[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
     RETIREMENT READINESS: STRENGTHENING THE FEDERAL PENSION SYSTEM 

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON FEDERAL WORKFORCE,
                  U.S. POSTAL SERVICE AND LABOR POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 25, 2012

                               __________

                           Serial No. 112-114

                               __________

Printed for the use of the Committee on Oversight and Government Reform


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy

                   DENNIS A. ROSS, Florida, Chairman
JUSTIN AMASH, Michigan, Vice         STEPHEN F. LYNCH, Massachusetts, 
    Chairman                             Ranking Minority Member
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
JASON CHAFFETZ, Utah                     Columbia
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
TIM WALBERG, Michigan                DANNY K. DAVIS, Illinois
TREY GOWDY, South Carolina




















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on January 25, 2012.................................     1
Statement of:
    Coble, Hon. Howard, a Representative in Congress from the 
      State of North Carolina....................................    83
    Coffman, Hon. Mike, a Representative in Congress from the 
      State of Colorado..........................................    95
    Dold, Hon. Robert J., a Representative in Congress from the 
      State of Illinois..........................................   106
    Griffin, Hon. Tim, a Representative in Congress from the 
      State of Arkansas..........................................    88
    Grimes, Charles D., III, Chief Operating Officer, U.S. Office 
      of Personnel Management; Andrew G. Biggs, Ph.D., resident 
      scholar, American Enterprise Institute; Pete Sepp, 
      executive vice president, National Taxpayers Union; and 
      David B. Snell, director of retirement benefits, National 
      Active and Retired Federal Employees Association...........     7
        Biggs, Andrew G., Ph.D...................................    17
        Grimes, Charles D., III..................................     7
        Sepp, Pete...............................................    24
        Snell, David B...........................................    39
    Nugent, Hon. Richard B., a Representative in Congress from 
      the State of Florida.......................................   102
    Schilling, Hon. Robert T., a Representative in Congress from 
      the State of Illinois......................................    99
Letters, statements, etc., submitted for the record by:
    Biggs, Andrew G., Ph.D., resident scholar, American 
      Enterprise Institute, prepared statement of................    19
    Coble, Hon. Howard, a Representative in Congress from the 
      State of North Carolina, prepared statement of.............    85
    Coffman, Hon. Mike, a Representative in Congress from the 
      State of Colorado, prepared statement of...................    97
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............   112
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   113
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, memo dated November 22, 2011............    56
    Dold, Hon. Robert J., a Representative in Congress from the 
      State of Illinois, prepared statement of...................   108
    Griffin, Hon. Tim, a Representative in Congress from the 
      State of Arkansas, prepared statement of...................    90
    Grimes, Charles D., III, Chief Operating Officer, U.S. Office 
      of Personnel Management, prepared statement of.............    10
    Lynch, Hon. Stephen F., a Representative in Congress from the 
      State of Massachusetts, prepared statement of Ms. Kelly....    75
    Nugent, Hon. Richard B., a Representative in Congress from 
      the State of Florida, prepared statement of................   104
    Ross, Hon. Dennis A., a Representative in Congress from the 
      State of Maryland, prepared statement of...................     4
    Schilling, Hon. Robert T., a Representative in Congress from 
      the State of Illinois, prepared statement of...............   101
    Sepp, Pete, executive vice president, National Taxpayers 
      Union, prepared statement of...............................    26
    Snell, David B., director of retirement benefits, National 
      Active and Retired Federal Employees Association, prepared 
      statement of...............................................    41


