U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

Table of Contents

II. Retirement Benefits

Overview

This part presents an analysis of the issues associated with enhanced LEO retirement benefits. At present, only LEOs receive such enhanced benefits in recognition of the need to ensure a "young and vigorous" corps of officers. However, over the years, the definition of LEO in the retirement laws has been muddied by piecemeal legislation and litigation, leading to numerous inconsistencies. At the same time, the work of Federal LEOs and other law enforcement personnel is continuing to rapidly evolve-especially since the horrific events of September 11, 2001. Accordingly, we recommend that OPM be given the authority necessary to modernize LEO retirement benefits. Our findings and recommendations are summarized in more detail below.

Findings

• The special retirement provisions for LEOs are intended to permit the Government to maintain a young and vigorous workforce through youthful career entry, continuous service, and early separation. Several provisions work in combination to accomplish these goals. These include a maximum entry age for LEOs, voluntary early retirement of LEOs with an enhanced annuity computation, and a mandatory retirement age. OPM data indicate that LEOs are, on average, younger than their non-LEO counterparts.
• The differences in LEO retirement benefits among groups of law enforcement employees stem primarily from three sources: the application of the statutory definition of "law enforcement officer," legislation extending LEO retirement benefits to new employee groups, and differences resulting from litigation.
• The LEO retirement definition has a more restrictive meaning than the commonly understood concept of "law enforcement officer." The main element of the definition is that the employee's duties must be primarily the "investigation, apprehension, or detention of individuals suspected or convicted of offenses against the criminal laws of the United States." Groups that generally do not meet this definition (because they prevent or detect violations instead of investigate them) include police officers, guards, and inspectors (including customs inspectors and immigration inspectors).
• Piecemeal legislation extending preferential retirement benefits to certain Federal uniformed police officers within the broader law enforcement community has exacerbated differences in retirement coverage of similarly situated police forces.
• Administrative and judicial decisions interpreting the LEO definition have created inconsistencies in LEO retirement coverage and weakened the program as a management tool.
• With increases in life expectancies, employees with law enforcement responsibilities are able to work longer today than previously. A significant percentage of retired LEOs are still able to work, and many retired LEOs return to Federal LEO or other positions. LEO retirement provisions encourage experienced LEOs to retire at an early age, when these employees may still be effective. Early retirement and mandatory retirement provisions do not distinguish among the physical requirements associated with different law enforcement occupations.
• LEO retirement coverage issues and pay issues are interrelated. The rationale for an enhanced, financially viable LEO annuity benefit is inextricably linked to early and mandatory retirement of LEOs. However, the relationship between retirement coverage and pay issues is often overlooked. The basic pay and premium pay entitlements provided to various LEOs and other law enforcement personnel vary significantly from group to group. Differences in pay provided to the various groups by legislation have complicated efforts to standardize pay and retirement benefits for LEOs and other law enforcement employees on a Governmentwide basis.
• Whether LEO benefits are extended prospectively or retroactively to new groups of law enforcement personnel could affect the staffing levels of these positions as a result of turnover due to early and mandatory retirement. Extension of LEO retirement coverage to new groups could result in the unintended loss of experienced LEO personnel. In addition, providing retroactive service credit for retirement purposes would be very costly.

Recommendations

We believe the law enforcement retirement program should be modernized to reflect the reality of today's law enforcement workforce. Therefore, we recommend that OPM be given the authority necessary to modernize LEO retirement benefits. OPM would use this authority, in consultation with employing agencies and with the concurrence of the Attorney General, as a workforce management tool to modernize LEO retirement and make it more flexible and adaptable to the rapidly evolving needs of the law enforcement community. In light of our findings regarding the variation in the physical demands associated with different law enforcement occupations and the expansion of the law enforcement mission in the aftermath of the 9/11 terrorist attacks, one option we are considering would be for OPM to use its new authority to establish a second tier of law enforcement benefits. Under such a system, the second tier of retirement benefits could fall somewhere between current LEO benefits and regular retirement benefits. Of course, OPM would not undertake any modification of LEO retirement benefits without fully consulting agency and employee stakeholders in order to arrive at a mutually acceptable LEO retirement system.

The Definition of "Law Enforcement Officer" for Retirement Purposes

To better understand why a new approach to LEO retirement is necessary, it is useful to review the statutory definition of "law enforcement officer" and the multiplicity of issues that surround law enforcement retirement benefits. The definition of "law enforcement officer" for Civil Service Retirement System (CSRS) purposes is set out in 5 U.S.C. 8331(20). The Federal Employees Retirement System (FERS) definition of "law enforcement officer" is set out in 5 U.S.C. 8401(17).

For CSRS purposes, a "law enforcement officer" is an employee whose primary duties are the "investigation, apprehension, and detention of individuals suspected or convicted of offenses against the criminal laws of the United States." The CSRS definition of "law enforcement officer" also includes (1) employees primarily performing "investigation, apprehension, and detention" duties who transfer to supervisory and administrative positions and (2) employees who have "frequent and direct" contact with convicted criminals, such as prison support staff³.

