted by amounts transferred relating to applicable
OASDI employee taxes as a result of corrections made, including
corrections made before the date of enactment of this Act). If
the excess CSRS deductions exceed the OASDI taxes, any
difference shall be paid to the covered individual or
survivors, as appropriate.
(2) Transfer.--Amounts transferred under this subsection
shall be determined notwithstanding any limitation under
section 6501 of the Internal Revenue Code of 1986.
(d) Payment of OASDI Employer Taxes.--
(1) In general.--Each employing agency shall pay an amount
equal to the OASDI employer taxes owed with respect to covered
individuals during the applicable period of erroneous coverage
(as adjusted by amounts transferred for the payment of such
taxes as a result of corrections made, including corrections
made before the date of enactment of this Act).
(2) Payment.--Amounts paid under this subsection shall be
determined subject to any limitation under section 6501 of the
Internal Revenue Code of 1986.
(e) Application of OASDI Tax Provisions of the Internal Revenue
Code of 1986 to Affected Individuals and Employing Agencies.--A covered
individual and the individual's employing agency shall be deemed to
have fully satisfied in a timely manner their responsibilities with
respect to the taxes imposed by sections 3101(a), 3102(a), and 3111(a)
of the Internal Revenue Code of 1986 on the wages paid by the employing
agency to such individual during the entire period such individual was
erroneously subject to CSRS coverage as a result of a retirement
coverage error based on the payments and transfers made under
subsections (c) and (d). No credit or refund of taxes on such wages
shall be allowed as a result of this subsection.
SEC. 2205. THRIFT SAVINGS PLAN TREATMENT FOR CERTAIN INDIVIDUALS.
(a) Applicability.--This section applies to an individual who--
(1) is eligible to make an election of coverage under section
2101 or 2102, and only if FERS coverage is elected (or remains
in effect) for the employee involved; or
(2) is described in section 2111, and makes or has made
retroactive employee contributions to the Thrift Savings Fund
under regulations prescribed by the Executive Director.
(b) Payment Into Thrift Savings Fund.--
(1) In general.--
(A) Payment.--With respect to an individual to whom
this section applies, the employing agency shall pay to
the Thrift Savings Fund under subchapter III of chapter
84 of title 5, United States Code, for credit to the
account of the employee involved, an amount equal to
the earnings which are disallowed under section
8432a(a)(2) of such title on the employee's retroactive
contributions to such Fund.
(B) Amount.--Earnings under subparagraph (A) shall be
computed in accordance with the procedures for
computing lost earningsunder section 8432a of title 5,
United States Code. The amount paid by the employing agency shall be
treated for all purposes as if that amount had actually been earned on
the basis of the employee' s contributions.
(C) Exceptions.--If an individual made retroactive
contributions before the effective date of the
regulations under section 2101(c), the Director may
provide for an alternative calculation of lost earnings
to the extent that a calculation under subparagraph (B)
is not administratively feasible. The alternative
calculation shall yield an amount that is as close as
practicable to the amount computed under subparagraph
(B), taking into account earnings previously paid.
(2) Additional employee contribution.--In cases in which the
retirement coverage error was corrected before the effective
date of the regulations under section 2101(c), the employee
involved shall have an additional opportunity to make
retroactive contributions for the period of the retirement
coverage error (subject to applicable limits), and such
contributions (including any contributions made after the date
of the correction) shall be treated in accordance with
paragraph (1).
(c) Regulations.--
(1) Executive director.--The Executive Director shall
prescribe regulations appropriate to carry out this section
relating to retroactive employee contributions and payments
made on or after the effective date of the regulations under
section 2101(c).
(2) Office.--The Office, in consultation with the Federal
Retirement Thrift Investment Board, shall prescribe regulations
appropriate to carry out this section relating to the
calculation of lost earnings on retroactive employee
contributions made before the effective date of the regulations
under section 2101(c).
SEC. 2206. CERTAIN AGENCY AMOUNTS TO BE PAID INTO OR REMAIN IN THE
CSRDF.
(a) Certain Excess Agency Contributions to Remain in the CSRDF.--
(1) In general.--Any amount described under paragraph (2)
shall--
(A) remain in the CSRDF; and
(B) may not be paid or credited to an agency.
(2) Amounts.--Paragraph (1) refers to any amount of
contributions made by an agency under section 8423 of title 5,
United States Code, on behalf of any employee, former employee,
or annuitant (or survivor of such employee, former employee, or
annuitant) who makes an election to correct a retirement
coverage error under this title, that the Office determines to
be excess as a result of such election.
(b) Additional Employee Retirement Deductions To Be Paid by
Agency.--If a correction in a retirement coverage error results in an
increase in employee deductions under section 8334 or 8422 of title 5,
United States Code, that cannot be fully paid by a reallocation of
otherwise available amounts previously deducted from the employee's pay
as employment taxes or retirement deductions, the employing agency--
(1) shall pay the required additional amount into the CSRDF;
and
(2) shall not seek repayment of that amount from the
employee, former employee, annuitant, or survivor.
SEC. 2207. CSRS COVERAGE DETERMINATIONS TO BE APPROVED BY OPM.
No agency shall place an individual under CSRS coverage unless--
(1) the individual has been employed with CSRS coverage
within the preceding 365 days; or
(2) the Office has agreed in writing that the agency's
coverage determination is correct.
SEC. 2208. DISCRETIONARY ACTIONS BY DIRECTOR.
(a) In General.--The Director of the Office of Personnel Management
may--
(1) extend the deadlines for making elections under this
title in circumstances involving an individual's inability to
make a timely election due to a cause beyond the individual's
control;
(2) provide for the reimbursement of necessary and reasonable
expenses incurred by an individual with respect to settlement
of a claim for losses resulting from a retirement coverage
error, including attorney's fees, court costs, and other actual
expenses;
(3) compensate an individual for monetary losses that are a
direct and proximate result of a retirement coverage error,
excluding claimed losses relating to forgone contributions and
earnings under the Thrift Savings Plan under subchapter III of
chapter 84 of title 5, United States Code, and all other
investment opportunities; and
(4) waive payments required due to correction of a retirement
coverage error under this title.
(b) Similar Actions.--In exercising the authority under this
section, the Director shall, to the extent practicable, provide for
similar actions in situations involving similar circumstances.
(c) Judicial Review.--Actions taken under this section are final
and conclusive, and are not subject to administrative or judicial
review.
(d) Regulations.--The Office of Personnel Management shall
prescribe regulations regarding the process and criteria used in
exercising the authority under this section.
(e) Report.--The Office of Personnel Management shall, not later
than 180 days after the date of enactment of this Act, and annually
thereafter for each year in which the authority provided in this
section is used, submit a report to each House of Congress on the
operation of this section.
SEC. 2209. REGULATIONS.
(a) In General.--In addition to the regulations specifically
authorized in this title, the Office may prescribe such other
regulations as are necessary for the administration of this title.
(b) Former Spouse.--The regulations prescribed under this title
shall provide for protection of the rights of a former spouse with
entitlement to an apportionment of benefits or to survivor benefits
based on the service of the employee.
Subtitle C--Other Provisions
SEC. 2301. PROVISIONS TO AUTHORIZE CONTINUED CONFORMITY OF OTHER
FEDERAL RETIREMENT SYSTEMS.
(a) Foreign Service.--Sections 827 and 851 of the Foreign Service
Act of 1980 (22 U.S.C. 4067 and 4071) shall apply with respect to this
title in the same manner as if this title were part of--
(1) the Civil Service Retirement System, to the extent this
title relates to the Civil Service Retirement System; and
(2) the Federal Employees' Retirement System, to the extent
this title relates to the Federal Employees' Retirement System.