     RETIREMENT READINESS: STRENGTHENING THE FEDERAL PENSION SYSTEM

                              ----------                              


                      WEDNESDAY, JANUARY 25, 2012

                  House of Representatives,
    Subcommittee on Federal Workforce, U.S. Postal 
                          Service and Labor Policy,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9 a.m., in 
room 2203, Rayburn House Office Building, Hon. Dennis A. Ross 
(chairman of the subcommittee) presiding.
    Present: Representatives Ross, Walberg, Lynch, Connolly, 
and Davis.
    Staff present: Robert Borden, general counsel; Will L. 
Boyington, staff assistant; Jennifer Hemingway, senior 
professional staff member; James Robertson, professional staff 
member; Peter Warren, legislative policy director; Jaron 
Bourke, minority director of administration; Kevin Corbin, 
minority deputy clerk; Ashley Etienne, minority director of 
communications; William Miles, minority professional staff 
member; and Mark Stephenson, minority senior policy advisor/
legislative director.
    Mr. Ross. Good morning. I will now call the Subcommittee on 
Federal Workforce, U.S. Postal Service and Labor Policy to 
order.
    Today's hearing is on ``Retirement Readiness: Strengthening 
the Federal Pension System.''
    As we do in all Oversight Committees, I will recite the 
Oversight Committee mission statement.
    We exist to secure two fundamental principles: First, 
Americans have a right to know that the money Washington takes 
from them is well-spent; and, second, Americans deserve an 
efficient, effective government that works for them. Our duty 
on Oversight and Government Reform Committee is to protect 
these rights.
    Our solemn responsibility is to hold government accountable 
to taxpayers, because taxpayers have a right to know what they 
get from their government. We will work tirelessly, in 
partnership with citizen watchdogs, to deliver the facts to the 
American people and bring genuine reform to the Federal 
bureaucracy.
    This is the mission of the Oversight and Government Reform 
Committee.
    And I know we have votes probably as early as 9:30. So we 
hopefully, especially with just the ranking member and I here 
today right now, will be able to get through this panel before 
we have to do votes, and then we will impanel our second panel 
right after that.
    With that, I will recognize myself for 5 minutes to deliver 
my opening statement.
    Today's hearing will explore options in reforming the 
entire Federal pension system to bring it more in line with the 
private-sector work force and help balance the budget. It is 
clear that the taxpayer cannot afford the current Federal 
pension cost structure in the long term.
    But what is good for the goose is good for the gander. 
Today's hearing will also explore options to ensure that 
Members of Congress are treated no better than their fellow 
citizens in the Federal work force. The taxpayer has had enough 
of ``do what I say, not what I do'' from Washington.
    Being a Member of Congress is not a career; it is an honor 
bestowed upon a few by the great people of this Nation--a great 
people who pay a great price for a work force and a Congress 
that costs too much.
    According to an August 10, 2010, analysis conducted by the 
CATO Institute, the Federal Government pays almost $42,000 in 
health insurance and pension benefits for Federal employees, 
which is nearly four times greater than that which is the 
average in the private sector.
    Worse, Members of Congress currently receive a pension 
benefit that is vastly better than the rest of the Federal work 
force. According to the Office of Personnel Management, the 
average annual pension for those retiring from Congress was 
$53,940. To put it in perspective, the average Social Security 
recipient receives $14,000 per year.
    In 2010, Obama's deficit-reduction commission recommended 
increasing the amount Federal employees pay toward their 
retirement and to start calculating their pension using the 
employee's average of 5-year salary rather than the current 3-
year salary as a base.
    Last December, Republicans in the House of Representatives 
passed H.R. 3630, which called for reform of the Federal 
pension system, making it more comparable to the marketplace 
and saving taxpayers $38 billion, according to the 
Congressional Budget Office.
    The bill also included recommendations of the President's 
deficit commission: increase the employee retirement 
contribution; eliminate the supplemental payment to individuals 
who voluntarily retire before age 62; and changed the pension 
formula for new hires. The bill also applied to Members of 
Congress and their staff.
    Unfortunately, this bill died in the Senate, but I suppose 
we should not expect too much since it currently takes over 
1,000 days to pass a budget in that chamber.
    Today we will hear from distinguished witnesses to examine 
the current policies and formulas that govern Federal pensions 
under the Civil Service Retirement System and the Federal 
Employees Retirement System. We will also hear from several 
Members of Congress who have introduced legislation aimed at 
adjusted or eliminating Members' pension coverage.
    Today's hearing is not about beating up on Federal 
employees or even Members of Congress. It is about living in 
the real world--a world where defined-benefit pension plans are 
disappearing and market-driven solutions, like the Federal 
Thrift Savings Plan, are on the rise.
    Protecting taxpayers and ensuring reasonable retirements 
for the Federal work force is our primary goal. But a deeper 
reality should set in here in Washington: The American people 
demand in their elected representatives a willingness to live 
under the laws they pass. They are tired of the perks and 
hypocrisy they witness in their Congress and are rightfully 
outraged by the pension benefits guaranteed to a Federal work 
force that has grown too large, paid for through an ever-
increasing tax burden on the hardworking American taxpayer. Too 
many working Americans watched their pensions evaporate because 
of the economic consequences of debt and borrowing caused, in 
part, by these unsustainable promises.
    There is no way to ensure value to the taxpayer and 
security to the worker, both private and public sector--there 
is--excuse me--there is a way to ensure value to the taxpayer 
and security to the worker, both public and private sector, 
through a more affordable pension system.
    On top of today's hearing, I will be introducing 
legislation that overhauls the Federal pension system and 
applies to Members of Congress. H.R. 3813 would increase the 
employee and Member retirement contribution by 1\1/2\ percent 
of salary over 3 years. My bill would also eliminate the 
supplemental payment to individuals who voluntarily retire 
before the age of 62; increases the employee retirement 
contribution for new hires; changes the multiplier used in the 
pension formula; and uses a 5-year average as a salary base. 
And all of these reforms would apply to Members of Congress, as 
well.
    As Congress looks forward to cut costs, Congress must also 
lead by example. I sincerely hope that this is just the 
beginning of a reform year in which we make government and 
Congress more accountable.
    I thank the witnesses for appearing today, and I look 
forward to your testimony.
    And I now recognize my friend and ranking member from 
Massachusetts, Mr. Lynch.
    [The prepared statement of Hon. Dennis A. Ross follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Lynch. Thank you very much, Mr. Chairman. It is good to 
be with you this morning.
    I do have to say, though, this is really--this hearing 
really is an attack on Federal employees, on Federal pensions. 
Only in Congress, only in the U.S. Congress, would a hearing 
entitled ``Retirement Readiness: Strengthening the Federal 
Pension System'' consist of eliminating Federal pensions. That 
is the way that my colleagues have suggested they are going to 
strengthen the pension system, is by eliminating the pension 
system.
    A couple of other things. The President did indeed 
recommend that Federal employees pay more for their pension, 
make greater contributions. The President also suggested we 
eliminate the supplemental benefit for early retirees. But he 
introduced those ideas as part of a--in a context of asking the 
wealthiest in this country also to kick in, to pay a little bit 
more. So he conceded that, yes, we should ask Federal employees 
to contribute more; yes, we should pare back benefits in light 
of our economic crisis. But at the same time, the President 
said, could we ask the wealthiest in this country to pay a 
little bit more?
    And that is why the bill went nowhere in the Senate. That 
is why it crashed and burned over there, because a lot of folks 
on the Republican side have signed this oath, this oath to 
Grover Norquist, that under no circumstances will they raise 
taxes. They won't raise taxes on the wealthiest. They won't 
raise taxes to pay for the war in Iraq, they won't raise taxes 
to pay for the war in Afghanistan, even though they describe 
themselves as being pro-military. Pro-military as long as they 
don't have to pay for it.
    And this hearing and much of the testimony that you will 
hear today is really an attack on Federal workers. There are 
some comparisons here--we will get into it later--but it is 
sad, it is really sad in this day and age that we would just go 
after our Federal employees.
    You know, eliminating pensions for Federal workers and 
eliminating pensions for Members of Congress is popular, I 
guess. And I think that, you know, we could have a bill that 
the people would support if we eliminated--if we eliminated all 
pay for Members of Congress, make them work for zero; eliminate 
their health benefits; eliminate their pensions; make them walk 
to work, even if from Massachusetts, make them walk back and 
forth. I think, you know, Congress is very unpopular right now. 
There is one poll out there that says that Congress' popularity 
is somewhere between the Taliban and the swine flu. And we 
probably deserve that. So, you know, it is one thing to 
acknowledge that and try to do better. It is quite another to 
feed into it.
    And if we eliminate pensions and health benefits and cut 
pay for Members of Congress, pretty soon it will get to a point 
that only people who are independently wealthy--you know, if we 
really are ascribing to the wishes of the Founders of this 
Nation and those who drafted our Constitution, the Framers of 
the Constitution really thought that Congress should be 
constituted by a mixture of people and backgrounds. If we 
eliminate pay and pensions and health benefits for Members of 
Congress, only those people who are independently wealthy or 
retired and have had a full career will be able to come here, 
will be able to afford to come here and represent the people in 
this great government.
    So I think it is pathetic, really, that so many bills are 
out here to go after Federal employees. We are asked to, in 
every aspect of government, match up against a private sector 
that is enormously well-funded and well-equipped to deal with 
some of the issues, whether it is financial services or 
environmental issues. We have a hard time matching up, posting 
up against people who we are, you know, proposed to regulate.
    But I thank the gentleman. I look forward to the testimony, 
and I yield back the balance of my time.
    Mr. Ross. Thank you, Mr. Lynch.
    I now ask unanimous consent that the statement of House 
Administration Chairman Dan Lungren be placed into the record.
    Without objection, it is so ordered.
    Members have 7 days to submit opening statements and 
extraneous material for the record.
    I will now introduce our first panel, and I welcome our 
witnesses.
    We have Mr. Chuck Grimes, who is the chief operating 
officer for the Office of Personnel Management. We have Dr. 
Andrew Biggs, who is a resident scholar at the American 
Enterprise Institute. We have Mr. Pete Sepp, who is executive 
vice president of the National Taxpayers Union. And we have Mr. 
David Snell, who is the director of retirement benefits for the 
National Active and Retired Federal Employees Association.
    Pursuant to committee rules, all witnesses will be sworn in 
before they testify. So please rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Ross. Thank you.
    Let the record reflect that all of the witnesses answered 
in the affirmative.
    In order to allow time for our discussion, please limit 
your comments to 5 minutes, and please also understand that 
your entire written statement will be made part of the record 
of this proceeding.
    With that, I will recognize Mr. Grimes for 5 minutes for an 
opening.

 STATEMENTS OF CHARLES D. GRIMES III, CHIEF OPERATING OFFICER, 
 U.S. OFFICE OF PERSONNEL MANAGEMENT; ANDREW G. BIGGS, PH.D., 
  RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE; PETE SEPP, 
 EXECUTIVE VICE PRESIDENT, NATIONAL TAXPAYERS UNION; AND DAVID 
B. SNELL, DIRECTOR OF RETIREMENT BENEFITS, NATIONAL ACTIVE AND 
             RETIRED FEDERAL EMPLOYEES ASSOCIATION

