[House Report 111-58, Part 2]
[From the U.S. Government Publishing Office]


111th Congress                                             Rept. 111-58
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

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



 
           FAMILY SMOKING PREVENTION AND TOBACCO CONTROL ACT

                                _______
                                

 March 26, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Towns, from the Committee on Oversight and Government Reform, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 1256]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Oversight and Government Reform, to whom was 
referred the bill (H.R. 1256) to protect the public health by 
providing the Food and Drug Administration with certain 
authority to regulate tobacco products, having considered the 
same, report favorably thereon with amendments and recommend 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     4
Background and Need for Legislation..............................     4
Legislative History..............................................     6
Section-by-Section...............................................     6
Explanation Of Amendments........................................    10
Committee Consideration..........................................    12
Roll Call Votes..................................................    12
Application Of Law To The Legislative Branch.....................    12
Statement Of Oversight Findings And Recommendations Of The 
  Committee......................................................    12
Statement Of General Performance Goals And Objectives............    13
Constitutional Authority Statement...............................    13
Federal Advisory Committee Act...................................    13
Unfunded Mandate Statement.......................................    13
Earmark Identification...........................................    13
Committee Estimate...............................................    13
Budget Authority And Congressional Budget Office Cost Estimate...    13
Changes In Existing Law Made By The Bill As Reported.............    26
Additional Views.................................................    35
  The amendments are as follows:
  Add at the end the following:

SEC. 408. EXEMPTION OF CERTAIN REPAYMENTS UNDER THE CIVIL SERVICE 
                    RETIREMENT SYSTEM FROM THE REQUIREMENT THAT THEY BE 
                    MADE WITH INTEREST.

  (a) In General.--Section 8334(d)(1) of title 5, United States Code, 
is amended--
          (1) by striking ``(d)(1)'' and inserting ``(d)(1)(A)''; and
          (2) by adding at the end the following:
  ``(B) No interest under subparagraph (A) shall be required in the 
case of any deposit to the extent that it represents the amount of any 
refund that was made to an employee or Member during the period 
beginning on October 1, 1990, and ending on February 28, 1991.''.
  (b) Applicability.--The amendments made by subsection (a) shall be 
effective with respect to any annuity, entitlement to which is based on 
a separation from service occurring on or after the date of enactment 
of this Act.
  Page 197, strike lines 7 through 10 and insert the following:

  ``(E)(i) Subject to clause (ii), sections 8351(a)(1), 8440a(a)(1), 
8440b(a)(1), 8440c(a)(1), 8440d(a)(1), and 8440e(a)(1) shall be applied 
in a manner consistent with the purposes of this paragraph.
  ``(ii) The Secretary concerned may, with respect to members of the 
uniformed services under the authority of such Secretary, establish 
such special rules as such Secretary considers necessary for the 
administration of this subparagraph, including rules in accordance with 
which such Secretary may--
          ``(I) provide for delayed automatic enrollment; or
          ``(II) preclude or suspend the application of automatic 
        enrollment.''.

  Add at the end the following:

SEC. 409. COMPUTATION OF CERTAIN ANNUITIES BASED ON PART-TIME SERVICE.

  (a) In General.--Section 8339(p) of title 5, United States Code, is 
amended by adding at the end the following:
  ``(3) In the administration of paragraph (1)--
          ``(A) subparagraph (A) of such paragraph shall apply with 
        respect to service performed before, on, or after April 7, 
        1986; and
          ``(B) subparagraph (B) of such paragraph--
                  ``(i) shall apply with respect to that portion of any 
                annuity which is attributable to service performed on 
                or after April 7, 1986; and
                  ``(ii) shall not apply with respect to that portion 
                of any annuity which is attributable to service 
                performed before April 7, 1986.''.
  (b) Applicability.--The amendment made by subsection (a) shall be 
effective with respect to any annuity, entitlement to which is based on 
a separation from service occurring on or after the date of enactment 
of this Act.

  Add at the end the following:

SEC. 410. TREATMENT OF MEMBERS OF THE UNIFORMED SERVICES UNDER THE 
                    THRIFT SAVINGS PLAN.

  (a) Sense of Congress.--It is the sense of Congress that--
          (1) members of the uniformed services should have a 
        retirement system that is at least as generous as the one which 
        is available to Federal civilian employees; and
          (2) Federal civilian employees receive matching contributions 
        from their employing agencies for their contributions to the 
        Thrift Savings Fund, but the costs of requiring such a matching 
        contribution from the Department of Defense could be 
        significant.
  (b) Reporting Requirement.--Not later than 180 days after the date of 
the enactment of this Act, the Secretary of Defense shall report to 
Congress on--
          (1) the cost to the Department of Defense of providing a 
        matching payment with respect to contributions made to the 
        Thrift Savings Fund by members of the armed forces;
          (2) the effect that requiring such a matching payment would 
        have on recruitment and retention; and
          (3) any other information that the Secretary of Defense 
        considers appropriate.

  Add at the end the following:

SEC. 411. AUTHORITY TO DEPOSIT REFUNDS UNDER FERS.

