[Congressional Record Volume 142, Number 50 (Thursday, April 18, 1996)]
[Senate]
[Pages S3630-S3632]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FORD (for himself, Mr. Coats, Mr. Lugar, Mrs. Hutchison, 
        and Mr. McConnell):
  S. 1686. A bill to provide for early deferred annuities under chapter 
83 of Title 5, United States Code, for certain former Department of 
Defense employees who are separated from service by reason of certain 
defense base closures, and for other purposes; to the Committee on 
Governmental Affairs.


        defense privatization and worker protection legislation

  Mr. FORD. Mr. President, this country has undergone tremendous 
changes over the last few years as a result of military downsizing and 
base closures. Making the transition has proved very difficult to 
communities all across the country and today, in an effort to ease that 
transition, I am introducing legislation with original cosponsors 
Senators Coats, Lugar, Hutchinson, and McConnell directed at specific 
problems we've seen with privatization of these bases.
  I know many of my colleagues are aware of the job loss that results 
from downsizing. That is because many jobs have become obsolete or 
redundant. But, there's also a whole other category of affected 
employees, whose skills and expertise are still needed by the military 
in the same roles, but in new privatized facilities. Under the 1995 
Base Closure and Realignment Commission (BRAC), these employees are 
still eligible to work for the Federal Government and receive a Federal 
pension.
  However, this would defeat one of our major goals in privatization--
to save the taxpayer money. The idea under privatization is to continue 
utilizing these workers' much-needed skills, but in the private sector, 
at a reduced cost to the taxpayer. Yet, by sending these workers out 
into the private sector, we are asking a huge portion of them to give 
up their retirement benefits.
  These workers are in a catch-22. If they move into the privatized 
facilities, where they would be performing the same mission and jobs as 
they had as Federal employees, they lose hard-earned pensions. If they 
remain in the Federal Government, they could face lower paying 
positions, while the community loses those workers altogether.
  With little incentive to move into the private sector, these 
employees could create a vacuum that private contractors are unable to 
fill. Under that scenario everyone loses: Highly skilled workers will 
be underemployed and underpaid. Private contractors won't be able to 
meet the challenge of taking over government facilities. And the 
taxpayer will foot the $390 million cost-avoidance bill the Navy 
estimates the government faces if they have to keep these workers on 
the payroll and deal with the failure of privatization.
  This problem was brought to my attention when the Louisville Naval 
Ordnance Station began the process of privatization, where unlike other 
base closings, moving the work would be a far greater cost than 
privatizing. But, it is a problem faced by workers in the same 
situation all across the country.
  That is why I am introducing legislation to provide a deferred 
annuity for those Department of Defense employees who are targeted for 
privatization, but stand to lose their benefits under the Civil Service 
Retirement System (CSRS). With this legislation, we can make good on 
the promise our Government made with these employees when they entered 
Government Service, and assure private contractors that a skilled work 
force will be available to them when they assume control of former 
Defense Department facilities.

  Most Federal employees hired before 1984 participate in the CSRS, 
while workers hired after 1984 belong to the Federal Employees 
Retirement System (FERS). Unlike CSRS, FERS is a portable plan, 
allowing a Federal employee to move between Federal and non-federal 
employment, without significantly penalizing the accrual of Federal 
benefits. Unfortunately, CSRS participants do not enjoy this same 
flexibility, because CSRS is a single component defined benefit plan.
  Because CSRS-covered employees are forced to separate from Federal 
employment before they're eligible for an immediate annuity, they see 
their federal retirement benefits lose considerable value. And, 
employees who withdraw their retirement contribution not only forfeit 
all benefits, but also cost the government money up front.
  I think we can all agree that privatization is a key component of 
reorganizing our defense priorities in this post-cold-war era of 
military downsizing. But, I believe my legislation is critical to 
ensuring that privatization works.
  It can accomplish these goals by providing a deferred annuity with 
indexing pension benefits for CSRS Department of Defense employees. 
Their positions will be immediately transferred to contractors assuming 
the workload designated for privatization. In this way we can provide a 
very restricted, but common sense way of keeping our military 
infrastructure running smoothly as we embark on military 
privatization's maiden voyage.
  And perhaps equally important, my legislation sends a clear message 
to this work force that their loyalty and dedication did not go 
unnoticed. These workers provided our men and women in uniform with the 
finest maintenance, supply and logistics system in the world. The best 
way we can repay this commitment to excellence is to uphold the Federal 
Government's end of the contract made when these workers first entered 
Government Service. That's in the workers' best interest and in the 
best interest of the Nation.
  I would also like at this time to thank Mrs. Carolyn Merk of the 
Congressional Research Service for her outstanding professional work in 
helping craft this legislation that we're introducing today.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1686