The main provision of the FERS LEO definition parallels the CSRS LEO definition. A FERS "law enforcement officer" is an employee whose primary duties are the "investigation, apprehension, and detention of individuals suspected or convicted of offenses against the criminal laws of the United States." Like the CSRS definition, the FERS definition also includes employees primarily performing "investigation, apprehension, and detention" duties who transfer to supervisory and administrative positions and employees who have "frequent and direct" with convicted criminals, such as prison support staff. However, the FERS definition of "law enforcement officer" is more restrictive than the CSRS LEO definition in that it expressly includes a rigorous duty standard at 5 U.S.C. 8401(17)(A)(ii), which provides that LEO positions must be sufficiently rigorous that "employment opportunities should be limited to young and physically vigorous individuals." This provision effectively mandates that an individual must pass maximum entry age and physical fitness and medical standards to be hired as a law enforcement officer. The regulatory definition of "rigorous position" at 5 CFR 842.802 requires agencies to establish such standards.

The FERS definition of "law enforcement officer" also includes two new employee groups not included in the CSRS definition. Under 5 U.S.C. 8401(17)(A)(i)(II), employees engaged in "protection of officials of the United States against threats to personal safety" are included in the FERS definition of "law enforcement officer." Further, under section 8401(17)(B), the FERS definition of "law enforcement officer" extends to Department of the Interior Park Police and members of the U.S. Secret Service Uniformed Division (employees who were placed in the D.C. Police Officers and Firefighters Retirement Plan before the creation of FERS).

In terms of occupational groups, LEOs under CSRS include FBI special agents, Secret Service special agents, Border Patrol agents, U.S. marshals, deputy U.S. marshals, and Bureau of Prisons correctional officers. Prison support staff in a wide variety of occupations are defined as "law enforcement officers" for retirement purposes based on having frequent direct contact with convicted criminals. LEOs under FERS include all of the groups covered by the CSRS LEO provisions, plus Secret Service Uniformed Division officers, Park Police officers, and employees primarily engaged in the "protection of officials of the United States against threats to personal safety."

The groups that are generally not within either the CSRS or FERS definition of "law enforcement officer" include certain police officers, guards, and U.S. Customs and Border Protection officers (including legacy customs inspectors and legacy immigration inspectors).

Review of Types of Retirement Systems/Benefits

Regular Retirement Under CSRS and FERS

Under CSRS, regular employees pay retirement contributions at 7.0 percent of basic pay, and agencies make a matching 7.0 percent payment. The normal cost for a regular CSRS employee is 24.4 percent⁴ of basic pay; therefore, the CSRS regular benefit is underfunded by 10.4 percent of basic pay.

A regular CSRS employee can retire voluntarily at age 55 with 30 years of service, at age 60 with 20 years of service, or at age 62 with 5 years of service. As established by 5 U.S.C. 8339(a), the regular CSRS annuity formula is:

(1.50%) x (high-3 average basic pay) x (service up to 5 years); plus
(1.75%) x (high-3 average basic pay) x (service between 5 and 10 years); plus
(2.00%) x (high-3 average basic pay) x (service over 10 years).

Under FERS, regular employees pay retirement contributions at 0.8 percent of basic pay. Agencies pay 10.7 percent of the employee's basic pay. The combined employee and agency shares total 11.5 percent, the current normal cost for a FERS regular employee⁵.

A regular FERS employee may retire voluntarily without an annuity reduction at Minimum Retirement Age (MRA) with 30 years of service, at age 60 with 20 years of service, or at age 62 with 5 years of service. As established by 5 U.S.C. 8415(a) and (g), the regular FERS annuity formula is:

(1% or 1.1%)⁶ x (high-3 average basic pay) x (creditable years of FERS service).

Law Enforcement Officer Retirement Under CSRS and FERS

Under CSRS, LEOs pay retirement contributions at 7.5 percent of basic pay, and agencies make a matching 7.5 percent payment. The normal cost for a CSRS LEO is 38.9 percent⁷ of basic pay; therefore, the CSRS LEO benefit is underfunded by 23.9 percent of basic pay.

Under CSRS, an employee may retire at age 50 with a minimum of 20 years of law enforcement officer, firefighter, or nuclear materials courier service. Under 5 U.S.C. 8339(d)(1), the CSRS LEO annuity formula is:

(2.5%) x (high-3 average basic pay) x (LEO service up to 20 years), plus
(2.0%) x (high-3 average basic pay) x (service over 20 years).

Under FERS, LEOs pay retirement contributions at 1.3 percent of basic pay. Agencies pay 22.7 percent of the employee's basic pay. The combined employee and agency shares total 24.0 percent, which is the current normal cost for a FERS LEO⁸.

Under 5 U.S.C. 8412(d), a FERS employee may retire at age 50 with a minimum of 20 years service as a law enforcement officer, member of the Capitol or Supreme Court Police, firefighter, or nuclear materials courier, or at any age with at least 25 years of such service. Under 5 U.S.C. 8415(d), the FERS LEO annuity formula is:

(1.7 %) x (high-3 average pay) x (LEO service up to 20 years), plus
(1.0 %) x (high-3 average pay) x (service over 20 years).

CSRS and FERS LEOs are subject to mandatory retirement. In order to be subject to mandatory retirement⁹, an employee must be eligible for retirement under the LEO provisions. That is, a law enforcement officer is subject to mandatory retirement when he or she is age 57 or older and has at least 20 years of law enforcement service. An agency head may retain a law enforcement officer until age 60 if the agency head finds that the LEO's continued service is in the public interest (5 U.S.C. 8335(b) and 5 U.S.C. 8425(b)). A CSRS law enforcement officer may be retained beyond age 60 with OPM's permission. (See section 1(3) of Executive Order 11228, June 14, 1965. In that order, the President delegated to the Civil Service Commission, the predecessor of OPM, his authority under 5 U.S.C. 8335(e) to exempt an employee covered by the Civil Service Retirement System from automatic separation.) A FERS LEO may be retained beyond age 60 with the permission of the President.