  (a) Deposit Authority.--Section 8422 of title 5, United States Code, 
is amended by adding at the end the following:
  ``(i)(1) Each employee or Member who has received a refund of 
retirement deductions under this or any other retirement system 
established for employees of the Government covering service for which 
such employee or Member may be allowed credit under this chapter may 
deposit the amount received, with interest. Credit may not be allowed 
for the service covered by the refund until the deposit is made.
  ``(2) Interest under this subsection shall be computed in accordance 
with paragraphs (2) and (3) of section 8334(e) and regulations 
prescribed by the Office. The option under the third sentence of 
section 8334(e)(2) to make a deposit in one or more installments shall 
apply to deposits under this subsection.
  ``(3) For the purpose of survivor annuities, deposits authorized by 
this subsection may also be made by a survivor of an employee or 
Member.''.
  (b) Technical and Conforming Amendments.--
          (1) Definitional amendment.--Section 8401(19)(C) of title 5, 
        United States Code, is amended by striking ``8411(f);'' and 
        inserting ``8411(f) or 8422(i);''.
          (2) Crediting of deposits.--Section 8422(c) of title 5, 
        United States Code, is amended by adding at the end the 
        following: ``Deposits made by an employee, Member, or survivor 
        also shall be credited to the Fund.''.
          (3) Section heading.--(A) The heading for section 8422 of 
        title 5, United States Code, is amended to read as follows:

``Sec. 8422. Deductions from pay; contributions for other service; 
                    deposits''.

          (B) The analysis for chapter 84 of title 5, United States 
        Code, is amended by striking the item relating to section 8422 
        and inserting the following:

``8422. Deductions from pay; contributions for other service; 
          deposits.''.
          (4) Restoration of annuity rights.--The last sentence of 
        section 8424(a) of title 5, United States Code, is amended by 
        striking ``based.'' and inserting ``based, until the employee 
        or Member is reemployed in the service subject to this 
        chapter.''.

  Add at the end the following:

TITLE V--RETIREMENT CREDIT FOR SERVICE OF CERTAIN EMPLOYEES TRANSFERRED 
          FROM DISTRICT OF COLUMBIA SERVICE TO FEDERAL SERVICE

SEC. 501. SHORT TITLE.

  This title may be cited as the ``District of Columbia Court, Offender 
Supervision, Parole, and Public Defender Employees Equity Act of 
2009''.

SEC. 502. RETIREMENT CREDIT FOR SERVICE OF CERTAIN EMPLOYEES 
                    TRANSFERRED FROM DISTRICT OF COLUMBIA SERVICE TO 
                    FEDERAL SERVICE.

  (a) In General.--Any individual who is treated as an employee of the 
Federal government for purposes of chapter 83 or chapter 84 of title 5, 
United States Code, on or after the date of enactment of this Act who 
performed qualifying District of Columbia service shall be entitled to 
have such service included in calculating the individual's creditable 
service under sections 8332 or 8411 of title 5, United States Code, but 
only for purposes of the following provisions of such title:
          (1) Sections 8333 and 8410 (relating to eligibility for 
        annuity).
          (2) Sections 8336 (other than subsections (d), (h), and (p) 
        thereof) and 8412 (relating to immediate retirement).
          (3) Sections 8338 and 8413 (relating to deferred retirement).
          (4) Sections 8336(d), 8336(h), 8336(p), and 8414 (relating to 
        early retirement).
          (5) Section 8341 and subchapter IV of chapter 84 (relating to 
        survivor annuities).
          (6) Section 8337 and subchapter V of chapter 84 (relating to 
        disability benefits).
  (b) Treatment of Detention Officer Service as Law Enforcement Officer 
Service.--Any portion of an individual's qualifying District of 
Columbia service which consisted of service as a detention officer 
under section 2604(2) of the District of Columbia Government 
Comprehensive Merit Personnel Act of 1978 (sec. 1--626.04(2), D.C. 
Official Code) shall be treated as service as a law enforcement officer 
under sections 8331(20) or 8401(17) of title 5, United States Code, for 
purposes of applying subsection (a) with respect to the individual.
  (c) Service Not Included in Computing Amount of Any Annuity.--
Qualifying District of Columbia service shall not be taken into account 
for purposes of computing the amount of any benefit payable out of the 
Civil Service Retirement and Disability Fund.

SEC. 503. QUALIFYING DISTRICT OF COLUMBIA SERVICE DEFINED.