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EARLY DEFERRED ANNUITIES OF CERTAIN FORMER 
                   EMPLOYEES OF THE DEPARTMENT OF DEFENSE.

       (a) Definitions.--For purposes of this section--
       (1) the term ``Civil Service Retirement System'' means the 
     retirement system under subchapter III of chapter 83 of title 
     5, United States Code;
       (2) the term ``defense contractor'' means any entity that--
       (A) contracts with the Department of Defense to perform a 
     function previously performed by Department of Defense 
     employees;
       (B) performs that function at the same installation at 
     which such function was previously performed by Department of 
     Defense employees or in the vicinity of that installation; 
     and
       (C) is the employer of one or more transferred employees;
       (3) the term ``early deferred retirement age'' means the 
     first age at which a transferred employee would have been 
     eligible for immediate retirement under subsection (a)

[[Page S3631]]

     or (b) of section 8336 of title 5, United States Code, if 
     such transferred employee had remained an employee within the 
     meaning of section 8331(1) of such title continuously until 
     attaining such age;
       (4) the term ``severance pay'' means severance pay payable 
     under section 5595 of title 5, United States Code;
       (5) the term ``separation pay'' means separation pay 
     payable under section 5597 of title 5, United States Code; 
     and
       (6) the term ``transferred employee'' means a former 
     employee of the Department of Defense (other than a temporary 
     employee) who--
       (A) while employed by the Department of Defense at a 
     military installation to be closed or realigned pursuant to 
     recommendations of the Defense Base Closure and Realignment 
     Commission that were approved by the President in 1995 under 
     section 2903(e) of the Defense Base Closure and Realignment 
     Act of 1990 (title XXIX of Public Law 101-510; 10 U.S.C. 2687 
     note) and while covered under the Civil Service Retirement 
     System, was separated from Federal service in a reduction-in-
     force resulting from conversion from performance of a 
     function by Department of Defense employees at that military 
     installation to performance of that function by a defense 
     contractor at that installation or in the vicinity of that 
     installation;
       (B) is employed by the defense contractor within 60 days 
     following such separation to perform substantially the same 
     function performed before the separation;
       (C) remains employed by the defense contractor or a 
     successor defense contractor, or subcontractor of a defense 
     contractor until attaining early deferred retirement age or 
     is involuntarily separated from employment by the defense 
     contractor before attaining such age for reasons other than 
     misconduct;
       (D) at the time separated from Federal service, was not 
     eligible for an immediate annuity under the Civil Service 
     Retirement System;
       (E) does not withdraw retirement contributions under 
     section 8342 of title 5, United States Code; and
       (F)(i) has not received separation pay or severance pay due 
     to a separation described in subparagraph (A); or
       (ii) has repaid the full amount of such pay with interest 
     (as determined by the Office of Personnel Management) to the 
     Department of Defense before attaining early deferred 
     retirement age.
       (b) Retirement Benefits of Transferred Employees.--
     Notwithstanding the age requirement under section 8338(a) of 
     title 5, United States Code, payment of a deferred annuity 
     for which a transferred employee is eligible under that 
     section shall commence on the first day of the first month 
     that begins after the date on which the transferred employee 
     attains early deferred retirement age.
       (c) Computation of Average Pay.--(1)(A) This paragraph 
     applies to the computation of the annuity of a transferred 
     employee who retires under this section who immediately 
     before separation from Federal service as described under 
     subsection (a)(6)(A) was employed in a position classified 
     under the General Schedule.
       (B) Subject to subparagraph (C), in the computation of an 
     annuity referred to under subparagraph (A) for a transferred 
     employee, the average pay of the transferred employee under 
     section 8331(4) of title 5, United States Code, shall be 
     adjusted at the same time and by the same percentage that 
     rates of basic pay are increased under section 5303 of title 
     5, United States Code, during the period beginning on the 