(b) Central Intelligence Agency.--Sections 292 and 301 of the
Central Intelligence Agency Retirement Act (50 U.S.C. 2141 and 2151)
shall apply with respect to this title in the same manner as if this
title were part of--
(1) the Civil Service Retirement System, to the extent this
title relates to the Civil Service Retirement System; and
(2) the Federal Employees' Retirement System, to the extent
this title relates to the Federal Employees' Retirement System.
SEC. 2302. AUTHORIZATION OF PAYMENTS.
All payments authorized or required by this title to be paid from
the Civil Service Retirement and Disability Fund, together with
administrative expenses incurred by the Office in administering this
title, shall be deemed to have been authorized to be paid from that
Fund, which is appropriated for the payment thereof.
SEC. 2303. INDIVIDUAL RIGHT OF ACTION PRESERVED FOR AMOUNTS NOT
OTHERWISE PROVIDED FOR UNDER THIS TITLE.
Nothing in this title shall preclude an individual from bringing a
claim against the Government of the United States which such individual
may have under section 1346(b) or chapter 171 of title 28, United
States Code, or any other provision of law (except to the extent the
claim is for any amounts otherwise provided for under this title).
Subtitle D--Effective Date
SEC. 2401. EFFECTIVE DATE.
Except as otherwise provided in this title, this title shall take
effect on the date of enactment of this Act.
I. PURPOSE
The Long-Term Care Security Act would establish a long-term
care insurance program for federal (including postal)
employees, members of the uniformed services, both civilian and
military retirees, and certain qualified relatives including
spouses, parents, parents-in-law, and stepparents.
The provisions of the Federal Erroneous Retirement Coverage
Corrections Act which are included in S. 2420 provide for the
correction of certain retirement coverage errors affecting
federal employees.
II. BACKGROUND
A. Need for long-term care legislation
Long-term care refers to a wide range of health and support
services for persons who have lost the capacity for self-care.
Long-term care services include home and community-based
services as well as those provided in nursing homes and other
institutions.
A steady increase in longevity and in the elderly
population has led to a rise in the number of Americans likely
to need some form of long-term care. It is estimated that
roughly 5.2 million persons age 65 or older, and 3.5 million
persons ages 18 through 64, currently receive long-term care
assistance either in the community or in nursing homes. The
need for long-term care is expected to grow substantially in
the future. By the year 2030, it is estimated that
approximately 20 percent of our population will be age 65 or
older.
Long-term care is expensive. The cost of nursing home care
is expected to rise from an average today of $46,000 per year
to an average of $97,000 per year by 2030. Long-term care
insurance can provide families with affordable options for
dealing with the catastrophic expenses of nursing home care,
home care, assisted living, and other forms of long-term care
services. Without insurance, families often must exhaust all
their income and assets to pay for long-term care.
Many individuals are under the false impression that their
health plan, disability insurance, or Medicare will adequately
cover their long-term care needs. Unfortunately, this is rarely
the case. Most health insurance plans do not cover costs
associated with long-term care, and Medicare covers long-term
care only under limited circumstances. Medicaid provides
coverage for long-term care, but eligibility is based on income
and assets. Without long-term care insurance, individuals must
deplete their assets, and eventually depend on Medicaid to pay
the costs of long-term care.
Premiums for long-term care insurance are typically less
expensive for younger purchasers. Establishing a long-term care
insurance program for the federal community could encourage
individuals to consider purchasing long-term care insurance
during their working years, when premiums are lower.
Long-term care insurance can help federal workers plan for
the future and protect themselves from the financial risks
associated with the difficult challenge of providing long-term
care and comfort to a loved one. By establishing a program that
offers affordable, quality long-term care insurance, the
federal government can serve as a model to other employers
across the country whose employees face similar long-term care
needs.
B. Summary of title I of the legislation, ``The Long-Term Care Security
Act'
Title I of S. 2420 requires the Office of Personnel
Management (OPM) to enter into seven-year contracts with one or
more qualified insurance carriers to provide long-term care
insurance policies to the federal community. Contracts must be
awarded on the basis of contractor qualifications, price, and
reasonable competition; they are not automatically renewable.
Competition among carriers for the opportunity to offer
long-term care insurance under this program should result in
affordable premiums and attractive benefit packages. Therefore,
the Committee encourages OPM to ensure the selection process
for qualified carriers is as competitive as possible. In
addition, the Committee encourages OPM to consider all
insurance companies that meet program criteria and guidelines.
S. 2420 expressly authorizes insurers to form consortia for
purposes of submitting proposals or bids to OPM and jointly
underwriting coverage if selected by OPM. Joint underwriting of
coverage may facilitate the availability and affordability of
long-term care insurance for federal employees. The federal
participant group would be larger than any group underwritten
by a single carrier today. Joint underwriting by multiple
carriers may thus be necessary in order to underwrite the risk
inherent in such a large population. Additionally, a consortium
could allow pooling of loss information enabling more accurate
and favorable pricing for federal employees. Further, a
consortium may be able to provide certain services more
efficiently to the large population of enrollees, and also
permit OPM to take advantage of the companies' different areas
of expertise.
Enrollees will pay the full premiums for long-term care
policies offered pursuant to this Act. OPM will be granted
access to the Employees' Life Insurance Fund for the initial
expenses of implementation and administration, which will be
subsequently reimbursed by the carriers. The master contracts
must require each carrier to reimburse the Employees' Life
Insurance Fund on a pro rata basis for ongoing OPM
administrative expenses, including lost investment income of
the Life Insurance Fund.
Each contract with a qualified carrier to provide long-term
care insurance under thisprogram must include detailed
statements of benefits, premium charges, terms of enrollment,
limitations, and any other terms and conditions mutually agreed to by
OPM. Each contract must also specify procedures to resolve
expeditiously any disputes regarding payment of claims and benefits.
During the contract period, premiums can be adjusted only by mutual
agreement between OPM and the carrier. Contracts must provide for
portability of coverage, ensuring that policies cannot be terminated
because of a change in the individual's status, such as separation from
service, divorce, or otherwise.
S. 2420 establishes underwriting standards under which the
provision of long-term care insurance is not guaranteed to any
individual, and OPM is not required to offer long-term care
insurance to those who are immediately eligible. However, OPM
is not precluded from offering long-term care insurance to
individuals who are immediately eligible, if OPM determines it
is appropriate to do so.
S. 2420 provides OPM with the authority and flexibility to
negotiate underwriting standards with carriers, just as it will
negotiate other terms and conditions. The Committee recognizes
the tension between the need to screen potential enrollees and
the desire to qualify as many eligible individuals as possible.
Without some underwriting, premiums could become too expensive
for potential enrollees, and carriers would be less interested
in participating in this program. The Committee encourages OPM
to negotiate underwriting standards that allow the greatest
number of individuals to obtain long-term care policies at
reasonable rates, while still containing costs. The Committee
also expects OPM to use the buying power of the large federal
community to make the underwriting standards as fair and
reasonable as possible.
S. 2420 requires the General Accounting Office (GAO) to
compare the competitiveness of this program with group and
individual coverage available in the private insurance market
and submit written evaluations to OPM and Congress before the
end of the third and fifth years of the program. In addition,
OPM is required to ensure that each applicant has information
regarding the general advantages and disadvantages of long-term
care insurance and any other information necessary to make an
informed decision about obtaining long-term care insurance.
The Committee understands that eligible individuals will
need access to adequate information to make an informed
decision regarding the purchase of long-term care insurance.
Long-term care insurance can be an effective way for some
individuals to plan for the future, but it is not an
appropriate product for everyone. The Committee recognizes the
importance of providing an adequate amount of information to
potential enrollees, without overwhelming them.
Some individuals eligible to participate in this long-term
care insurance program have previously purchased long-term care
insurance in the private market. Some of these individuals have
expressed an interest in converting their present long-term
care insurance policies into policies made available under this
Act. The Committee urges OPM to investigate the feasibility of
such conversions and to examine the impact any potential
conversions might have on the administration of the long-term
care insurance program authorized by this Act.