               STATEMENT OF CHARLES D. GRIMES III

    Mr. Grimes. Chairman Ross, Ranking Member Lynch, and 
members of the subcommittee, thank you for the opportunity to 
appear before you to discuss Federal pensions.
    OPM's mission is to recruit, retain, and honor a world-
class work force to serve the American people. As part of that 
mission and by law, OPM oversees administration of the Civil 
Service Retirement System [CSRS], and the Federal Employees 
Retirement System [FERS], covering annuitants in the executive, 
legislative, and judicial branches.
    OPM processes annuity payments for retirees and their 
survivors. As of October 1, 2010, there were 1.52 million CSRS 
annuitants, with an average monthly annuity of $2,941, based 
upon 29.6 years of service; and 361,000 FERS annuitants, with 
an average monthly annuity of $1,065, based on 17.2 years of 
service. There were 262 retired CSRS Members, with an average 
monthly annuity of $5,785, based on 20.7 years of service; and 
181 retired FERS members, with an average monthly annuity of 
$3,205, based on 16.2 years of service.
    Generally, Federal employees who entered service prior to 
1984 are covered by CSRS. When established in 1920, coverage 
was limited to permanent and competitive employees in the 
executive branch. In the 1940's, coverage was extended to 
agency heads and, upon election, to the President, Vice 
President, and Members of Congress.
    With some exceptions, Federal employees contribute 7 
percent of their pay to CSRS, congressional employees 
contribute 7.5 percent, and Members contribute a combined 8 
percent of their pay to CSRS and Social Security, while the 
employing agency pays those rates into the retirement fund. The 
CSRS defined annuity benefit is computed based on the high-3 
average pay and length of service.
    The Federal Employees Retirement System Act of 1986 
established a new three-tier retirement structure with a 
defined benefit annuity, a defined contribution under TSP, and 
Social Security. Generally, Federal employees who entered 
service on or after January 1, 1984, are covered by FERS, and 
Members first elected in 1984 or later are automatically 
covered.
    With FERS, Congress made a conscious and conscientious 
decision to prevent the underfunding problems that have plagued 
so many private, State, and local defined-benefit retirement 
systems. FERS was designed as a fully funded retirement system 
with a dynamic normal cost-of-service credit paid for by the 
employer and employee contributions. It was also designed to 
better serve the needs of a more mobile work force. Though the 
defined benefit provides maximum benefits when an employee 
continues Federal employment into retirement, TSP and Social 
Security are fully portable.
    Under FERS, Federal employees contribute 0.8 percent of 
their pay, and the employing agency in fiscal year 1912 
contributes 11.9 percent. Members and congressional employees 
pay 1.3 percent, and Congress pays 16.7 percent for employees 
and 18.3 percent for Members. Federal employees and Member 
contribute 6.2 percent of their pay to Social Security, with 
the exception of 2011 and the first couple of months of 2012 
due to the payroll tax relief bill.
    The FERS basic annuity is computed based on the high-3 
average pay and length of service. In addition, some FERS 
retirees may be entitled to receive an annuity supplement, 
payable to age 62, based on the potential Social Security 
benefit earned by Federal employment.
    On September 19, 2011, President Obama released ``Living 
Within Our Means and Investing in the Future: The President's 
Plan for Economic Growth and Deficit Reduction.'' The 
President's plan proposed an increase in the employee 
contribution to FERS and CSRS, as well as other defined-benefit 
plans not administered by OPM. Federal employees' total pension 
amounts would remain unchanged, and the employee contribution 
would increase 0.4 percent of pay a year over 3 years, for a 
total increase of 1.2 percentage points.
    The President's plan also proposed the elimination of the 
FERS annuity supplement for new employees, other than employees 
subject to mandatory retirement. Overall, the plan is estimated 
to save $21 billion over 10 years.
    Thank you for the opportunity to testify today, and I am 
happy to address any questions you may have.
    [The prepared statement of Mr. Grimes follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Ross. Thank you, Mr. Grimes.
    Mr. Biggs, you are recognized for 5 minutes for an opening.

              STATEMENT OF ANDREW G. BIGGS, PH.D.

    Mr. Biggs. Thank you very much.
    Chairman Ross, Ranking Member Lynch, and members of the 
subcommittee, thank you for offering me the opportunity to 
testify today with regard to Federal employee retirement 
benefits.
    Legislation has been proposed that would alter Federal 
employee retirement benefits by increasing employee 
contributions and reducing the percentage of final earnings 
replaced by the FERS pension plan.
    If we wish to ensure comparability of pay between the 
public and private sectors, whether these policies make sense 
depends, in part, upon how the Federal and private-sector 
pension provision compares. If Federal compensation drops below 
private-sector levels, then the government may have difficulty 
attracting and retaining employees. If Federal compensation 
exceeds private levels, however, then taxpayer resources may be 
wastefully employed.
    To illustrate potential differences, I analyzed retirement 
benefits for a typical Federal employee relative to what a 
private-sector worker with the same salary could expect to 
receive. The details of my calculations are outlined in my 
written testimony, but I will summarize the results here.
    While older Federal employees are covered under the Civil 
Service Retirement System, younger and newly hired workers will 
receive retirement income from three principal sources: Social 
Security benefits, the defined-benefit Federal Employee 
Retirement System, and the defined-contribution Thrift Savings 
Plan. Most private-sector workers will receive retirement 
income from a combination of Social Security and a defined-
contribution 401(k)-type pension plan.
    In a defined-benefit plan, retirement benefits are 
calculated using a formula based upon final earnings and the 
number of years of service. In a defined-contribution plan by 
contrast, benefits are a function of contributions and interest 
earned over the years. Workers may choose how to invest their 
contributions, but they also bear any market risk associated 
with those choices.
    I assumed a Federal employee retiring at age 62 after 28 
years of service with final earnings of $78,650, which is 
roughly typical for Federal employees of that age. At 
retirement, he or she would be eligible for the following 
benefits: $18,264 per year in Social Security benefits, $23,710 
from the FERS plan, and $8,610 from his or her TSP account. The 
Federal employee's total retirement income would equal roughly 
$50,583, or 64 percent of their final earnings.
    A private-sector worker with the same salary could expect 
to receive the same Social Security benefit of $18,264, plus 
around $7,044 from a 401(k) plan with a typical employer match. 
The private-sector worker's total benefit of $25,308 replaces 
roughly 32 percent of final earnings.
    For this stylized employee, Federal retirement benefits are 
roughly twice as generous as those paid to a typical private-
sector worker. Federal employees receive an employer match to 
their defined-contribution TSP pension that is significantly 
more generous than the typical private-sector plan, in addition 
to which they receive defined benefits through the FERS plan.
    Federal employees also may have access to supplemental 
benefits if they retire prior to age 62 and to retiree health 
coverage. In short, the Federal Government retiree income 
package is a generous one that few private-sector employers 
match or exceed.
    Now, differing employees will experience different 
outcomes, and we obviously can disagree about some of the 
assumptions made in generating these figures. But no reasonable 
changes to assumptions will show Federal retirement benefits to 
be comparable to or inferior to a typical private-sector plan.
    These figures alone do not say what we should do about 
Federal employee pensions. What matters is the total 
compensation package, which includes salaries, pensions, other 
fringe benefits, job security, and general working conditions. 
Yet most peer-reviewed academic research conducted over the 
past several decades has shown Federal employees' salaries to 
be higher than those paid to private-sector workers with 
similar levels of experience and education. My own work with 
Jason Richwine of The Heritage Foundation found similar results 
with salaries, while recording a total benefits package that 
exceeded private-sector levels.
    Employee compensation is often described and certainly 
perceived as a matter of fairness. But the fair level of 
compensation, meaning fair both to employees and to taxpayers, 
is the minimum level that allows the Federal Government to 
attract and retain the employees it needs. It appears that the 
Federal compensation taken as a whole exceeds that minimum 
level, sometimes by a significant margin.
    Whether to alter the terms of Federal retirement benefits, 
salaries, or other terms of employment is up to Congress to 
decide. It should be done in the context not of meeting some 
specific budgetary goal but of setting pay that competes with 
but doesn't supersede private-sector levels.
    Thank you very much.
    [The prepared statement of Mr. Biggs follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Ross. Thank you, Dr. Biggs.
    Mr. Sepp, you are recognized for 5 minutes for an opening.