Agencies also set maximum entry age requirements for LEOs. Agencies typically set the maximum entry age of LEOs based on the age and service requirements for LEO mandatory retirement, which is generally age 57 with at least 20 years of LEO service. Thus, maximum entry age is typically age 37 because it allows an employee to achieve 20 years of LEO service at age 57, the mandatory retirement age.

DC Police Officers and Firefighters Retirement Plan

While most Park Police officers, U.S. Secret Service Uniformed Division (USSSUD) officers and Secret Service special agents are covered by FERS, a group of approximately 233 Secret Service employees, including officers and special agents, are covered by the DC Police Officers' and Firefighters' Retirement Plan (DCPOFP). Before FERS was established, Park Police officers and USSSUD officers were covered by DCPOFP. Also, CSRS-covered Secret Service special agents are eligible to transfer to DCPOFP (based on having 10 or more years of service directly related to the protection of the President). New Park Police officers, USSSUD officers, and Secret Service special agents, hired after January 1, 1984, are covered by the FERS LEO provisions.

DCPOFP provides that a USSSUD officer, a USSS special agent, or a Park Police officer with at least 20 years of service under DCPOFP can retire voluntarily at any age. Average base pay is the average of the employee's highest base pay during any 12 consecutive months. The annuity formula is:

(2.5%) x (highest 12 month average base pay) x (police service through the first 20 years) plus,
(3.0%) x (highest 12 month average base pay) x (police service after 20 years) plus,
(2.5%) x (highest 12 month average base pay) x (years of other creditable service).

The annual regular retirement benefit is capped at 80 percent of the employee's final salary. The cap may be exceeded when credit is added for unused sick leave.

Section 5-712(b) of the D.C. Code provides that any member of the United States Secret Service Uniformed Division, the United States Park Police force, or Secret Service special agents covered by DCPOFP, after having attained 20 years of creditable police service, are subject to mandatory retirement at age 60, with service beyond age 60 permitted at the discretion of the agency head.

Park Police and Secret Service retirees covered by DCPOFP are not subject to the reemployed annuitant pay offset requirements that apply generally to CSRS and FERS retirees who are employed by the Federal Government (5 U.S.C. 8344 or 8468). In addition, Park Police and Secret Service retirees covered by DCPOFP are entitled to annuity adjustments based on changes in the salary of active employees (called the "equalization provision"), while CSRS/FERS retirees receive cost-of-living adjustments (COLAs) based on the consumer price index¹⁰.

Retirement Provisions for Capitol Police

U.S. Capitol Police are employed by Congress under 5 U.S.C. 2107, and as such, make retirement contributions, in accordance with 5 U.S.C. 8334(c) and 8422(a), as congressional employees. Consequently, as congressional employees, Capitol Police are subject to retirement contributions of either 7.5 percent (CSRS), or 1.3 percent (FERS). These are the same contribution rates applicable to LEOs under CSRS and FERS.

The Capitol Police Retirement Act (Public Law 101 428, October 15, 1990) added Capitol Police to the retirement statutes as a new group subject to special retirement provisions equivalent to those applicable to LEOs. Public Law 101-428 did not include Capitol Police in the CSRS or FERS definition of "law enforcement officer" set out at 5 U.S.C. 8331(20) and 8411(17). Instead, Capitol Police were added to the retirement provisions as a distinct group, separate from law enforcement officers. For the purpose of this report, Capitol Police are considered to be LEOs. However, it should be noted that the LEO quit rate and transfer rate data discussed elsewhere in this report do not include Capitol Police. Since Capitol Police are employees of the legislative branch, OPM's Central Personnel Data File does not contain information on this group.

Capitol Police are entitled to early retirement, an enhanced annuity computation (at the same accrual rate as other LEOs), and maximum entry age and mandatory retirement provisions that are similar to the LEO provisions. A member of the Capitol Police may retire at age 50 with 20 years of LEO service or, under FERS, at any age with 25 years of LEO service. A Capitol Police officer is subject to mandatory retirement when the officer reaches age 57 and has at least 20 years of LEO service. If the Capitol Police Board finds that it would be in the public interest, the Board may exempt a member of the Capitol Police from mandatory retirement until age 60.

Retirement Provisions for Supreme Court Police

The Supreme Court Police were granted enhanced retirement benefits by Public Law 106-553 (December 21, 2000). This law made amendments to chapters 83 and 84 of title 5, United States Code, to allow members of the Supreme Court Police to be treated as "law enforcement officers" for retirement purposes. For the purpose of this report, Supreme Court Police are considered to be LEOs. However, it should be noted that the LEO quit rate and transfer rate data discussed elsewhere in this report do not include Supreme Court Police. Since Supreme Court Police are employees of the judicial branch, OPM's Central Personnel Data File does not contain information on this group.

Supreme Court Police are entitled to early retirement, an enhanced annuity computation (at the same accrual rate as other LEOs), and maximum entry age and mandatory retirement provisions that are similar to the LEO provisions. A member of the Supreme Court Police may retire at age 50 with 20 years of LEO service, or, under FERS, at any age with 25 years of LEO service. A Supreme Court Police officer is subject to mandatory retirement when the officer reaches age 57 and has at least 20 years of LEO service. If the Marshal of the Supreme Court finds that it would be in the public interest, he or she may exempt a member of the Supreme Court Police from mandatory retirement until age 60.