Numerous bills have been introduced in the 106th Congress
to provide long-term care insurance for federal employees and
annuitants, members of the uniformed services, and civilian and
military retirees. Among these are S. 57, introduced by Senator
Mikulski; S. 36, introduced by Senator Grassley; and S. 894,
introduced by Senator Cleland.
In an effort to achieve consensus, discussions and
negotiations regarding the creation of a federal long-term care
insurance program have been held with interested staff,
representatives from the Office of Personnel Management (OPM),
the federal employee unions, the National Association of
Insurance Commissioners, the Health Insurance Association of
America, as well as representatives of several major insurance
companies, among others. In the Senate, S. 2420 emerged from
these negotiations as the clear, strongly supported compromise.
Title I of S. 2420 is identical to its House companion measure,
H.R. 4040, as it passed the House on May 9, 2000.
S. 2420 will help millions of American families plan
responsibly for their retirement and gain the security that is
necessary for achieving a high quality of life in their
retirement years.
C. Summary of title II of the legislation, the ``Federal Erroneous
Retirement Coverage Corrections Act''
In 1984, the federal government made a transition from the
Civil Service Retirement System (CSRS) to the Federal Employees
Retirement System (FERS). As government agencies carried out
the complex job of applying the transition rules, many errors
were committed and thousands of employees were placed in the
wrong retirement system.
The CSRS and the FERS are two distinct retirement systems.
The CSRS is a stand-alone defined benefit pension plan that
does not include Social Security coverage. Benefits are based
on a formula involving length of service, high-three average
salary and an accrual rate. The FERS is a three-tiered
retirement system combining Social Security, a defined benefit
component and a defined contribution component known as the
Thrift Savings Plan (TSP). The TSP is similar to 401(k) plans
as found in the private sector. In order for employees covered
by the FERS to have similar income replacement rates in
retirement to those covered by the CSRS, participation in the
Thrift Savings Plan, with its government match for employee
contributions, is necessary. (A third system, the ``CSRS-
Offset'' system, covers employees who vested in the CSRS before
separating from government service for more than one year. This
offset system is a hybrid, combining Social Security coverage
with a defined benefit component with the aggregate benefit
amount intended to equal the amount the employee would have
received under the CSRS.)
Under current statute, federal agencies have no choice but
to correct a retirement coverage error when it is discovered,
effectively forcing employees into a new retirement plan. Since
most of the retirement coverage errors involve employees
wrongfully placed in the CSRS or the CSRS-Offset system,
employees whose coverage is corrected often have not
participated in the TSP to the same degree they would have had
they known they were to retire under theFERS. Thus, the
automatic correction of a retirement coverage error can have a harmful
impact on an employee's financial ability to plan for retirement.
On June 17, 1999, Senator Cochran, for himself and Senator
Akaka, introduced S. 1232, the Federal Erroneous Retirement
Coverage Corrections Act, which was referred to the Committee
on Governmental Affairs. This proposal provides comprehensive
and equitable relief to employees, former employees, retirees,
and survivors who are affected by retirement coverage errors.
It provides individuals with a choice between corrected
retirement coverage and the coverage the employee expected to
receive, without amending the Social Security Act. For each
type of retirement coverage error, individuals are furnished
the opportunity to maintain their expected level of retirement
benefits without a change in their retirement savings and
planning.
For example, current law requires FERS eligible employees
who were incorrectly placed in the CSRS-Offset system to be
automatically placed in FERS. However, S. 2420, as amended,
would provide these employees with the option to be corrected
to FERS or remain in the CSRS-Offset system. Many employees do
not have the financial resources to make the retroactive TSP
contributions necessary to maintain their expected level of
retirement benefits under FERS. This legislation provides these
employees with equitable relief by furnishing them the option
to remain in the CSRS-Offset system and receive the retirement
benefits they expected. Among other provisions, this
legislation also provides certain employees who missed an
opportunity to contribute to the Thrift Savings Plan due to a
coverage error the opportunity to receive interest on their TSP
make-up contributions.
On June 21, 1999, S. 1232 was referred to the Subcommittee
on International Security, Proliferation, and Federal Services.
On July 16, 1999, the Subcommittee on International Security,
Proliferation, and Federal Services reported S. 1232 to the
Committee on Governmental Affairs by polling letter. On August
3, 1999, the Committee held a business meeting and voted
unanimously, by voice vote, to favorably report the bill. The
bill was reported to the Senate on October 8, 1999 (see S.
Report 106-178). S. 1232 passed the Senate by unanimous consent
on November 3, 1999. On November 18, the House passed H. Res.
394, a resolution returning S. 1232 to the Senate on the
grounds that it contravened the constitutional requirement that
revenue measures originate in the House.
The Committee has addressed the concerns raised in H. Res.
394 by removing the specific provisions cited in H. Res. 394 as
contravening the constitutional requirement that revenue
measures originate in the House. Specifically, Section 401 of
S. 1232, which provided that transfers and payments of
contributions under the bill would not result in an income tax
liability for affected employees, has been deleted and is not
included in S. 2420. In addition, Title V of S. 1232 has also
been deleted and is not included in S. 2420. This latter
language, which provided portability of service credit between
the Federal Reserve Board and FERS, was incorporated as Title
II of S. 335, the Deceptive Mail Prevention and Enforcement
Act, which became Public Law 106-168. Except for the two
changes discussed above, the provisions of the Federal
Erroneous Retirement Coverage Corrections Act as contained in
S. 2420, as amended, are identical to S. 1232.
The provisions of the Federal Erroneous Retirement Coverage
Corrections Act, which are included in S. 2420, provide long-
awaited relief to many federal employees and their families
who, through no fault of their own, find themselves the victims
of retirement coverage errors. The Committee believes the
Federal Erroneous Retirement Coverage Corrections Act provides
a comprehensive solution to the problems faced by federal
employees due to retirement coverage errors, and that it does
so at a reasonable cost and without creating unnecessary
administrative burdens. By affording affected federal employees
the opportunity to be made whole, S. 2420 strikes the
appropriate balance between the needs of those affected by
retirement errors and federal agencies struggling to fulfill
their mandates with already tight budgets.
III. LEGISLATIVE HISTORY
S. 2420 was introduced by Senator Grassley on April 13,
2000, and referred to the Committee on Governmental Affairs. On
May 1, 2000, the bill was referred to the Subcommittee on
International Security, Proliferation, and Federal Services.
The Subcommittee on International Security, Proliferation,
and Federal Services held a hearing on long-term care insurance
on May 16, 2000. Senators Charles Grassley and Barbara Mikulski
testified, along with the Director of OPM, Ms. Janice R.
Lachance, in support of S. 2420.
On May 24, 2000 the Subcommittee on International Security,
Proliferation, and Federal Services, by polling letter, sought
approval to report S. 2420 to the Committee on Governmental
Affairs with a substitute amendment making technical changes to
the bill and adding provisions of the Federal Erroneous
Retirement Coverage Corrections Act. The Subcommittee voted
unanimously by polling letter to approve the bill, as amended,
and on May 31 it was reported to the Committee on Governmental
Affairs.
On June 14, 2000, the Committee considered S. 2420, as
amended by the Subcommittee on International Security,
Proliferation, and Federal Services. S. 2420 was ordered to be
reported by the Committee by voice vote. Committee members
present were Senators Thompson, Stevens, Collins, Voinovich,
Cochran, Lieberman, Akaka, Torricelli, and Cleland.
IV. SECTION-BY-SECTION ANALYSIS
Title I--Federal long-term care insurance
Section 1001. Short title.--This section titles the bill
the ``Long-Term Care Security Act.''