                     STATEMENT OF PETE SEPP

    Mr. Sepp. Mr. Chairman and Mr. Ranking Member, members of 
the committee, I am very grateful that you invited National 
Taxpayers Union to testify today.
    I will begin my testimony by referring to another 
testimony, one that occurred in 1984 from our pension 
consultant at the time, H.P. Mueller. He pointed out not only 
the dimensions of the old Civil Service Retirement System and 
its possible financial difficulties; he also talked about how 
that current system was unfair to Federal retirees and 
employees, as well. So we are approaching this issue from both 
perspectives.
    Another interesting parallel, though, is that he was 
saying, even at that time, that the consultants the committee 
that he was testifying before, Hay Associates, paid to try and 
do private-sector comparisons with pensions still were not 
including an adequate universe of the private sector to conduct 
such a comparison. I think we still have those difficulties 
today. I think it is a testament to my fellow panelist, Mr. 
Biggs, that he could come up with such great comparisons with 
the private sector.
    That is one of the points that I would like to make in this 
testimony. We still need high-quality data to do good 
comparisons of congressional Federal employee compensation 
versus the private sector. That is going to be necessary for 
any reform efforts moving forward.
    Another point I would like to make has to do with 
bipartisanship. We are going to have a great deal of partisan 
disagreement over what direction to take over pension reform. I 
would contend that this kind of bipartisan effort has to begin 
not only within Congress but outside of Congress. We are 
willing to do that; we have been doing that.
    I would call your attention to this report, ``Toward Common 
Ground.'' This was put out by NTU and U.S. Public Interest 
Research Group, a left-of-center organization, identifying over 
a trillion dollars' worth of budget savings. This was not easy. 
It took us sitting down in a room, arguing with each other, 
literally coming close to pulling each other's hair out, but we 
settled on these recommendations.
    One of them had to do with the granting of waivers under 
OPM for retired annuitants coming back into Federal service and 
drawing full dual compensation. We noted that if this practice 
were curtailed, if the rules were restored to a more reasonable 
level, you could achieve something on the order of $600 million 
in savings over 5 years. Not much, but it is a start. My 
message: If we can do it, so can Congress.
    Which brings me to Congress. I am not here necessarily to 
argue that Members should not be compensated at all. How about 
we start with a few basic reforms that can show the American 
people we are trying to make progress?
    One I think, H.R. 981. It would allow Members to opt out of 
the FERS system. That is a good start. H.R. 2162, it would 
expand the number of felonies to 20 that would disqualify a 
Member for receiving a pension. Let's start there, see where 
else this could possibly lead.
    One example might be to simply equalize the contribution 
rates and benefit formulas for Members with those of the 
general Federal rank-and-file. I know my testimony has 
conducted a couple of comparisons along those lines. One I 
would like to point your attention to--and, here again, I am 
not talking about comparisons between the general public and 
Members of Congress but rather between Members and the rank-
and-file. Is the differential, the amount of extra benefit plus 
the amount of extra contribution Members pay, justifiable? I 
would argue the time has come to reconsider that.
    Just one illustration: Ten years of service of a lawmaker, 
10 years of service of a rank-and-file employee, same salary. 
The employee gets about $15,600 in pension to start at 62; the 
Member, $26,600. For that differential, the Member pays a 
little over $8,300 over his or her entire career. And that is 
an $11,000 extra benefit in the first year for about $8,300 
worth of extra contributions over 10.
    That provides an illustration, I think, that we can 
approach this from a sensible perspective and say, all the 
rhetoric, all the anger from the public aside, we have some 
genuine issues that can be resolved here. We are willing to 
work with you to do that.
    And let me thank you, Mr. Chairman, as well as Mr. Gowdy 
and Mr. Chaffetz, for cosponsoring several pieces of reform 
legislation that could help get this conversation going.
    Thank you.
    [The prepared statement of Mr. Sepp follows:]

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    Mr. Ross. Thank you, Mr. Sepp.

                  STATEMENT OF DAVID B. SNELL

    Mr. Snell, you are recognized for 5 minutes for an opening.
    Mr. Snell. Thank you, Mr. Chairman and members of the 
committee. I am Dave Snell, director of retirement benefits at 
the National Active and Retired Federal Employees Association.
    I am testifying here today on behalf of the Federal Postal 
Coalition, a group of nearly 30 organizations whose individuals 
span almost the entire spectrum of the Federal community. Thank 
you for the opportunity to testify on behalf of these nearly 5 
million workers and retirees.
    I would like to make three basic points today. First, 
retirement plans should be judged by whether they provide the 
income security needed to ensure that retirees do not suffer 
significant decline in their standard of living in retirement. 
Second, judged by that universal standard, current Federal 
retirement programs provide adequate but not overly generous 
retirement income. And, third, making permanent cuts to modest 
Federal retirement compensation of middle-class workers to pay 
for a 1-year payroll tax holiday is both unfair and unwise.
    Federal workers did not enter public service to become 
rich, but they do face the same economic challenges as everyone 
else, including the need to prepare for retirement. Although 
they are paid, on average, 26 percent less than their private-
sector counterparts, a modest retirement package helps to make 
up for part of that lower pay by helping to provide reasonable 
income security in their later years.
    Unfortunately, recent legislative proposals have sought to 
unravel this basic bargain, unfairly singling out middle-class 
Federal employees for disproportionate sacrifice. Last month, 
the House passed legislation that would use permanent cuts to 
Federal retirement compensation of middle-class Federal and 
postal workers to pay for a 1-year payroll tax holiday. Federal 
employees should not have to pay for two-thirds of the cost of 
continuing the holiday. This is not shared sacrifice.
    Federal families are no more immune from the challenges 
that come with tough economic times than any other working 
American family. They, too, have been experiencing declining 
home values, diminished savings, rising health insurance costs, 
escalating tuition for their children's college, spouses who 
have lost jobs, and grown children unable to find work after 
college.
    Cuts to Federal retirement benefits and further pay freezes 
harm hardworking Federal employees and their families who are 
struggling with these challenges just like their private-sector 
counterparts. They also undermine the Federal Government's 
ability to attract and retain talent, threatening harm to a 
Federal civil service critical to meeting the increasingly 
complex and deeply important tasks that the American citizens 
need for them to do.
    Rather than looking to eliminate the current Federal 
Employees Retirement System [FERS], or reduce its benefits, 
Members of Congress should look to the system as a model for 
private-sector reforms. The basic FERS annuity is modest. Taken 
together with the other two components of the plan, Social 
Security and the Thrift Savings Plan, FERS provides an adequate 
retirement security.
    H.R. 3630 would substantially reduce the retirement income 
security provided by FERS and effectively provide a pay cut for 
Federal employees currently under a pay freeze for the last 2 
years. New employees would experience a 41 percent reduction in 
their deferred compensation, resulting in a new median annuity 
of only $425 a month or $5,098 annually. That is barely over a 
third of what a minimum-wage earner would make per year working 
40 hours per week for $7.25 an hour.
    As much as anyone, our Nation's civil servants understand 
the constraints of the Federal budget and the gravity of the 
Nation's fiscal responsibilities. But we do not believe that it 
is fair to be singled out for sacrifice to pay for a tax 
holiday that some of us do not even receive.
    Thank you again for the opportunity to share our views, and 
I am happy to take any questions.
    [The prepared statement of Mr. Snell follows:]

