[Senate Report 106-344]
[From the U.S. Government Publishing Office]



106th Congress 
 2d Session                      SENATE                          Report
                                                                106-344
_______________________________________________________________________



                                                       Calendar No. 685



 
                      LONG-TERM CARE SECURITY ACT

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNTED STATES SENATE

                              to accompany

                                S. 2420

TO AMEND TITLE 5, UNITED STATES CODE, TO PROVIDE FOR THE ESTABLISHMENT 
OF A PROGRAM UNDER WHICH LONG-TERM CARE INSURANCE IS MADE AVAILABLE TO 
FEDERAL EMPLOYEES, MEMBERS OF THE UNIFORMED SERVICES, AND CIVILIAN AND 
               MILITARY RETIREES, AND FOR OTHER PURPOSES




                 July 14, 2000.--Ordered to be printed
                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE VOINOVICH, Ohio               RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
                      Dan G. Blair, Senior Counsel
                      Michael L. Loesch, Counsel,
      International Security, Proliferation, and Federal Services 
                              Subcommittee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Lawrence B. Novey, Minority Counsel
           Nanci E. Langley, Minority Deputy Staff Director,
      International Security, Proliferation, and Federal Services 
                              Subcommittee
                     Darla D. Cassell, Chief Clerk
                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Purpose.........................................................17
 II. Background......................................................17
III. Legislative History.............................................22
 IV. Section-by-Section Analysis.....................................23
  V. Regulatory Impact Statement.....................................28
 VI. CBO Cost Estimate...............................................29
VII. Executive Communications........................................37
VIII.Changes to Existing Law.........................................38

                                                       Calendar No. 685
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-344

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




                      LONG-TERM CARE SECURITY ACT

                                _______
                                

                 July 14, 2000.--Ordered to be printed

                                _______
                                

Mr. Thompson, from the Committee on Governmental Affairs, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 2420]

    The Committee on Governmental Affairs, to which was 
referred the bill (S. 2420) to amend title 5, United States 
Code, to provide for the establishment of a program under which 
long-term care insurance is made available to Federal 
employees, members of the uniformed services, and civilian and 
military retirees, and for other purposes, having considered 
the same, reports favorably thereon with an amendment in the 
nature of a substitute and recommends by voice vote that the 
bill, as amended, do pass.
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

               TITLE I--FEDERAL LONG-TERM CARE INSURANCE

SEC. 1001. SHORT TITLE.

    This title may be cited as the ``Long-Term Care Security Act''.

SEC. 1002. LONG-TERM CARE INSURANCE.

    (a) In General.--Subpart G of part III of title 5, United States 
Code, is amended by adding at the end the following:

                 ``CHAPTER 90--LONG-TERM CARE INSURANCE

``Sec. 
``9001. Definitions.
``9002. Availability of insurance.
``9003. Contracting authority.
``9004. Financing.
``9005. Preemption.
``9006. Studies, reports, and audits.
``9007. Jurisdiction of courts.
``9008. Administrative functions.
``9009. Cost accounting standards.

``Sec. 9001. Definitions

    For purposes of this chapter:
          ``(1) Employee.--The term `employee' means--
                  ``(A) an employee as defined by section 8901(1); and
                  ``(B) an individual described in section 2105(e), but 
                does not include an individual employed by the 
                government of the District of Columbia.
          ``(2) Annuitant.--The term `annuitant' has the meaning such 
        term would have under paragraph (3) of section 8901 if, for 
        purposes of such paragraph, the term `employee' were considered 
        to have the meaning given to it under paragraph (1) of this 
        subsection.
          ``(3) Member of the uniformed services.--The term `member of 
        the uniformed services' means a member of the uniformed 
        services, other than a retired member of the uniformed 
        services, who is--
                  ``(A) on active duty or full-time National Guard duty 
                for a period of more than 30 days; and
                  ``(B) a member of the Selected Reserve.
          ``(4) Retired member of the uniformed services.--The term 
        `retired member of the uniformed services' means a member or 
        former member of the uniformed services entitled to retired or 
        retainer pay, including a member or former member retired under 
        chapter 1223 of title 10 who has attained the age of 60 and who 
        satisfies such eligibility requirements as the Office of 
        Personnel Management prescribes under section 9008.
          ``(5) Qualified relative.--The term `qualified relative' 
        means each of the following:
                  ``(A) The spouse of an individual described in 
                paragraph (1), (2), (3), or (4).
                  ``(B) A parent, stepparent, or parent-in-law of an 
                individual described in paragraph (1) or (3).
                  ``(C) A child (including an adopted child, a 
                stepchild, or, to the extent the Office of Personnel 
                Management by regulation provides, a foster child) of 
                an individual described in paragraph (1), (2), (3), or 
                (4), if such child is at least 18 years of age.
                  ``(D) An individual having such other relationship to 
                an individual described in paragraph (1), (2), (3), or 
                (4) as the Office may by regulation prescribe.
          ``(6) Eligible individual.--The term `eligible individual' 
        refers to an individual described in paragraph (1), (2), (3), 
        (4), or (5).
          ``(7) Qualified carrier.--The term `qualified carrier' means 
        an insurance company (or consortium of insurance companies) 
        that is licensed to issue long-term care insurance in all 
        States, taking any subsidiaries of such a company into account 
        (and, in the case of a consortium, considering the member 
        companies and any subsidiaries thereof, collectively).
          ``(8) State.--The term `State' includes the District of 
        Columbia.
          ``(9) Qualified long-term care insurance contract.--The term 
        `qualified long-term care insurance contract' has the meaning 
        given such term by section 7702B of the Internal Revenue Code 
        of 1986.
          ``(10) Appropriate secretary.--The term `appropriate 
        Secretary' means--
                  ``(A) except as otherwise provided in this paragraph, 
                the Secretary of Defense;
                  ``(B) with respect to the Coast Guard when it is not 
                operating as a service of the Navy, the Secretary of 
                Transportation;
                  ``(C) with respect to the commissioned corps of the 
                National Oceanic and Atmospheric Administration, the 
                Secretary of Commerce; and
                  ``(D) with respect to the commissioned corps of the 
                Public Health Service, the Secretary of Health and 
                Human Services.

``Sec. 9002. Availability of insurance

    ``(a) In General.--The Office of Personnel Management shall 
establish and, in consultation with the appropriate Secretaries, 
administer a program through which an individual described in paragraph 
(1), (2), (3), (4), or (5) of section 9001 may obtain long-term care 
insurance coverage under this chapter for such individual.
    ``(b) General Requirements.--Long-term care insurance may not be 
offered under this chapter unless--
          ``(1) the only coverage provided is under qualified long-term 
        care insurance contracts; and
          ``(2) each insurance contract under which any such coverage 
        is provided is issued by a qualified carrier.
    ``(c) Documentation Requirement.--As a condition for obtaining 
long-term care insurance coverage under this chapter based on one's 
status as a qualified relative, an applicant shall provide 
documentation to demonstrate the relationship, as prescribed by the 
Office.
    ``(d) Underwriting Standards.--
          ``(1) Disqualifying condition.--Nothing in this chapter shall 
        be considered to require that long-term care insurance coverage 
        be made available in the case of any individual who would be 
        eligible for benefits immediately.
          ``(2) Spousal parity.--For the purpose of underwriting 
        standards, a spouse of an individual described in paragraph 
        (1), (2), (3), or (4) of section 9001 shall, as nearly as 
        practicable, be treated like that individual.
          ``(3) Guaranteed issue.--Nothing in this chapter shall be 
        considered to require that long-term care insurance coverage be 
        guaranteed to an eligible individual.
          ``(4) Requirement that contract be fully insured.--In 
        addition to the requirements otherwise applicable under section 
        9001(9), in order to be considered a qualified long-term care 
        insurance contract for purposes of this chapter, a contract 
        must be fully insured, whether through reinsurance with other 
        companies or otherwise.
          ``(5) Higher standards allowable.--Nothing in this chapter 
        shall, in the case of an individual applying for long-term care 
        insurance coverage under this chapter after the expiration of 
        such individual's first opportunity to enroll, preclude the 
        application of underwriting standards more stringent than those 
        that would have applied if that opportunity had not yet 
        expired.
    ``(e) Guaranteed Renewability.--The benefits and coverage made 
available to eligible individuals under any insurance contract under 
this chapter shall be guaranteed renewable (as defined by section 7A(2) 
of the model regulations described in section 7702B(g)(2) of the 
Internal Revenue Code of 1986), including the right to have insurance 
remain in effect so long as premiums continue to be timely made. 
However, the authority to revise premiums under this chapter shall be 
available only on a class basis and only to the extent otherwise 
allowable under section 9003(b).

``Sec. 9003. Contracting authority

    ``(a) In General.--The Office of Personnel Management shall, 
without regard to section 5 of title 41 or any other statute requiring 
competitive bidding, contract with one or more qualified carriers for a 
policy or policies of long-term care insurance. The Office shall ensure 
that each resulting contract (hereafter in this chapter referred to as 
a `master contract') is awarded on the basis of contractor 
qualifications, price, and reasonable competition.
    ``(b) Terms and Conditions.--
          ``(1) In general.--Each master contract under this chapter 
        shall contain--
                  ``(A) a detailed statement of the benefits offered 
                (including any maximums, limitations, exclusions, and 
                other definitions of benefits);
                  ``(B) the premiums charged (including any limitations 
                or other conditions on their subsequent adjustment);
                  ``(C) the terms of the enrollment period; and
                  ``(D) such other terms and conditions as may be 
                mutually agreed to by the Office and the carrier 
                involved, consistent with the requirements of this 
                chapter.
          ``(2) Premiums.--Premiums charged under each master contract 
        entered into under this section shall reasonably and equitably 
        reflect the cost of the benefits provided, as determined by the 
        Office. The premiums shall not be adjusted during the term of 
        the contract unless mutually agreed to by the Office and the 
        carrier.
          ``(3) Nonrenewability.--Master contracts under this chapter 
        may not be made automatically renewable.
    ``(c) Payment of Required Benefits; Dispute Resolution.--
          ``(1) In general.--Each master contract under this chapter 
        shall require the carrier to agree--
                  ``(A) to provide payments or benefits to an eligible 
                individual if such individual is entitled thereto under 
                the terms of the contract; and
                  ``(B) with respect to disputes regarding claims for 
                payments or benefits under the terms of the contract--
                          ``(i) to establish internal procedures 
                        designed to expeditiously resolve such 
                        disputes; and
                          ``(ii) to establish, for disputes not 
                        resolved through procedures under clause (i), 
                        procedures for one or more alternative means of 
                        dispute resolution involving independent third-
                        party review under appropriate circumstances by 
                        entities mutually acceptable to the Office and 
                        the carrier.
          ``(2) Eligibility.--A carrier's determination as to whether 
        or not a particular individual is eligible to obtain long-term 
        care insurance coverage under this chapter shall be subject to 
        review only to the extent and in the manner provided in the 
        applicable master contract.
          ``(3) Other claims.--For purposes of applying the Contract 
        Disputes Act of 1978 to disputes arising under this chapter 
        between a carrier and the Office--
                  ``(A) the agency board having jurisdiction to decide 
                an appeal relative to such a dispute shall be such 
                board of contract appeals as the Director of the Office 
                of Personnel Management shall specify in writing (after 
                appropriate arrangements, as described in section 8(c) 
                of such Act); and
                  ``(B) the district courts of the United States shall 
                have original jurisdiction, concurrent with the United 
                States Court of Federal Claims, of any action described 
                in section 10(a)(1) of such Act relative to such a 
                dispute.
          ``(4) Rule of construction.--Nothing in this chapter shall be 
        considered to grant authority for the Office or a third-party 
        reviewer to change the terms of any contract under this 
        chapter.
    ``(d) Duration.--
          ``(1) In general.--Each master contract under this chapter 
        shall be for a term of 7 years, unless terminated earlier by 
        the Office in accordance with the terms of such contract. 
        However, the rights and responsibilities of the enrolled 
        individual, the insurer, and the Office (or duly designated 
        third-party administrator) under such contract shall continue 
        with respect to such individual until the termination of 
        coverage of the enrolled individual or the effective date of a 
        successor contract thereto.
          ``(2) Exception.--
                  ``(A) Shorter duration.--In the case of a master 
                contract entered into before the end of the period 
                described in subparagraph (B), paragraph (1) shall be 
                applied by substituting `ending on the last day of the 
                7-year period described in paragraph (2)(B)' for `of 7 
                years'.
                  ``(B) Definition.--The period described in this 
                subparagraph is the 7-year period beginning on the 
                earliest date as of which any long-term care insurance 
                coverage under this chapter becomes effective.
          ``(3) Congressional notification.--No later than 180 days 
        after receiving the second report required under section 
        9006(c), the President (or his designee) shall submit to the 
        Committees on Government Reform and on Armed Services of the 
        House of Representatives and the Committees on Governmental 
        Affairs and on Armed Services of the Senate, a written 
        recommendation as to whether the program under this chapter 
        should be continued without modification, terminated, or 
        restructured. During the 180-day period following the date on 
        which the President (or his designee) submits the 
        recommendation required under the preceding sentence, the 
        Office of Personnel Management may not take any steps to rebid 
        or otherwise contract for any coverage to be available at any 
        time following the expiration of the 7-year period described in 
        paragraph (2)(B).
          ``(4) Full portability.--Each master contract under this 
        chapter shall include such provisions as may be necessary to 
        ensure that, once an individual becomes duly enrolled, long-
        term care insurance coverage obtained by such individual 
        pursuant to that enrollment shall not be terminated due to any 
        change in status (such as separation from Government service or 
        the uniformed services) or ceasing to meet the requirements for 
        being considered a qualified relative (whether as a result of 
        dissolution of marriage or otherwise).