  In this title, ``qualifying District of Columbia service'' means any 
of the following:
          (1) Service performed by an individual as a nonjudicial 
        employee of the District of Columbia courts--
                  (A) which was performed prior to the effective date 
                of the amendments made by section 11246(b) of the 
                Balanced Budget Act of 1997; and
                  (B) for which the individual did not ever receive 
                credit under the provisions of subchapter III of 
                chapter 83 or chapter 84 of title 5, United States Code 
                (other than by virtue of section 8331(1)(iv) of such 
                title).
          (2) Service performed by an individual as an employee of an 
        entity of the District of Columbia government whose functions 
        were transferred to the Pretrial Services, Parole, Adult 
        Supervision, and Offender Supervision Trustee under section 
        11232 of the Balanced Budget Act of 1997--
                  (A) which was performed prior to the effective date 
                of the individual's coverage as an employee of the 
                Federal Government under section 11232(f) of such Act; 
                and
                  (B) for which the individual did not ever receive 
                credit under the provisions of subchapter III of 
                chapter 83 or chapter 84 of title 5, United States Code 
                (other than by virtue of section 8331(1)(iv) of such 
                title).
          (3) Service performed by an individual as an employee of the 
        District of Columbia Public Defender Service--
                  (A) which was performed prior to the effective date 
                of the amendments made by section 7(e) of the District 
                of Columbia Courts and Justice Technical Corrections 
                Act of 1998; and
                  (B) for which the individual did not ever receive 
                credit under the provisions of subchapter III of 
                chapter 83 or chapter 84 of title 5, United States Code 
                (other than by virtue of section 8331(1)(iv) of such 
                title).
          (4) In the case of an individual who was an employee of the 
        District of Columbia Department of Corrections who was 
        separated from service as a result of the closing of the Lorton 
        Correctional Complex and who was appointed to a position with 
        the Bureau of Prisons, the District of Columbia courts, the 
        Pretrial Services, Parole, Adult Supervision, and Offender 
        Supervision Trustee, the United States Parole Commission, or 
        the District of Columbia Public Defender Service, service 
        performed by the individual as an employee of the District of 
        Columbia Department of Corrections--
                  (A) which was performed prior to the effective date 
                of the individual's coverage as an employee of the 
                Federal Government; and
                  (B) for which the individual did not ever receive 
                credit under the provisions of subchapter III of 
                chapter 83 or chapter 84 of title 5, United States Code 
                (other than by virtue of section 8331(1)(iv) of such 
                title).

SEC. 504. CERTIFICATION OF SERVICE.

  The Office of Personnel Management shall accept the certification of 
the appropriate personnel official of the government of the District of 
Columbia or other independent employing entity concerning whether an 
individual performed qualifying District of Columbia service and the 
length of the period of such service the individual performed.

  Conform table of contents in section 1(b) accordingly.

                          Purpose and Summary

    H.R. 1256, the Family Smoking Prevention and Tobacco 
Control Act, was introduced by Rep. Waxman on March 3, 2009. 
The legislation includes provisions that fall within the 
jurisdiction of the Committee on Oversight and Government 
Reform. Specifically, Title IV of H.R. 1256, the Thrift Savings 
Plan Enhancement Act of 2009, makes several changes to 
modernize and enhance the Thrift Savings Plan (TSP) and 
provides for other changes to federal employee retirement 
benefits.

                  Background and Need for Legislation

    In general, TSP was designed to play an important role in 
employees' retirement income and participation should be 
strongly encouraged. The bill requires the Federal Retirement 
Thrift Investment Board (Board) to automatically enroll newly 
hired federal and military employees in the Thrift Savings Plan 
(TSP). Currently, 14% of eligible federal civilian employees 
and 75% of uniformed service members are not participating in 
TSP and are therefore less likely than participants to be 
financially self-sufficient in retirement. For civilian 
employees in the Federal Employee Retirement System (FERS), TSP 
represents one part of a three part system, the other parts 
being Social Security and the FERS annuity.
    The bill also requires the establishment of a qualified 
Roth contribution option for the TSP. This option, which has 
been in use in the private sector for a number of years, 
permits employees to contribute money to their TSP account 
after paying taxes on the contribution and to withdraw money 
tax-free upon retirement. This option could be attractive to 
federal employees at both the lower and upper ends of the wage 
scale.
    The bill would authorize the Board to create additional 
self-directed investment options, including additional index 
funds, provided that the costs of such options are borne solely 
by the participants who use such options and after consultation 
with affected employee organizations.
    The Committee believes the authority to add self-directed 
investment options under the Thrift Savings Plan will enable 
the Board to serve the best interests of participants by making 
available low-cost index funds that offer important 
diversification benefits. Since it is unlikely any fixed asset 
allocation or fixed set of asset classes will satisfy the 
requirements of every investor, the authority to add 
appropriate self-directed investment options may enable 
participants to access the full set of core asset classes 
optimal in their own financial circumstances.
    The Committee recognizes some investors today have 
sophisticated or specialized investment needs. Participants may 
want added diversity by investing in funds comprised of real 
estate investment trusts, emerging markets, or inflation-
protected bonds. Other participants may want to align their 
portfolio with their personal convictions by investing in 
socially responsible funds. The self-directed investment 
options are intended to provide a vehicle for meeting these 
needs of plan participants without complicating the basic 
structure of the Thrift Savings Plan.
    Finally, the bill amends FERS by crediting retiring federal 
employees with unused sick leave when determining the amount of 
their FERS annuity, as is currently the case for participants 
in the CSRS. This would allow FERS employees to include unused 
sick leave in determining their total years of service as part 
of the annuity computation. Total years of service is one part 
of the formula used to calculate annuities under the FERS 
system. Unused sick leave would not be a factor in determining 
an employee's average pay or their eligibility for a FERS 
annuity. The change would reduce the incentive for employees to 
use excess sick leave as they approach retirement. The Office 
of Personnel Management (OPM) has found that FERS employees who 
are approaching retirement use significantly more sick leave 
than their CSRS counterparts. OPM estimates that this results 
in $68 million in lost productivity each year. The change is 
intended to address the related problems of absenteeism and 
lost productivity in federal agencies that result from the 
current ``use it or lose it'' approach to sick leave under the 
FERS system.