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    Mr. Ross. Thank you, Mr. Snell.
    I will now recognize myself for 5 minutes for questioning. 
And I am going to go to the heart of what I think is facing us 
here, and that is the congressional pension system.
    Do you, each one of you, believe that Congress should bring 
its retirement rules in line with those of most Federal 
employees? And I will start off with you, Mr. Grimes. And why 
or why not? Speaking specifically of Congress.
    Mr. Grimes. Honestly, the administration would not have a 
view on whether congressional pensions should be the same as 
the rank-and-file. Thank you.
    Mr. Ross. Dr. Biggs.
    Mr. Biggs. In general, yes.
    Mr. Ross. And any follow-up, I mean, as to why or why not?
    Mr. Biggs. Well, with congressional pensions, there are 
some specific issues that you are looking at, in terms of short 
tenure and not--well, presumably, or supposedly, not as much 
job security. But, in general, you can address those through a 
defined-contribution plan, where there is an employee 
contribution and an employer match. If the Member of Congress 
leaves, they can take that with them.
    Working that circumstance into a defined-benefit plan gets 
tricky. The defined-benefit plan, if you look at what is called 
the normal cost of pensions under FERS for Members of Congress, 
is much, much more generous than the ordinary FERS for Federal 
employees, which in turn is much, much more generous than what 
a typical private-sector worker gets. So I think clearly some 
scaling down makes sense.
    Mr. Ross. Mr. Sepp.
    Mr. Sepp. Certainly. And I would just point out one other 
rather interesting statistic concerning the normal cost factor, 
in other words the agency contribution that is set aside for 
Members of Congress. That actually has been rising at a 
somewhat faster rate than what you would find for the rank-and-
file contribution, which actually tends to fluctuate between 11 
and 12 percent. It was about 15 percent back in 1997, now it is 
over 18 percent for lawmakers.
    Mr. Ross. Mr. Snell.
    Mr. Snell. Mr. Chairman, our coalition believes that 
Members of Congress should be on an equal footing with all 
other Federal retirees in the matter of their retirement.
    Mr. Ross. Thank you.
    Mr. Grimes, I know it is very important that OPM makes sure 
that the Federal Government recruits and retains and rewards 
Federal employees. And that is all part and parcel, I think, of 
what needs to be done in order to keep our human resources at 
their best.
    Now, taking us from a defined-benefits plan to a defined-
contributions plan, will that in any way, in your opinion, 
impact the recruitment and retention of Federal employees?
    Mr. Grimes. Our employee surveys show that benefits 
provided by the Federal Government for employment are essential 
for recruiting and retaining high-quality employees.
    We believe that the President's proposal to increase 
contributions over 3 years by the amount of 1.2 percent is an 
adequate response in this time of difficulty.
    Mr. Ross. Okay. But do you think it is--is it going to 
change the ability for the Federal Government to retain and 
recruit if we move toward a defined-contribution plan as 
opposed to a defined-benefit plan?
    Mr. Grimes. Well, back when FERS was implemented, of course 
we did add that component.
    Mr. Ross. Right.
    Mr. Grimes. And I don't know that our recruitment strategy 
changed at that time. But time would have to tell.
    Mr. Ross. Dr. Biggs, in terms of the private sector versus 
the public sector, I think we have seen Fortune 500 companies 
rarely, if at all, provide a defined-benefits plan. In fact, I 
think--and let me know if this is true or not--they are moving 
toward an almost all defined-contribution plan, which is 
essentially a 401(k). Is that your understanding?
    Mr. Biggs. That is correct. Defined-benefits plans are 
dying out in the private sector, and there is a variety of 
reasons, one of which, though, is the ability to recruit and 
retain.
    Defined-benefit plans have an very odd, sort of, path of 
benefit accumulation over a worker's career. For a long period 
of time, under defined-benefit plans, an employee accumulates 
very little of what you call pension wealth. That tends to 
shoot up very quickly later in their career and then falls down 
again once they reach their 60's. I would refer you to the work 
from Michael Podgursky of the University of Missouri, who has 
looked at this very closely with reference to teachers.
    What that means is a defined-benefit plan is worth very, 
very little to short-term employees. The young, mobile 
employees you might wish to recruit, a defined-benefit plan is 
essentially worthless to them. Also, you have older employees 
who you wish to keep on the job later, continuing employment 
often means they lose money under a DB plan. So you get this 
pushing and pulling effect which often works contrary to what 
you want to do in terms of employee recruitment and retainment.
    Mr. Ross. Mr. Sepp, from your research, are we moving 
toward, even in government pensions, whether it be municipal, 
county, or State pensions, from a defined-benefits plan to a 
defined-contributions plan?
    Mr. Sepp. I would say we are. And a lot of it is not by 
choice, it is by necessity. If you take a look, for example, at 
Rhode Island's problems. The treasurer there, Gina Raimondo, 
had to come up with a plan that has much heavier reliance on 
defined-contribution systems to finance the whole retirement 
structure.
    Mr. Ross. Because they just can't afford it.
    Mr. Sepp. Affordability is a problem. Plus, of course, in 
the State and local pension plans, you have the additional 
factor of investments. In other words, the Federal Government 
doesn't invest DB assets----
    Mr. Ross. Right.
    Mr. Sepp [continuing]. In markets, whereas State and local 
governments often do. They have had a lot of volatility there.
    Mr. Ross. I follow you.
    I see that my time is up. I will now recognize the ranking 
member, Mr. Lynch from Massachusetts, for 5 minutes for 
questioning.
    Mr. Lynch. Thank you, Mr. Chairman.
    I do note here, we have a MetLife--a 2008 MetLife study 
that indicates that workers are more likely to consider pension 
benefits as an important factor in remaining with a company. 
And it would seem to refute at least some of what we are 
hearing there from the panel. Is there any real rebuttal on 
that?
    MetLife is saying that--let me see if I can find it--72 
percent of employees cite retirement benefits--defined-benefit 
retirement benefits as an important factor in their loyalty to 
their employer. And they additionally found--there are several 
others studies that show defined-benefit plans keep workers at 
the job longer than workers without pensions and that firms 
with defined-benefit pensions experienced lower turnover rates 
than non-pension firms.
    Do you find that surprising?
    Mr. Biggs. I am not sure that finding is actually 
inconsistent with the points that I just made, in terms of the 
incentives of defined-benefit pensions.
    It is certainly true that a mid-career employee under a DB 
plan who quits and shifts to another job, because the DB plan 
isn't portable, will often leave literally hundreds of 
thousands of dollars on the table by doing that. So a mid-
career----
    Mr. Lynch. That would be a disincentive, wouldn't it?
    Mr. Biggs. Sure. A mid-career employee, therefore, has a 
strong disincentive to leave.
    What that often means in public service, though, is if you 
have somebody--this applies more to the State and local level--
someone who is burned out in their job and would like to leave, 
they effectively are prohibited from doing it by the effects of 
the DB plan.
    There is, I think, strong empirical evidence that public 
employees respond to the push-and-pull incentives of defined-
benefit pension plans. For instance, if you have a----
    Mr. Lynch. Okay. I don't want you to eat up all my time.
    Mr. Biggs. Sure.
    Mr. Lynch. Thank you.
    I also notice that, you know, there is a lot of comparison 
going on about private-sector defined-benefit plans. One thing 
I did notice, that 96 percent of defined-benefit plans in the 
private sector are fully paid for by the employer, so that 
there is only 4 percent of these defined-benefit plans that--I 
mean, 96 percent of them, the employer covers everything. 
Employees don't have to contribute a nickel, not a dime, 
nothing. And we are comparing them to, you know, the Federal 
plan that requires employees to contribute over their 
lifetime--a fairly significant amount over their career.
    So I having a little bit of trouble comparing a private-
sector plan that requires no contribution, employer covers 
everything--which is 96 percent of those plans--and the plan 
that we are talking about here today. Any thoughts on that?
    Mr. Biggs. I think my answer to that would be that very, 
very few private-sector employees today, particularly newly 
hired private-sector employees, have DB pensions. I noted in my 
testimony that most private-sector DB plans are not 
contributory; there isn't an employee contribution. But the 
fact is simply that very few private-sector workers have those. 
If you look at----
    Mr. Lynch. Would they be larger firms or--the problem is, 
you know, you try to compare--I mean, what is it, 8 million 
Federal employees, and then you are trying to compare that to 
Al's Deli. You know, how do you make that comparison?
    Mr. Biggs. They would tend to be more unionized firms--
heavy industry, airlines, auto, things of that nature. In my 
testimony, I focused based on worker type. I compared two 
workers who were classified by the Bureau of Labor Statistics 
as professional management or related workers--the white-
collared, skilled workers that roughly approximate where 
Federal employees are.
    If you adjust for firm size, you are likely to find 
somewhat larger pension contributions. But there are very few 
newly hired private-sector workers in any type of firm who are 
being offered a DB pension. It is just very unusual.
    Mr. Lynch. Right. But, as you said, if you are comparing 
defined-benefit plans to defined-benefit plans, you probably 
should look at firms that are similar, right? As opposed to--
new firms are generally small when they start. You know what I 
mean?
    Mr. Biggs. I am not talking about firms. I am----
    Mr. Lynch. So you are already----
    Mr. Biggs. Even newly hired employees at large firms.
    Mr. Lynch. I am going to take back my time, if I could. 
Thanks.
    Actually, Mr. Chairman, I will yield back. I only have a 
few seconds left. Thank you.
    Mr. Ross. Thank you.
    The gentleman from Illinois, Mr. Davis, is recognized for 5 
minutes.
    Mr. Davis. Thank you very much, Mr. Chairman. I want to 
thank you for yielding.
    I would like to go back to a remark that was made by one of 
the witnesses a few minutes ago that I believe deserves some 
highlighting. Mr. Snell from the Federal Postal Coalition, I 
believe it was you that said that Federal workers do not enter 
public service to become rich. And I will repeat that: Federal 
workers do not enter public service to become rich.
    In fact, I believe that the average Federal worker enters 
these jobs out of the desire to serve their country and to make 
a difference on behalf of others. That is a point that I think 
has been overshadowed a great deal in recent years.
    For the most part, Federal workers are middle-income, 
hardworking Americans who perform critical jobs and duties day-
in and day-out. To suggest that they do not deserve a 
retirement annuity sufficient enough to cover their expenses in 
the later years of their life is pretty much as uncompassionate 
as I think we can get.
    Let me ask each of you if you are aware that the majority 
of Federal employees work in cities and communities outside the 
District of Columbia. You are aware of that?
    Mr. Snell. Yes.
    Mr. Davis. Well, in fact, I believe that each and every one 
of us on this podium, as well as on the panel, know Federal 
employees and postal employees in my congressional district who 
work with the idea that after retirement they ought to be able 
to at least take care of their basic expenses.
    I have a large number of Federal employees in my 
congressional district, which is the Seventh Congressional 
District of Illinois, which is a major metropolitan area. And, 
Mr. Snell, let me ask you, what do you think are some of the 
potential negative economic consequences in congressional 
districts such as ours if Congress freezes Federal workers' pay 
for an additional year, as required based on H.R. 3630?
    Mr. Snell. Thank you, Congressman.
    That is--the implications on freezing it for another year, 
workers' pay, it will substantially reduce their ability to 
help feed their families, send their kids to school. It will 
also have an impact on their contributions to their Thrift 
Savings Plan or other retirement nest eggs that they may have.
    So I think what we are talking about by another freeze is 
again penalizing middle-class Federal workers, postal workers, 
to help solve a budget problem they didn't commit. And, I mean, 
they didn't have--they are not responsible for.
    Mr. Davis. Thank you.
    Mr. Biggs, in your testimony, you mentioned that Federal 
work force pay is comparable to pay in the private sector for 
similar work. However, I would like to ask if you and the other 
witnesses are aware of a recent study by the Bureau of Labor 
Statistics that found that there is actually a 26 percent pay 
gap between Federal workers and their similarly skilled and 
educated private-sector counterparts.
    Mr. Biggs. I am well aware of that study.
    I will say, opinion is divided on Federal pay. On one side 
are the studies done for the Federal pay agent, which find 
these large pay gaps for Federal employees. On the other side 
are effectively three decades of peer-reviewed academic 
research, which finds a very different result using different--
a variety of different methods.
    The problem with the pay-agent result is they try to 
compare jobs to jobs. They say, what does a Federal job pay 
relative to a similar private-sector job? They don't look at 
the people who fill those jobs. The Congressional Budget 
Office, over 20 years ago, along with academic research, has 
shown that for any given job the Federal Government tends to 
place in that job an individual with less experience and less 
education than the private sector would. Once you account for 
that, this 26 percent pay gap simply disappears.
    So there is a reason why those studies from the pay agent 
are not taken particularly seriously by academics who look at 
these issues.
    Mr. Davis. Mr. Chairman, let me ask unanimous consent to 
include in the record the memorandum from the Federal Salary 
Council that highlights the 26 percent pay gap found by the 
Bureau of Labor Statistics.
    Mr. Ross. Without objection, so ordered.
    [The information referred to follows:]