``Sec. 9004. Financing

    ``(a) In General.--Each eligible individual obtaining long-term 
care insurance coverage under this chapter shall be responsible for 100 
percent of the premiums for such coverage.
    ``(b) Withholdings.--
          ``(1) In general.--The amount necessary to pay the premiums 
        for enrollment may--
                  ``(A) in the case of an employee, be withheld from 
                the pay of such employee;
                  ``(B) in the case of an annuitant, be withheld from 
                the annuity of such annuitant;
                  ``(C) in the case of a member of the uniformed 
                services described in section 9001(3), be withheld from 
                the pay of such member; and
                  ``(D) in the case of a retired member of the 
                uniformed services described in section 9001(4), be 
                withheld from the retired pay or retainer pay payable 
                to such member.
          ``(2) Voluntary withholdings for qualified relatives.--
        Withholdings to pay the premiums for enrollment of a qualified 
        relative may, upon election of the appropriate eligible 
        individual (described in section 9001(1)*09(4)), be withheld 
        under paragraph (1) to the same extent and in the same manner 
        as if enrollment were for such individual.
    ``(c) Direct Payments.--All amounts withheld under this section 
shall be paid directly to the carrier.
    ``(d) Other Forms of Payment.--Any enrollee who does not elect to 
have premiums withheld under subsection (b) or whose pay, annuity, or 
retired or retainer pay (as referred to in subsection (b)(1)) is 
insufficient to cover the withholding required for enrollment (or who 
is not receiving any regular amounts from the Government, as referred 
to in subsection (b)(1), from which any such withholdings may be made, 
and whose premiums are not otherwise being provided for under 
subsection (b)(2)) shall pay an amount equal to the full amount of 
those charges directly to the carrier.
    ``(e) Separate Accounting Requirement.--Each carrier participating 
under this chapter shall maintain records that permit it to account for 
all amounts received under this chapter (including investment earnings 
on those amounts) separate and apart from all other funds.
    ``(f) Reimbursements.--
          ``(1) Reasonable initial costs.--
                  ``(A) In general.--The Employees' Life Insurance Fund 
                is available, without fiscal year limitation, for 
                reasonable expenses incurred by the Office of Personnel 
                Management in administering this chapter before the 
                start of the 7-year period described in section 
                9003(d)(2)(B), including reasonable implementation 
                costs.
                  ``(B) Reimbursement requirement.--Such Fund shall be 
                reimbursed, before the end of the first year of that 7-
                year period, for all amounts obligated or expended 
                under subparagraph (A) (including lost investment 
                income). Such reimbursement shall be made by carriers, 
                on a pro rata basis, in accordance with appropriate 
                provisions which shall be included in master contracts 
                under this chapter.
          ``(2) Subsequent costs.--
                  ``(A) In general.--There is hereby established in the 
                Employees' Life Insurance Fund a Long-Term Care 
                Administrative Account, which shall be available to the 
                Office, without fiscal year limitation, to defray 
                reasonable expenses incurred by the Office in 
                administering this chapter after the start of the 7-
                year period described in section 9003(d)(2)(B).
                  ``(B) Reimbursement requirement.--Each master 
                contract under this chapter shall include appropriate 
                provisions under which the carrier involved shall, 
                during each year, make such periodic contributions to 
                the Long-Term Care Administrative Account as necessary 
                to ensure that the reasonable anticipated expenses of 
                the Office in administering this chapter during such 
                year (adjusted to reconcile for any earlier 
                overestimates or underestimates under this 
                subparagraph) are defrayed.

``Sec. 9005. Preemption

    ``The terms of any contract under this chapter which relate to the 
nature, provision, or extent of coverage or benefits (including 
payments with respect to benefits) shall supersede and preempt any 
State or local law, or any regulation issued thereunder, which relates 
to long-term care insurance or contracts.

``Sec. 9006. Studies, reports, and audits

    ``(a) Provisions Relating to Carriers.--Each master contract under 
this chapter shall contain provisions requiring the carrier--
          ``(1) to furnish such reasonable reports as the Office of 
        Personnel Management determines to be necessary to enable it to 
        carry out its functions under this chapter; and
          ``(2) to permit the Office and representatives of the General 
        Accounting Office to examine such records of the carrier as may 
        be necessary to carry out the purposes of this chapter.
    ``(b) Provisions Relating to Federal Agencies.--Each Federal agency 
shall keep such records, make such certifications, and furnish the 
Office, the carrier, or both, with such information and reports as the 
Office may require.
    ``(c) Reports by the General Accounting Office.--The General 
Accounting Office shall prepare and submit to the President, the Office 
of Personnel Management, and each House of Congress, before the end of 
the third and fifth years during which the program under this chapter 
is in effect, a written report evaluating such program. Each such 
report shall include an analysis of the competitiveness of the program, 
as compared to both group and individual coverage generally available 
to individuals in the private insurance market. The Office shall 
cooperate with the General Accounting Office to provide periodic 
evaluations of the program.

``Sec. 9007. Jurisdiction of courts

    ``The district courts of the United States have original 
jurisdiction of a civil action or claim described in paragraph (1) or 
(2) of section 9003(c), after such administrative remedies as required 
under such paragraph (1) or (2) (as applicable) have been exhausted, 
but only to the extent judicial review is not precluded by any dispute 
resolution or other remedy under this chapter.

``Sec. 9008. Administrative functions

    ``(a) In General.--The Office of Personnel Management shall 
prescribe regulations necessary to carry out this chapter.
    ``(b) Enrollment Periods.--The Office shall provide for periodic 
coordinated enrollment, promotion, and education efforts in 
consultation with the carriers.
    ``(c) Consultation.--Any regulations necessary to effect the 
application and operation of this chapter with respect to an eligible 
individual described in paragraph (3) or (4) of section 9001, or a 
qualified relative thereof, shall be prescribed by the Office in 
consultation with the appropriate Secretary.
    ``(d) Informed Decisionmaking.--The Office shall ensure that each 
eligible individual applying for long-term care insurance under this 
chapter is furnished the information necessary to enable that 
individual to evaluate the advantages and disadvantages of obtaining 
long-term care insurance under this chapter, including the following:
          ``(1) The principal long-term care benefits and coverage 
        available under this chapter, and how those benefits and 
        coverage compare to the range of long-term care benefits and 
        coverage otherwise generally available.
          ``(2) Representative examples of the cost of long-term 
care,and the sufficiency of the benefits available under this chapter 
relative to those costs. The information under this paragraph shall 
also include--
                  ``(A) the projected effect of inflation on the value 
                of those benefits; and
                  ``(B) a comparison of the inflation-adjusted value of 
                those benefits to the projected future costs of long-
                term care.
          ``(3) Any rights individuals under this chapter may have to 
        cancel coverage, and to receive a total or partial refund of 
        premiums. The information under this paragraph shall also 
        include--
                  ``(A) the projected number or percentage of 
                individuals likely to fail to maintain their coverage 
                (determined based on lapse rates experienced under 
                similar group long-term care insurance programs and, 
                when available, this chapter); and
                  ``(B)(i) a summary description of how and when 
                premiums for long-term care insurance under this 
                chapter may be raised;
                  ``(ii) the premium history during the last 10 years 
                for each qualified carrier offering long-term care 
                insurance under this chapter; and
                  ``(iii) if cost increases are anticipated, the 
                projected premiums for a typical insured individual at 
                various ages.
          ``(4) The advantages and disadvantages of long-term care 
        insurance generally, relative to other means of accumulating or 
        otherwise acquiring the assets that may be needed to meet the 
        costs of long-term care, such as through tax-qualified 
        retirement programs or other investment vehicles.

``Sec. 9009. Cost accounting standards

    ``The cost accounting standards issued pursuant to section 26(f) of 
the Office of Federal Procurement Policy Act (41 U.S.C. 422(f)) shall 
not apply with respect to a long-term care insurance contract under 
this chapter.''.
    (b) Conforming Amendment.--The analysis for part III of title 5, 
United States Code, is amended by adding at the end of subpart G the 
following:

``90. Long-Term Care Insurance..............................   9001.''.

SEC. 1003. EFFECTIVE DATE.

    The Office of Personnel Management shall take such measures as may 
be necessary to ensure that long-term care insurance coverage under 
title 5, United States Code, as amended by this title, may be obtained 
in time to take effect not later than the first day of the first 
applicable pay period of the first fiscal year which begins after the 
end of the 18-month period beginning on the date of the enactment of 
this Act.

        TITLE II--FEDERAL RETIREMENT COVERAGE ERRORS CORRECTION

SEC. 2001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Federal 
Erroneous Retirement Coverage Corrections Act''.
    (b) Table of Contents.--The table of contents for this title is as 
follows:

        TITLE II--FEDERAL RETIREMENT COVERAGE ERRORS CORRECTION

Sec. 2001. Short title; table of contents.
Sec. 2002. Definitions.
Sec. 2003. Applicability.
Sec. 2004. Irrevocability of elections.

  Subtitle A--Description of Retirement Coverage Errors to Which This 
           Title Applies and Measures for Their Rectification

CHAPTER 1--EMPLOYEES AND ANNUITANTS WHO SHOULD HAVE BEEN FERS COVERED, 
 BUT WHO WERE ERRONEOUSLY CSRS COVERED OR CSRS-OFFSET COVERED INSTEAD, 
             AND SURVIVORS OF SUCH EMPLOYEES AND ANNUITANTS

Sec. 2101. Employees.
Sec. 2102.  Annuitants and survivors.

  CHAPTER 2--EMPLOYEE WHO SHOULD HAVE BEEN FERS COVERED, CSRS-OFFSET 
COVERED, OR CSRS COVERED, BUT WHO WAS ERRONEOUSLY SOCIAL SECURITY-ONLY 
                            COVERED INSTEAD

Sec. 2111.  Applicability.
Sec. 2112.  Correction mandatory.

CHAPTER 3--EMPLOYEE WHO SHOULD OR COULD HAVE BEEN SOCIAL SECURITY-ONLY 
  COVERED BUT WHO WAS ERRONEOUSLY CSRS-OFFSET COVERED OR CSRS COVERED 
                                INSTEAD

Sec. 2121.  Employee who should be Social Security-Only covered, but 
who is erroneously CSRS or CSRS-Offset covered instead.

          CHAPTER 4--EMPLOYEE WHO WAS ERRONEOUSLY FERS COVERED

Sec. 2131.  Employee who should be Social Security-Only covered, CSRS 
covered, or CSRS-Offset covered and is not FERS-Eligible, but who is 
erroneously FERS covered instead.
Sec. 2132.  FERS-Eligible employee who should have been CSRS covered, 
CSRS-Offset covered, or Social Security-Only covered, but who was 
erroneously FERS covered instead without an election.
Sec. 2133.  Retroactive effect.

 CHAPTER 5--EMPLOYEE WHO SHOULD HAVE BEEN CSRS-OFFSET COVERED, BUT WHO 
                  WAS ERRONEOUSLY CSRS COVERED INSTEAD

Sec. 2141.  Applicability.
Sec. 2142.  Correction mandatory.

  CHAPTER 6--EMPLOYEE WHO SHOULD HAVE BEEN CSRS COVERED, BUT WHO WAS 
                ERRONEOUSLY CSRS-OFFSET COVERED INSTEAD

Sec. 2151.  Applicability.
Sec. 2152.  Correction mandatory.

                     Subtitle B--General Provisions

Sec. 2201.  Identification and notification requirements.
Sec. 2202.  Information to be furnished to and by authorities 
administering this title.
Sec. 2203.  Service credit deposits.
Sec. 2204.  Provisions related to Social Security coverage of 
misclassified employees.
Sec. 2205.  Thrift Savings Plan treatment for certain individuals.
Sec. 2206.  Certain agency amounts to be paid into or remain in the 
CSRDF.
Sec. 2207.  CSRS coverage determinations to be approved by OPM.
Sec. 2208.  Discretionary actions by Director.
Sec. 2209.  Regulations.

                      Subtitle C--Other Provisions

Sec. 2301.  Provisions to authorize continued conformity of other 
Federal retirement systems.
Sec. 2302.  Authorization of payments.
Sec. 2303.  Individual right of action preserved for amounts not 
otherwise provided for under this title.

                       Subtitle D--Effective Date

Sec. 2401.  Effective date.

SEC. 2002. DEFINITIONS.

    For purposes of this title:
          (1) Annuitant.--The term ``annuitant'' has the meaning given 
        such term under section 8331(9) or 8401(2) of title 5, United 
        States Code.
          (2) CSRS.--The term ``CSRS'' means the Civil Service 
        Retirement System.
          (3) CSRDF.--The term ``CSRDF'' means the Civil Service 
        Retirement and Disability Fund.
          (4) CSRS covered.--The term ``CSRS covered'', with respect to 
        any service, means service that is subject to the provisions of 
        subchapter III of chapter 83 of title 5, United States Code, 
        other than service subject to section 8334(k) of such title.
          (5) CSRS-offset covered.--The term ``CSRS-Offset covered'', 
        with respect to any service, means service that is subject to 
        the provisions of subchapter III of chapter 83 of title 5, 
        United States Code, and to section 8334(k) of such title.
          (6) Employee.--The term ``employee'' has the meaning given 
        such term under section 8331(1) or 8401(11) of title 5, United 
        States Code.
          (7) Executive director.--The term ``Executive Director of the 
        Federal Retirement Thrift Investment Board'' or ``Executive 
        Director'' means the Executive Director appointed under section 
        8474 of title 5, United States Code.
          (8) FERS.--The term ``FERS'' means the Federal Employees'' 
        Retirement System.
          (9) FERS covered.--The term ``FERS covered'', with respect to 
        any service, means service that is subject to chapter 84 of 
        title 5, United States Code.
          (10) Former employee.--The term ``former employee'' means an 
        individual who was an employee, but who is not an annuitant.
          (11) OASDI taxes.--The term ``OASDI taxes'' means the OASDI 
        employee tax and the OASDI employer tax.
          (12) OASDI employee tax.--The term ``OASDI employee tax'' 
        means the tax imposed under section 3101(a) of the Internal 
        Revenue Code of 1986 (relating to Old-Age, Survivors and 
        Disability Insurance).
          (13) OASDI employer tax.--The term ``OASDI employer tax'' 
        means the tax imposed under section 3111(a) of the Internal 
        Revenue Code of 1986 (relating to Old-Age, Survivors and 
        Disability Insurance).
          (14) OASDI trust funds.--The term ``OASDI trust funds'' means 
        the Federal Old-Age and Survivors Insurance Trust Fund and the 
        Federal Disability Insurance Trust Fund.
          (15) Office.--The term ``Office'' means the Office of 
        Personnel Management.
          (16) Retirement coverage determination.--The term 
        ``retirement coverage determination'' means a determination by 
        an employee or agent of the Government as to whether a 
        particular type of Government service is CSRS covered, CSRS-
        Offset covered, FERS covered, or Social Security-Only covered.
          (17) Retirement coverage error.--The term ``retirement 
        coverage error'' means an erroneous retirement coverage 
        determination that was in effect for a minimum period of 3 
        years of service after December 31, 1986.
          (18) Social security-only covered.--The term ``Social 
        Security-Only covered'', with respect to any service, means 
        Government service that--
                  (A) constitutes employment under section 210 of the 
                Social Security Act (42 U.S.C. 410); and
                  (B)(i) is subject to OASDI taxes; but
                  (ii) is not subject to CSRS or FERS.
          (19) Survivor.--The term ``survivor'' has the meaning given 
        such term under section 8331(10) or 8401(28) of title 5, United 
        States Code.
          (20) Thrift savings fund.--The term ``Thrift Savings Fund'' 
        means the Thrift Savings Fund established under section 8437 of 
        title 5, United States Code.

SEC. 2003. APPLICABILITY.

    (a) In General.--This title shall apply with respect to retirement 
coverage errors that occur before, on, or after the date of enactment 
of this Act.
    (b) Limitation.--Except as otherwise provided in this title, this 
title shall not apply to any erroneous retirement coverage 
determination that was in effect for a period of less than 3 years of 
service after December 31, 1986.