                          Legislative History

    On April 29, 2008, the Subcommittee on Federal Workforce, 
Postal Service, and the District of Columbia held a hearing on 
legislative proposals by the Board to provide for automatic 
enrollment and another provision not included in H.R. 1256. The 
witnesses were Greg Long, Executive Director, Federal 
Retirement Thrift Investment Board and Richard Brown, Vice 
Chair, Employee Thrift Advisory Council.
    On July 10, 2008, the Subcommittee held a hearing on, 
``Investing in the Future: Minority Opportunities and the 
Thrift Savings Plan.'' The witnesses were Greg Long, Executive 
Director, Federal Retirement Thrift Investment Board; Michael 
Sobel, Managing Director & Head of U.S. Equity Trading, 
Barclays Global Investors; Mr. Edward Swan, Jr., President, 
Fiduciary Investment Solutions Group; Mr. Jarvis Hollingsworth, 
Partner, Bracewell & Giuliani, L.L.P; Mr. Thurman White, Chief 
Executive Officer, Progress Investment Management; Ms. Mellody 
Hobson, President, Ariel Capital Management, Inc.; and Mr. 
Jessie Brown, President, Krystal Investments. This hearing 
examined ways to increase minority participation in the 
management of TSP and explored why the federal government uses 
passive management strategies versus active management of TSP 
funds.
    H.R. 6500, the Thrift Savings Plan Enhancement Act of 2008, 
was introduced by then-Chairman Waxman, together with then-
Ranking Member Tom Davis and then-Subcommittee Chairman Danny 
Davis, on July 15, 2008, and referred to the Committee on 
Oversight and Government Reform. Title IV of H.R. 1256 is 
similar to H.R. 6500. The Committee passed H.R. 6500 by voice 
vote on July 16, 2008. One amendment to the bill was offered by 
Rep. Danny Davis, and adopted by the Committee. The amendment, 
which added an additional reporting requirement, is now 
included in the text of Title IV of H.R. 1256.
    H.R. 1108 (110th Congress), the Family Smoking Prevention 
and Tobacco Control Act, passed the House by a 326-102 vote on 
July 30, 2008. Title IV of H.R. 1256 is similar to the 
provisions included and passed by the House in H.R. 1108.

                           Section-by-Section


               TITLE IV--THRIFT SAVINGS PLAN ENHANCEMENT

Section 401: Short title; table of contents

    Section 1 specifies that the bill may be cited as the 
``Thrift Savings Plan Enhancement Act of 2009'' and provides a 
table of contents.

Section 402: Automatic enrollments

    Subsection (a) of this section strikes paragraphs 2 through 
4 of section 8432(b) of title 5, United States Code and inserts 
a new paragraph 2. The new subparagraph 2(A) requires the 
Board, by regulation, to provide for new participants to be 
automatically enrolled in the TSP at the default percentage of 
basic pay. Subparagraph 2(B) provides that the default 
percentage of basic pay shall be equal to 3%, or such other 
percentage not less than 2% or more than 5% as the Board may 
prescribe by regulation. Subparagraph 2(C) makes clear that the 
regulations required under 2(A) shall include provisions under 
which individuals who would otherwise be automatically enrolled 
may modify the percentage of basic pay contributed or decline 
enrollment in the TSP altogether. Subparagraph 2(D) defines the 
term ``new participant'' for purposes of paragraph 2 to mean 
any individual participating in the TSP pursuant to an 
appointment or election which occurs after any regulations 
required by subparagraph (A) first take effect. Subparagraph 
2(E) provides that various sections of title 5 shall be applied 
in a manner consistent with the purposes of paragraph 2. Those 
sections apply to federal employees subject to the Civil 
Service Retirement System, justices and judges, bankruptcy and 
magistrate judges, Court of Federal Claims judges, judges of 
the United States Court of Appeals for Veterans Claims, and 
members of the uniformed services. In the case of members of 
the uniformed services, the Secretary concerned may issue 
special rules for such members, including by providing for 
delayed automatic enrollment or suspending or precluding the 
application of automatic enrollment.