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    Mr. Davis. Thank you. My time is up, and I would yield 
back.
    Mr. Ross. Thank you.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Similarly, I would like to ask unanimous consent that the 
statement of Colleen M. Kelly, the national president of the 
National Treasury Employees Union, also be entered into the 
record.
    Mr. Ross. And, without objection, it is so ordered.
    [The prepared statement of Ms. Kelly follows:]

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    Mr. Ross. That completes our questioning by these Members. 
We have been called to vote. We will recess now.
    I want to thank our panelists for being here today. I 
appreciate your testimony.
    And then we will reconvene right after this series of votes 
to impanel our second panel of witnesses.
    [Recess.]
    Mr. Ross. I want to reconvene the Subcommittee on Federal 
Workforce, U.S. Postal Service and Labor Policy. In the 
interest of time, we are going to go ahead and get started, and 
I would like to recognize one of our first panelists, the 
gentleman from North Carolina, Mr. Coble, for 5 minutes on his 
bill.

 STATEMENT OF HON. HOWARD COBLE, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF NORTH CAROLINA

    Mr. Coble. Chairman Ross, I thank you and your fellow 
members of the subcommittee for having called this hearing.
    Reforming congressional pensions is long overdue. From the 
feedback that I have received over the years, Mr. Chairman, 
this program is unpopular with many taxpayers. When I first ran 
for office in 1984, I told citizens of the Sixth District of 
North Carolina that if elected, I would not participate in the 
congressional pension program--not my most brilliant financial 
decision, I might add--and would work to reform the system.
    North Carolina has a similar system back home, and I have 
rejected that as well, for this reason, Mr. Chairman. I believe 
the taxpayers pay our salary. I don't know that they need to 
pay our pensions. Over the years, I have tried unsuccessfully 
to change the congressional pension program. I have introduced 
bills to abolish the system and to make it equal to the pension 
that all Federal employees receive. All of these past efforts 
died quickly and quietly.
    So for the 112th Congress, I tried a new approach. My bill 
would link to the time of service required before a Member of 
Congress would be eligible for participation in the pension 
program. This legislation, H.R. 2652, extends the time 
required, as is the case now, from 5 years to 12 years before a 
Member is vested in an annuity under the Federal Employees 
Retirement System. In order to avoid any constitutional 
concerns, the bill would only apply to Members who have not yet 
been elected to serve in the Congress.
    Extending the required years of service from 5 to 12 years 
was a logical calculation. It is the equivalent of two terms in 
the Senate or six terms in the House or a combination of each 
of the two.
    It is also important to note, Mr. Chairman, that H.R. 2652 
has no impact on other Federal employees. During the past few 
years, many workers and retirees in America have lost their 
pensions due to bankruptcy or in the stock market. In my view, 
the decision to participate in the congressional pension 
program is a personal one, between the Representative and his 
or her constituents. H.R. 2652 does not interfere with that 
relationship. It simply raises the bar of eligibility for 
Members seeking a Federal annuity.
    I think the bar should be raised, and considering the 
current economy, I think doing so now would be received very 
well by the American taxpayers.
    I am not patting myself on the back. Well, maybe I am, but 
I am patting you on the back as well, Mr. Chairman, you and 
your members, for having called this hearing because many 
people in this town don't want any discussion directed to 
pensions. They want the status quo to remain intact, and I 
think that is probably--in my opinion, that is a mistake. I 
appreciate your consideration for H.R. 2652 and hope that you 
will support this legislation so that we can begin the process 
of improving the congressional pension program.
    Mr. Chairman, in closing, I don't know of any pension 
situation that vests after only 5 years. I think it is overly 
generous, and I think that is one of the reasons why it is so 
unpopular among taxpayers in America, and I thank you again, 
Mr. Chairman.
    [The prepared statement of Hon. Howard Coble follows:]

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    Mr. Ross. Thank you, Mr. Coble, I appreciate your time 
today.
    Now recognize the gentleman from Arkansas' Second 
Congressional District, Mr. Griffin, for 5 minutes.
    Mr. Coble. Mr. Chairman, may I be excused?
    Mr. Ross. Yes, sir.
    Mr. Coble. I am going to head to the airport.
    Mr. Ross. Have a safe trip home, Mr. Coble.
    Mr. Coble. Thank you, sir. Appreciate it.
    Mr. Ross. Yes, sir.

  STATEMENT OF HON. TIM GRIFFIN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF ARKANSAS

    Mr. Griffin. Thank you, Mr. Chairman, thank you to Ranking 
Member Lynch for inviting me to testify on my bill, H.R. 3480, 
the End Pensions in Congress [EPIC] Act.
    My top priority in Congress is to encourage private sector 
job creation, especially through finding ways that the 
government can live within its means. I believe the EPIC Act 
helps to achieve this goal.
    Americans are demanding bold and real change from 
Washington, and I believe my proposal meets that test, and as I 
hear a lot when I am back in my district in Arkansas, it is 
something that my constituents really don't think we will ever 
do.
    On November 18, 2011, I introduced the EPIC Act, which 
would end the congressional pension plan for future Members of 
Congress and recently elected Members who have not yet vested. 
So if you are here like me and you haven't been here 5 years, 
then it would end the pension for you as well as new Members of 
Congress.
    If you have already vested, then you have the opportunity 
to opt in if you want to stay in the system, and then it won't 
impact you. I thought that was only fair for the people who had 
been here for some time, to leave the rules of the game as they 
were when they got here.
    For me, this is not a moral judgment. I personally, like 
Congressman Coble, decided not to participate in the 
congressional pension program. I did that because I ran on it. 
But this is not a moral judgment for me, and I don't ask that 
folks necessarily share my view on whether to take the pension 
in order to support the EPIC Act.
    I would love to provide Members with pensions, but for me, 
it is just a matter of the bottom line, and that is that we 
can't afford it. Our national debt has topped $15 trillion, 
going to $16 trillion, and the Federal Government borrows 42 
cents for every dollar it spends. And I recognize that ending 
congressional pensions alone will not fix our debt problems. In 
fact, it won't even significantly reduce our Federal spending. 
I get that. But I believe it is the gateway, if you will, it is 
the necessary starting point for reforming the Federal 
Employees Retirement Program more broadly, FERS, as we call it.
    Congress must lead by example and cannot credibly tackle 
FERS without first reforming our own federally funded benefits. 
Many of my constituents have told me they support ending 
congressional pensions and pensions for future Federal 
employees because they know those combined, not just focusing 
on the congressional, but those combined will save the American 
taxpayers hundreds of billions of dollars. The private sector 
has already realized that defined-benefit pension plans for 
employees are a thing of the past. This realization came at a 
cost with the failure of the pension programs of some of 
America's biggest companies.
    Take, for example, United Airlines and Delphi corporations. 
Both of these companies' pension programs were turned over to 
the Pension Benefit Guaranty Corporation, and now some 
participants in those programs receive reduced payments.
    If you look at what the private sector gets in terms of 
private-sector employees and their benefits and what we get in 
the Federal Government, what we get is generous by any 
standard. Most private-sector employers do not provide pension 
benefits. Some provide TSPs with a 3 percent match. We get a 5 
percent match.
    The Federal Government is currently projected to contribute 
about $25 billion to FERS in 2012. By 2025, there is a three-
quarter of a trillion dollar deficit. If we do not adjust these 
benefits for future recipients, our retired Federal employees 
may be faced with potential cuts to their benefits. We have 
already seen this in Greece, where the current financial crisis 
has resulted in a 20 percent cut in pensions.
    So the bottom line is this: It is not a choice between 
leaving things the same or changing and reforming the system. 
We either have to reform the system, or eventually benefits are 
going to be cut for people currently relying on them.
    I ask for your support with my bill. I think it is a first 
step toward reforming pensions more broadly. I think it is 
about time we did it. Thank you for having me here today. Look 
forward to working with you on it.
    [The prepared statement of Hon. Tim Griffin follows:]