SEC. 2004. IRREVOCABILITY OF ELECTIONS.

    Any election made (or deemed to have been made) by an employee or 
any other individual under this title shall be irrevocable.

  Subtitle A--Description of Retirement Coverage Errors to Which This 
           Title Applies and Measures for Their Rectification

CHAPTER 1--EMPLOYEES AND ANNUITANTS WHO SHOULD HAVE BEEN FERS COVERED, 
 BUT WHO WERE ERRONEOUSLY CSRS COVERED OR CSRS-OFFSET COVERED INSTEAD, 
             AND SURVIVORS OF SUCH EMPLOYEES AND ANNUITANTS

SEC. 2101. EMPLOYEES.

    (a) Applicability.--This section shall apply in the case of any 
employee or former employee who should be (or should have been) FERS 
covered but, as a result of a retirement coverage error, is (or was) 
CSRS covered or CSRS-Offset covered instead.
    (b) Uncorrected Error.--
          (1) Applicability.--This subsection applies if the retirement 
        coverage error has not been corrected before the effective date 
        of the regulations described under paragraph (3). As soon as 
        practicable after discovery of the error, and subject to the 
        right of an election under paragraph (2), if CSRS covered or 
        CSRS-Offset covered, such individual shall be treated as CSRS-
        Offset covered, retroactive to the date of the retirement 
        coverage error.
          (2) Coverage.--
                  (A) Election.--Upon written notice of a retirement 
                coverage error, an individual may elect to be CSRS-
                Offset covered or FERS covered, effective as of the 
                date of the retirement coverage error. Such election 
                shall be made not later than 180 days after the date of 
                receipt of such notice.
                  (B) Nonelection.--If the individual does not make an 
                election by the date provided under subparagraph (A), a 
                CSRS-Offset covered individual shall remain CSRS-Offset 
                covered and a CSRS covered individual shall be treated 
                as CSRS-Offset covered.
          (3) Regulations.--The Office shall prescribe regulations to 
        carry out this subsection.
    (c) Corrected Error.--
          (1) Applicability.--This subsection applies if the retirement 
        coverage error was corrected before the effective date of the 
        regulations described under subsection (b).
          (2) Coverage.--
                  (A) Election.--
                          (i) CSRS-offset covered.--Not later than 180 
                        days after the date of enactment of this Act, 
                        the Office shall prescribe regulations 
                        authorizing individuals to elect, during the 
                        18-month period immediately following the 
                        effective date of such regulations, to be CSRS-
                        Offset covered, effective as of the date of the 
                        retirement coverage error.
                          (ii) Thrift savings fund contributions.--If 
                        under this section an individual elects to be 
                        CSRS-Offset covered, all employee contributions 
                        to the Thrift Savings Fund made during the 
                        period of FERS coverage (and earnings on such 
                        contributions) may remain in the Thrift Savings 
                        Fund in accordance with regulations prescribed 
                        by the Executive Director, notwithstanding any 
                        limit that would otherwise be applicable.
                  (B) Previous settlement payment.--An individual who 
                previously received a payment ordered by a court or 
                provided as a settlement of claim for losses resulting 
                from a retirement coverage error shall not be entitled 
                to make an election under this subsection unless that 
                amount is waived in whole or in part under section 
                2208, and any amount not waived is repaid.
                  (C) Ineligibility for election.--An individual who, 
                subsequent to correction of the retirement coverage 
                error, received a refund of retirement deductions under 
                section 8424 of title 5, United States Code, or a 
                distribution under section 8433 (b), (c), or (h)(1)(A) 
                of title 5, United States Code, may not make an 
                election under this subsection.
          (3) Corrective action to remain in effect.--If an individual 
        is ineligible to make an election or does not make an election 
        under paragraph (2) before the end of any time limitation under 
        this subsection, the corrective action taken before such time 
        limitation shall remain in effect.

SEC. 2102. ANNUITANTS AND SURVIVORS.

    (a) In General.--This section shall apply in the case of an 
individual who is--
          (1) an annuitant who should have been FERS covered but, as a 
        result of a retirement coverage error, was CSRS covered or 
        CSRS-Offset covered instead; or
          (2) a survivor of an employee who should have been FERS 
        covered but, as a result of a retirement coverage error, was 
        CSRS covered or CSRS-Offset covered instead.
    (b) Coverage.--
          (1) Election.--Not later than 180 days after the date of 
        enactment of this Act, the Office shall prescribe regulations 
        authorizing an individual described under subsection (a) to 
        elect CSRS-Offset coverage or FERS coverage, effective as of 
        the date of the retirement coverage error.
          (2) Time limitation.--An election under this subsection shall 
        be made not later than 18 months after the effective date of 
        the regulations prescribed under paragraph (1).
          (3) Reduced annuity.--
                  (A) Amount in account.--If the individual elects 
                CSRS-Offset coverage, the amount in the employee's 
                Thrift Savings Fund account under subchapter III of 
                chapter 84 of title 5, United States Code, on the date 
                of retirement that represents the Government's 
                contributions and earnings on those contributions 
                (whether or not such amount was subsequently 
                distributed from the Thrift Savings Fund) will form the 
                basis for a reduction in the individual's annuity, 
                under regulations prescribed by the Office.
                  (B) Reduction.--The reduced annuity to which the 
                individual is entitled shall be equal to an amount 
                which, when taken together with the amount referred to 
                in subparagraph (A), would result in the present value 
                of the total being actuarially equivalent to the 
                present value of an unreduced CSRS-Offset annuity that 
                would have been provided the individual.
          (4) Reduced benefit.--If--
                  (A) a surviving spouse elects CSRS-Offset benefits; 
                and
                  (B) a FERS basic employee death benefit under section 
                8442(b) of title 5, United States Code, was previously 
                paid;
        then the survivor's CSRS-Offset benefit shall be subject to a 
        reduction, under regulations prescribed by the Office. The 
        reduced annuity to which the individual is entitled shall be 
        equal to an amount which, when taken together with the amount 
        of the payment referred to under subparagraph (B) would result 
        in the present value of the total being actuarially equivalent 
        to the present value of an unreduced CSRS-Offset annuity that 
        would have been provided the individual.
          (5) Previous settlement payment.--An individual who 
        previously received a payment ordered by a court or provided as 
        a settlement of claim for losses resulting from a retirement 
        coverage error may not make an election under this subsection 
        unless repayment of that amount is waived in whole or in part 
        under section 2208, and any amount not waived is repaid.
    (c) Nonelection.--If the individual does not make an election under 
subsection (b) before any time limitation under this section, the 
retirement coverage shall be subject to the following rules:
          (1) Corrective action previously taken.--If corrective action 
        was taken before the end of any time limitation under this 
        section, that corrective action shall remain in effect.
          (2) Corrective action not previously taken.--If corrective 
        action was not taken before such time limitation, the employee 
        shall be CSRS-Offset covered, retroactive to the date of the 
        retirement coverage error.

  CHAPTER 2--EMPLOYEE WHO SHOULD HAVE BEEN FERS COVERED, CSRS-OFFSET 
COVERED, OR CSRS COVERED, BUT WHO WAS ERRONEOUSLY SOCIAL SECURITY-ONLY 
                            COVERED INSTEAD

SEC. 2111. APPLICABILITY.

    This chapter shall apply in the case of any employee who--
          (1) should be (or should have been) FERS covered but, as a 
        result of a retirement coverage error, is (or was) Social 
        Security-Only covered instead;
          (2) should be (or should have been) CSRS-Offset covered but, 
        as a result of a retirement coverage error, is (or was) Social 
        Security-Only covered instead; or
          (3) should be (or should have been) CSRS covered but, as a 
        result of a retirement coverage error, is (or was) Social 
        Security-Only covered instead.

SEC. 2112. CORRECTION MANDATORY.

    (a) Uncorrected Error.--If the retirement coverage error has not 
been corrected, as soon as practicable after discovery of the error, 
such individual shall be covered under the correct retirement coverage, 
effective as of the date of the retirement coverage error.
    (b) Corrected Error.--If the retirement coverage error has been 
corrected, the corrective action previously taken shall remain in 
effect.

CHAPTER 3--EMPLOYEE WHO SHOULD OR COULD HAVE BEEN SOCIAL SECURITY-ONLY 
  COVERED BUT WHO WAS ERRONEOUSLY CSRS-OFFSET COVERED OR CSRS COVERED 
                                INSTEAD

SEC. 2121. EMPLOYEE WHO SHOULD BE SOCIAL SECURITY-ONLY COVERED, BUT WHO 
                    IS ERRONEOUSLY CSRS OR CSRS-OFFSET COVERED INSTEAD.

    (a) Applicability.--This section applies in the case of a 
retirement coverage error in which a Social Security-Only covered 
employee was erroneously CSRS covered or CSRS-Offset covered.
    (b) Uncorrected Error.--
          (1) Applicability.--This subsection applies if the retirement 
        coverage error has not been corrected before the effective date 
        of the regulations described in paragraph (3).
          (2) Coverage.--In the case of an individual who is 
        erroneously CSRS covered, as soon as practicable after 
        discovery of the error, and subject to the right of an election 
        under paragraph (3), such individual shall be CSRS-Offset 
        covered, effective as of the date of the retirement coverage 
        error.
          (3) Election.--
                  (A) In general.--Upon written notice of a retirement 
                coverage error, an individual may elect to be CSRS-
                Offset covered or Social Security-Only covered, 
                effective as of the date of the retirement coverage 
                error. Such election shall be made not later than 180 
                days after the date of receipt of such notice.
                  (B) Nonelection.--If the individual does not make an 
                election before the date provided under subparagraph 
                (A), the individual shall remain CSRS-Offset covered.
                  (C) Regulations.--The Office shall prescribe 
                regulations to carry out this paragraph.
    (c) Corrected Error.--
          (1) Applicability.--This subsection applies if the retirement 
        coverage error was corrected before the effective date of the 
        regulations described under subsection (b)(3).
          (2) Election.--Not later than 180 days after the date of 
        enactment of this Act, the Office shall prescribe regulations 
        authorizing individuals to elect, during the 18-month period 
        immediately following the effective date of such regulations, 
        to be CSRS-Offset covered or Social Security-Only covered, 
        effective as of the date of the retirement coverage error.
          (3) Nonelection.--If an eligible individual does not make an 
        election under paragraph (2) before the end of any time 
        limitation under this subsection, the corrective action taken 
        before such time limitation shall remain in effect.

          CHAPTER 4--EMPLOYEE WHO WAS ERRONEOUSLY FERS COVERED

SEC. 2131. EMPLOYEE WHO SHOULD BE SOCIAL SECURITY-ONLY COVERED, CSRS 
                    COVERED, OR CSRS-OFFSET COVERED AND IS NOT FERS-
                    ELIGIBLE, BUT WHO IS ERRONEOUSLY FERS COVERED 
                    INSTEAD.

    (a) Applicability.--This section applies in the case of a 
retirement coverage error in which a Social Security-Only covered, CSRS 
covered, or CSRS-Offset covered employee not eligible to elect FERS 
coverage under authority of section 8402(c) of title 5, United States 
Code, was erroneously FERS covered.
    (b) Uncorrected Error.--
          (1) Applicability.--This subsection applies if the retirement 
        coverage error has not been corrected before the effective date 
        of the regulations described in paragraph (2).
          (2) Coverage.--
                  (A) Election.--
                          (i) In general.--Upon written notice of a 
                        retirement coverage error, an individual may 
                        elect to remain FERS covered or to be Social 
                        Security-Only covered, CSRS covered, or CSRS-
                        Offset covered, as would have applied in the 
                        absence of the erroneous retirement coverage 
                        determination, effective as of the date of the 
                        retirement coverage error. Such election shall 
                        be made not later than 180 days after the date 
                        of receipt of such notice.
                          (ii) Treatment of fers election.--An election 
                        of FERS coverage under this subsection is 
                        deemed to be an election under section 301 of 
                        the Federal Employees Retirement System Act of 
                        1986 (5 U.S.C. 8331 note; Public Law 99-09335; 
                        100 Stat. 599).
                  (B) Nonelection.--If the individual does not make an 
                election before the date provided under subparagraph 
                (A), the individual shall remain FERS covered, 
                effective as of the date of the retirement coverage 
                error.
          (3) Employee contributions in thrift savings fund.--If under 
        this section, an individual elects to be Social Security-Only 
        covered, CSRS covered, or CSRS-Offset covered, all employee 
        contributions to the Thrift Savings Fund made during the period 
        of erroneous FERS coverage (and all earnings on such 
        contributions) may remain in the Thrift Savings Fund in 
        accordance with regulations prescribed by the Executive 
        Director, notwithstanding any limit under section 8351 or 8432 
        of title 5, United States Code.
          (4) Regulations.--Except as provided under paragraph (3), the 
        Office shall prescribe regulations to carry out this 
        subsection.
    (c) Corrected Error.--
          (1) Applicability.--This subsection applies if the retirement 
        coverage error was corrected before the effective date of the 
        regulations described under paragraph (2).
          (2) Election.--Not later than 180 days after the date of 
        enactment of this Act, the Office shall prescribe regulations 
        authorizing individuals to elect, during the 18-month period 
        immediately following the effective date of such regulations to 
        remain Social Security-Only covered, CSRS covered, or CSRS-
        Offset covered, or to be FERS covered, effective as of the date 
        of the retirement coverage error.
          (3) Nonelection.--If an eligible individual does not make an 
        election under paragraph (2), the corrective action taken 
        before the end of any time limitation under this subsection 
        shall remain in effect.
          (4) Treatment of fers election.--An election of FERS coverage 
        under this subsection is deemed to be an election under section 
        301 of the Federal Employees Retirement System Act of 1986 (5 
        U.S.C. 8331 note; Public Law 99-09335; 100 Stat. 599).

SEC. 2132. FERS-ELIGIBLE EMPLOYEE WHO SHOULD HAVE BEEN CSRS COVERED, 
                    CSRS-OFFSET COVERED, OR SOCIAL SECURITY-ONLY 
                    COVERED, BUT WHO WAS ERRONEOUSLY FERS COVERED 
                    INSTEAD WITHOUT AN ELECTION.