Section 1002.--This section amends Subpart G of Part III of
Title 5, United States Code, by adding a new Chapter 90--Long-
Term Care Insurance, Sections 9001-9009 as follows:
Section 9001. Definitions.--Under this section, individuals
eligible to purchase long-term care insurance include most of
those employees and annuitants who would be eligible to
participate in the Federal Employees Health Benefits Program
(FEHBP) with the exception of District of Columbia government
employees. Eligibility also extends to active duty and retired
members of the uniformed services, including the Commissioned
Corps of the Public Health Service and National Oceanic and
Atmospheric Administration. Relatives of active employees or
members of the uniformed services qualified to purchase long-
term care insurance include the spouse, children at least 18
years of age, parents, stepparents, or parents-in-law. For
retirees, spouses and children are qualified to participate.
OPM is authorized to include other eligible relatives.
This section defines a ``qualified carrier'' as an
insurance company or consortium of insurance companies licensed
to issue long-term care insurance in all 50 States and the
District of Columbia, either directly or through their
subsidiaries. Through reference to Section 7702B of the
Internal Revenue Code (IRC) of 1986 (the amendments made by the
Health Insurance Portability and Accountability Act of 1996,
which establish favorable tax treatment for certain long-term
care insurance contracts), this section defines a ``qualified
long-term care insurance contract'' as one which covers only
long-term care services; does not pay or reimburse expenses
covered under Medicare; is guaranteed renewable; does not
provide for a cash surrender value or other money that can be
paid, assigned, or pledged as collateral for a loan, or
borrowed; applies all refunds of premiums and policy holder
dividends or similar amounts as a reduction in future premiums
or to increase future benefits; and meets certain consumer
protection standards.
By reference to the definition of qualified long-term care
insurance contracts and services contained in Section 7702B of
the IRC, this section defines qualified long-term care services
as necessary diagnostic, preventive, therapeutic, curing,
treating, mitigating, and rehabilitative services and
maintenance or personal care services required by a chronically
ill individual and provided according to a plan prescribed by a
licensed health care practitioner. Under the IRC and this
chapter, ``chronically ill individuals'' must have functional
impairments that make them unable to perform, without
substantial assistance from another individual, at least two of
five specified activities of daily living (ADLs) for a period
certified to last at least 90 days. It also includes any
cognitively impaired persons who require substantial
supervision to protect them from threats to health and safety.
Section 9002. Availability of insurance.--This section
requires the OPM to establish and, in consultation with the
appropriate executive branch cabinet secretaries, administer a
program through which eligible individuals may obtain long-term
care insurance coverage. Individuals seeking coverage as
relatives of eligible employees or annuitants are required to
provide documentation of their relationship, as determined by
OPM. (The eligible employee or annuitant need not purchase a
policy for a qualified relative to purchase one.) Coverage must
be provided through qualified long-term care insurance
contracts (as defined by the Section 7702B of the IRC) that are
fully insured or reinsured (that is, financially capable of
paying all qualified claims) and issued by a qualified carrier.
This section establishes underwriting standards under which
provision of long-term care insurance is not guaranteed to any
individual, and it is not required to be provided to
individuals who would be immediately eligible for benefits. The
intent of this section is to make clear that OPM is not
required to offer long-term care policies to those who are
immediately eligible. The provision should not be read,
however, to preclude OPM from offering long-term care insurance
to individuals who are immediately benefit eligible if OPM
during the contract negotiation process determines it is
appropriate to do so. Individuals who do not enroll during
their first period of opportunity but who elect to enroll
during a subsequent opportunity may be required to meet more
stringent underwriting standards than would have been applied
during the first enrollment period.
For purposes of underwriting, this section specifies that
spouses of eligible employees and spouses of eligible
annuitants must be treated as nearly as practicable like the
eligible individual. It further provides that benefits and
coverage are guaranteed renewable as long as the premiums
continue to be paid in a timely manner. Premiums may be revised
on a class basis only.
Section 9003. Contracting authority.--This section
authorizes OPM to contract with one or more qualified carriers
for a policy or policies of long-term care insurance on the
basis of contractor qualifications, price, and reasonable
competition. Each ``master contract'' is required to include a
detailed statement of benefits, premium charges, the terms of
the enrollment period, and any limitations. Master contracts
shall not be automatically renewable. Premiums must reasonably
and equitably reflect the cost of benefits provided, as
determined by OPM; premiums can be adjusted during a contract
period only by mutual agreement between OPM and the carrier.
Under the terms of the master contract, carriers must agree
to provide payments or benefits to entitled individuals. Master
contracts must also specify procedures to resolve expeditiously
disputes regarding payment of claims or benefits, including
internal administrative procedures and independent third-party
review under appropriate circumstances. The choice of third
party review entities must be mutually acceptable to OPM and
the carrier. Master contracts shall also include procedures for
review of an individual's eligibility for coverage. Disputes
between a carrier and OPM shall be subject to de novo judicial
review after exhaustion of administrative remedies.
Neither OPM nor any third-party reviewer shall have the
authority to change the terms of any master contract. Each
master contract is for a term of seven years, that term
beginning on the earliest date as of which any long-term care
insurance coverage under the Act becomes effective. Any master
contract entered into later than the effective date for
coverage shall end at the close of the same seven-year period.
Master contracts may be terminated earlier by OPM according to
the contract terms. If a master contract is terminated, the
rights and responsibilitiesof the enrolled individuals, of the
insurers, and OPM must continue until the termination of the enrolled
individuals' coverage or the effective date of a successor contract.
Within 180 days of submission of a report by the GAO before
the end of the fifth year of the program, the President (or his
designee) shall submit to the Committees on Government Reform
and on Armed Services of the House of Representatives and the
Committees on Governmental Affairs and on Armed Services of the
Senate a written recommendation as to whether this program
should be continued unmodified, terminated, or restructured.
For 180 days after their recommendation, OPM is prevented from
rebidding or otherwise contracting for any coverage that would
follow the expiration of the seven-year period.
This section requires each master contract to provide for
portability of coverage, ensuring that the policies of duly
enrolled individuals shall not be terminated because of a
change in the individual's status, such as separating from
covered employment or no longer being a qualified relative due
to divorce or otherwise.
Section 9004. Financing.--This section establishes that 100
percent of the premiums for long-term care insurance coverage
under this program must be paid by eligible individuals either
through withholding from pay or retirement benefits or through
direct payments to the carrier. Eligible employees or
annuitants may pay for a qualified relative's premium through
withholding from the employee's pay or annuitant's retirement
benefit.
This section requires each participating carrier to
maintain records that permit it to account for all amounts
received under this program, including investment earnings on
these amounts, separately and apart from all other funds of the
carrier. It grants OPM access to the Employees' Life Insurance
Fund to finance reasonable expenses associated with initial
implementation and administration of this chapter, without
fiscal year limitation. Subsequently, the master contracts must
require each carrier to reimburse the Employees' Life Insurance
Fund on a pro rata basis for initial as well as ongoing OPM
administrative expenses, including lost investment income of
the Life Insurance Fund.
Section 9005. Preemption.--This section states that any
state or local laws and regulations relating to long-term care
insurance or contracts are superseded and preempted by the
terms of any contract under this chapter.
Section 9006. Studies, reports, and audits.--This section
requires carriers with master contracts to furnish reasonable
reports to OPM and permits OPM and GAO to examine the carrier's
records as necessary to carry out this chapter. Additionally,
federal agencies are required to keep records, make
certifications, and furnish OPM with information and reports.
GAO is required to compare the competitiveness of this program
with group and individual coverage available in the private
insurance market and submit written evaluations to OPM, the
President and each House of Congress before the end of the
third and fifth years of this program. OPM is also required to
cooperate with GAO in providing periodic evaluations of the
program.
Section 9007. Jurisdiction of courts.--This section
provides that, after all required administrative remedies have
been exhausted, individuals disputing a decision of a carrier
to deny payments or benefits may file a civil action or claim
against the carrier in U.S. District Courts, provided judicial
review is not precluded by the dispute resolution procedures
and remedies provided under the Act.