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    Mr. Ross. Thank you, Mr. Griffin.
    I now recognize the gentleman from Colorado's Sixth 
Congressional District, Mr. Coffman, for 5 minutes.

 STATEMENT OF HON. MIKE COFFMAN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF COLORADO

    Mr. Coffman. Thank you, Mr. Chairman, and Ranking Member 
Lynch.
    I had the honor of serving in both the U.S. Army and the 
Marine Corps. And in the Congress of the United States, I have 
the opportunity to serve on the House Armed Services Committee. 
And I think Admiral Mullen, when he was chairman of the Joint 
Chiefs of Staff, testified before the Congress that the 
greatest threat to U.S. security is our national debt. He 
didn't say it was Al Qaeda. He didn't say it was North Korea or 
Iran. He said it was an internal problem, and that is America's 
national debt.
    We in the Congress are going to have to exercise 
extraordinary leadership in navigating this country out of our 
debt crisis, and in doing so, we are going to have to ask the 
American people to make sacrifices, to include Federal 
employees and even our military, and so it is about leadership.
    And if there is one thing I learned in both the U.S. Army 
and the Marine Corps about leadership, it was leading by 
example. Never ask anyone to do anything that you yourself 
would not be willing to do. And so I believe that the Congress 
of the United States has to lead by example to give us the 
credibility to attack these very difficult issues.
    Last September, I introduced House Resolution 2913, and 
what House Resolution 2913 does is it in effect ends the 
congressional pension program. It does so by honoring all 
accrued benefits that Members have earned under this program, 
but not allowing any more benefits to accrue. Members of 
Congress pay in 1.3 percent of their salary into this pension 
program. It is a factor of 1.7 percent is the benefit they 
accrue for the first 20 years, 1 percent thereafter, and so 
what it would say is that we will honor anything that has been 
accrued up to the effective date of the bill, and for those 
Members who are not vested yet, it takes 5 years to be vested, 
then they would certainly get that 1.3 percent refunded to 
them.
    I believe that the Founding Fathers of this country 
envisioned a Congress where its Members came from other 
professions to serve in the Congress and didn't see the 
Congress as a career in and of itself, where they would be 
reliant upon the taxpayers of the United States to provide them 
a pension for the rest of their lives, and so I feel that this 
also fits in that vision by doing away with the defined benefit 
pension program.
    We would still have a defined contribution pension program 
that is available to all Federal employees, whereby members can 
put up to $17,000 into the defined contribution pension plan 
and have a 5 percent match of their salary that is matched by 
the taxpayers of the United States, and I think this is more in 
line with what our private sector counterparts get all across 
America, and so, again, I think this is about leading by 
example. This is about Congress making a sacrifice to show the 
American people that we have skin in the game with them during 
these challenging economic times. So, Mr. Chairman and Ranking 
Member Lynch, I look forward to your questions.
    [The prepared statement of Hon. Mike Coffman follows:]

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    Mr. Ross. Thank you, Mr. Coffman.
    Mr. Griffin. Mr. Chairman.
    Mr. Ross. Yes, Mr. Griffin.
    Mr. Griffin. I just want to ask permission I be allowed to 
go catch my plane.
    Mr. Ross. Sure.
    Mr. Griffin. Thank you, appreciate it.
    Mr. Ross. Thank you, Mr. Griffin.
    The gentleman from the 17th Congressional District of 
Illinois, Mr. Schilling, you are recognized for 5 minutes.

  STATEMENT OF HON. ROBERT T. SCHILLING, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Schilling. Thank you, Chairman Ross and Ranking Member 
Lynch.
    I appreciate the opportunity to be here today to testify. 
When I came to Congress, there was several different issues to 
discuss, and what I did was I put together a bill 2397, H.R. 
2397. I call it the Congressional Retirement Age Act. It is a 
bipartisan money-saving piece of legislation that provides an 
opportunity for Congress to lead by example.
    And in Congress, we often talk about what we can do today 
to make things better for our kids and our grandkids. To 
achieve this, I think we are going to have to make some tough 
decisions and then some easy decisions. The Congressional 
Retirement Age Act represents a small commonsense step we can 
take toward reevaluating the pensions that the Members of 
Congress are eligible to receive.
    When I ran for office, I made a contract with the people of 
the 17th District of Illinois, and one of the elements of this 
contract was to reject the congressional pension. This was a 
personal decision, rooted in the belief that our Founders did 
not set Congress up to be a career. And I am not here to preach 
to anyone. My goal is to advocate for good policy change 
basically.
    As you know, Members of Congress are eligible to receive a 
pension at the age of 62 after 5 years of Federal service. 
However, if a Member has served for 25 years, they can receive 
it as early as age 50. I can tell you that I have talked to 
many of my constituents about this issue and am hard pressed to 
recall one person that believes Congress should receive a 
pension, let alone as early as age 50, and this especially 
rings true when you consider that the earliest the folks back 
home can retire and receive their Social Security benefits is 
age 65.
    The first bill I introduced as a Member of Congress is H.R. 
2397. It simply ties a Member of Congress' eligibility to 
receive pension benefits to the Social Security retirement age. 
Regardless of whether or not you believe Congress should be 
getting a pension, I hope that we can all agree that Members of 
Congress who do elect to receive the pension benefits should 
not be able to do so before their constituents can access 
Social Security benefits.
    I believe that this is a bipartisan effort with 26 
cosponsors in the House, and then Senator Sherrod Brown of Ohio 
has spearheaded the effort in the Senate. The Congressional 
Retirement Age Act has the support of the National Taxpayers 
Union and the Taxpayers Protection Alliance.
    According to a preliminary CBO staff estimate, this 
legislation would save $10 million to $15 million over 10 
years. This is real money. At a time when we are facing a 
national debt of more than $15 trillion, all the cost savings 
we can get definitely count.
    Again, I would just like to thank you for opportunity to 
speak on this legislation today, and I would also like to thank 
Chairman Ross and Congressman Chaffetz for cosponsoring H.R. 
2397. I would welcome the support of all of the Members in 
Congress on this bill and look forward to working together and 
hope that we can advance the Congressional Retirement Age Act.
    [The prepared statement of Hon. Robert T. Schilling 
follows:]

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    Mr. Ross. Thank you, Mr. Schilling.
    Mr. Schilling. And I also have a----
    Mr. Ross. A plane to catch?
    Mr. Schilling. Yeah.
    Mr. Ross. Have a safe trip.
    Mr. Schilling. Thank you very much. Have a great one.
    Mr. Ross. Thank you for taking the time.
    The gentleman from Florida's Fifth Congressional District, 
my colleague Mr. Nugent, you are recognized for 5 minutes.