    (a) In General.--
          (1) FERS election prevented.--If an individual was prevented 
        from electing FERS coverage because the individual was 
        erroneously FERS covered during the period when the individual 
        was eligible to elect FERS under title III of the Federal 
        Employees Retirement System Act or the Federal Employees' 
        Retirement System Open Enrollment Act of 1997 (Public Law 105-
        0961; 111 Stat. 1318 et seq.), the individual--
                  (A) is deemed to have elected FERS coverage; and
                  (B) shall remain covered by FERS, unless the 
                individual declines, under regulations prescribed by 
                the Office, to be FERS covered.
          (2) Declining fers coverage.--If an individual described 
        under paragraph (1)(B) declines to be FERS covered, such 
        individual shall be CSRS covered, CSRS-Offset covered, or 
        Social Security-Only covered, as would apply in the absence of 
        a FERS election, effective as of the date of the erroneous 
        retirement coverage determination.
    (b) Employee Contributions in Thrift Savings Fund.--If under this 
section, an individual declines to be FERS covered and instead is 
Social Security-Only covered, CSRS covered, or CSRS-Offset covered, as 
would apply in the absence of a FERS election, all employee 
contributions to the Thrift Savings Fund made during the period of 
erroneous FERS coverage (and all earnings on such contributions) may 
remain in the Thrift Savings Fund in accordance with regulations 
prescribed by the Executive Director, notwithstanding any limit that 
would otherwise be applicable.
    (c) Inapplicability of Duration of Erroneous Coverage.--This 
section shall apply regardless of the length of time the erroneous 
coverage determination remained in effect.

SEC. 2133. RETROACTIVE EFFECT.

    This chapter shall be effective as of January 1, 1987, except that 
section 2132 shall not apply to individuals who made or were deemed to 
have made elections similar to those provided in this section under 
regulations prescribed by the Office before the effective date of this 
title.

 CHAPTER 5--EMPLOYEE WHO SHOULD HAVE BEEN CSRS-OFFSET COVERED, BUT WHO 
                  WAS ERRONEOUSLY CSRS COVERED INSTEAD

SEC. 2141. APPLICABILITY.

    This chapter shall apply in the case of any employee who should be 
(or should have been) CSRS-Offset covered but, as a result of a 
retirement coverage error, is (or was) CSRS covered instead.

SEC. 2142. CORRECTION MANDATORY.

    (a) Uncorrected Error.--If the retirement coverage error has not 
been corrected, as soon as practicable after discovery of the error, 
such individual shall be covered under the correct retirement coverage, 
effective as of the date of the retirement coverage error.
    (b) Corrected Error.--If the retirement coverage error has been 
corrected before the effective date of this title, the corrective 
action taken before such date shall remain in effect.

CHAPTER 6--EMPLOYEE WHO SHOULD HAVE BEEN CSRS COVERED, BUT WHO WAS 
                    ERRONEOUSLY CSRS-OFFSET COVERED INSTEAD

SEC. 2151. APPLICABILITY.

    This chapter shall apply in the case of any employee who should be 
(or should have been) CSRS covered but, as a result of a retirement 
coverage error, is (or was) CSRS-Offset covered instead.

SEC. 2152. CORRECTION MANDATORY.

    (a) Uncorrected Error.--If the retirement coverage error has not 
been corrected, as soon as practicable after discovery of the error, 
such individual shall be covered under the correct retirement coverage, 
effective as of the date of the retirement coverage error.
    (b) Corrected Error.--If the retirement coverage error has been 
corrected before the effective date of this title, the corrective 
action taken before such date shall remain in effect.

                     Subtitle B--General Provisions

SEC. 2201. IDENTIFICATION AND NOTIFICATION REQUIREMENTS.

    Government agencies shall take all such measures as may be 
reasonable and appropriate to promptly identify and notify individuals 
who are (or have been) affected by a retirement coverage error of their 
rights under this title.

SEC. 2202. INFORMATION TO BE FURNISHED TO AND BY AUTHORITIES 
                    ADMINISTERING THIS TITLE.

    (a) Applicability.--The authorities identified in this subsection 
are--
          (1) the Director of the Office of Personnel Management;
          (2) the Commissioner of Social Security; and
          (3) the Executive Director of the Federal Retirement Thrift 
        Investment Board.
    (b) Authority To Obtain Information.--Each authority identified in 
subsection (a) may secure directly from any department or agency of the 
United States information necessary to enable such authority to carry 
out its responsibilities under this title. Upon request of the 
authority involved, the head of the department or agency involved shall 
furnish that information to the requesting authority.
    (c) Authority To Provide Information.--Each authority identified in 
subsection (a) may provide directly to any department or agency of the 
United States all information such authority believes necessary to 
enable the department or agency to carry out its responsibilities under 
this title.
    (d) Limitation; Safeguards.--Each of the respective authorities 
under subsection (a) shall--
          (1) request or provide only such information as that 
        authority considers necessary; and
          (2) establish, by regulation or otherwise, appropriate 
        safeguards to ensure that any information obtained under this 
        section shall be used only for the purpose authorized.

SEC. 2203. SERVICE CREDIT DEPOSITS.

    (a) CSRS Deposit.--In the case of a retirement coverage error in 
which--
          (1) a FERS covered employee was erroneously CSRS covered or 
        CSRS-Offset covered;
          (2) the employee made a service credit deposit under the CSRS 
        rules; and
          (3) there is a subsequent retroactive change to FERS 
        coverage;
the excess of the amount of the CSRS civilian or military service 
credit deposit over the FERS civilian or military service credit 
deposit, together with interest computed in accordance with paragraphs 
(2) and (3) of section 8334(e) of title 5, United States Code, and 
regulations prescribed by the Office, shall be paid to the employee, 
the annuitant or, in the case of a deceased employee, to the individual 
entitled to lump-sum benefits under section 8424(d) of title 5, United 
States Code.
    (b) FERS Deposit.--
          (1) Applicability.--This subsection applies in the case of an 
        erroneous retirement coverage determination in which--
                  (A) the employee owed a service credit deposit under 
                section 8411(f) of title 5, United States Code; and
                  (B)(i) there is a subsequent retroactive change to 
                CSRS or CSRS-Offset coverage; or
                  (ii) the service becomes creditable under chapter 83 
                of title 5, United States Code.
          (2) Reduced annuity.--
                  (A) In general.--If at the time of commencement of an 
                annuity there is remaining unpaid CSRS civilian or 
                military service credit deposit for service described 
                under paragraph (1), the annuity shall be reduced based 
                upon the amount unpaid together with interest computed 
                in accordance with section 8334(e) (2) and (3) of title 
                5, United States Code, and regulations prescribed by 
                the Office.
                  (B) Amount.--The reduced annuity to which the 
                individual is entitled shall be equal to an amount 
                that, when taken together with the amount referred to 
                under subparagraph (A), would result in the present 
                value of the total being actuarially equivalent to the 
                present value of the unreduced annuity benefit that 
                would have been provided the individual.
          (3) Survivor annuity.--
                  (A) In general.--If at the time of commencement of a 
                survivor annuity, there is remaining unpaid any CSRS 
                service credit deposit described under paragraph (1), 
                and there has been no actuarial reduction in an annuity 
                under paragraph (2), the survivor annuity shall be 
                reduced based upon the amount unpaid together with 
                interest computed in accordance with section 8334(e) 
                (2) and (3) of title 5, United States Code, and 
                regulations prescribed by the Office.
                  (B) Amount.--The reduced survivor annuity to which 
                the individual is entitled shall be equal to an amount 
                that, when taken together with the amount referred to 
                under subparagraph (A), would result in the present 
                value of the total being actuarially equivalent to the 
                present value of an unreduced survivor annuity benefit 
                that would have been provided the individual.

SEC. 2204. PROVISIONS RELATED TO SOCIAL SECURITY COVERAGE OF 
                    MISCLASSIFIED EMPLOYEES.

    (a) Definitions.--In this section, the term--
          (1) ``covered individual'' means any employee, former 
        employee, or annuitant who--
                  (A) is or was employed erroneously subject to CSRS 
                coverage as a result of a retirement coverage error; 
                and
                  (B) is or was retroactively converted to CSRS-offset 
                coverage, FERS coverage, or Social Security-only 
                coverage; and
                  (2) ``excess CSRS deduction amount'' means an amount 
                equal to the difference between the CSRS deductions 
                withheld and the CSRS-Offset or FERS deductions, if 
                any, due with respect to a covered individual during 
                the entire period the individual was erroneously 
                subject to CSRS coverage as a result of a retirement 
                coverage error.
    (b) Reports to Commissioner of Social Security.--
          (1) In general.--In order to carry out the Commissioner of 
        Social Security's responsibilities under title II of the Social 
        Security Act, the Commissioner may request the head of each 
        agency that employs or employed a covered individual to report 
        (in coordination with the Office of Personnel Management) in 
        such form and within such timeframe as the Commissioner may 
        specify, any or all of--
                  (A) the total wages (as defined in section 3121(a) of 
                the Internal Revenue Code of 1986) paid to such 
                individual during each year of the entire period of the 
                erroneous CSRS coverage; and
                  (B) such additional information as the Commissioner 
                may require for the purpose of carrying out the 
                Commissioner's responsibilities under title II of the 
                Social Security Act (42 U.S.C. 401 et seq.).
          (2) Compliance.--The head of an agency or the Office shall 
        comply with a request from the Commissioner under paragraph 
        (1).
          (3) Wages.--For purposes of section 201 of the Social 
        Security Act (42 U.S.C. 401), wages reported under this 
        subsection shall be deemed to be wages reported to the 
        Secretary of the Treasury or the Secretary's delegates pursuant 
        to subtitle F of the Internal Revenue Code of 1986.
    (c) Payment Relating to OASDI Employee Taxes.--
          (1) In general.--The Office shall transfer from the Civil 
        Service Retirement and Disability Fund to the General Fund of 
        the Treasury an amount equal to the lesser of the excess CSRS 
        deduction amount or the OASDI taxes due for covered individuals 
        (as adjusted by amounts transferred relating to applicable 
        OASDI employee taxes as a result of corrections made, including 
        corrections made before the date of enactment of this Act). If 
        the excess CSRS deductions exceed the OASDI taxes, any 
        difference shall be paid to the covered individual or 
        survivors, as appropriate.
          (2) Transfer.--Amounts transferred under this subsection 
        shall be determined notwithstanding any limitation under 
        section 6501 of the Internal Revenue Code of 1986.
    (d) Payment of OASDI Employer Taxes.--
          (1) In general.--Each employing agency shall pay an amount 
        equal to the OASDI employer taxes owed with respect to covered 
        individuals during the applicable period of erroneous coverage 
        (as adjusted by amounts transferred for the payment of such 
        taxes as a result of corrections made, including corrections 
        made before the date of enactment of this Act).
          (2) Payment.--Amounts paid under this subsection shall be 
        determined subject to any limitation under section 6501 of the 
        Internal Revenue Code of 1986.
    (e) Application of OASDI Tax Provisions of the Internal Revenue 
Code of 1986 to Affected Individuals and Employing Agencies.--A covered 
individual and the individual's employing agency shall be deemed to 
have fully satisfied in a timely manner their responsibilities with 
respect to the taxes imposed by sections 3101(a), 3102(a), and 3111(a) 
of the Internal Revenue Code of 1986 on the wages paid by the employing 
agency to such individual during the entire period such individual was 
erroneously subject to CSRS coverage as a result of a retirement 
coverage error based on the payments and transfers made under 
subsections (c) and (d). No credit or refund of taxes on such wages 
shall be allowed as a result of this subsection.

SEC. 2205. THRIFT SAVINGS PLAN TREATMENT FOR CERTAIN INDIVIDUALS.

    (a) Applicability.--This section applies to an individual who--
          (1) is eligible to make an election of coverage under section 
        2101 or 2102, and only if FERS coverage is elected (or remains 
        in effect) for the employee involved; or
          (2) is described in section 2111, and makes or has made 
        retroactive employee contributions to the Thrift Savings Fund 
        under regulations prescribed by the Executive Director.
    (b) Payment Into Thrift Savings Fund.--
          (1) In general.--
                  (A) Payment.--With respect to an individual to whom 
                this section applies, the employing agency shall pay to 
                the Thrift Savings Fund under subchapter III of chapter 
                84 of title 5, United States Code, for credit to the 
                account of the employee involved, an amount equal to 
                the earnings which are disallowed under section 
                8432a(a)(2) of such title on the employee's retroactive 
                contributions to such Fund.
                  (B) Amount.--Earnings under subparagraph (A) shall be 
                computed in accordance with the procedures for 
                computing lost earningsunder section 8432a of title 5, 
United States Code. The amount paid by the employing agency shall be 
treated for all purposes as if that amount had actually been earned on 
the basis of the employee' s contributions.
                  (C) Exceptions.--If an individual made retroactive 
                contributions before the effective date of the 
                regulations under section 2101(c), the Director may 
                provide for an alternative calculation of lost earnings 
                to the extent that a calculation under subparagraph (B) 
                is not administratively feasible. The alternative 
                calculation shall yield an amount that is as close as 
                practicable to the amount computed under subparagraph 
                (B), taking into account earnings previously paid.
          (2) Additional employee contribution.--In cases in which the 
        retirement coverage error was corrected before the effective 
        date of the regulations under section 2101(c), the employee 
        involved shall have an additional opportunity to make 
        retroactive contributions for the period of the retirement 
        coverage error (subject to applicable limits), and such 
        contributions (including any contributions made after the date 
        of the correction) shall be treated in accordance with 
        paragraph (1).
    (c) Regulations.--
          (1) Executive director.--The Executive Director shall 
        prescribe regulations appropriate to carry out this section 
        relating to retroactive employee contributions and payments 
        made on or after the effective date of the regulations under 
        section 2101(c).
          (2) Office.--The Office, in consultation with the Federal 
        Retirement Thrift Investment Board, shall prescribe regulations 
        appropriate to carry out this section relating to the 
        calculation of lost earnings on retroactive employee 
        contributions made before the effective date of the regulations 
        under section 2101(c).

SEC. 2206. CERTAIN AGENCY AMOUNTS TO BE PAID INTO OR REMAIN IN THE 
                    CSRDF.

    (a) Certain Excess Agency Contributions to Remain in the CSRDF.--
          (1) In general.--Any amount described under paragraph (2) 
        shall--
                  (A) remain in the CSRDF; and
                  (B) may not be paid or credited to an agency.
          (2) Amounts.--Paragraph (1) refers to any amount of 
        contributions made by an agency under section 8423 of title 5, 
        United States Code, on behalf of any employee, former employee, 
        or annuitant (or survivor of such employee, former employee, or 
        annuitant) who makes an election to correct a retirement 
        coverage error under this title, that the Office determines to 
        be excess as a result of such election.
    (b) Additional Employee Retirement Deductions To Be Paid by 
Agency.--If a correction in a retirement coverage error results in an 
increase in employee deductions under section 8334 or 8422 of title 5, 
United States Code, that cannot be fully paid by a reallocation of 
otherwise available amounts previously deducted from the employee's pay 
as employment taxes or retirement deductions, the employing agency--
          (1) shall pay the required additional amount into the CSRDF; 
        and
          (2) shall not seek repayment of that amount from the 
        employee, former employee, annuitant, or survivor.

SEC. 2207. CSRS COVERAGE DETERMINATIONS TO BE APPROVED BY OPM.

    No agency shall place an individual under CSRS coverage unless--
          (1) the individual has been employed with CSRS coverage 
        within the preceding 365 days; or
          (2) the Office has agreed in writing that the agency's 
        coverage determination is correct.