Section 9008. Administrative functions.--Under this
section, OPM is required to prescribe the regulations necessary
to carry out this chapter, and shall provide for enrollment
periods, promotion, and education efforts. In addition, OPM is
required to consult with the appropriate Secretaries in
prescribing regulations with respect to active and retired
members of the uniformed services and their qualified
relatives. OPM is also required to ensure that each applicant
has the information necessary to make an informed decision
about obtaining long-term care insurance and to compare
coverage and benefits to that otherwise generally available.
OPM must provide information on the cost of long-term care and
sufficiency of benefits to cover those costs, including the
effects of inflation; an individual's right to cancel coverage
and receive a premium refund; the number or percent of
individuals likely to fail to maintain their coverage; how and
when premiums for long-term care insurance under this chapter
may be raised; a ten-year premium history for each qualified
long-term care insurer under this chapter and whether increases
are anticipated; the projected premiums for a typical insured
individual at various ages; and the general advantages and
disadvantages of long-term care insurance relative to other
means of meeting the costs of long-term care.
Section 9009. Cost Accounting standards.--This section
provides that long-term care insurance contracts under this
chapter are exempt from the cost accounting standards issued by
the Office of Federal Procurement Policy.
Section 3. Effective date.--This section requires OPM to
ensure that long-term care insurance coverage under this Act
will be available so that it may take effect not later than the
beginning of the first fiscal year following a period of 18
months after enactment.
Title II--Federal retirement coverage errors correction
These provisions of the Federal Erroneous Retirement
Coverage Corrections Act would provide a remedy to federal
employees who have been placed in the wrong retirement system.
Section 2001: Provides the short title (``Federal Erroneous
Retirement Coverage Corrections Act'') and the Table of
Contents.
Section 2002: Defines the terms used throughout the Act.
Section 2003: Provides coverage for all errors that have
been in effect for at least three years of service after
December 31, 1986.
Section 2004: Provides that elections made under this Act
are irrevocable.
Subtitle A: Description of retirement coverage errors and
measures for rectification
This subtitle details the specific types of retirement
coverage errors and the remedies provided by the Act.
Chapter 1: Covers employees and annuitants who should have
been FERS covered, but were erroneously covered under CSRS or
CSRS Offset. These individuals have a choice between correction
to FERS or be covered by CSRS Offset. Includes provisions that
allow all employee contributions, and earnings thereon, to
remain in the TSP account if CSRS Offset is elected.
Chapter 2: Covers employees who should have been covered by
a retirement plan (CSRS, CSRS Offset, or FERS), but were
erroneously covered by Social Security only. In all cases,
coverage is corrected to the appropriate plan so that the
employee has retirement coverage.
Chapter 3: Covers employees who should have been covered by
Social Security only, but were erroneously covered by CSRS or
CSRS Offset. These individuals have a choice between correction
to Social Security only or be covered by CSRS Offset.
Chapter 4: Covers employees who should have been covered by
CSRS, CSRS Offset, or Social Security only, but were
erroneously covered by FERS. These individuals have a choice
between remaining in FERS or correction to the appropriate
plan. Includes provisions that allow all employee
contributions, and earnings thereon, to remain in the TSP
account if coverage other than FERS is elected.
Chapter 5: Covers employees who should have been covered by
CSRS Offset, but were erroneously covered by CSRS. Coverage is
corrected to CSRS Offset to conform with Social Security
coverage law.
Chapter 6: Covers employees who should have been covered by
CSRS, but were erroneously covered by CSRS Offset. Coverage is
corrected to CSRS to conform with Social Security coverage law.
Subtitle B: General provisions
Section 2201: Requires that all government agencies make
reasonable efforts to identify and notify individuals affected
by retirement coverage errors.
Section 2202: Authorizes OPM, SSA, and TSP to obtain any
information necessary to carry out the responsibilities of this
Act.
Section 2203: Provides for payment of interest on certain
deposits made by employees that, due to correction of a
retirement coverage error, are returned to the employee. Allows
retirement credit for certain periods of service without
payment of a service credit deposit. Provides that the
retirement or survivor benefit is actuarially reduced by the
amount of deposit owed.
Section 2204: Provides that the employing agency pays any
employer OASDI taxes due for the period of erroneous coverage,
subject to the three-year statute of limitations in the
Internal Revenue Code. OPM will transfer excess employee
retirement deductions to the OASDI Trust Funds to fund the
employee share of the OASDI taxes. In no case will an employee
be required to pay additional OASDI taxes.
Section 2205: Provides that certain employees who missed an
opportunity to contribute to TSP due to a coverage error may
receive earnings on their own TSP make-up contributions.
``Lost'' earnings will be paid by the employing agency. Note:
Current law already provides that certain employees who missed
an opportunity to contribute to TSP due to a coverage error may
receive agency matching contributions on TSP make-up
contributions, agency automatic one percent contributions to
TSP, and earnings on both.
Section 2206: Provides that employing agencies may not
remove excess agency retirement contributions from the Civil
Service Retirement and Disability Fund.
Section 2207: Requires that agencies obtain written
approval from OPM before placing certain employees under CSRS
coverage.
Section 2208: Authorizes the Director of OPM to extend
deadlines, reimburse individuals for reasonable expenses
incurred by reason of the coverage error or for losses, and
waive repayments required under the Act.
Section 2209: Authorizes OPM to prescribe regulations to
administer the Act.
Subtitle C: Other provisions
Section 2301: Makes remedies provided under the Act also
available to employees of the Foreign Service and the Central
Intelligence Agency.
Section 2302: Authorizes payments from the Civil Service
Retirement and Disability Fund for administrative expenses
incurred by OPM and for other payments required under the Act.
Section 2303: States that the Act does not preclude
individuals from bringing suit against the Government of the
United States for amounts not provided under the Act.
Subtitle D: Effective date
Section 2401: Provides that the Act is effective from the
date of enactment.
V. REGULATORY IMPACT STATEMENT
Paragraph 11(b)(1) of rule XXVI of the Standing Rules of
the Senate requires that each report accompanying a bill
evaluate ``the regulatory impact which would be incurred in
carrying out this bill.'' S. 2420 would preempt state and local
laws that govern long-term care coverage and benefits if those
laws conflict with benefit contracts for federal employees.
While this preemption would be an intergovernmental mandate,
state and local governments would not bear any additional costs
because the preemption would limit the scope of regulation by
those governments.
The bill also would change the way the government of the
District of Columbia and Gallaudet University correct errors
associated with the incorrect enrollment of employees in
federal retirement plans. This requirement would be both an
intergovernmental and private-sector mandate as defined by the
Unfunded Mandates Reform Act. However, costs associated with
making those corrections would be minimal because only a small
number of employees have been affected by errors addressed by
the bill. Consequently, the Congressional Budget Office
estimates that the total cost of the mandate would be minimal
and would not exceed the thresholds established in UMRA ($55
million for intergovernmental mandates and $109 million for
private-sector mandates in 2000, adjusted for inflation).
VI. CBO COST ESTIMATE
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 12, 2000.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 2420, the Long-Term
Care Security Act and the Federal Erroneous Retirement Coverage
Corrections Act.
If you wish further details on this estimate, we will be
pleased to provide them. The principal CBO staff contacts are
Chuck Betley (for title I) and Eric Rollins (for title II).
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
S. 2420--Long-Term Care Security Act and Federal Erroneous Retirement
Coverage Corrections Act
Summary: S. 2420 has two major components. Title I of the
bill, the Long-Term Care Security Act, would require the Office
of Personnel Management (OPM) to develop and administer a long-
term care insurance program for federal employees, members of
the uniformed services, retirees from federal or military
service, and specified relatives of the primary eligible
groups. Because the federal government would not contribute to
the enrollees' premiums, and the insurer or insurers would be
required to reimburse OPM for its expenses in setting up and
administering the plan, net federal outlays would be zero over
the long run. However, the government would initially incur
some start-up costs, which would ultimately be reimbursed by
the insurers.