Section 403: Qualified Roth contribution program

    This section amends title 5 by inserting a new section 
8432d. The new section requires the Board to include by 
regulation in the TSP a qualified Roth contribution program 
under such terms and conditions as the Board may prescribe. The 
term ``qualified Roth contribution program'' means a program 
described in paragraph (1) of section 402A(b) of the Internal 
Revenue Code of 1986. The Committee understands this to be a 
program under which employee contributions to the TSP would be 
included as taxable income and withdrawals at retirement would 
be not be considered taxable income.

Section 404: Authority to establish self-directed investment window

    This section amends section 8438 of title 5 to give the 
Board the authority to add a self-directed investment window 
under the TSP, if the Board determines such an addition would 
be in the best interests of the participants. Such addition 
shall be limited to (1) low-cost, passively-managed index funds 
that offer diversification benefits and (2) other investment 
options, if the Board determines the options to be appropriate 
retirement investment vehicles. The Board is required to ensure 
that any administrative expenses related to the self-directed 
investment window are borne solely by the participants using 
such window and consult with the Employee Thrift Advisory 
Council before establishing any such window. The Board may also 
establish such terms and conditions for the self-directed 
investment window as it considers appropriate to protect the 
interests of participants.

Section 405: Reporting requirements

    This section requires the Board to submit an annual report 
to Congress by March 31st of each year on the operations of the 
TSP during the previous calendar year. The report will include 
information on the number of participants, the median balance 
in participants' accounts, demographic information on 
participants, the percentage of funds allocated among 
investment funds or options, the status of the development and 
implementation of the self-directed investment window, the 
diversity demographics of any company, investment advisor or 
other entity retained to invest and manage the assets of the 
Thrift Savings Fund, and any other information the Board 
considers appropriate. A copy of the report shall be made 
available to the public on the internet.
    The section also requires the Board to include in the 
periodic statements provided to participants the amount of 
investment management fees, administrative fees, and any other 
fees or expenses paid with respect to each investment fund or 
option under TSP.

Section 406: Acknowledgement of risk

    This section amends section 8439(d) of title 5 to require 
participants to sign an acknowledgement of risk whenever they 
elect to invest sums in any fund or option other than the 
Government Securities Investment Fund. The section further 
amends section 8477(e) of title 5 to make clear that 
fiduciaries shall not be liable for providing for automatic 
enrollment, for enrolling participants under a default 
investment fund, for allowing a participant to invest through 
the self-directed investment window, or for establishing 
restrictions applicable to participants' ability to invest 
through the self-directed investment window.

Section 407: Credit for unused sick leave

    This section amends section 8415 of title 5 to allow the 
total service of an employee who retires on an immediate 
annuity, or who dies leaving a survivor or survivors entitled 
to annuity, to include the days of unused sick leave when 
computing the employee's FERS annuity. Unused sick leave will 
not be counted in determining average pay or annuity 
eligibility under the FERS system. The amendments made by this 
section shall apply to annuities computed based on separations 
occurring on or after the date of enactment of the Act.

Section 408: Exemption of certain repayments under the Civil Service 
        retirement system

    This section amends section 8334 of title 5 to provide that 
no interest under subparagraph (A) of section 8334 shall be 
required in the case of any deposit made under such section to 
the extent that it represents the amount of any refund that was 
made to an employee or Member during the period beginning on 
October 1, 1990, and ending on February 28, 1991.

Section 409: Part-time annuity calculation for some CSRS employees

    This section amends section 8339 of title 5 to make 
applicable the current CSRS post-1986 part-time annuity 
calculation to years of service performed before, on, or after 
April 7, 1986.

Section 410: Treatment of members of the uniformed services under the 
        Thrift Savings Plan

    This section states that it is the sense of the Congress 
that members of the uniformed services should have a retirement 
system that is at least as generous as the one which is 
available to federal civilian employees. It recognizes that 
federal civilian employees receive a matching TSP contribution 
from their agency, and acknowledges that the cost of providing 
a similar matching contribution for members of the uniformed 
services would be significant.
    The section further requires the Secretary of Defense to 
report to Congress on the cost of providing a matching payment 
to members of the armed services, the effect that requiring 
such a matching payment would have on recruitment and 
retention, and any other information the Secretary considers 
appropriate within 180 days.

Section 411: Authority to deposit refunds under FERS

    This section amends section 8422 of title 5 to allow 
employees or Members who have received a refund of retirement 
deductions under FERS to deposit the amount received, with 
interest. Credit for the years of service covered by such 
refund may not be allowed until the deposit is made. For the 
purpose of survivor annuities, deposits authorized by this 
section may also be made by a survivor of an employee or 
Member. The section makes further technical and conforming 
amendments to title 5.

TITLE V--RETIREMENT CREDIT FOR SERVICE OF CERTAIN EMPLOYEES TRANSFERRED 
          FROM DISTRICT OF COLUMBIA SERVICE TO FEDERAL SERVICE

Section 501: Short title.

    This title may be cited as the ``District of Columbia 
Court, Offender Supervision, Parole, and Public Defender 
Employees Equity Act of 2009.''