SEC. 2208. DISCRETIONARY ACTIONS BY DIRECTOR.

    (a) In General.--The Director of the Office of Personnel Management 
may--
          (1) extend the deadlines for making elections under this 
        title in circumstances involving an individual's inability to 
        make a timely election due to a cause beyond the individual's 
        control;
          (2) provide for the reimbursement of necessary and reasonable 
        expenses incurred by an individual with respect to settlement 
        of a claim for losses resulting from a retirement coverage 
        error, including attorney's fees, court costs, and other actual 
        expenses;
          (3) compensate an individual for monetary losses that are a 
        direct and proximate result of a retirement coverage error, 
        excluding claimed losses relating to forgone contributions and 
        earnings under the Thrift Savings Plan under subchapter III of 
        chapter 84 of title 5, United States Code, and all other 
        investment opportunities; and
          (4) waive payments required due to correction of a retirement 
        coverage error under this title.
    (b) Similar Actions.--In exercising the authority under this 
section, the Director shall, to the extent practicable, provide for 
similar actions in situations involving similar circumstances.
    (c) Judicial Review.--Actions taken under this section are final 
and conclusive, and are not subject to administrative or judicial 
review.
    (d) Regulations.--The Office of Personnel Management shall 
prescribe regulations regarding the process and criteria used in 
exercising the authority under this section.
    (e) Report.--The Office of Personnel Management shall, not later 
than 180 days after the date of enactment of this Act, and annually 
thereafter for each year in which the authority provided in this 
section is used, submit a report to each House of Congress on the 
operation of this section.

SEC. 2209. REGULATIONS.

    (a) In General.--In addition to the regulations specifically 
authorized in this title, the Office may prescribe such other 
regulations as are necessary for the administration of this title.
    (b) Former Spouse.--The regulations prescribed under this title 
shall provide for protection of the rights of a former spouse with 
entitlement to an apportionment of benefits or to survivor benefits 
based on the service of the employee.

                      Subtitle C--Other Provisions

SEC. 2301. PROVISIONS TO AUTHORIZE CONTINUED CONFORMITY OF OTHER 
                    FEDERAL RETIREMENT SYSTEMS.

    (a) Foreign Service.--Sections 827 and 851 of the Foreign Service 
Act of 1980 (22 U.S.C. 4067 and 4071) shall apply with respect to this 
title in the same manner as if this title were part of--
          (1) the Civil Service Retirement System, to the extent this 
        title relates to the Civil Service Retirement System; and
          (2) the Federal Employees' Retirement System, to the extent 
        this title relates to the Federal Employees' Retirement System.
    (b) Central Intelligence Agency.--Sections 292 and 301 of the 
Central Intelligence Agency Retirement Act (50 U.S.C. 2141 and 2151) 
shall apply with respect to this title in the same manner as if this 
title were part of--
          (1) the Civil Service Retirement System, to the extent this 
        title relates to the Civil Service Retirement System; and
          (2) the Federal Employees' Retirement System, to the extent 
        this title relates to the Federal Employees' Retirement System.

SEC. 2302. AUTHORIZATION OF PAYMENTS.

    All payments authorized or required by this title to be paid from 
the Civil Service Retirement and Disability Fund, together with 
administrative expenses incurred by the Office in administering this 
title, shall be deemed to have been authorized to be paid from that 
Fund, which is appropriated for the payment thereof.

SEC. 2303. INDIVIDUAL RIGHT OF ACTION PRESERVED FOR AMOUNTS NOT 
                    OTHERWISE PROVIDED FOR UNDER THIS TITLE.

    Nothing in this title shall preclude an individual from bringing a 
claim against the Government of the United States which such individual 
may have under section 1346(b) or chapter 171 of title 28, United 
States Code, or any other provision of law (except to the extent the 
claim is for any amounts otherwise provided for under this title).

                       Subtitle D--Effective Date

SEC. 2401. EFFECTIVE DATE.

    Except as otherwise provided in this title, this title shall take 
effect on the date of enactment of this Act.

                               I. PURPOSE

    The Long-Term Care Security Act would establish a long-term 
care insurance program for federal (including postal) 
employees, members of the uniformed services, both civilian and 
military retirees, and certain qualified relatives including 
spouses, parents, parents-in-law, and stepparents.
    The provisions of the Federal Erroneous Retirement Coverage 
Corrections Act which are included in S. 2420 provide for the 
correction of certain retirement coverage errors affecting 
federal employees.

                             II. BACKGROUND

A. Need for long-term care legislation

    Long-term care refers to a wide range of health and support 
services for persons who have lost the capacity for self-care. 
Long-term care services include home and community-based 
services as well as those provided in nursing homes and other 
institutions.
    A steady increase in longevity and in the elderly 
population has led to a rise in the number of Americans likely 
to need some form of long-term care. It is estimated that 
roughly 5.2 million persons age 65 or older, and 3.5 million 
persons ages 18 through 64, currently receive long-term care 
assistance either in the community or in nursing homes. The 
need for long-term care is expected to grow substantially in 
the future. By the year 2030, it is estimated that 
approximately 20 percent of our population will be age 65 or 
older.
    Long-term care is expensive. The cost of nursing home care 
is expected to rise from an average today of $46,000 per year 
to an average of $97,000 per year by 2030. Long-term care 
insurance can provide families with affordable options for 
dealing with the catastrophic expenses of nursing home care, 
home care, assisted living, and other forms of long-term care 
services. Without insurance, families often must exhaust all 
their income and assets to pay for long-term care.
    Many individuals are under the false impression that their 
health plan, disability insurance, or Medicare will adequately 
cover their long-term care needs. Unfortunately, this is rarely 
the case. Most health insurance plans do not cover costs 
associated with long-term care, and Medicare covers long-term 
care only under limited circumstances. Medicaid provides 
coverage for long-term care, but eligibility is based on income 
and assets. Without long-term care insurance, individuals must 
deplete their assets, and eventually depend on Medicaid to pay 
the costs of long-term care.
    Premiums for long-term care insurance are typically less 
expensive for younger purchasers. Establishing a long-term care 
insurance program for the federal community could encourage 
individuals to consider purchasing long-term care insurance 
during their working years, when premiums are lower.
    Long-term care insurance can help federal workers plan for 
the future and protect themselves from the financial risks 
associated with the difficult challenge of providing long-term 
care and comfort to a loved one. By establishing a program that 
offers affordable, quality long-term care insurance, the 
federal government can serve as a model to other employers 
across the country whose employees face similar long-term care 
needs.

B. Summary of title I of the legislation, ``The Long-Term Care Security 
        Act'

    Title I of S. 2420 requires the Office of Personnel 
Management (OPM) to enter into seven-year contracts with one or 
more qualified insurance carriers to provide long-term care 
insurance policies to the federal community. Contracts must be 
awarded on the basis of contractor qualifications, price, and 
reasonable competition; they are not automatically renewable.
    Competition among carriers for the opportunity to offer 
long-term care insurance under this program should result in 
affordable premiums and attractive benefit packages. Therefore, 
the Committee encourages OPM to ensure the selection process 
for qualified carriers is as competitive as possible. In 
addition, the Committee encourages OPM to consider all 
insurance companies that meet program criteria and guidelines.
    S. 2420 expressly authorizes insurers to form consortia for 
purposes of submitting proposals or bids to OPM and jointly 
underwriting coverage if selected by OPM. Joint underwriting of 
coverage may facilitate the availability and affordability of 
long-term care insurance for federal employees. The federal 
participant group would be larger than any group underwritten 
by a single carrier today. Joint underwriting by multiple 
carriers may thus be necessary in order to underwrite the risk 
inherent in such a large population. Additionally, a consortium 
could allow pooling of loss information enabling more accurate 
and favorable pricing for federal employees. Further, a 
consortium may be able to provide certain services more 
efficiently to the large population of enrollees, and also 
permit OPM to take advantage of the companies' different areas 
of expertise.
    Enrollees will pay the full premiums for long-term care 
policies offered pursuant to this Act. OPM will be granted 
access to the Employees' Life Insurance Fund for the initial 
expenses of implementation and administration, which will be 
subsequently reimbursed by the carriers. The master contracts 
must require each carrier to reimburse the Employees' Life 
Insurance Fund on a pro rata basis for ongoing OPM 
administrative expenses, including lost investment income of 
the Life Insurance Fund.
    Each contract with a qualified carrier to provide long-term 
care insurance under thisprogram must include detailed 
statements of benefits, premium charges, terms of enrollment, 
limitations, and any other terms and conditions mutually agreed to by 
OPM. Each contract must also specify procedures to resolve 
expeditiously any disputes regarding payment of claims and benefits. 
During the contract period, premiums can be adjusted only by mutual 
agreement between OPM and the carrier. Contracts must provide for 
portability of coverage, ensuring that policies cannot be terminated 
because of a change in the individual's status, such as separation from 
service, divorce, or otherwise.
    S. 2420 establishes underwriting standards under which the 
provision of long-term care insurance is not guaranteed to any 
individual, and OPM is not required to offer long-term care 
insurance to those who are immediately eligible. However, OPM 
is not precluded from offering long-term care insurance to 
individuals who are immediately eligible, if OPM determines it 
is appropriate to do so.
    S. 2420 provides OPM with the authority and flexibility to 
negotiate underwriting standards with carriers, just as it will 
negotiate other terms and conditions. The Committee recognizes 
the tension between the need to screen potential enrollees and 
the desire to qualify as many eligible individuals as possible. 
Without some underwriting, premiums could become too expensive 
for potential enrollees, and carriers would be less interested 
in participating in this program. The Committee encourages OPM 
to negotiate underwriting standards that allow the greatest 
number of individuals to obtain long-term care policies at 
reasonable rates, while still containing costs. The Committee 
also expects OPM to use the buying power of the large federal 
community to make the underwriting standards as fair and 
reasonable as possible.
    S. 2420 requires the General Accounting Office (GAO) to 
compare the competitiveness of this program with group and 
individual coverage available in the private insurance market 
and submit written evaluations to OPM and Congress before the 
end of the third and fifth years of the program. In addition, 
OPM is required to ensure that each applicant has information 
regarding the general advantages and disadvantages of long-term 
care insurance and any other information necessary to make an 
informed decision about obtaining long-term care insurance.
    The Committee understands that eligible individuals will 
need access to adequate information to make an informed 
decision regarding the purchase of long-term care insurance. 
Long-term care insurance can be an effective way for some 
individuals to plan for the future, but it is not an 
appropriate product for everyone. The Committee recognizes the 
importance of providing an adequate amount of information to 
potential enrollees, without overwhelming them.
    Some individuals eligible to participate in this long-term 
care insurance program have previously purchased long-term care 
insurance in the private market. Some of these individuals have 
expressed an interest in converting their present long-term 
care insurance policies into policies made available under this 
Act. The Committee urges OPM to investigate the feasibility of 
such conversions and to examine the impact any potential 
conversions might have on the administration of the long-term 
care insurance program authorized by this Act.
    Numerous bills have been introduced in the 106th Congress 
to provide long-term care insurance for federal employees and 
annuitants, members of the uniformed services, and civilian and 
military retirees. Among these are S. 57, introduced by Senator 
Mikulski; S. 36, introduced by Senator Grassley; and S. 894, 
introduced by Senator Cleland.
    In an effort to achieve consensus, discussions and 
negotiations regarding the creation of a federal long-term care 
insurance program have been held with interested staff, 
representatives from the Office of Personnel Management (OPM), 
the federal employee unions, the National Association of 
Insurance Commissioners, the Health Insurance Association of 
America, as well as representatives of several major insurance 
companies, among others. In the Senate, S. 2420 emerged from 
these negotiations as the clear, strongly supported compromise. 
Title I of S. 2420 is identical to its House companion measure, 
H.R. 4040, as it passed the House on May 9, 2000.
    S. 2420 will help millions of American families plan 
responsibly for their retirement and gain the security that is 
necessary for achieving a high quality of life in their 
retirement years.

C. Summary of title II of the legislation, the ``Federal Erroneous 
        Retirement Coverage Corrections Act''

    In 1984, the federal government made a transition from the 
Civil Service Retirement System (CSRS) to the Federal Employees 
Retirement System (FERS). As government agencies carried out 
the complex job of applying the transition rules, many errors 
were committed and thousands of employees were placed in the 
wrong retirement system.
    The CSRS and the FERS are two distinct retirement systems. 
The CSRS is a stand-alone defined benefit pension plan that 
does not include Social Security coverage. Benefits are based 
on a formula involving length of service, high-three average 
salary and an accrual rate. The FERS is a three-tiered 
retirement system combining Social Security, a defined benefit 
component and a defined contribution component known as the 
Thrift Savings Plan (TSP). The TSP is similar to 401(k) plans 
as found in the private sector. In order for employees covered 
by the FERS to have similar income replacement rates in 
retirement to those covered by the CSRS, participation in the 
Thrift Savings Plan, with its government match for employee 
contributions, is necessary. (A third system, the ``CSRS-
Offset'' system, covers employees who vested in the CSRS before 
separating from government service for more than one year. This 
offset system is a hybrid, combining Social Security coverage 
with a defined benefit component with the aggregate benefit 
amount intended to equal the amount the employee would have 
received under the CSRS.)
    Under current statute, federal agencies have no choice but 
to correct a retirement coverage error when it is discovered, 
effectively forcing employees into a new retirement plan. Since 
most of the retirement coverage errors involve employees 
wrongfully placed in the CSRS or the CSRS-Offset system, 
employees whose coverage is corrected often have not 
participated in the TSP to the same degree they would have had 
they known they were to retire under theFERS. Thus, the 
automatic correction of a retirement coverage error can have a harmful 
impact on an employee's financial ability to plan for retirement.
    On June 17, 1999, Senator Cochran, for himself and Senator 
Akaka, introduced S. 1232, the Federal Erroneous Retirement 
Coverage Corrections Act, which was referred to the Committee 
on Governmental Affairs. This proposal provides comprehensive 
and equitable relief to employees, former employees, retirees, 
and survivors who are affected by retirement coverage errors. 
It provides individuals with a choice between corrected 
retirement coverage and the coverage the employee expected to 
receive, without amending the Social Security Act. For each 
type of retirement coverage error, individuals are furnished 
the opportunity to maintain their expected level of retirement 
benefits without a change in their retirement savings and 
planning.
    For example, current law requires FERS eligible employees 
who were incorrectly placed in the CSRS-Offset system to be 
automatically placed in FERS. However, S. 2420, as amended, 
would provide these employees with the option to be corrected 
to FERS or remain in the CSRS-Offset system. Many employees do 
not have the financial resources to make the retroactive TSP 
contributions necessary to maintain their expected level of 
retirement benefits under FERS. This legislation provides these 
employees with equitable relief by furnishing them the option 
to remain in the CSRS-Offset system and receive the retirement 
benefits they expected. Among other provisions, this 
legislation also provides certain employees who missed an 
opportunity to contribute to the Thrift Savings Plan due to a 
coverage error the opportunity to receive interest on their TSP 
make-up contributions.
    On June 21, 1999, S. 1232 was referred to the Subcommittee 
on International Security, Proliferation, and Federal Services. 
On July 16, 1999, the Subcommittee on International Security, 
Proliferation, and Federal Services reported S. 1232 to the 
Committee on Governmental Affairs by polling letter. On August 
3, 1999, the Committee held a business meeting and voted 
unanimously, by voice vote, to favorably report the bill. The 
bill was reported to the Senate on October 8, 1999 (see S. 
Report 106-178). S. 1232 passed the Senate by unanimous consent 
on November 3, 1999. On November 18, the House passed H. Res. 
394, a resolution returning S. 1232 to the Senate on the 
grounds that it contravened the constitutional requirement that 
revenue measures originate in the House.
    The Committee has addressed the concerns raised in H. Res. 
394 by removing the specific provisions cited in H. Res. 394 as 
contravening the constitutional requirement that revenue 
measures originate in the House. Specifically, Section 401 of 
S. 1232, which provided that transfers and payments of 
contributions under the bill would not result in an income tax 
liability for affected employees, has been deleted and is not 
included in S. 2420. In addition, Title V of S. 1232 has also 
been deleted and is not included in S. 2420. This latter 
language, which provided portability of service credit between 
the Federal Reserve Board and FERS, was incorporated as Title 
II of S. 335, the Deceptive Mail Prevention and Enforcement 
Act, which became Public Law 106-168. Except for the two 
changes discussed above, the provisions of the Federal 
Erroneous Retirement Coverage Corrections Act as contained in 
S. 2420, as amended, are identical to S. 1232.
    The provisions of the Federal Erroneous Retirement Coverage 
Corrections Act, which are included in S. 2420, provide long-
awaited relief to many federal employees and their families 
who, through no fault of their own, find themselves the victims 
of retirement coverage errors. The Committee believes the 
Federal Erroneous Retirement Coverage Corrections Act provides 
a comprehensive solution to the problems faced by federal 
employees due to retirement coverage errors, and that it does 
so at a reasonable cost and without creating unnecessary 
administrative burdens. By affording affected federal employees 
the opportunity to be made whole, S. 2420 strikes the 
appropriate balance between the needs of those affected by 
retirement errors and federal agencies struggling to fulfill 
their mandates with already tight budgets.