Retirement Benefits Issues

The differences in retirement benefits provided to Federal employees in the broad law enforcement community stem primarily from three sources: the application of the statutory definition of "law enforcement officer," legislation that has extended LEO retirement benefits to certain employee groups, and disparities in LEO retirement coverage as a result of litigation. However, other issues, such as agency staffing, the interrelationship of pay and retirement, and the cost of extending retirement benefits, also warrant consideration.

Issue: Statutory Definition of "Law Enforcement Officer"

The current definition of "law enforcement officer" lacks the flexibility needed to respond to the reality of law enforcement work as it is today. That definition can be traced back to choices made as early as 1948. In 1948, Congress and the Civil Service Commission faced a dilemma. One year earlier, Congress had extended enhanced retirement to FBI special agents, a clearly identifiable group of employees. Almost immediately, other groups of Federal criminal investigators¹¹ came forward seeking enhanced benefits on equity grounds. Congress wanted to extend enhanced retirement to other criminal investigators and considered two alternative means of doing so: (1) specifically name each employee group that would receive enhanced coverage, or (2) draft a general definition that would encompass all of the employee groups that would receive coverage.

The first alternative promised to clearly limit enhanced retirement coverage to the intended group of employees. However, given the constantly changing duties of existing positions and agency missions, the list would become obsolete rather quickly and would require constant updates. On the other hand, the second alternative, a general definition, was flexible. Employees could move into and out of the general definition as their duties changed. However, the application of the general definition was not clear-cut in every case. The former Civil Service Commission advocated the general definition approach. Congress agreed. (Extract from Hearings before a Subcommittee of the Committee on Post Office and Civil Service, House of Representatives, Eighth Congress, 2^nd Session, on H.R. 5401 and H.R. 5523 (March 31, 1948).)

The statutory definition of "law enforcement officer" which was ultimately adopted by Congress, and which has remained largely unaltered over the years, has a meaning that is more restrictive than the commonly understood notion of the term. This has created a false perception that the definition of "law enforcement officer" includes more employee groups than it actually does. The disparity between the commonly understood concept of who is a law enforcement officer and the limited retirement definition of this term has fostered litigation and administrative difficulties. Further, the statutory definition of "law enforcement officer" has not kept pace with the evolution of the Federal law enforcement workforce. The definition imposes an out of date, black-and-white concept of law enforcement and criminal investigation on the broad continuum of law enforcement duties of the present day.

As a general matter, an employee meets the definition of "law enforcement officer" when the employee's duties are primarily the "investigation, apprehension, or detention of individuals suspected or convicted of offenses against the criminal laws of the United States." LEO retirement coverage does not depend on the classification of a position within an occupational series (e.g., Police Officer GS-0083) or the law enforcement mission of a particular agency.

The strict, legal definition "law enforcement officer" does not include employees whose primary duties involve maintaining law and order, protecting life and property, guarding against or inspecting for violations of law, or investigating persons other than persons who are suspected or convicted of offenses against the criminal laws of the United States. In addition, duties such as routine patrolling, securing crime scenes, and interviewing or detaining witnesses for interrogation are not criminal investigation duties that fall within the limited definition of "law enforcement officer." In this regard, groups that are generally excluded from the CSRS and FERS definitions of "law enforcement officer" are police officers, guards, and inspectors (including legacy customs inspectors and legacy immigration inspectors).

Issue: Inconsistent Extension of Enhanced Retirement Benefits to Particular Groups

As discussed in the previous section, Federal uniformed police generally do not have LEO retirement coverage because they are excluded from the statutory definition of "law enforcement officer." In response, Congress has enacted special legislation that has extended preferential retirement benefits to certain Federal uniformed police within the broad law enforcement community, but not to other similarly situated groups.

For example, Congress has extended special retirement coverage to U.S. Secret Service Uniformed Division officers, U.S. Park Police, U.S. Capitol Police, and U.S. Supreme Court Police (see Section C). However, their standard police work-maintaining law and order, protecting life and property-falls outside the definition of "law enforcement officer" for retirement purposes (i.e., their duties are not primarily the "investigation, apprehension, or detention of individuals suspected or convicted of offenses against the criminal laws of the United States"). While U.S. Secret Service Uniformed Division officers, U.S. Park Police officers, U.S. Capitol Police officers, and U.S. Supreme Court Police officers receive enhanced retirement benefits under the laws listed above, arguably similarly situated Federal police officers, such as police officers at the Department of Defense, the Department of Veterans Affairs, the U.S. Mint, the Bureau of Engraving and Printing, and the Department of Homeland Security, are not entitled to the same treatment.

This patchwork approach to extending law enforcement benefits has created disparities within the broad law enforcement community. Legislative changes directed at select groups of employees are not responsive or flexible enough to adjust to the changing nature of law enforcement work.

Issue: Disparities in LEO Retirement Coverage as a Result of Litigation

Both the Merit Systems Protection Board (MSPB) and the U.S. Court of Appeals for the Federal Circuit have issued decisions that have created additional disparities within the broad law enforcement community and weakened the LEO retirement program as a management tool.