Section 502: Retirement credit for service of certain employees 
        transferred from District of Columbia service to federal 
        service

    This section permits certain federal employees who 
performed ``qualifying District of Columbia service'' to be 
entitled to have such service included in calculating the 
individual's creditable service under the FERS system. The 
section further provides that any portion of an individual's 
qualifying District of Columbia service which consisted of 
service as a detention officer under section 2604(2) of the 
District of Columbia Government Comprehensive Merit Personnel 
Act of 1978 shall be treated as service as a law enforcement 
officer under the FERS system. Qualifying District of Columbia 
service under this section shall not be taken into account for 
purposes of computing the amount of any benefit payable out of 
the Civil Service Retirement and Disability Fund.

Section 503: Qualifying District of Columbia service defined

    This section defines ``qualifying District of Columbia 
Service'' to include certain service performed by an individual 
as a non-judicial employee of the District of Columbia courts, 
certain service performed by an individual as an employee of an 
entity of the District of Columbia government whose functions 
were transferred to the Pretrial Services, Parole, Adult 
Supervision, and Offender Supervision Trustee, certain service 
performed by an individual as an employee of the District of 
Columbia Public Defender Service, and the service of certain 
employees of the District of Columbia Department of 
Corrections.

Section 504: Certification of service

    This section requires the Office of Personnel Management to 
accept the certification of the appropriate personnel official 
of the government of the District of Columbia or other 
independent employing entity concerning whether an individual 
performed qualifying District of Columbia service and the 
length of the period of such service the individual performed.

                       Explanation of Amendments

    The following amendments were adopted in Committee:
    Rep. Van Hollen offered an amendment to the bill, which was 
considered and passed by the Committee on a voice vote. The 
amendment would correct an unintended consequence that followed 
the enactment of the Omnibus Reconciliation Act of 1990 (Public 
Law 101-508) on November 5, 1990, and provide relief for 
federal employees who were adversely affected by that 
enactment. The Omnibus Reconciliation Act of 1990 made 
retroactive changes to the rules related to separating federal 
employees. While the rules were made retroactive to October 1, 
1990, the implementing regulations were not promulgated until 
February 1991. This four month period between the enactment of 
the law and the promulgation of the implementing regulations 
has adversely affected any federal employee who withdrew their 
retirement contributions during this period. The amendment 
would provide relief to the employees affected by this 
situation.
    Rep. Issa offered an amendment to the bill, which was 
considered and passed by the Committee on a voice vote. The 
amendment modifies section 402, dealing with automatic 
enrollments in the TSP program, to allow the Secretaries of the 
military departments greater discretion in determining if 
automatic enrollment is appropriate and in the best interests 
of members of the uniformed services. Under this amendment, the 
Secretary concerned may provide for delayed automatic 
enrollment for service members, or preclude or suspend 
automatic enrollment in the TSP.
    Rep. Lynch offered an amendment to the bill, which was 
considered and passed by the Committee on a voice vote. The 
amendment would correct an inequitable annuity reduction that 
currently occurs if certain federal employees work part-time at 
the end of their career. This inequity can create personnel 
problems in federal agencies and can cause individuals who are 
eligible to retire, or who will shortly be eligible to retire, 
to avoid working on a part-time basis, even if it would 
otherwise be in the government's interest.
    The amendment would permit the use of high-three average 
salary computations for full-and part-time work, whether the 
work was performed before or after 1986. This eliminates the 
adverse effect of performing part-time service late in an 
employee's career and provides a simplified annuity computation 
in cases involving part-time service. On August 31, 2007, the 
Subcommittee on Federal Workforce, Postal Service, and the 
District of Columbia held a hearing on H.R. 2780, legislation 
identical to the amendment proposed by Rep. Lynch. The 
Committee held a business meeting on March 13, 2008, to 
consider H.R. 2780 and ordered the bill to be reported 
favorably on a voice vote. (See House Committee on Oversight 
and Government Reform, Clarifying the Method for Computing 
Certain Annuities Under the Civil Service Retirement System 
Based on Part-Time Service, 110th Congress (2008) (H. Rept. 
110-770).
    Rep. Issa offered an amendment to the bill, which was 
considered and passed by the Committee on a voice vote. The 
amendment states the sense of Congress that members of the 
uniformed services should have a retirement system that is at 
least as generous as the one which is available to Federal 
civilian employees. The sense of Congress further recognizes 
that federal civilian employees under the FERS system receive 
matching contributions from their employing agencies (CSRS and 
military personnel do not). However, the costs of requiring 
such a matching contribution from the Department of Defense for 
members of the uniformed services could be significant.
    The retirement benefits offered to military and civil 
service personnel are not intended to be identical. Although 
civil service employees receive matching contributions from 
agencies to their TSP fund, military service members receive a 
significantly higher percentage of pay upon becoming eligible 
for a pension. However, the Committee recognizes that members 
of the uniformed services who do not serve long enough to be 
eligible for a military pension are also not provided with 
matching TSP contributions, and are left with only the 
individual contributions made to a TSP fund when they leave the 
service. Recognizing the complex budgetary, personnel, 
recruitment, and retention issues at stake, the amendment 
requires the Secretary of Defense to report to Congress on the 
cost of providing matching contributions to uniformed services 
personnel and how such a system would affect existing 
recruitment and retention programs.
    Rep. Norton offered an amendment to the bill, which was 
considered and passed by the Committee on a voice vote. The 
amendment adds the ``District of Columbia Court, Offender 
Supervision, Parole, and Public Defender Employees Equity Act 
of 2009'' as Title V of the legislation. This amendment would 
correct a long-standing limitation on retirement eligibility 
for some non-judicial employees of the DC Courts, the Court 
Services and Offender Supervision Agency (CSOSA), the DC Public 
Defender Service (PDS), and former DC Department of Corrections 
employees who were appointed to positions with the Federal 
Bureau of Prisons or other related federal agencies.
    Under the 1997 National Capital Revitalization and Self-
Government Improvement Act of 1997, the federal government took 
over the operation of the District of Columbia Courts and 
related services, making the non-judicial employees of the DC 
Courts and the employees of CSOSA federal employees. In 1998, 
employees of PDS were similarly transferred as part of the 
District of Columbia Courts and Justice Technical Collections 
Act. As federal employees, these court, CSOSA, and PDS 
employees were brought under the FERS retirement system. 
However, for the employees transferred in 1997 and 1998, the 
calculation of their ``creditable service'' for the purposes of 
determining when they would be eligible to retire and the 
amount of annuity they would be entitled to under FERS only 
began from the date of the transfer. That is, the 1997 and 1998 
laws made no provision for treating their years of service as 
court and related services employees (in many cases, in 
identical positions) prior to passage of these laws as 
creditable service for determining retirement eligibility.
    The amendment requires that the time served by these 
employees before 1997 be counted towards the employees' overall 
federal retirement eligibility as ``creditable service.'' In 
addition, because the employees are still entitled to their DC 
retirement benefits (based upon their work status up until 
1997), the amendment does not count the pre-1997 years spent as 
DC government employees towards the amount of federal 
retirement annuity an employee is eligible to receive. The 
amendment allows these employees to retire without penalty 
after they have given 20 years of service or more, as with 
other federal employees under the FERS system.
    Rep. Connolly offered an amendment to the bill, which was 
considered and passed by the Committee on a voice vote. The 
amendment would allow individuals who left the federal 
government, and received a refund of their Federal Employees 
Retirement System (FERS) contributions, to re-enter government 
service without losing their accrued annuity. Instead of 
forfeiting credit earned during their prior service, returning 
employees would be able to redeposit their cashed out annuity, 
with interest, upon re-employment. This benefit is already 
available to federal employees who are registered under the 
older Civil Service Retirement System (CSRS). It ensures that 
former federal employees are not penalized if they wish to 
return to government service.