     date on which the transferred employee separates from Federal 
     service as described under subsection (a)(6)(A) and ending on 
     the date on which the transferred employee attains early 
     deferred retirement age.
       (C) Average pay as adjusted by this paragraph may not 
     exceed the limitation on maximum pay, final pay, or average 
     pay (as applicable) under section 8340(g)(1) (A) or (B) of 
     title 5, United States Code.
       (2)(A) This paragraph applies to the compensation of an 
     annuity of a transferred employee who retires in accordance 
     with this section who immediately before separation from 
     Federal service as described under subsection (a)(6)(A) was a 
     prevailing rate employee as defined under section 5342(2) of 
     title 5, United States Code.
       (B) In the computation of an annuity referred to under 
     subparagraph (A) for a transferred employee, average pay 
     under section 8331(4) of title 5, United States Code, shall 
     be adjusted at the same time and by the same percentage that 
     pay rates for positions that are in the same area as, and are 
     comparable to, the last position the transferred employee 
     held as a prevailing rate employee, are increased under 
     section 5343(a) of such title during the period beginning on 
     the date on which the transferred employee separates from 
     Federal service as described under subsection (a)(6)(A) and 
     ending on the date on which the transferred employee attains 
     early deferred retirement age.
       (d) Service for a Defense Contractor Relating to Creditable 
     Service and Health Insurance.--(1) Service performed by a 
     transferred employee for a defense contractor after 
     separation from Federal service as described under subsection 
     (a)(6)(A) shall not be treated as creditable service for 
     purposes of computing the amount of an early deferred annuity 
     in accordance with this section.
       (2) Nothing in this section shall be construed to require 
     employee or agency contributions under chapter 89 of title 5, 
     United States Code, for any period of service performed by a 
     transferred employee for a defense contractor after 
     separation from Federal service as described under subsection 
     (a)(6)(A).
       (e) Receipt of Benefits While Employed by a Defense 
     Contractor.--A transferred employee may commence receipt of 
     an early deferred annuity in accordance with this section 
     while continuing to work for a defense contractor.
       (f) Lump-Sum Credit Payment.--If a transferred employee 
     dies before attaining early deferred retirement age, such 
     employee shall be treated as a former employee who dies not 
     retired for purposes of payment of the lump-sum credit under 
     section 8342(d) of title 5, United States Code.
       (g) Implementing Regulations.--The Office of Personnel 
     Management shall promulgate regulations to carry out the 
     provisions of this section.
       (h) Effective Date.--This section shall take effect on 
     August 1, 1996, and shall apply to transferred employees 
     separated from Federal service on or after that date.
                                                                    ____


                   BRAC Privatization: The CSRS Issue


                                 issue

       The 1995 Base Realignment and Closure (BRAC) Commission 
     recommended the privatization of certain military facilities. 
     The President has directed the Air Force to privatize two Air 
     Force logistic centers. For privatization to succeed, the 
     maintenance of an experienced workforce is critical. 
     Retirement benefits have become recognized as a major 
     impediment to the privatization of the Louisville and 
     Indianapolis Navy facilities and other Department of Defense 
     (DOD) facilities.
       Without legislation to protect their retirement benefits 
     many employees will--and are--transferring to other Federal 
     positions to maintain and protect their retirement benefits 
     under the Civil Service Retirement System (CSRS).
       If many key employees transfer within the Government rather 
     than work for a private sector contractor, privatization 
     savings to the Government may not be fully realized. The 
     Department of the Navy estimates that privatization of 
     Louisville and Indianapolis would provide up to $390 million 
     in ``cost avoidance'' to the Government. Unlike other Base 
     closings, the cost to the Federal government to close and 
     move the work at Louisville and Indianapolis is far greater 
     than the cost of privatization. The retention of the Federal 
     employees at these facilities is essential to the private 
     contractor.