Title II, the Federal Erroneous Retirement Coverage
Corrections Act, would alter the procedures for correcting
situations where federal employees have been mistakenly placed
in the wrong retirement system. Many of those retirement
coverage errors occurred between 1984, when the Civil Service
Retirement System (CSRS) was closed to new entrants, and 1987,
when the Federal Employees' Retirement System (FERS) was
created.
CBO estimates that this bill would reduce discretionary
spending by $51 million over the 2001-2005 period, primarily
because of lower agency contributions to the Civil Service
Retirement and Disability Fund (CSRDF) and the Thrift Savings
Plan (TSP). S. 2420 would also increase direct spending by $20
million over the same period. Because the bill would affect
direct spending, pay-as-you-go procedures would apply.
The bill would preempt state laws governing long-term care
contracts for federal employees, and this preemption would be
an intergovernmental mandate as defined in the Unfunded
Mandates Reform Act (UMRA). Also, the requirements to continue
retirement coverage in some instances and to correct retirement
errors in others for employees of the District of Columbia and
Gallaudet University would be intergovernmental and private-
sector mandates. However, CBO estimates that the cost of those
mandates would be small and would not exceed the thresholds
established in UMRA ($55 million for intergovernmental mandates
and $109 million for private-sector mandates in 2000, adjusted
annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 2420 is shown in the following table.
------------------------------------------------------------------------
Outlays by fiscal year, in millions of
dollars--
---------------------------------------
2001 2002 2003 2004 2005
------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Title II:
Makeup Contributions to TSP. (\1\) 15 -3 -4 -4
Makeup Payments to Social (\1\) (\1\) 0 0 0
Security...................
Makeup Payments to the CSRDF -3 2 -3 -4 -4
Agency Retirement (\1\) -2 -5 -6 -6
Contributions..............
Employer TSP Contributions.. -1 -4 -7 -7 -8
Employer Social Security (\1\) (\1\) 0 0 0
Contributions..............
---------------------------------------
Total--Subject to -4 13 -18 -20 -22
Appropriation............
=======================================
CHANGES IN DIRECT SPENDING
Title I:
OPM Administrative Expenses. 3 18 -21 0 0
Title II:
OPM Administrative Expenses. 1 1 (\1\) (\1\) (\1\)
Federal Retirement Benefits. (\1\) 2 (\1\) (\1\) (\1\)
Transfers from CSRDF to -3 3 0 0 0
Social Security Trust Funds
Postal Service Contributions 1 (\1\) 4 5 5
to the CSRDF...............
Postal Service Outlays (off- -2 6 -4 0 0
budget)....................
Postal Service Contributions (\1\) (\1\) 0 0 0
to Social Security Trust
Funds (off-budget).........
Receipt of Transfers by 3 -3 0 0 0
Social Security Trust Funds
(off-budget)...............
---------------------------------------
Subtotal--Title II........ 1 9 (\1\) 5 5
=======================================
Total--On Budget Direct Spending 3 23 -16 5 5
Total--Off-Budget Direct 1 3 -4 0 0
Spending.......................
------------------------------------------------------------------------
\1\ Less than $500,000.
Note.--Components may not sum to totals because of rounding.
The mandatory costs of this legislation would fall within
budget functions 600 (income security) and 950 (undistributed
offsetting receipts). This estimate assumes that S. 2420 will
be enacted by October 1, 2000.
Basis of estimate
Title I: Long-Term Care Security Act
S. 2420 specifies that eligible individuals who opt to
purchase long-term care insurance would be responsible for 100
percent of the cost of the premiums, so that the federal
government would not incur net costs over the long term.
However, because OPM would expend funds for start-up and
administrative expenses before enrollees' premiums are
received, the agency would incur outlays in 2001 and 2002,
which would be direct spending from the Employees' Life
Insurance Fund.
Upon enactment, OPM would be allowed 18 months to set up
the long-term care insurance program. CBO assumes that, if the
bill were enacted in fiscal year 2000, OPM would begin in 2001
to negotiate with one or more insurance carriers to establish
the benefits to be provided under the plan and the premiums to
be charged. The program would take effect in 2003, and premiums
would begin to be deducted from enrollees' salary or retirement
payments. The federal government would not contribute to the
enrollees' premiums, and the insurer or insurers would be
required to reimburse OPM for the agency's expenses in setting
up and administering the plan.
The expenses that OPM would incur before being able to
collect premiums from enrollees and reimbursement from the
insurers would be paid for the Employees' Life Insurance Fund.
Based on information from OPM and the costs of administering
other benefit programs, CBO estimates that start-up costs over
three fiscal years would be about $23 million. A significant
portion of the costs would be for education and outreach--
especially for printing and mailing brochures to inform
potential participants of their eligibility and options under
the plan. About 10 percent of the estimated costs represents
expenses for drafting specifications for the plan, evaluating
contract proposals, negotiating with contractors, and setting
up systems fro tracking enrollment and premium deductions.
Expenditures for education and outreach would be
significant because long-term care insurance is a new benefit
for many employees, unlike pensions and health insurance, which
are already established and familiar. Furthermore, OPM would
have to contact active and retired military personnel, whose
benefits are ordinarly administered by the Department of
Defense. Intensive outreach efforts can help attract a larger
pool of participants, which would help to assure the plan's
financial solvency by broadening the distribution of people who
pay premiums and including more enrollees with a low risk of
needing services.
Expenses of $3 million in 2001 would be primarily for
developing the long-term care insurance plan and negotiating
with insurers, while education and outreach expenses are
projected to increase outlays to $18 million in 2002. Start-up
expenses for administrative costs and processing enrollment in
the first year of the plan's operation are estimated to amount
to $2 million in 2003. Once the insurance program is
established, CBO expects that, beginning in 2003, OPM would
incur costs of about $1 million annually to administer it.
Reimbursement of the estimated $23 million in start-up costs
incurred from 2001 through 2003, as well as for the first-year
administrative expenses of $1 million, would occur in 2003, so
that receipts would exceed outlays by OPM by about $21 million
in 2003.
Those ongoing expenses are expected to remain steady unless
another open season is held. The bill directs OPM to conduct
open enrollment seasons periodically, during which
administrative expenses would be expected to increase. However,
frequent open seasons would create opportunities for risk
selection, as low-risk individuals could defer joining the plan
until they perceive that their risk of needing long-term care
has changed. The bill would make it harder for people to elect
coverage only when their risk changes by authorizing the
insurance plans to apply underwriting standards for individuals
who defer joining at their first opportunity. Nevertheless, CBO
expects that OPM would allow open seasons infrequently. If open
seasons occur at the same intervals as the length of the
contract specified in the bill, or once every seven years, the
next increase in outlays for a new open season would occur in
2010.
S. 2420 specifies that the government collect premiums from
most enrollees by withholding a portion of their pay and, in
turn, transfer these amounts to the insurance companies. These
transactions would also be direct spending but would have no
significant net effect on the budget.
Title II: Federal Erroneous Retirement Coverage Corrections
Act
There are two main retirement programs for full-time
regular federal employees. Most full-time employees hired
before 1984 are in the Civil Service Retirement System, a
defined benefit plan. Those hired after 1983 are generally
covered by the Federal Employees' Retirement System, which
features a more limited defined benefit that CSRS and the
defined contribution Thrift Savings Plan with matching
contributions by the government. Employees in CSRS are not
covered by Social Security, while those in FERS are. Employees
who return to government service after 1987 and have five years
of prior service under CSRS may be covered by a hybrid plan
known as CSRS offset, which features a combination of CSRS and
Social Security benefits.
