FROM THE OFFICE OF PUBLIC AFFAIRS

Mr. Chairman and Members of the Subcommittee:

I am pleased to submit testimony concerning H.R. 1228, a bill to extend law enforcement retirement benefits to certain occupations within the Treasury Department. As you know, the Department is comprised of 14 bureaus, whose missions range from drug interdiction to international finance. The Department is committed to supporting every occupation in carrying out its mission while managing resources in a responsible manner. In my position as chief Human Resources executive for the Department, let me assure you that Treasury management takes a great interest in the welfare of our employees and we strive to ensure that employees receive the maximum value from the available benefits package.

Both the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS) provide enhanced retirement benefits for certain classes of employees, including federal law enforcement officers. These special retirement provisions (commonly referred to as "6(c)" coverage) allow these classes of employees to retire earlier (e.g., age 50 with 20 years of service) than other employees, and were created because of the belief that the strenuous physical requirements of these positions mandate a young and vigorous workforce. The law also provides for a mandatory retirement age (age 57 with 20 years of service) and the authority of agency heads to set a maximum entry age for appointment to law enforcement positions. Treasury has a maximum entry age (and reentry age) of 37 for appointment to law enforcement positions. I also note that law enforcement officers are granted other benefits, such as higher entry level salaries and higher rates of pay in some localities.

The current statute does not specify the positions eligible for this enhanced retirement benefit. Instead, it defines a law enforcement officer as someone who primarily investigates, apprehends or detains individuals suspected or convicted of offenses against the criminal laws of the United States. For the most part, this has been defined as positions falling within the criminal investigator (GS-1811) series. Of the 127,000 full time Treasury employees, more than 11,000 employees are GS-1811s or others covered under the special law enforcement retirement provisions. H.R. 1228 proposes extending law enforcement retirement benefits to nine specific occupational categories within Treasury: Customs inspectors; Customs canine enforcement officers; Customs operations enforcement officers; Customs detection system specialists airborne; Customs flight engineers; Police officers from the Bureau of Engraving and Printing; Secret Service special officers; and Internal Revenue Service revenue officers. There are approximately 16,000 employees in these nine occupations. Under current statute, these occupations are not covered.

H.R. 1228 would change this by extending these enhanced retirement benefits to a large number of employees. The Administration is in the process of reviewing the complex nature of compensation for law enforcement and in particular port of entry inspectors. This review is not yet complete and therefore we cannot support extending law enforcement coverage at this time.

In addition, extending this coverage has significant budgetary impact which must be considered in making any determination on whether to extend these special benefits. Enhanced law enforcement benefits cost employing agencies and the retirement fund more than regular employee benefits. In March 1998, the Treasury Office of Inspector General published an analysis of the costs associated with granting law enforcement retirement benefits to 8,000 Customs inspectors and canine enforcement officers. This detailed analysis is submitted to the Committee for its review. The annual increased cost for such coverage would be approximately $75 million per year. If retroactive service credit is granted, that would create an unfunded liability of $539 million. Again, these figures are based on an analysis of approximately 8,000 employees. As I stated previously, H.R. 1228 covers about 16,000 Treasury employees. Therefore, we can expect the costs to be roughly double or $150 million per year, which will increase over time, and create (if retroactive service credit is granted) an unfunded liability of $1 billion. We have not had the time between the hearing notice and today's hearing to analyze the remaining occupations using our model, but we will be happy to do so and report the detailed costs to the Committee within 45 days.

Simply stated, we do not currently have the budgetary resources necessary to cover such costs. Because of the current statutory spending caps that were outlined in the 1997 budget agreement, the resources to pay for extending this coverage would have to be taken from other areas, and the resulting consequences must be carefully thought through.

Let me reiterate that the Department fully supports its workforce, which I believe is evident in the caliber of the work we do and the people we employ. The current statute established a standard for determining which positions are eligible for the special retirement provisions. Changes to the statute by including a broader and more diverse range of occupations will have significant budgetary impact, with possible related but unintended consequences, requiring careful consideration.

Thank you for the opportunity to appear before you today. I would be happy to answer any questions you may have.