As previously noted, the statutory definition of "law enforcement officer" sacrifices specificity in favor of flexibility and has resulted in litigation that has exacerbated differences in retirement coverage among groups of employees. At one time, LEO retirement coverage was decided solely on the basis of duties assigned to a position (i.e., a "position-oriented" approach). However, administrative and judicial decisions have shifted coverage determinations to an individual, case-by-case coverage approach. The shift to individual determinations can be traced back to the decision in Ellis v. United States, 610 F.2d 760 (Ct.Cl.1979). In Ellis, the Court of Claims overturned the longstanding policy that special retirement eligibility could be based only on the official duties of an employee's position of record. Instead, Ellis held that an employee could earn enhanced retirement credit, despite the fact that his position was not approved for enhanced coverage, based on the fact that his actual duties qualified for enhanced service credit. Thus, Ellis emphasized an "incumbent-oriented" approach as an alternative to the "position-oriented" approach set out in OPM's LEO retirement regulations. As a result of Ellis, agencies must make thousands of individual service credit determinations. Since these determinations are made on an individual, fact-intensive, case-by-case basis, the resulting decisions tend to be inconsistent when viewed across employee groups¹².

After the Ellis decision, MSPB considered various criteria for determining whether the actual duties of an individual claimant satisfy the statutory and regulatory requirements for LEO coverage. In a line of cases beginning with Hobbs v. Office of Personnel Management, 58 M.S.P.R. 628 (1993), MSPB developed seven factors or indicia to determine whether an individual was a "law enforcement officer." MSPB determined that a "law enforcement officer" within the definition contemplated by statute commonly (1) has frequent direct contact with criminal suspects; (2) is authorized to carry a firearm; (3) interrogates witnesses and suspects, giving Miranda warnings when appropriate; (4) works for long periods without a break; (5) is on call 24-hours a day; (6) is required to maintain a level of physical fitness; and (7) is exposed to hazard. See Hobbs v. Office of Personnel Management, 58 M.S.P.R. 628 (1993); Sauser v. Office of Personnel Management, 59 M.S.P.R. 489 (1993); Peek v. Office of Personnel Management, 63 M.S.P.R. 430 (1994), aff'd, 59 F.3d 181 (Fed. Cir. 1995); Bingaman v. Department of the Treasury, 127 F.3d 1431 (Fed. Cir. 1997); Hannon v. Department of Justice, 82 M.S.P.R. 315 (1999), aff'd, 234 F.3d 674 (Fed. Cir. 2001).

The seven-factor test attempted to standardize the "incumbent-oriented" approach to LEO coverage decisions. Ultimately, however, MSPB found the "incumbent-oriented" approach and the seven-factor LEO test to be unworkable. In 2000, MSPB reassessed this approach, and in Watson v. Department of the Navy, 86 M.S.P.R. 318 (2000), announced that it would no longer use it. Instead, MSPB decided that it would give due weight to the reasons put forward by the agency for the creation and existence of the position. On review, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) found that MSPB's "position-oriented" approach conformed to law (Watson v. Department of the Navy, 262 F.3d 1292 (Fed. Cir. 2001) (noting that under the statutes, an employee may only receive LEO retirement credit if the position he or she occupies primarily involves certain specified duties). The Federal Circuit also noted the weaknesses of the seven-factor test MSPB had used under the obsolete "incumbent- oriented" approach. Specifically, the Federal Circuit noted that many elements of the seven-factor test actually had little probative value in LEO retirement coverage determinations. Watson v. Department of the Navy, 262 F.3d 1292, 1302.

Thus, the history of litigation of LEO coverage cases shows that MSPB and the Federal Circuit have traveled full circle from a "position-oriented" approach to an "incumbent-oriented" approach, and back again. This litigation history shows the difficulties MSPB and the Federal Circuit have encountered in applying the statutory definition of "law enforcement officer."

Treating law enforcement retirement benefits strictly as an entitlement undermines the value of these benefits as a workforce management tool. OPM and employing agencies should determine the structure of the Federal law enforcement workforce in accordance with policy goals set out by Congress and the Administration. Administrative and judicial review should be structured to maximize long-term utility, flexibility, consistency, and continuity.

Issue: Difficulties Encountered by Agencies

The shifting interpretations by MSPB and the courts, coupled with the limited nature of the general definition of "law enforcement officer," have made it difficult for agencies to apply this definition. Agencies are responsible for drafting position descriptions and for deciding which positions merit LEO retirement coverage. As discussed above, deciding whether a position should receive LEO retirement coverage involves consideration of a variety of criteria. In many cases, the mix of duties assigned to a position is not easily categorized as constituting primarily LEO or non-LEO duties, considering the limited nature of the definition and the shifting legal precedents.

Agencies also face the challenge of keeping pace with the evolution of their law enforcement missions. Currently, law enforcement and related positions encompass a range of activities that are far removed from those that existed in the 1940s and 1950s. From 1947 to the present, Federal police forces and Federal inspection employees have been adapting to new threats. Federal law enforcement, inspection, and police forces currently include such units as SWAT teams; bomb detection and explosive ordinance disposal (EOD) teams; K-9 teams; nuclear, chemical, biological and hazardous material decontamination and disposal teams; and airborne surveillance units. This evolution in law enforcement has exacerbated the difficulty of applying the definition of "law enforcement officer" to modern missions and work situations.

Issue: Loss of Experienced Law Enforcement Officers

The current early voluntary retirement provisions may operate to prematurely deprive the Government of its most experienced personnel. Further, the mandatory retirement provisions applicable to current LEOs may be inappropriate if applied uniformly across the full spectrum of law enforcement positions.