                        III. LEGISLATIVE HISTORY

    S. 2420 was introduced by Senator Grassley on April 13, 
2000, and referred to the Committee on Governmental Affairs. On 
May 1, 2000, the bill was referred to the Subcommittee on 
International Security, Proliferation, and Federal Services.
    The Subcommittee on International Security, Proliferation, 
and Federal Services held a hearing on long-term care insurance 
on May 16, 2000. Senators Charles Grassley and Barbara Mikulski 
testified, along with the Director of OPM, Ms. Janice R. 
Lachance, in support of S. 2420.
    On May 24, 2000 the Subcommittee on International Security, 
Proliferation, and Federal Services, by polling letter, sought 
approval to report S. 2420 to the Committee on Governmental 
Affairs with a substitute amendment making technical changes to 
the bill and adding provisions of the Federal Erroneous 
Retirement Coverage Corrections Act. The Subcommittee voted 
unanimously by polling letter to approve the bill, as amended, 
and on May 31 it was reported to the Committee on Governmental 
Affairs.
    On June 14, 2000, the Committee considered S. 2420, as 
amended by the Subcommittee on International Security, 
Proliferation, and Federal Services. S. 2420 was ordered to be 
reported by the Committee by voice vote. Committee members 
present were Senators Thompson, Stevens, Collins, Voinovich, 
Cochran, Lieberman, Akaka, Torricelli, and Cleland.

                    IV. SECTION-BY-SECTION ANALYSIS

Title I--Federal long-term care insurance

    Section 1001. Short title.--This section titles the bill 
the ``Long-Term Care Security Act.''
    Section 1002.--This section amends Subpart G of Part III of 
Title 5, United States Code, by adding a new Chapter 90--Long-
Term Care Insurance, Sections 9001-9009 as follows:
    Section 9001. Definitions.--Under this section, individuals 
eligible to purchase long-term care insurance include most of 
those employees and annuitants who would be eligible to 
participate in the Federal Employees Health Benefits Program 
(FEHBP) with the exception of District of Columbia government 
employees. Eligibility also extends to active duty and retired 
members of the uniformed services, including the Commissioned 
Corps of the Public Health Service and National Oceanic and 
Atmospheric Administration. Relatives of active employees or 
members of the uniformed services qualified to purchase long-
term care insurance include the spouse, children at least 18 
years of age, parents, stepparents, or parents-in-law. For 
retirees, spouses and children are qualified to participate. 
OPM is authorized to include other eligible relatives.
    This section defines a ``qualified carrier'' as an 
insurance company or consortium of insurance companies licensed 
to issue long-term care insurance in all 50 States and the 
District of Columbia, either directly or through their 
subsidiaries. Through reference to Section 7702B of the 
Internal Revenue Code (IRC) of 1986 (the amendments made by the 
Health Insurance Portability and Accountability Act of 1996, 
which establish favorable tax treatment for certain long-term 
care insurance contracts), this section defines a ``qualified 
long-term care insurance contract'' as one which covers only 
long-term care services; does not pay or reimburse expenses 
covered under Medicare; is guaranteed renewable; does not 
provide for a cash surrender value or other money that can be 
paid, assigned, or pledged as collateral for a loan, or 
borrowed; applies all refunds of premiums and policy holder 
dividends or similar amounts as a reduction in future premiums 
or to increase future benefits; and meets certain consumer 
protection standards.
    By reference to the definition of qualified long-term care 
insurance contracts and services contained in Section 7702B of 
the IRC, this section defines qualified long-term care services 
as necessary diagnostic, preventive, therapeutic, curing, 
treating, mitigating, and rehabilitative services and 
maintenance or personal care services required by a chronically 
ill individual and provided according to a plan prescribed by a 
licensed health care practitioner. Under the IRC and this 
chapter, ``chronically ill individuals'' must have functional 
impairments that make them unable to perform, without 
substantial assistance from another individual, at least two of 
five specified activities of daily living (ADLs) for a period 
certified to last at least 90 days. It also includes any 
cognitively impaired persons who require substantial 
supervision to protect them from threats to health and safety.
    Section 9002. Availability of insurance.--This section 
requires the OPM to establish and, in consultation with the 
appropriate executive branch cabinet secretaries, administer a 
program through which eligible individuals may obtain long-term 
care insurance coverage. Individuals seeking coverage as 
relatives of eligible employees or annuitants are required to 
provide documentation of their relationship, as determined by 
OPM. (The eligible employee or annuitant need not purchase a 
policy for a qualified relative to purchase one.) Coverage must 
be provided through qualified long-term care insurance 
contracts (as defined by the Section 7702B of the IRC) that are 
fully insured or reinsured (that is, financially capable of 
paying all qualified claims) and issued by a qualified carrier.
    This section establishes underwriting standards under which 
provision of long-term care insurance is not guaranteed to any 
individual, and it is not required to be provided to 
individuals who would be immediately eligible for benefits. The 
intent of this section is to make clear that OPM is not 
required to offer long-term care policies to those who are 
immediately eligible. The provision should not be read, 
however, to preclude OPM from offering long-term care insurance 
to individuals who are immediately benefit eligible if OPM 
during the contract negotiation process determines it is 
appropriate to do so. Individuals who do not enroll during 
their first period of opportunity but who elect to enroll 
during a subsequent opportunity may be required to meet more 
stringent underwriting standards than would have been applied 
during the first enrollment period.
    For purposes of underwriting, this section specifies that 
spouses of eligible employees and spouses of eligible 
annuitants must be treated as nearly as practicable like the 
eligible individual. It further provides that benefits and 
coverage are guaranteed renewable as long as the premiums 
continue to be paid in a timely manner. Premiums may be revised 
on a class basis only.
    Section 9003. Contracting authority.--This section 
authorizes OPM to contract with one or more qualified carriers 
for a policy or policies of long-term care insurance on the 
basis of contractor qualifications, price, and reasonable 
competition. Each ``master contract'' is required to include a 
detailed statement of benefits, premium charges, the terms of 
the enrollment period, and any limitations. Master contracts 
shall not be automatically renewable. Premiums must reasonably 
and equitably reflect the cost of benefits provided, as 
determined by OPM; premiums can be adjusted during a contract 
period only by mutual agreement between OPM and the carrier.
    Under the terms of the master contract, carriers must agree 
to provide payments or benefits to entitled individuals. Master 
contracts must also specify procedures to resolve expeditiously 
disputes regarding payment of claims or benefits, including 
internal administrative procedures and independent third-party 
review under appropriate circumstances. The choice of third 
party review entities must be mutually acceptable to OPM and 
the carrier. Master contracts shall also include procedures for 
review of an individual's eligibility for coverage. Disputes 
between a carrier and OPM shall be subject to de novo judicial 
review after exhaustion of administrative remedies.
    Neither OPM nor any third-party reviewer shall have the 
authority to change the terms of any master contract. Each 
master contract is for a term of seven years, that term 
beginning on the earliest date as of which any long-term care 
insurance coverage under the Act becomes effective. Any master 
contract entered into later than the effective date for 
coverage shall end at the close of the same seven-year period. 
Master contracts may be terminated earlier by OPM according to 
the contract terms. If a master contract is terminated, the 
rights and responsibilitiesof the enrolled individuals, of the 
insurers, and OPM must continue until the termination of the enrolled 
individuals' coverage or the effective date of a successor contract.
    Within 180 days of submission of a report by the GAO before 
the end of the fifth year of the program, the President (or his 
designee) shall submit to the Committees on Government Reform 
and on Armed Services of the House of Representatives and the 
Committees on Governmental Affairs and on Armed Services of the 
Senate a written recommendation as to whether this program 
should be continued unmodified, terminated, or restructured. 
For 180 days after their recommendation, OPM is prevented from 
rebidding or otherwise contracting for any coverage that would 
follow the expiration of the seven-year period.
    This section requires each master contract to provide for 
portability of coverage, ensuring that the policies of duly 
enrolled individuals shall not be terminated because of a 
change in the individual's status, such as separating from 
covered employment or no longer being a qualified relative due 
to divorce or otherwise.
    Section 9004. Financing.--This section establishes that 100 
percent of the premiums for long-term care insurance coverage 
under this program must be paid by eligible individuals either 
through withholding from pay or retirement benefits or through 
direct payments to the carrier. Eligible employees or 
annuitants may pay for a qualified relative's premium through 
withholding from the employee's pay or annuitant's retirement 
benefit.
    This section requires each participating carrier to 
maintain records that permit it to account for all amounts 
received under this program, including investment earnings on 
these amounts, separately and apart from all other funds of the 
carrier. It grants OPM access to the Employees' Life Insurance 
Fund to finance reasonable expenses associated with initial 
implementation and administration of this chapter, without 
fiscal year limitation. Subsequently, the master contracts must 
require each carrier to reimburse the Employees' Life Insurance 
Fund on a pro rata basis for initial as well as ongoing OPM 
administrative expenses, including lost investment income of 
the Life Insurance Fund.
    Section 9005. Preemption.--This section states that any 
state or local laws and regulations relating to long-term care 
insurance or contracts are superseded and preempted by the 
terms of any contract under this chapter.
    Section 9006. Studies, reports, and audits.--This section 
requires carriers with master contracts to furnish reasonable 
reports to OPM and permits OPM and GAO to examine the carrier's 
records as necessary to carry out this chapter. Additionally, 
federal agencies are required to keep records, make 
certifications, and furnish OPM with information and reports. 
GAO is required to compare the competitiveness of this program 
with group and individual coverage available in the private 
insurance market and submit written evaluations to OPM, the 
President and each House of Congress before the end of the 
third and fifth years of this program. OPM is also required to 
cooperate with GAO in providing periodic evaluations of the 
program.
    Section 9007. Jurisdiction of courts.--This section 
provides that, after all required administrative remedies have 
been exhausted, individuals disputing a decision of a carrier 
to deny payments or benefits may file a civil action or claim 
against the carrier in U.S. District Courts, provided judicial 
review is not precluded by the dispute resolution procedures 
and remedies provided under the Act.
    Section 9008. Administrative functions.--Under this 
section, OPM is required to prescribe the regulations necessary 
to carry out this chapter, and shall provide for enrollment 
periods, promotion, and education efforts. In addition, OPM is 
required to consult with the appropriate Secretaries in 
prescribing regulations with respect to active and retired 
members of the uniformed services and their qualified 
relatives. OPM is also required to ensure that each applicant 
has the information necessary to make an informed decision 
about obtaining long-term care insurance and to compare 
coverage and benefits to that otherwise generally available. 
OPM must provide information on the cost of long-term care and 
sufficiency of benefits to cover those costs, including the 
effects of inflation; an individual's right to cancel coverage 
and receive a premium refund; the number or percent of 
individuals likely to fail to maintain their coverage; how and 
when premiums for long-term care insurance under this chapter 
may be raised; a ten-year premium history for each qualified 
long-term care insurer under this chapter and whether increases 
are anticipated; the projected premiums for a typical insured 
individual at various ages; and the general advantages and 
disadvantages of long-term care insurance relative to other 
means of meeting the costs of long-term care.
    Section 9009. Cost Accounting standards.--This section 
provides that long-term care insurance contracts under this 
chapter are exempt from the cost accounting standards issued by 
the Office of Federal Procurement Policy.
    Section 3. Effective date.--This section requires OPM to 
ensure that long-term care insurance coverage under this Act 
will be available so that it may take effect not later than the 
beginning of the first fiscal year following a period of 18 
months after enactment.