                               background

       The 1995 BRAC Commission directed privatization of two Navy 
     facilities with a large federal workforce, the Naval Surface 
     Warfare Center, Louisville, Kentucky and the Naval Surface 
     Warfare Center, Indianapolis, Indiana. In addition, President 
     Clinton directed the Air Force to try and privatize two Air 
     Force logistic centers, one in Texas and one in California 
     which were ordered to be closed by the 1995 BRAC.
       These Federal employees are different from other employees 
     adversely affected by downsizing. The key difference is that 
     these employees are not being separated because their 
     services are no longer needed or because the work they 
     accomplished is redundant or unnecessary. Under the BRAC 
     ``Close and Move'' scenario, these employees would have been 
     eligible to continue their Federal employment (and qualify 
     for an annuity) at another federal installation. These 
     employees are expected to continue accomplishing the same 
     mission as before, but they will be working as private sector 
     employees.
       Most Federal employees hired before 1984 currently 
     participate in the CSRS. Those workers hired after 1984 
     participate in the Federal Employees Retirement System 
     (FERS). FERS is different than CSRS because it is a portable 
     plan that allows a Federal employee to move between Federal 
     and non-federal employment. In doing so, the accrual of 
     Federal benefits is not significantly penalized.
       However, employees under CSRS have no portability because 
     it is a single component defined benefit plan. Therefore, 
     when CSRS-COVERED workers are forced to separate from Federal 
     employment before they are eligible for an immediate annuity, 
     their retirement benefits lose considerable value. Employees 
     who lose their Federal position and withdraw their retirement 
     contribution early will forfeit all benefits from the Federal 
     government and thereby are not eligible for a pension.
       Employees with the most experience tend to be covered under 
     CSRS. These are the employees the contractor taking over the 
     work at a government facility considers to be very valuable. 
     For example, 46% of the employees at the Louisville Naval 
     Surface Warfare Center are covered by CSRS and are not 
     eligible for retirement. Many of these employees, and those 
     in Indiana, Texas and California who are highly skilled, are 
     seeking to transfer to other Federal positions. Some are even 
     accepting lower paid positions within DOD so they may 
     maintain their CSRS retirement benefits. As a result, there 
     is little incentive for CSRS employees to accept positions 
     with the private contractor. Therefore, the privatization of 
     Federal facilities could fail at a significant cost to the 
     Government and the U.S. taxpayers.


                          Legislative remedy:

       To rectify the CSRS issue, the attached draft legislation 
     proposes to index a deferred

[[Page S3632]]

     annuity for certain DOD CSRS Employees. The legislation would 
     address the issue of CSRS employees receiving a retirement 
     benefit by:
       Indexing the average pay on which the annuity is computed, 
     and
       Allowing a Federal deferred annuity to be paid to specific 
     CSRS employees at the individuals optional retirement age.
       The legislation will apply only to Transferred Employees of 
     the Department of Defense. A Transferred Employee is one 
     whose job is privatized pursuant to a 1995 decision of the 
     BRAC Commission and pursuant to a President directive 
     privatizing a base to be closed by the 1995 BRAC. This 
     indexedial deferred annuity will be available only to 
     individuals participating in CSRS, and not to those 
     participating in FERS. The proposed legislation will apply to 
     only those CSRS employees who are ineligible to retire and 
     who accept work with the private contractor. They will be 
     ineligible for severance pay.
       Reasons for legislation:
       At this time there are no administrative remedies.
       Treats employees equitably and thus stabilizes the work 
     force for privatization.
                                 ______