To maintain a "young and vigorous" LEO workforce, the LEO retirement provisions permit a law enforcement officer to retire in his or her early 50s, or in the case of FERS, in his 40s if the LEO has at least 25 years of LEO service. These provisions encourage LEOs to retire when they have attained a great deal of experience. However, LEO life expectancy and reemployment statistics indicate that the Government is losing these highly experienced LEOs at a point in their careers when they are still capable of effectively serving the Government.

Retirement statistics indicate that a significant percentage of retired LEOs return to LEO positions with the Federal Government. Based on March 2003 data, approximately 950 Secret Service special agents (GS-1811) retired from January 1, 1993, through December 31, 2002. As of March 2003, 352 (approximately 37 percent) of these retirees had been re-employed by the Federal Government. These statistics do not include the number of retired Secret Service special agents who were employed by State or local governments or by private sector firms in a law enforcement capacity. Furthermore, the average life expectancy for male law enforcement retirees under CSRS has increased, from 77.81 in 1971 to 82.70 in 2002. Clearly, the working conditions and the length of a typical LEO career is not the same as it was in the past.

Further, a law enforcement officer is forced to retire at age 57, or shortly thereafter. All employees in the broad Federal law enforcement community are not exposed to the same physical demands. The physical demands of Federal law enforcement vary from occupation to occupation because the duties of the various occupations span a range of law enforcement activities. For example, the physical demands of a position primarily engaged in the investigation of financial crimes are not as arduous as in a position which involves frequent all-night stake-outs. The work of each position is important, but the nature of the duties of each position influences the length of the typical career of employees engaged in those duties.

Issue: Cost and Retirement Creditable Basic Pay

LEO retirement coverage issues and pay issues are interrelated, and changes in the pay area must take into account the impact on retirement¹³.

Certain special pay provisions apply to employees who are covered by the LEO retirement provisions. General Schedule employees who have LEO retirement coverage are entitled to special LEO statutory special rates at GS grades 3 through 10. Thus, if LEO retirement coverage were to be extended to new groups of employees, retirement-creditable basic pay could increase, which would result in a higher annuity. Also, for employees who currently receive annual premium pay for administratively uncontrollable overtime (AUO) work, coverage under the LEO retirement provisions would mean that their AUO pay is treated as retirement-creditable basic pay (5 U.S.C. 8331(3)(D)). This could result in an increase in retirement benefits of up to 25 percent, even before considering the effect of the enhanced LEO annuity computation formula.

Under both CSRS and FERS, the law provides a higher annuity for law enforcement officers than that provided for regular employees. At age 50 with 20 years of service, a CSRS LEO's annuity is about 38 percent higher than the annuity of a regular employee (Appendix A1). Under FERS, the defined benefit is 70 percent higher for LEOs (Appendix A2). However, since the FERS defined benefit is at a lower accrual rate and because it is one part of a three-part retirement program (along with Social Security and the Thrift Savings Plan), the actual amount of the defined benefit is a less significant part of retirement for a FERS retiree than the defined benefit component is for a CSRS retiree. On the other hand, these percentages are based on the annuity calculation formula only and do not take into account the higher average salary resulting from the inclusion of certain overtime or premium pay that law enforcement officers may count as basic pay for retirement and which, in the case of a FERS employee, may also be contributed to the Thrift Savings Plan and form the basis for Social Security benefits. These early benefits are not reduced for age, as they would be for a regular employee retiring under standard early retirement rules.

In addition, the rationale for an enhanced annuity formula is inextricably tied to early and mandatory retirement of LEOs. When the mandatory retirement requirement for CSRS LEOs was added to the law in 1974, concerns were raised that the annuity formula would not provide LEOs subject to mandatory retirement with a sufficient annuity. Since a law enforcement officer could be subject to mandatory retirement at an early age with as little as 20 years of service, there was a risk that the annuity would not be financially viable. Because of this concern, the current enhanced annuity formula for CSRS LEOs was added to the law in 1974 to enable the mandatory retirement requirement while avoiding the possibility of economic hardship. The enhanced benefit was intended to provide a retiring LEO with a benefit approximately equal to the annuity of a regular employee retiring under the general civil service age and service requirements.

The interrelationship between retirement coverage and pay issues is sometimes overlooked. The significant effect that retirement creditable premium pay has on annuity rates is illustrated by the charts at Appendix A1 and Appendix A2. These charts illustrate hypothetical examples of how premium pay increases the annual annuity of a law enforcement officer. Retirement creditable premium pay, combined with the enhanced LEO annuity formula, provides LEOs with an annuity greater than the annuity of a regular employee retiring with 30 years of service.

The basic pay and premium pay provided to the various occupational groups in the Federal law enforcement community varies significantly. In general, criminal investigators receive up to 25 percent of basic pay as enhanced retirement creditable premium pay (e.g., standard pay plus law enforcement availability pay) and enhanced retirement benefits. Police officers receive some additional pay (e.g., OPM approved special pay rates for police officers), and some police forces receive enhanced retirement, primarily due to special legislation¹⁴. Legacy customs inspectors generally are entitled to enhanced retirement creditable premium pay but not enhanced retirement under the Customs Officer Pay Reform Amendments (COPRA). That law gives a legacy customs inspector credit for overtime pay as basic pay for retirement, but has been limited to 50 percent of the statutory maximum ($30,000 in recent years). Therefore, for retirement purposes a legacy customs inspector may include up to $15,000 of overtime pay in annual basic pay for retirement purposes.