   STATEMENT OF HON. RICHARD B. NUGENT, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Nugent. Well, first of all, I would like to thank the 
committee and particularly you, Chairman Ross, and Ranking 
Member Lynch for allowing us to speak here today.
    I came to D.C. in 2010 as a new Member at orientation week 
like everybody else, and I met with the benefits office to talk 
about the health care benefits, the Thrift Savings Plan, and 
other pension plans. During that meeting, I turned down the 
health insurance plan. I didn't think that I should have better 
benefits than anybody at the Sheriff's Office where I just 
retired. I did that because I believe I am here representing 
the people of the Fifth District, Congressional District of 
Florida. I am not here to enrich myself but, rather, serve my 
community, my neighbors, and my Nation.
    That is why to this day, my wife and I buy health 
insurance, which we pay for out of our own pocket. This 
decision costs us over $10,000 a year.
    During that meeting, I also tried to opt out of the 
congressional pension fund, FERS, for the same reason. I also 
asked if there was a way to contribute to the Thrift Savings 
Plan without getting a government match for my investment. 
Frankly, I was shocked when the benefits representative told me 
that I was legally required to accept a congressional pension 
as long as I was here for at least 5 years. Similarly, I 
couldn't contribute to the TSP without receiving a Federal 
match of up to 5 percent. Even more, if I didn't put a single 
penny, not a single penny into the TSP, the government would 
still contribute to the match of 1 percent of my salary without 
any cost to me.
    Once I was sworn in, I dug into this issue further to try 
to figure out why, exactly, I was legally prohibited from 
choosing not to participate in the Federal Employee Retirement 
System. What I found out was until 2004, Members of Congress 
could opt out to decline coverage under the Federal Employee 
Retirement System. In fact, to this day, anybody elected to 
this body before September 30, 2003 continues to be able to 
decline the Federal Employee Retirement System coverage. It is 
only Members of the House of Representatives, not even 
Senators, entering office of September 30, 2003 who are legally 
obligated to participate in the Federal Employee Retirement 
System. Why are Senators allowed to opt out and not 
Representatives? Why are folks elected before September 30, 
2003 allowed to opt out at this time but not after that date? 
And, frankly, I really don't know.
    What I do know is this, I was a cop for 38 years, and for 
the last 10 of those years, I was sheriff of Hernando County, 
Florida. That was my career, and what I am doing here in the 
House of Representatives is serving my country. As I see it, 
you get a pension for your career, not for your service. 
Congress is not and will never be my career. That is why I 
introduced H.R. 981, Congress is Not a Career Act.
    This bill would simply put Members of Congress like me, 
elected to the House of Representatives after September 2003, 
on the same footing as those folks that were here longer than 
us. I want to make it clear that Congress is Not a Career Act 
does not require anybody to give up a pension. Additionally, 
supporting my bill does not commit you to opting out of the 
Federal Employee Retirement fund. It simply says that you will 
have a choice.
    H.R. 981 gives Members the choice of participating in the 
Thrift Savings Plan without receiving the Federal match. Again, 
the bill doesn't require anybody to do something nor does it 
prohibit anybody from participating in anything. It simply says 
that Members should have the option to invest in their future 
without having the taxpayers contribute to that investment.
    As you all may know, all three of my sons are active duty 
members of the U.S. Army. They and their brothers and sisters 
of arms also have a TSP program that they can contribute to. 
However, the majority of service members do not receive any 
type, any type of Federal match for their TSP contribution. I 
can't fathom receiving a TSP match while my kids and other 
service members fighting for our freedoms don't get a match of 
their own.
    The Congress is Not a Career Act is not about denying 
anybody benefits they are rightly entitled to. It is about 
allowing those of us who don't view this institution as a 
career and don't think we should get a pension for serving our 
country, who don't think we should be enriching ourselves while 
sitting in the People's House the ability to opt out of the 
Federal Employee Retirement System and the Federal match to our 
Thrift Savings Plan. I was amazed that you become vested in the 
Federal system after simply 5 years.
    With that, I really want to thank this committee for 
listening to all of us today in regards to how we can 
restructure and bring sanity back to the Federal Government. 
When we are at an all-time low, it is about us acting to 
restore faith in this body that we so proudly serve, the public 
of this United States, and with that, I yield back the balance 
of my time.
    [The prepared statement of Hon. Richard B. Nugent follows:]

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    Mr. Ross. Thank you, Mr. Nugent.
    I now recognize the gentleman from Illinois's 10th 
Congressional District, Mr. Dold, for 5 minutes.

STATEMENT OF HON. ROBERT J. DOLD, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF ILLINOIS

    Mr. Dold. I certainly want to thank the committee.
    And Chairman Ross, thank you for holding the hearing.
    Ranking Member Lynch, thank you.
    I am here today to talk a little bit about the 
Congressional Integrity and Pension Forfeiture Act, which is 
really an expansion of a law that was signed the Honest 
Leadership and Open Government Act in 2007, and while you have 
a copy of my statement, what I thought I would do is just 
summarize the gist of it and why we are putting forth this 
bipartisan piece of legislation.
    Right now, you have the ability to, if you are a felon, to 
receive a pension from the taxpayers of the United States. 
Congressional Research Service has said over the past 50 years 
that we have had Members of Congress that have been convicted 
of at least 16 different felonies, including receiving illegal 
gratuities, bribery, conspiracy, extortion, income tax evasion, 
embezzlement, theft of public funds, and yet these individuals 
would be eligible to receive a pension, at least until 2007, 
and that law became the law of the land.
    Unfortunately, it only covers Members of Congress while 
currently serving. We have had other instances and other 
instances more recently in the State of Illinois where we have 
had former Members of Congress that have gone on to hold 
elective office and become--and I believe should be held to a 
higher standard by their constituents that have violated the 
law and become felons, and yet they are still eligible to 
receive their pensions from the American taxpayer. I think this 
is wrong.
    I think that if you violate a public trust and commit a 
felony under the certain areas that have been provided, 
expanded, that you should forfeit that pension. Right now, we 
are talking about not a big sum of money--it is about $800,000 
a year that if this law were to have been enacted would not 
have to be paid out to former Members of Congress.
    I think this is a commonsense piece of legislation, one 
that should pass the House by 435 votes and pass the Senate 
unanimously.
    We continually hear about how Congress is passing laws that 
are not holding themselves up to that law first and foremost, 
and I hear that back in my district regularly, and I am 
confident that most of you do as well. We need to be held, I 
think, to a higher standard. And if we violate that public 
trust, we should absolutely have skin in the game to say we 
will not be able to receive taxpayer funded pensions for the 
remainder of our lives.
    Now, I recognize that there is some misconceptions about 
what the pensions are out there for Members of Congress, that 
you vest in 5 years and that it is 1.7 percent, so it is not a 
huge sum of money, but what it does do is it lets the American 
public know that we, indeed, in this body will hold ourselves 
to a higher standard.
    This is an expansion of the already existing Honest 
Leadership and Open Government Act. I think it makes a lot of 
sense. It is one that I think we should act on actually 
immediately, and I don't want to belabor the point, so I am 
happy to answer your questions, and thank you again for the 
opportunity to join you.
    [The prepared statement of Hon. Robert J. Dold follows:]

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    Mr. Ross. Thank you, Mr. Dold, and in the interest of time 
and pursuant to a previous agreement, we will not be asking 
questions of the Members, but I believe, Mr. Connolly, you 
would like to make a statement?
    Mr. Connolly. No, Mr. Chairman. Well, thank you. I just 
wanted to participate.
    I am very interested in hearing our colleagues and 
certainly will take their proposals under advisement. I 
continue to believe on the broader point in terms of public 
service, you know, we have fine, upstanding civil servants who 
serve this country, whether they wear the uniform or they 
don't. And I would hope that we here in Congress, as we talk 
about benefits and compensation, provide the dignity and 
respect those civil servants have earned and that we make sure 
that we take care to ensure that their compensation is fair and 
reflects that dignity and respect.
    And with that, I yield back, Mr. Chairman.
    Mr. Ross. Thank you, Mr. Connolly.
    I want to thank the Members for appearing today and thank 
you for your efforts and look forward to working with you on 
these pieces of legislation. This subcommittee now stands 
adjourned. Thank you.
    [Whereupon, at 11:25 a.m., the subcommittee was adjourned.]
    [The prepared statements of Hon. Elijah E. Cummings and 
Hon. Gerald E. Connolly and additional information submitted 
for the hearing record follow:]

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