Title II--Federal retirement coverage errors correction

    These provisions of the Federal Erroneous Retirement 
Coverage Corrections Act would provide a remedy to federal 
employees who have been placed in the wrong retirement system.
    Section 2001: Provides the short title (``Federal Erroneous 
Retirement Coverage Corrections Act'') and the Table of 
Contents.
    Section 2002: Defines the terms used throughout the Act.
    Section 2003: Provides coverage for all errors that have 
been in effect for at least three years of service after 
December 31, 1986.
    Section 2004: Provides that elections made under this Act 
are irrevocable.
            Subtitle A: Description of retirement coverage errors and 
                    measures for rectification
    This subtitle details the specific types of retirement 
coverage errors and the remedies provided by the Act.
    Chapter 1: Covers employees and annuitants who should have 
been FERS covered, but were erroneously covered under CSRS or 
CSRS Offset. These individuals have a choice between correction 
to FERS or be covered by CSRS Offset. Includes provisions that 
allow all employee contributions, and earnings thereon, to 
remain in the TSP account if CSRS Offset is elected.
    Chapter 2: Covers employees who should have been covered by 
a retirement plan (CSRS, CSRS Offset, or FERS), but were 
erroneously covered by Social Security only. In all cases, 
coverage is corrected to the appropriate plan so that the 
employee has retirement coverage.
    Chapter 3: Covers employees who should have been covered by 
Social Security only, but were erroneously covered by CSRS or 
CSRS Offset. These individuals have a choice between correction 
to Social Security only or be covered by CSRS Offset.
    Chapter 4: Covers employees who should have been covered by 
CSRS, CSRS Offset, or Social Security only, but were 
erroneously covered by FERS. These individuals have a choice 
between remaining in FERS or correction to the appropriate 
plan. Includes provisions that allow all employee 
contributions, and earnings thereon, to remain in the TSP 
account if coverage other than FERS is elected.
    Chapter 5: Covers employees who should have been covered by 
CSRS Offset, but were erroneously covered by CSRS. Coverage is 
corrected to CSRS Offset to conform with Social Security 
coverage law.
    Chapter 6: Covers employees who should have been covered by 
CSRS, but were erroneously covered by CSRS Offset. Coverage is 
corrected to CSRS to conform with Social Security coverage law.
            Subtitle B: General provisions
    Section 2201: Requires that all government agencies make 
reasonable efforts to identify and notify individuals affected 
by retirement coverage errors.
    Section 2202: Authorizes OPM, SSA, and TSP to obtain any 
information necessary to carry out the responsibilities of this 
Act.
    Section 2203: Provides for payment of interest on certain 
deposits made by employees that, due to correction of a 
retirement coverage error, are returned to the employee. Allows 
retirement credit for certain periods of service without 
payment of a service credit deposit. Provides that the 
retirement or survivor benefit is actuarially reduced by the 
amount of deposit owed.
    Section 2204: Provides that the employing agency pays any 
employer OASDI taxes due for the period of erroneous coverage, 
subject to the three-year statute of limitations in the 
Internal Revenue Code. OPM will transfer excess employee 
retirement deductions to the OASDI Trust Funds to fund the 
employee share of the OASDI taxes. In no case will an employee 
be required to pay additional OASDI taxes.
    Section 2205: Provides that certain employees who missed an 
opportunity to contribute to TSP due to a coverage error may 
receive earnings on their own TSP make-up contributions. 
``Lost'' earnings will be paid by the employing agency. Note: 
Current law already provides that certain employees who missed 
an opportunity to contribute to TSP due to a coverage error may 
receive agency matching contributions on TSP make-up 
contributions, agency automatic one percent contributions to 
TSP, and earnings on both.
    Section 2206: Provides that employing agencies may not 
remove excess agency retirement contributions from the Civil 
Service Retirement and Disability Fund.
    Section 2207: Requires that agencies obtain written 
approval from OPM before placing certain employees under CSRS 
coverage.
    Section 2208: Authorizes the Director of OPM to extend 
deadlines, reimburse individuals for reasonable expenses 
incurred by reason of the coverage error or for losses, and 
waive repayments required under the Act.
    Section 2209: Authorizes OPM to prescribe regulations to 
administer the Act.
            Subtitle C: Other provisions
    Section 2301: Makes remedies provided under the Act also 
available to employees of the Foreign Service and the Central 
Intelligence Agency.
    Section 2302: Authorizes payments from the Civil Service 
Retirement and Disability Fund for administrative expenses 
incurred by OPM and for other payments required under the Act.
    Section 2303: States that the Act does not preclude 
individuals from bringing suit against the Government of the 
United States for amounts not provided under the Act.
            Subtitle D: Effective date
    Section 2401: Provides that the Act is effective from the 
date of enactment.

                     V. REGULATORY IMPACT STATEMENT

    Paragraph 11(b)(1) of rule XXVI of the Standing Rules of 
the Senate requires that each report accompanying a bill 
evaluate ``the regulatory impact which would be incurred in 
carrying out this bill.'' S. 2420 would preempt state and local 
laws that govern long-term care coverage and benefits if those 
laws conflict with benefit contracts for federal employees. 
While this preemption would be an intergovernmental mandate, 
state and local governments would not bear any additional costs 
because the preemption would limit the scope of regulation by 
those governments.
    The bill also would change the way the government of the 
District of Columbia and Gallaudet University correct errors 
associated with the incorrect enrollment of employees in 
federal retirement plans. This requirement would be both an 
intergovernmental and private-sector mandate as defined by the 
Unfunded Mandates Reform Act. However, costs associated with 
making those corrections would be minimal because only a small 
number of employees have been affected by errors addressed by 
the bill. Consequently, the Congressional Budget Office 
estimates that the total cost of the mandate would be minimal 
and would not exceed the thresholds established in UMRA ($55 
million for intergovernmental mandates and $109 million for 
private-sector mandates in 2000, adjusted for inflation).

                         VI. CBO COST ESTIMATE

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 12, 2000.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2420, the Long-Term 
Care Security Act and the Federal Erroneous Retirement Coverage 
Corrections Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The principal CBO staff contacts are 
Chuck Betley (for title I) and Eric Rollins (for title II).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

S. 2420--Long-Term Care Security Act and Federal Erroneous Retirement 
        Coverage Corrections Act

    Summary: S. 2420 has two major components. Title I of the 
bill, the Long-Term Care Security Act, would require the Office 
of Personnel Management (OPM) to develop and administer a long-
term care insurance program for federal employees, members of 
the uniformed services, retirees from federal or military 
service, and specified relatives of the primary eligible 
groups. Because the federal government would not contribute to 
the enrollees' premiums, and the insurer or insurers would be 
required to reimburse OPM for its expenses in setting up and 
administering the plan, net federal outlays would be zero over 
the long run. However, the government would initially incur 
some start-up costs, which would ultimately be reimbursed by 
the insurers.
    Title II, the Federal Erroneous Retirement Coverage 
Corrections Act, would alter the procedures for correcting 
situations where federal employees have been mistakenly placed 
in the wrong retirement system. Many of those retirement 
coverage errors occurred between 1984, when the Civil Service 
Retirement System (CSRS) was closed to new entrants, and 1987, 
when the Federal Employees' Retirement System (FERS) was 
created.
    CBO estimates that this bill would reduce discretionary 
spending by $51 million over the 2001-2005 period, primarily 
because of lower agency contributions to the Civil Service 
Retirement and Disability Fund (CSRDF) and the Thrift Savings 
Plan (TSP). S. 2420 would also increase direct spending by $20 
million over the same period. Because the bill would affect 
direct spending, pay-as-you-go procedures would apply.
    The bill would preempt state laws governing long-term care 
contracts for federal employees, and this preemption would be 
an intergovernmental mandate as defined in the Unfunded 
Mandates Reform Act (UMRA). Also, the requirements to continue 
retirement coverage in some instances and to correct retirement 
errors in others for employees of the District of Columbia and 
Gallaudet University would be intergovernmental and private-
sector mandates. However, CBO estimates that the cost of those 
mandates would be small and would not exceed the thresholds 
established in UMRA ($55 million for intergovernmental mandates 
and $109 million for private-sector mandates in 2000, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2420 is shown in the following table.

------------------------------------------------------------------------
                                  Outlays by fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2001    2002    2003    2004    2005
------------------------------------------------------------------------
                    SPENDING SUBJECT TO APPROPRIATION

Title II:
    Makeup Contributions to TSP.   (\1\)      15      -3      -4      -4
    Makeup Payments to Social      (\1\)   (\1\)       0       0       0
     Security...................
    Makeup Payments to the CSRDF      -3       2      -3      -4      -4
    Agency Retirement              (\1\)      -2      -5      -6      -6
     Contributions..............
    Employer TSP Contributions..      -1      -4      -7      -7      -8
    Employer Social Security       (\1\)   (\1\)       0       0       0
     Contributions..............
                                 ---------------------------------------
      Total--Subject to               -4      13     -18     -20     -22
       Appropriation............
                                 =======================================
                       CHANGES IN DIRECT SPENDING

Title I:
    OPM Administrative Expenses.       3      18     -21       0       0
Title II:
    OPM Administrative Expenses.       1       1   (\1\)   (\1\)   (\1\)
    Federal Retirement Benefits.   (\1\)       2   (\1\)   (\1\)   (\1\)
    Transfers from CSRDF to           -3       3       0       0       0
     Social Security Trust Funds
    Postal Service Contributions       1   (\1\)       4       5       5
     to the CSRDF...............
    Postal Service Outlays (off-      -2       6      -4       0       0
     budget)....................
    Postal Service Contributions   (\1\)   (\1\)       0       0       0
     to Social Security Trust
     Funds (off-budget).........
    Receipt of Transfers by            3      -3       0       0       0
     Social Security Trust Funds
     (off-budget)...............
                                 ---------------------------------------
      Subtotal--Title II........       1       9   (\1\)       5       5
                                 =======================================
Total--On Budget Direct Spending       3      23     -16       5       5
Total--Off-Budget Direct               1       3      -4       0       0
 Spending.......................
------------------------------------------------------------------------
\1\ Less than $500,000.

Note.--Components may not sum to totals because of rounding.

    The mandatory costs of this legislation would fall within 
budget functions 600 (income security) and 950 (undistributed 
offsetting receipts). This estimate assumes that S. 2420 will 
be enacted by October 1, 2000.