Given the interrelationship between pay and retirement, it is critical that any changes in either area be closely coordinated with the other.

Issue: Related Staffing and Funding Concerns

Any extension of LEO retirement coverage to new groups of employees, whether prospective or retroactive, would entail significant costs. An extension of LEO coverage could also affect staffing. Generally, when designing or adjusting employee benefits provisions, it is OPM's longstanding policy that any changes should be prospective only. However, in the case of LEO retirement provisions, we face a particular design challenge.

Under the current retirement eligibility provisions, a law enforcement officer must have at least 20 years of LEO service for entitlement to the enhanced LEO annuity computation. Further, an agency cannot mandatorily retire an employee until the employee has completed 20 years of LEO service. If LEO retirement coverage were to be granted on a prospective basis to a class of employees, absent other significant statutory changes, most employees in the class would have to work an additional 20 years to accrue sufficient LEO service for entitlement to the enhanced annuity computation. Therefore, if the LEO retirement provisions are simply extended to new groups on a prospective basis, many employees in the new groups would have difficulty achieving 20 years of LEO service for entitlement to an enhanced LEO retirement. In addition, because many employees would have less than 20 years of LEO service at age 57, many employees would work beyond the mandatory retirement age 57, which would be contrary to the presumed need for a young and vigorous workforce, unless the mandatory retirement age was modified.

Alternatively, if LEO retirement coverage were to be granted retroactively to a class of employees, some portion of the class would immediately become subject to mandatory separation (i.e., at age 57 with 20 years of law enforcement service) or would be eligible for early retirement with a significantly enhanced benefit. This could result in the loss of experienced personnel, unless the mandatory retirement age and early retirement eligibility requirements were modified.

The age distribution charts in Appendix A3 provide some information on the number of law enforcement personnel age 57 or older who could be subject to immediate mandatory separation under the current LEO provisions.

As of September 30, 2003, FERS-covered employees constituted about 85 percent of the current workforce of immigration inspectors and customs inspectors and 92 percent of non-LEO police officers. The Federal Government employed only about 3,139 CSRS-covered immigration inspectors, customs inspectors, and police officers as of September 30, 2003. The average age and service of these CSRS-covered employees was approximately age 54 with 29 years of service. As of September 30, 2003, about 32 percent of the CSRS-covered immigration inspectors, customs inspectors, and police officers were eligible for retirement under the retirement eligibility and computation provisions for regular employees. By September 30, 2005, the percentage of these employees eligible for retirement will increase to about 49 percent.

In addition, if LEO retirement coverage were to be granted to a class of employees under FERS, the employees in the class would be immediately and prospectively subject to physical and medical standards applicable to law enforcement officers. The imposition of physical and medical standards could result in a certain number of employees being deemed physically or medically unfit for further service as a law enforcement officer, which could also result in the unintended loss of experienced personnel.

Extension of prospective or retroactive LEO coverage to new groups also would entail significant costs for the Government. If coverage is extended prospectively, agencies would immediately assume the FERS cost in higher payroll expenditures in the form of increased agency retirement contributions. This increase would be due to the higher normal cost associated with law enforcement retirement. The difference between the FERS normal cost for a regular employee and a law enforcement employee is 12.5 percent of basic pay. If retroactive coverage is granted, the CSRS unfunded liability and the FERS supplemental liability of the Civil Service Retirement and Disability Fund would increase significantly.

Retirement Benefits Recommendations

The existing retirement program for LEOs has served its intended purpose well. Over the past half century it has allowed the Federal Government to maintain a young and vigorous corps of LEOs. However, not only have the nature and scope of law enforcement activities and missions evolved dramatically during that same period, they continue to do so. As a result, we believe the current program should be modified to provide the flexibility to fully accommodate that continuing evolution.

Many individuals have made major life choices based upon the LEO retirement system as it has long existed. While changes may be necessary, we must not let those changes unfairly affect those that are covered by the current structure. Further, we must also be fair to those who must absorb the costs, both directly (agencies) and ultimately (the taxpayers).

As noted throughout this report, the bright-line distinction that existed between FBI special agents in the late 1940s and other Federal law enforcement-related personnel has blurred with time–the result of legislation and litigation, on the one hand, and changes in the Federal law enforcement missions on the other. When special retirement provisions for criminal investigators were first enacted over a half century ago, Federal law enforcement missions were more straightforward than they are today. There was a clear distinction between personnel who needed to be young and vigorous to perform their duties effectively and those who did not. A uniform retirement structure was well-suited to fulfill the associated human capital needs. In terms of law enforcement, even the world of 1974 (when law enforcement retirement was last substantively revised) was much closer to that of the late 1940s than it is to today's world.

The world today is a very different and much more complex place, and the physical requirements in the field of law enforcement are much more varied and demanding, particularly in light of the 9/11 terrorist attacks. Further, the distinctions among crime prevention, antiterrorist activities, and criminal investigation work are not as clear cut as they once were. In that post-9/11 world, Federal police and inspectors have assumed new duties critical to the war on terrorism. Police forces that were once guard-like in nature now include highly-trained and specialized units, such as SWAT teams, bomb detection squads, and airborne surveillance units. Similarly, U.S. Customs and Border Protection officers now need to detect and defend against weapons of mass destruction and terrorism and must contend with an added element of risk and danger. Many of these employees undergo much of the same law enforcement training as current LEOs. Thus, while not all positions within the Federal law enforcement community require the same level of physical vigor currently required of many LEOs, it is clear that greater flexibility is needed in the LEO retirement program to deal with these variations. In short, the Federal law enforcement retirement system must be modernized to reflect and address the challenges of our post-9/11 world.

