FOR IMMEDIATE RELEASE September 9, 1997

CONTACT: Douglas K. Walker (202) 606-1800 dkwalker@opm.gov

Washington, D.C.--The Office of Personnel Management today proposed a plan to help current and former federal employees who were placed in the wrong retirement system. OPMs proposal provides a solution to those people who have been disadvantaged by an error in their retirement coverage.

The government is a responsible employer and cares about these people, said OPMs Acting Director Janice R. Lachance. We believe our proposal provides employees and their families an opportunity for choice and allows us to help those harmed by this error.

The problems stem from the governments transition to the Federal Employees Retirement System (FERS) beginning in 1984. Certain employees hired since 1984 had been placed in the older Civil Service Retirement System (CSRS) and were later informed that they should have been placed under FERS. Retirement coverage errors generally resulted from the difficulties government agencies experienced in applying two sets of transition rules. The first set, effective January 1, 1984, governed whether a federal employee would be automatically subject to full Social Security taxes. The second set addressed the grandfathering provisions of the FERS Act of 1986.

FERS provides an annuity and Social Security benefits and includes a tax-deferred Thrift Savings Plan (TSP) component with a government contribution not available to employees under CSRS. To provide benefits equivalent to those payable under CSRS, it is generally considered necessary to contribute to the TSP and enhance retirement benefits by obtaining government matching.

Employees who were erroneously placed in CSRS or CSRS Offset (a plan combining Social Security and CSRS coverage, and designed to equate to CSRS) for a substantial period may have been disadvantaged with respect to TSP benefits. For example, due to the erroneous coverage, they may not have contributed to the TSP in the belief that they would obtain a CSRS or CSRS Offset benefit.

Since the TSP first began in 1987, employees whose erroneous coverage has been detected and corrected have been allowed to obtain TSP benefits retroactively with make-up contributions, but may not have taken advantage of the make-up opportunity for a variety of reasons, including lack of income available for savings.

To remedy this situation, OPMs proposal would allow individuals who have been affected by an error lasting at least three years would be allowed to choose to be retroactively placed in either FERS (which current law requires) or CSRS Offset, whichever the individual prefers. CSRS Offset coverage would provide, through an annuity and Social Security, benefits the employee expected during the erroneous coverage.

Providing a choice between FERS and CSRS Offset allows a choice that is the equivalent of choosing between FERS and CSRS, but does not disturb Social Security coverage rules. The CSRS Offset solution also makes the remedy administratively feasible for employees who have already been corrected to FERS and are participating in Social Security, including retirees who may have already begun to receive Social Security benefits.

Employees, retirees, survivors, and certain separated employees will have a window of opportunity in which to exercise their election. Implementation of the proposed legislation will include an outreach program to maximize the number of affected people who make timely use of their election options.

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