Basis of estimate

            Title I: Long-Term Care Security Act
    S. 2420 specifies that eligible individuals who opt to 
purchase long-term care insurance would be responsible for 100 
percent of the cost of the premiums, so that the federal 
government would not incur net costs over the long term. 
However, because OPM would expend funds for start-up and 
administrative expenses before enrollees' premiums are 
received, the agency would incur outlays in 2001 and 2002, 
which would be direct spending from the Employees' Life 
Insurance Fund.
    Upon enactment, OPM would be allowed 18 months to set up 
the long-term care insurance program. CBO assumes that, if the 
bill were enacted in fiscal year 2000, OPM would begin in 2001 
to negotiate with one or more insurance carriers to establish 
the benefits to be provided under the plan and the premiums to 
be charged. The program would take effect in 2003, and premiums 
would begin to be deducted from enrollees' salary or retirement 
payments. The federal government would not contribute to the 
enrollees' premiums, and the insurer or insurers would be 
required to reimburse OPM for the agency's expenses in setting 
up and administering the plan.
    The expenses that OPM would incur before being able to 
collect premiums from enrollees and reimbursement from the 
insurers would be paid for the Employees' Life Insurance Fund. 
Based on information from OPM and the costs of administering 
other benefit programs, CBO estimates that start-up costs over 
three fiscal years would be about $23 million. A significant 
portion of the costs would be for education and outreach--
especially for printing and mailing brochures to inform 
potential participants of their eligibility and options under 
the plan. About 10 percent of the estimated costs represents 
expenses for drafting specifications for the plan, evaluating 
contract proposals, negotiating with contractors, and setting 
up systems fro tracking enrollment and premium deductions.
    Expenditures for education and outreach would be 
significant because long-term care insurance is a new benefit 
for many employees, unlike pensions and health insurance, which 
are already established and familiar. Furthermore, OPM would 
have to contact active and retired military personnel, whose 
benefits are ordinarly administered by the Department of 
Defense. Intensive outreach efforts can help attract a larger 
pool of participants, which would help to assure the plan's 
financial solvency by broadening the distribution of people who 
pay premiums and including more enrollees with a low risk of 
needing services.
    Expenses of $3 million in 2001 would be primarily for 
developing the long-term care insurance plan and negotiating 
with insurers, while education and outreach expenses are 
projected to increase outlays to $18 million in 2002. Start-up 
expenses for administrative costs and processing enrollment in 
the first year of the plan's operation are estimated to amount 
to $2 million in 2003. Once the insurance program is 
established, CBO expects that, beginning in 2003, OPM would 
incur costs of about $1 million annually to administer it. 
Reimbursement of the estimated $23 million in start-up costs 
incurred from 2001 through 2003, as well as for the first-year 
administrative expenses of $1 million, would occur in 2003, so 
that receipts would exceed outlays by OPM by about $21 million 
in 2003.
    Those ongoing expenses are expected to remain steady unless 
another open season is held. The bill directs OPM to conduct 
open enrollment seasons periodically, during which 
administrative expenses would be expected to increase. However, 
frequent open seasons would create opportunities for risk 
selection, as low-risk individuals could defer joining the plan 
until they perceive that their risk of needing long-term care 
has changed. The bill would make it harder for people to elect 
coverage only when their risk changes by authorizing the 
insurance plans to apply underwriting standards for individuals 
who defer joining at their first opportunity. Nevertheless, CBO 
expects that OPM would allow open seasons infrequently. If open 
seasons occur at the same intervals as the length of the 
contract specified in the bill, or once every seven years, the 
next increase in outlays for a new open season would occur in 
2010.
    S. 2420 specifies that the government collect premiums from 
most enrollees by withholding a portion of their pay and, in 
turn, transfer these amounts to the insurance companies. These 
transactions would also be direct spending but would have no 
significant net effect on the budget.
            Title II: Federal Erroneous Retirement Coverage Corrections 
                    Act
    There are two main retirement programs for full-time 
regular federal employees. Most full-time employees hired 
before 1984 are in the Civil Service Retirement System, a 
defined benefit plan. Those hired after 1983 are generally 
covered by the Federal Employees' Retirement System, which 
features a more limited defined benefit that CSRS and the 
defined contribution Thrift Savings Plan with matching 
contributions by the government. Employees in CSRS are not 
covered by Social Security, while those in FERS are. Employees 
who return to government service after 1987 and have five years 
of prior service under CSRS may be covered by a hybrid plan 
known as CSRS offset, which features a combination of CSRS and 
Social Security benefits.
    FERS employees may contribute up to 10 percent of their pay 
to the TSP. They receive an automatic contribution from their 
employing agency equal to 1 percent of their pay and may also 
receive an additional 4 percent in matching contributions. CSRS 
and CSRS Offset employees may also participate in the TSP, but 
they may only contribute up to 5 percent of their pay and do 
not receive any government contributions.
    Assumptions about Retirement Coverage Errors. CBO estimated 
the number of retirement coverage errors that have been made 
based on discussions with personnel officials in a number of 
large government agencies, including the Postal Service and the 
Departments of Defense, Veterans Affairs, and Agriculture. 
Those agencies comprise approximately 70 percent of the federal 
civilian workforce. On the basis of those discussions, CBO 
estimates that approximately 18,000 coverage errors have 
occurred throughout the government, of which approximately 
12,000 have already been corrected. The two most common types 
of coverage errors appear to involve employees who should be in 
FERS but were accidentally put in CSRS and employees with prior 
service who returned to government service and were misplaced 
in either FERS or CSRS Offset.
    Under current law, coverage errors are usually corrected by 
converting the employee to the proper retirement system, 
retroactive to the original date of the error. However, some 
employees who were accidentally placed in FERS may remain in 
FERS by making a retroactive election of FERS coverage.
    S. 2420 would allow most employees affected by coverage 
errors to choose whether they would like to be placed in the 
proper retirement system or make their incorrect coverage 
permanent. Employeees who have been incorrectly covered by CSRS 
could elect only CSRS Offset or FERS. Employees whose coverage 
errors have not been corrected would have 180 days after the 
discovery of the error to make an election; employees whose 
coverage errors have already been fixed would have 18 months 
after the issuance of final implementing regulations to make 
their election. All elections would be irrevocable, and 
employees who did not make an election would remain in their 
current coverage. Coverage errors lasting less than three years 
would not be covered by the bill. CBO assumed that under the 
bill agencies would stop correcting coverage errors for the 
first six months of 2001 pending the issuance of final 
regulations to implement the bill, and that they would finish 
processing the resulting backlog by the end of 2002.
    Under current law, when an individual's coverage is 
corrected to FERS, the employing agency makes a lump-sum 
deposit into his or her TSP account based on the employee's 
prior TSP contributions. That deposit is equal to the 
contributions the government would have made and earnings that 
they would have generated under FERS rules. If the employee did 
not have a TSP account, only a deposit for the automatic 1-
percent contributions is made. Earning are calculated using the 
individual's own fund allocation decisions (if he or she had a 
TSP account) or the G Fund rate (otherwise). Employees may 
provide makeup contributions to their TSP accounts out of 
future pay. These makeup contributions receive agency matching 
contributions (up to the 5-percent FERS maximum) and related 
earnings as if the contributions had been made at the proper 
time. However, back earnings are paid only on the agency's 
matching funds, not on the employee's makeup contributions.
    For employees who elect FERS coverage, the bill would 
require agencies to pay lost earnings on the employees' makeup 
contributions to the TSP. (Employees whose coverage had been 
corrected to FERS before the bill's enactment would receive 
makeup earnings on any makeup contributions made prior to 
enactment.)
    CBO assumed that these employees' choice of retirement 
coverage would be strongly influenced by whether or not they 
had made significant contributions to the TSP while they were 
incorrectly covered by CSRS or CSRS Offset. Most employees with 
little or no prior TSP contributions would need to make 
retroactive contributions for a substantial amount of time--as 
much as eight or nine years--in order to make up the 
contributions they would have made under FERS. For these 
employees, CSRS Offset coverage would be relatively attractive. 
In contrast, employees with significant prior TSP contributions 
might need only two to three years to catch up. As a result, 
many of these employees would still choose to have their 
coverage corrected to FERS.
    Most employees covered by CSRS have not made regular 
contributions to the TSP. According to the Federal Retirement 
Thrift Investment Board, only 22 percent of CSRS employees made 
contributions to the TSP in 1989 (the earliest year of data 
available). This percentage has since risen but did not exceed 
50 percent until 1996. CBO estimates that only a third of 
employees erroneously placed in CSRS or CSRS Offset have made 
significant contributions to the TSP, and assumed tat 80 
percent of those employees would elect FERS coverage. Two-
thirds of the employees incorrectly placed in CSRS or CSRS 
Offset have made little or no TSP contributions, and CBO 
assumed that 80 percent of those employees would elect CSRS 
offset coverage. Overall, we assumed that 60 percent of those 
employees would elect CSRS Offset coverage. Overall, we assumed 
that 60 percent of those employees would elect CSRS Offset 
coverage and 40 percent would elect FERS.
    Effect on Discretionary Spending. CPO estimates that 
discretionary spending would decline by $51 million over the 
2001-2005 period as the result of S. 2420.
    Makeup Contributions to the TSP. S. 2420 would have two 
effects on the makeup contributions that agencies pay to the 
TSP. Agencies would not have to pay makeup contributions for 
employees who elect CSRS Offset coverage instead of FERS, but 
payments for individuals who elect FERS coverage would be 
higher than under current law. This latter effect would 
predominate in 2002, when agencies would pay for lost earnings 
on the makeup contributions made by employees whose coverage 
errors were corrected before the bill'senactment. In later 
years, annual agency spending on makeup contributions would decline 
because many employees would elect CSRS Offset coverage and not be 
eligible for makeup TSP contributions. CBO estimates that overall 
agency spending on makeup TSP contributions would increase by $4 
million over the 2001-2005 period.
    Makeup Payments to Social Security. Agencies are currently 
responsible for paying makeup Social Security payroll taxes 
covering the last 3 years, 3 months, and 15 days for employees 
whose coverage is changed from CSRS to FERS or CSRS Offset. 
Since agencies would stop correcting coverage errors in the 
first six months of 2001 (and thus make fewer corrections than 
under current law), CBO estimates that makeup payments would 
decrease slightly in that year. However, makeup payments would 
be slightly higher in 2002 as agencies work through the backlog 
of uncorrected errors. CBO estimates that these amounts would 
be less than $500,000 in each year.
    Makeup Payments to the CSRDF. Under current law, 
adjustments to past agency contributions to the CSRDF are 
completely retroactive. Agencies contribute 8.51 percent of 
basic pay for most employees covered by CSRS or CSRS Offset and 
10.7 percent of basic pay for most employees under FERS. 
Agencies thus make additional contributions for employees whose 
coverage is changed from CSRS or CSRS Offset to FERS and 
receive a partial refund of their retirement contributions for 
employees whose coverage is changed from FERS to CSRS or CSRS 
Offset. This bill would have similar requirements, except that 
agencies could no longer receive partial refunds of their 
contributions. Since many employees who would be switched to 
FERS coverage under current law would elect CSRS Offset 
coverage under the bill, the payments that agencies make for 
retroactive adjustments would decrease by $12 million over the 
2001-2005 period.
    Agency Retirement Contribution. The amount that agencies 
contribute toward their employees' retirement would decline by 
$19 million over the 2001-2005 period as more employees are 
covered by CSRS Offset rather than FERS compared to current 
law.
    Employer TSP Contributions. The employees who elect CSRS 
Offset coverage under S. 2420 would no longer be eligible for 
the automatic and matching TSP contributions available under 
FERS, lowering agency spending on TSP contributions by $27 
million over the 2001-2005 period.
    Employer Social Security Contributions. Agency payments of 
Social Security payroll taxes would decline by negligible 
amounts in 2001 and 2002, due primarily to timing differences 
in the number of coverage errors corrected.
    Effects on Direct Spending. Direct spending would be 
affected in a variety of ways by the retirement correction 
provisions.
    OPM Administrative Expenses. S. 2420 would allow OPM to pay 
the costs of implementing title II directly from the CSRDF. CBO 
anticipates that OPM would incur most of these costs in 2001 
and 2002, when it would issue implementing regulations and 
process elections made by employees with coverage errors that 
were corrected prior to the bill's enactment. CBO estimates 
that these administrative costs would total about $1 million in 
both 2001 and 2002, and about $100,000 annually after that.
    Federal Retirement Benefits. Since the employees affected 
by retirement coverage errors are generally still in the middle 
of their careers, CBO anticipates that S. 2420 would not have a 
significant impact on federal retirement benefits over the 
2001-2005 period. However, a small number of disabled retirees 
and survivors would be eligible to make an election under the 
bill, and CBO assumes that some of them would receive higher 
benefits by changing their retirement coverage. (Individuals 
who change their retirement coverage would also receive 
retroactive benefits.) CBO estimates that annual spending on 
retirement benefits would rise by negligible amounts over the 
2001-2005 period, except in 2002, when most elections would be 
processed and outlays, mostly for retroactive benefits, would 
rise by $2 million.
    Transfers from the CSRDF to Social Security. Employees who 
have been mistakenly covered by CSRS when they should have been 
in CSRS Offset or FERS have been contributing 7 percent of 
their basic pay to the CSRDF, instead of contributing 0.8 
percent to the CSRDF and 6.2 percent to Social Security. When 
the coverage error is corrected under current law, the 6.2 
percent in erroneous CSRS contributions (up to the Social 
Security taxable maximum) is generally transferred to the 
Social Security trust funds. S. 2420 would continue this 
practice, but transfers from the CSRDF to Social Security would 
decrease by $3 million in 2001 and rise by $3 million in 2002 
due to timing effects.
    Postal Service Contributions to the CSRDF. As noted 
earlier, agencies would make lower contributions to the CSRDF 
under S. 2420 because many affected employees would change 
their retirement coverage from FERS to CSRS Offset. CBO 
estimates that this would reduce offsetting receipts to the 
CSRDF by $15 million over the 2001-2005 period. (CBO's estimate 
includes only the change in contributions for the Postal 
Service; effects on contributions from other agencies are not 
scored because they depend on the future level of 
appropriations.)
    Postal Service Outlays. CBO estimates that S. 2420 would 
increase outlays for the Postal Service by a total of $4 
million in 2001 and 2002 and by larger amounts in subsequent 
years. CBO assumes that the Postal Service would offset these 
higher costs in 2003 by raising postage rates.
    Postal Service Contributions to Social Security. Postal 
Service contributions to the Social Security trust funds would 
be slightly lower in 2001 and slightly higher in 2002 due to 
the effects that S. 2420 would have on when coverage errors are 
corrected. The amounts involved would be less than $500,000 
each year.
    Receipt of Transfers by Social Security. The timing shift 
in payments from the CSRDF to Social Security would reduce 
offsetting receipts to the Social Security trust funds, which 
are off-budget, by $3 million in 2001 and increase receipts by 
$3 million in 2002.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-procedures, only the 
on-budget effects in the current year, the budget year, and the 
succeeding four years are counted.

----------------------------------------------------------------------------------------------------------------
                                                          By fiscal year, in millions of dollars--
                                          ----------------------------------------------------------------------
                                            2001   2002   2003    2004   2005   2006   2007   2008   2009   2010
----------------------------------------------------------------------------------------------------------------
Changes in outlays.......................      3     23     -16      5      5      6      6      7      7      8
Changes in receipts......................                              not applicable
----------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: S. 2420 would 
preempt state and local laws that govern long-term care 
coverage and benefits if those laws conflict with benefit 
contracts for federal employees. While this preemption would be 
an intergovernmental mandate, state and local governments would 
not bear any additional costs because the preemption would 
limit the scope of regulation by those governments.
    The bill would change the way the government of the 
District of Columbia and Gallaudet University correct erros 
associated with the incorrect enrollment of employees in 
federal retirement plans. This requirement would be both an 
intergovernmental and private-sector mandate as defined by 
UMRA. However, costs associated with making those corrections 
would be minimal because only a small number of employees have 
been affected by errors addressed by the bill. Consequently, 
CBO estimates that the total cost of the mandate would be 
minimal and would not exceed the thresholds established in 
UMRA.
    Previous CBO estimates: In March 2000, the House Committee 
on Government Reform ordered reported H.R. 4040, which would 
also establish a long-term care insurance benefit for federal 
employees. CBO estimated that OPM's outlays for establishing 
and administering the new benefit would be the same under H.R. 
4040 and S. 2420. The estimates for the two bills differ in one 
regard. The estimate for H.R. 4040 assumed that insurers would 
be allowed to spread their reimbursement of administrative and 
start-up expenses over the duration of the seven-year contract, 
while S. 2420 specifies that reimbursement for incurred 
expenses be paid during the first year.
    On August 24, 1999, CBO estimated that S. 1232, the Federal 
Erroneous Retirement Coverage Corrections Act, as ordered 
reported by the Senate Committee on Governmental Affairs on 
August 3, 1999, would decrease discretionary spending by $42 
million and increase direct spending by $42 million over the 
2000-2004 period. The provisions of S. 1232 are very similar to 
those of title II of S. 2420, and CBO prepared its estimates 
for the two bills using the same basic assumptions.
    The difference between the direct spending effects of the 
two bills primarily reflects a change in CBO's scoring 
methodology. It its estimate of S. 1232, CBO included the 
bill's effect on the offsetting receipts received by the CSRDF. 
Since issuing that estimate, CBO has consulted with the Budget 
Committees and changed its scoring approach. Because agency 
payments to the CSRDF come mostly from appropriated funds and 
are purely intragovernmental, including their effect on 
offsetting receipts can present an inaccurate picture of a 
provision's impact on mandatory spending. As a result, CBO no 
longer scores the effects that higher (or lower) agency 
payments to the CSRDF have on offsetting receipts, unless those 
payments come from funds that have already been appropriated or 
are being appropriated in the same piece of legislation. The 
new scoring approach does not affect payments made by the 
Postal Service, which is largely funded outside of the 
appropriations process.
    Estimate prepared by: Federal Cost: Chuck Betley (title I) 
and Eric Rollins (title II). Impact on State, Local, and Tribal 
Governments: Leo Lex. Impact on the Private Sector: John 
Harris.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                     vii. executive communications

                       U.S. Office of Personnel Management,
                                     Washington, DC, June 29, 2000.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: I am writing to offer the views of the 
Office of Personnel Management (OPM) on the amended version of 
S. 2420, as ordered reported by the Committee on Governmental 
Affairs. That bill would provide not only for the establishment 
of a program under which long-term care insurance is made 
available to Federal employees, members of the uniformed 
services, and civilian and military retirees, but also for the 
correction of retirement coverage errors under chapters 83 and 
84 of title 5, United States Code.
    As you are aware, this Administration is committed to 
helping all Americans to address their long-term care needs. 
The President's long-term care initiative would not only fund 
services to support family caregivers of older persons, and 
improve opportunities for those cared for in home and 
community-based settings to obtain assistance, but also 
encourage the purchase of long-term care insurance by Federal 
employees.
    I am pleased to see the spirit of bipartisan cooperation 
which characterized the discussions of long-term care insurance 
for Federal employees is reflected in Title I of S. 2420. That 
Title, which is virtually identical to H.R. 4040, as passed by 
the House of Representatives, reflects an emerging consensus 
which may differ in some respects from the initial positions of 
the original proponents, including the Administration, but 
which has produced a program in which we may all take pride.
    In addition, as I have noted previously, we appreciate the 
diligence of the Committee in working to craft an equitable 
solution to the problems created by erroneous retirement 
coverage determinations. Recognizing that the language of S. 
1232, which is incorporated as Title II of S. 2420, differs in 
some respects from the Administration's proposal to address 
retirement coverage errors, I believe that language provides 
comprehensive and equitable relief at a reasonable cost to the 
Federal Government. Accordingly, OPM has no objection to Title 
II of S. 2420, as ordered reported.
    In summary, I have no objection to the Senate's passage of 
S. 2420, as reported with the amendments noted above. It will 
provide long-awaited relief to many Federal employees and their 
families who, through no fault of their own, find they are 
affected by retirement coverage errors, as well as offer an 
opportunity for Federal civilian and military individuals and 
their families to participate in a long-term care insurance 
program that will serve as a model for other employers in 
addressing the challenges of a new century.
    The Office of Management and Budget advises that there is 
no objection to the submission of this letter to the Congress 
from the standpoint of the Administration's program.
            Sincerely,
                                        Janice R. Lachance,
                                                          Director.

                     VIII. CHANGES IN EXISTING LAW

    There are no changes to existing law.

                                
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