FERS employees may contribute up to 10 percent of their pay
to the TSP. They receive an automatic contribution from their
employing agency equal to 1 percent of their pay and may also
receive an additional 4 percent in matching contributions. CSRS
and CSRS Offset employees may also participate in the TSP, but
they may only contribute up to 5 percent of their pay and do
not receive any government contributions.
Assumptions about Retirement Coverage Errors. CBO estimated
the number of retirement coverage errors that have been made
based on discussions with personnel officials in a number of
large government agencies, including the Postal Service and the
Departments of Defense, Veterans Affairs, and Agriculture.
Those agencies comprise approximately 70 percent of the federal
civilian workforce. On the basis of those discussions, CBO
estimates that approximately 18,000 coverage errors have
occurred throughout the government, of which approximately
12,000 have already been corrected. The two most common types
of coverage errors appear to involve employees who should be in
FERS but were accidentally put in CSRS and employees with prior
service who returned to government service and were misplaced
in either FERS or CSRS Offset.
Under current law, coverage errors are usually corrected by
converting the employee to the proper retirement system,
retroactive to the original date of the error. However, some
employees who were accidentally placed in FERS may remain in
FERS by making a retroactive election of FERS coverage.
S. 2420 would allow most employees affected by coverage
errors to choose whether they would like to be placed in the
proper retirement system or make their incorrect coverage
permanent. Employeees who have been incorrectly covered by CSRS
could elect only CSRS Offset or FERS. Employees whose coverage
errors have not been corrected would have 180 days after the
discovery of the error to make an election; employees whose
coverage errors have already been fixed would have 18 months
after the issuance of final implementing regulations to make
their election. All elections would be irrevocable, and
employees who did not make an election would remain in their
current coverage. Coverage errors lasting less than three years
would not be covered by the bill. CBO assumed that under the
bill agencies would stop correcting coverage errors for the
first six months of 2001 pending the issuance of final
regulations to implement the bill, and that they would finish
processing the resulting backlog by the end of 2002.
Under current law, when an individual's coverage is
corrected to FERS, the employing agency makes a lump-sum
deposit into his or her TSP account based on the employee's
prior TSP contributions. That deposit is equal to the
contributions the government would have made and earnings that
they would have generated under FERS rules. If the employee did
not have a TSP account, only a deposit for the automatic 1-
percent contributions is made. Earning are calculated using the
individual's own fund allocation decisions (if he or she had a
TSP account) or the G Fund rate (otherwise). Employees may
provide makeup contributions to their TSP accounts out of
future pay. These makeup contributions receive agency matching
contributions (up to the 5-percent FERS maximum) and related
earnings as if the contributions had been made at the proper
time. However, back earnings are paid only on the agency's
matching funds, not on the employee's makeup contributions.
For employees who elect FERS coverage, the bill would
require agencies to pay lost earnings on the employees' makeup
contributions to the TSP. (Employees whose coverage had been
corrected to FERS before the bill's enactment would receive
makeup earnings on any makeup contributions made prior to
enactment.)
CBO assumed that these employees' choice of retirement
coverage would be strongly influenced by whether or not they
had made significant contributions to the TSP while they were
incorrectly covered by CSRS or CSRS Offset. Most employees with
little or no prior TSP contributions would need to make
retroactive contributions for a substantial amount of time--as
much as eight or nine years--in order to make up the
contributions they would have made under FERS. For these
employees, CSRS Offset coverage would be relatively attractive.
In contrast, employees with significant prior TSP contributions
might need only two to three years to catch up. As a result,
many of these employees would still choose to have their
coverage corrected to FERS.
Most employees covered by CSRS have not made regular
contributions to the TSP. According to the Federal Retirement
Thrift Investment Board, only 22 percent of CSRS employees made
contributions to the TSP in 1989 (the earliest year of data
available). This percentage has since risen but did not exceed
50 percent until 1996. CBO estimates that only a third of
employees erroneously placed in CSRS or CSRS Offset have made
significant contributions to the TSP, and assumed tat 80
percent of those employees would elect FERS coverage. Two-
thirds of the employees incorrectly placed in CSRS or CSRS
Offset have made little or no TSP contributions, and CBO
assumed that 80 percent of those employees would elect CSRS
offset coverage. Overall, we assumed that 60 percent of those
employees would elect CSRS Offset coverage. Overall, we assumed
that 60 percent of those employees would elect CSRS Offset
coverage and 40 percent would elect FERS.
Effect on Discretionary Spending. CPO estimates that
discretionary spending would decline by $51 million over the
2001-2005 period as the result of S. 2420.
Makeup Contributions to the TSP. S. 2420 would have two
effects on the makeup contributions that agencies pay to the
TSP. Agencies would not have to pay makeup contributions for
employees who elect CSRS Offset coverage instead of FERS, but
payments for individuals who elect FERS coverage would be
higher than under current law. This latter effect would
predominate in 2002, when agencies would pay for lost earnings
on the makeup contributions made by employees whose coverage
errors were corrected before the bill'senactment. In later
years, annual agency spending on makeup contributions would decline
because many employees would elect CSRS Offset coverage and not be
eligible for makeup TSP contributions. CBO estimates that overall
agency spending on makeup TSP contributions would increase by $4
million over the 2001-2005 period.
Makeup Payments to Social Security. Agencies are currently
responsible for paying makeup Social Security payroll taxes
covering the last 3 years, 3 months, and 15 days for employees
whose coverage is changed from CSRS to FERS or CSRS Offset.
Since agencies would stop correcting coverage errors in the
first six months of 2001 (and thus make fewer corrections than
under current law), CBO estimates that makeup payments would
decrease slightly in that year. However, makeup payments would
be slightly higher in 2002 as agencies work through the backlog
of uncorrected errors. CBO estimates that these amounts would
be less than $500,000 in each year.
Makeup Payments to the CSRDF. Under current law,
adjustments to past agency contributions to the CSRDF are
completely retroactive. Agencies contribute 8.51 percent of
basic pay for most employees covered by CSRS or CSRS Offset and
10.7 percent of basic pay for most employees under FERS.
Agencies thus make additional contributions for employees whose
coverage is changed from CSRS or CSRS Offset to FERS and
receive a partial refund of their retirement contributions for
employees whose coverage is changed from FERS to CSRS or CSRS
Offset. This bill would have similar requirements, except that
agencies could no longer receive partial refunds of their
contributions. Since many employees who would be switched to
FERS coverage under current law would elect CSRS Offset
coverage under the bill, the payments that agencies make for
retroactive adjustments would decrease by $12 million over the
2001-2005 period.
Agency Retirement Contribution. The amount that agencies
contribute toward their employees' retirement would decline by
$19 million over the 2001-2005 period as more employees are
covered by CSRS Offset rather than FERS compared to current
law.
Employer TSP Contributions. The employees who elect CSRS
Offset coverage under S. 2420 would no longer be eligible for
the automatic and matching TSP contributions available under
FERS, lowering agency spending on TSP contributions by $27
million over the 2001-2005 period.
Employer Social Security Contributions. Agency payments of
Social Security payroll taxes would decline by negligible
amounts in 2001 and 2002, due primarily to timing differences
in the number of coverage errors corrected.
Effects on Direct Spending. Direct spending would be
affected in a variety of ways by the retirement correction
provisions.
OPM Administrative Expenses. S. 2420 would allow OPM to pay
the costs of implementing title II directly from the CSRDF. CBO
anticipates that OPM would incur most of these costs in 2001
and 2002, when it would issue implementing regulations and
process elections made by employees with coverage errors that
were corrected prior to the bill's enactment. CBO estimates
that these administrative costs would total about $1 million in
both 2001 and 2002, and about $100,000 annually after that.