In this regard, it no longer makes sense to consider criminal investigation as a unique and isolated function, to be performed after crimes have been committed. We must accept and work with the reality that there are no longer clear, black-and-white dichotomies among LEOs and other law enforcement personnel, but that there are in fact shades of gray both in the duties they perform and the level of physical fitness needed to perform them. It is necessary to look at law enforcement as it has become (and is becoming), not as it once was. The Federal law enforcement community must be able to adapt to these new realities, with tools sufficiently flexible to accommodate the much more complex and evolving environment in which they must operate.

Thus, the question is not whether modification of the current structure is necessary, but how the new system can operate in such a manner that is able to be effectively responsive to a changing world on a timely basis. We believe that this can be achieved by granting the Office of Personnel Management authority to establish the structure of law enforcement retirement by regulation in consultation with agencies and with the concurrence of the Attorney General. Therefore, we recommend that OPM be given the authority necessary to modernize LEO retirement benefits, with appropriate modifications to the judicial review process that would maximize long-term utility, flexibility, consistency, and continuity. OPM would use this authority, in consultation with employing agencies, as a workforce management tool to make LEO retirement more flexible and adaptable to the rapidly evolving needs of the law enforcement community. This proposal would permit human capital needs to be addressed in a cost-effective manner that is fair to both employees and the taxpayers. In light of our findings regarding the variation in the physical demands associated with different law enforcement occupations and the expansion of the law enforcement mission in the aftermath of the 9/11 terrorist attacks, one option we are considering would be for OPM to use its new authority to establish a second tier of law enforcement benefits. Under such a system, the second tier of retirement benefits could fall somewhere between current LEO benefits and regular retirement benefits. Of course, OPM would not undertake any modification of LEO retirement benefits without fully consulting agency and employee stakeholders in order to arrive at a mutually acceptable LEO retirement system.

Where appropriate, consistency would be ensured throughout the Federal Government, but the framework could also accommodate changes or special circumstances. At the same time, it would allow flexibility in establishing retirement eligibility standards and mandatory requirements that would allow agencies to recruit and retain experienced personnel. We believe broad regulatory authority is the best approach for dealing with these issues. Provisions for early retirement and mandatory retirement should take into account the physical demands associated with the duties performed, while also preventing the imposition of overly restrictive hiring barriers or forced retirements that unnecessarily constrain staffing options. This approach maximizes agency flexibility for recruitment and provides a tool to retain experienced personnel that may be responsive to agency needs. We believe broad regulatory authority is the best approach for dealing with these issues.

³In 1956, Congress granted enhanced LEO retirement benefits to prison support staff primarily for equity reasons. Specifically, before the enactment of Public Law 84-854 that year, Congress noted that prison support staff were in frequent and direct contact with dangerous prisoners and therefore were in the same hazardous environment as correctional officers. Congress also noted that prison support staffs were called upon to perform detention tasks in emergency situations, such as prison escape attempts. In theory, prison support staff are subject to the same "young and vigorous" standards as criminal investigators and other LEOs. Under the FERS LEO definition, prison support staff are subject to maximum entry age and rigorous physical requirements comparable to those applicable to other LEOs. [Back]

⁴The normal cost for CSRS regular employees will increase to 25.0 percent after September 30, 2004. [Back]

⁵The normal cost for FERS regular employees will increase to 12.0 percent after September 30, 2004. [Back]

⁶The 1.1% accrual rate applies only to a regular employee who retires under the immediate retirement provisions and who is at least 62 and has at least 20 years of service at retirement. The 1.1% accrual rate does not apply in the case of a congressional employee, military technician (dual status), law enforcement officer, member of the Supreme Court Police, firefighter, nuclear materials courier, or air traffic controller. [Back]

⁷The normal cost for CSRS LEO employees will increase to 40.3 percent after September 30, 2004. [Back]

⁸The normal cost for FERS LEO employees will increase to 25.1 percent after September 30, 2004. [Back]

⁹The mandatory retirement age for CSRS LEOs was first established at age 55 by Public Law 93-350. Subsequently, the mandatory retirement age for law enforcement officers was raised to age 57 by Public Law 103-283. [Back]

¹⁰Formerly, DC police were covered by such an equalization provision; however, all DC police who retired on or after February 15, 1980, receive COLAs instead of an equalization adjustment. [Back]

¹¹The term "special agent" is the vernacular that many agencies use to describe those falling under the GS-1811 series criminal investigator definition. [Back]

¹²For example, the Department of Homeland Security has four Federal Protective Service (FPS) police officers who have been granted law enforcement officer retirement through appeals to MSPB, while hundreds of other FPS police officers do not enjoy such coverage. [Back]

¹³Specifically, the definition of "law enforcement officer" at 5 U.S.C. 5541(3), which is used in determining eligibility for certain LEO pay entitlements in the premium pay law as well as other pay provisions, incorporates references to the definitions of "law enforcement officer" at 5 U.S.C. 8331(20) and 8401(17). [Back]

¹⁴These police forces are the U.S. Supreme Court Police, U.S. Capitol Police, U.S. Secret Service Uniformed Division, and U.S. Park Police. The Library of Congress police force is in the process of being incorporated into the U.S. Capitol Police. [Back]

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