                        Committee Consideration

    The Committee met on March 18, 2009, to consider Title IV 
of H.R. 1256 and ordered the bill, as amended, to be reported 
favorably by a voice vote.

                            Roll Call Votes

    There were no roll call votes held on the bill.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. The 
bill provides for improvements to the federal employee TSP for 
which legislative branch employees are eligible participants.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report, including the need to modernize and improve the 
TSP.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report, and include improving the operations of the 
TSP.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress to enact the law 
proposed by Titles IV and V of H.R. 1256. Article I, Section 8, 
Clause 18 of the Constitution of the United States grants the 
Congress the power to enact this law.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement whether 
the provisions of the report include unfunded mandates. In 
compliance with this requirement, the Committee has received a 
letter from the Congressional Budget Office included herein.

                         Earmark Identification

    Titles IV and V of H.R. 1256 do not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
Titles IV and V of H.R. 1256. However, clause 3(d)(3)(B) of 
that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 1256 from the Director of 
the Congressional Budget Office:
                                      U.S. Congress
                                Congressional Budget Office
                                    Washington, DC, March 24, 2009.
Hon. Edolphus Towns,
Chairman, Committee on Oversight and Government Reform
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed estimate for H.R. 1256, the Family 
Smoking Prevention and Tobacco Control Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Julia 
Christensen and Amber Marcellino.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