Federal Retirement Benefits. Since the employees affected
by retirement coverage errors are generally still in the middle
of their careers, CBO anticipates that S. 2420 would not have a
significant impact on federal retirement benefits over the
2001-2005 period. However, a small number of disabled retirees
and survivors would be eligible to make an election under the
bill, and CBO assumes that some of them would receive higher
benefits by changing their retirement coverage. (Individuals
who change their retirement coverage would also receive
retroactive benefits.) CBO estimates that annual spending on
retirement benefits would rise by negligible amounts over the
2001-2005 period, except in 2002, when most elections would be
processed and outlays, mostly for retroactive benefits, would
rise by $2 million.
Transfers from the CSRDF to Social Security. Employees who
have been mistakenly covered by CSRS when they should have been
in CSRS Offset or FERS have been contributing 7 percent of
their basic pay to the CSRDF, instead of contributing 0.8
percent to the CSRDF and 6.2 percent to Social Security. When
the coverage error is corrected under current law, the 6.2
percent in erroneous CSRS contributions (up to the Social
Security taxable maximum) is generally transferred to the
Social Security trust funds. S. 2420 would continue this
practice, but transfers from the CSRDF to Social Security would
decrease by $3 million in 2001 and rise by $3 million in 2002
due to timing effects.
Postal Service Contributions to the CSRDF. As noted
earlier, agencies would make lower contributions to the CSRDF
under S. 2420 because many affected employees would change
their retirement coverage from FERS to CSRS Offset. CBO
estimates that this would reduce offsetting receipts to the
CSRDF by $15 million over the 2001-2005 period. (CBO's estimate
includes only the change in contributions for the Postal
Service; effects on contributions from other agencies are not
scored because they depend on the future level of
appropriations.)
Postal Service Outlays. CBO estimates that S. 2420 would
increase outlays for the Postal Service by a total of $4
million in 2001 and 2002 and by larger amounts in subsequent
years. CBO assumes that the Postal Service would offset these
higher costs in 2003 by raising postage rates.
Postal Service Contributions to Social Security. Postal
Service contributions to the Social Security trust funds would
be slightly lower in 2001 and slightly higher in 2002 due to
the effects that S. 2420 would have on when coverage errors are
corrected. The amounts involved would be less than $500,000
each year.
Receipt of Transfers by Social Security. The timing shift
in payments from the CSRDF to Social Security would reduce
offsetting receipts to the Social Security trust funds, which
are off-budget, by $3 million in 2001 and increase receipts by
$3 million in 2002.
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act sets up pay-as-you-go procedures
for legislation affecting direct spending or receipts. The net
changes in outlays and governmental receipts that are subject
to pay-as-you-go procedures are shown in the following table.
For the purposes of enforcing pay-as-you-procedures, only the
on-budget effects in the current year, the budget year, and the
succeeding four years are counted.
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
----------------------------------------------------------------------
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
Changes in outlays....................... 3 23 -16 5 5 6 6 7 7 8
Changes in receipts...................... not applicable
----------------------------------------------------------------------------------------------------------------
Intergovernmental and private-sector impact: S. 2420 would
preempt state and local laws that govern long-term care
coverage and benefits if those laws conflict with benefit
contracts for federal employees. While this preemption would be
an intergovernmental mandate, state and local governments would
not bear any additional costs because the preemption would
limit the scope of regulation by those governments.
The bill would change the way the government of the
District of Columbia and Gallaudet University correct erros
associated with the incorrect enrollment of employees in
federal retirement plans. This requirement would be both an
intergovernmental and private-sector mandate as defined by
UMRA. However, costs associated with making those corrections
would be minimal because only a small number of employees have
been affected by errors addressed by the bill. Consequently,
CBO estimates that the total cost of the mandate would be
minimal and would not exceed the thresholds established in
UMRA.
Previous CBO estimates: In March 2000, the House Committee
on Government Reform ordered reported H.R. 4040, which would
also establish a long-term care insurance benefit for federal
employees. CBO estimated that OPM's outlays for establishing
and administering the new benefit would be the same under H.R.
4040 and S. 2420. The estimates for the two bills differ in one
regard. The estimate for H.R. 4040 assumed that insurers would
be allowed to spread their reimbursement of administrative and
start-up expenses over the duration of the seven-year contract,
while S. 2420 specifies that reimbursement for incurred
expenses be paid during the first year.
On August 24, 1999, CBO estimated that S. 1232, the Federal
Erroneous Retirement Coverage Corrections Act, as ordered
reported by the Senate Committee on Governmental Affairs on
August 3, 1999, would decrease discretionary spending by $42
million and increase direct spending by $42 million over the
2000-2004 period. The provisions of S. 1232 are very similar to
those of title II of S. 2420, and CBO prepared its estimates
for the two bills using the same basic assumptions.
The difference between the direct spending effects of the
two bills primarily reflects a change in CBO's scoring
methodology. It its estimate of S. 1232, CBO included the
bill's effect on the offsetting receipts received by the CSRDF.
Since issuing that estimate, CBO has consulted with the Budget
Committees and changed its scoring approach. Because agency
payments to the CSRDF come mostly from appropriated funds and
are purely intragovernmental, including their effect on
offsetting receipts can present an inaccurate picture of a
provision's impact on mandatory spending. As a result, CBO no
longer scores the effects that higher (or lower) agency
payments to the CSRDF have on offsetting receipts, unless those
payments come from funds that have already been appropriated or
are being appropriated in the same piece of legislation. The
new scoring approach does not affect payments made by the
Postal Service, which is largely funded outside of the
appropriations process.
Estimate prepared by: Federal Cost: Chuck Betley (title I)
and Eric Rollins (title II). Impact on State, Local, and Tribal
Governments: Leo Lex. Impact on the Private Sector: John
Harris.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
vii. executive communications
U.S. Office of Personnel Management,
Washington, DC, June 29, 2000.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: I am writing to offer the views of the
Office of Personnel Management (OPM) on the amended version of
S. 2420, as ordered reported by the Committee on Governmental
Affairs. That bill would provide not only for the establishment
of a program under which long-term care insurance is made
available to Federal employees, members of the uniformed
services, and civilian and military retirees, but also for the
correction of retirement coverage errors under chapters 83 and
84 of title 5, United States Code.
As you are aware, this Administration is committed to
helping all Americans to address their long-term care needs.
The President's long-term care initiative would not only fund
services to support family caregivers of older persons, and
improve opportunities for those cared for in home and
community-based settings to obtain assistance, but also
encourage the purchase of long-term care insurance by Federal
employees.
I am pleased to see the spirit of bipartisan cooperation
which characterized the discussions of long-term care insurance
for Federal employees is reflected in Title I of S. 2420. That
Title, which is virtually identical to H.R. 4040, as passed by
the House of Representatives, reflects an emerging consensus
which may differ in some respects from the initial positions of
the original proponents, including the Administration, but
which has produced a program in which we may all take pride.
In addition, as I have noted previously, we appreciate the
diligence of the Committee in working to craft an equitable
solution to the problems created by erroneous retirement
coverage determinations. Recognizing that the language of S.
1232, which is incorporated as Title II of S. 2420, differs in
some respects from the Administration's proposal to address
retirement coverage errors, I believe that language provides
comprehensive and equitable relief at a reasonable cost to the
Federal Government. Accordingly, OPM has no objection to Title
II of S. 2420, as ordered reported.
In summary, I have no objection to the Senate's passage of
S. 2420, as reported with the amendments noted above. It will
provide long-awaited relief to many Federal employees and their
families who, through no fault of their own, find they are
affected by retirement coverage errors, as well as offer an
opportunity for Federal civilian and military individuals and
their families to participate in a long-term care insurance
program that will serve as a model for other employers in
addressing the challenges of a new century.
The Office of Management and Budget advises that there is
no objection to the submission of this letter to the Congress
from the standpoint of the Administration's program.
Sincerely,
Janice R. Lachance,
Director.
VIII. CHANGES IN EXISTING LAW
There are no changes to existing law.