H.R. 1256--Family Smoking Prevention and Tobacco Control Act

    Summary: H.R. 1256 would authorize the Food and Drug 
Administration (FDA) to regulate tobacco products, and would 
require the agency to assess fees on manufacturers and 
importers of tobacco products to cover the cost of FDA's new 
regulatory activities authorized by the bill. Such fees could 
be collected and made available for obligation only to the 
extent and in the amounts provided in advance in appropriation 
acts. The bill also contains provisions that affect direct 
spending and revenues associated with the retirement benefits 
of federal employees.
    CBO estimates that:
     Implementing the bill would increase spending 
subject to appropriation, on net, by about $0.1 billion over 
the 2010-2014 period and by $0.8 billion over the 2010-2019 
period, assuming annual appropriation actions consistent with 
the bill;
     Enacting H.R. 1256 would increase direct spending 
by $0.2 billion over the 2010-2014 period and by $0.6 billion 
over the 2010-2019 period;
     Federal revenues would increase by $0.3 billion 
over the 2010-2014 period and by $1.3 billion over the 2010-
2019 period; and
     Considering both the revenue and direct spending 
effects, enacting the bill would reduce budget deficits by a 
total of $0.1 billion over the 2010-2014 period and by $0.7 
billion over the 2010-2019 period. (Those amounts exclude the 
effects that are subject to appropriation action.)
    The legislation's effects on direct spending and revenues 
over the 2009-2013 and 2009-2018 periods are relevant for 
enforcing pay-as-you-go rules under the current budget 
resolution. CBO estimates that enacting H.R. 1256 would 
increase direct spending by $0.1 billion over the 2009-2013 
period and by $0.5 billion over the 2009-2018 period. Enacting 
the bill also would increase revenues by $0.2 billion over the 
2009-2013 period and by $1.0 billion over the 2009-2018 period. 
Together, those changes would yield net pay-as-you-go savings 
of $0.1 billion over five years and $0.5 billion over 10 years.
    H.R. 1256 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) because it would 
preempt certain state laws governing tobacco products and 
require tribal governments that manufacture or distribute 
tobacco products to comply with new federal regulations. CBO 
estimates that the costs to state, local, and tribal 
governments to comply with the mandates in the bill would not 
exceed the threshold established in UMRA ($69 million in 2009, 
adjusted annually for inflation).
    CBO also expects that the federal regulations authorized by 
this bill would result in lower consumption of tobacco products 
and thus would reduce the amount of tax revenues and settlement 
funds collected by state and local governments. However, those 
declines in revenues, estimated to total over $1 billion during 
the 2010-2014 period, would not result from intergovernmental 
mandates.
    H.R 1256 would impose a number of mandates on private-
sector entities. Among other things, the bill would assess a 
fee on companies that manufacture or import tobacco products, 
impose new restrictions on the sale, distribution and marketing 
of tobacco products, mandate disclosure of product information 
and grant FDA authority to regulate tobacco products. CBO 
estimates that the aggregate direct cost of complying with 
those mandates would exceed the threshold established by UMRA 
for private-sector mandates ($139 million in 2009, adjusted 
annually for inflation) in each year, beginning with 2010.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1256 is shown in the following table. 
The costs of this legislation fall primarily within budget 
functions 550 (health) and 600 (income security).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           By fiscal year, in millions of dollars--
                                     -------------------------------------------------------------------------------------------------------------------
                                        2010     2011     2012     2013     2014     2015     2016     2017     2018     2019    2010-2014    2010-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Food and Drug Administration (FDA)
 Collection of New Tobacco Fees:
    Authorization Level.............     -235     -450     -477     -505     -534     -566     -599     -635     -672     -712       -2,201       -5,385
    Estimated Outlays...............     -235     -450     -477     -505     -534     -566     -599     -635     -672     -712       -2,201       -5,385
Spending of Fees by FDA to Regulate
 Tobacco Products:
    Authorization Level.............      235      450      477      505      534      566      599      635      672      712        2,201        5,385
    Estimated Outlays...............       50      275      498      610      619      627      629      631      668      708        2,052        5,315
Net Effect on FDA Spending:
    Authorization Level.............        0        0        0        0        0        0        0        0        0        0            0            0
    Estimated Outlays...............     -185     -175       21      105       85       61       30       -4       -4       -4         -149          -70
Thrift Savings Plan Enhancement:
    Estimated Authorization Level...       14       49       62       76       89      102      112      121      130      139          290          894
    Estimated Outlays...............       13       47       62       75       88      101      111      121      130      139          285          887
    Total Changes:\1\
        Estimated Authorization            14       49       62       76       89      102      112      121      130      139          290          894
         Level......................
        Estimated Outlays...........     -172     -128       83      180      173      162      141      117      126      135          136          817

                                                               CHANGES IN DIRECT SPENDING

Sick Leave Retirement Credit:
    Estimated Budget Authority......        8       17       27       37       48       60       72       86      100      114          137          569
    Estimated Outlays...............        8       17       27       37       48       60       72       86      100      114          137          569
Other Retirement Provisions:
    Estimated Budget Authority......        8        6        7       10       11       12       12       13       13       14           42          106
    Estimated Outlays...............        8        6        7       10       11       12       12       13       13       14           42          106
Medicaid: Tobacco Provisions:
    Estimated Budget Authority......       -1       -2       -4       -6       -9      -11      -13      -15      -18      -20          -22          -99
    Estimated Outlays...............       -1       -2       -4       -6       -9      -11      -13      -15      -18      -20          -22          -99
    Total Changes:
        Estimated Budget Authority..       15       21       30       41       50       61       71       84       95      108          157          576
        Estimated Outlays...........       15       21       30       41       50       61       71       84       95      108          157          576

                                                                   CHANGES IN REVENUES

Thrift Savings Plan Enhancement.....       50       79       98      122      155      198      255      330      426      550          504        2,263
Tobacco Excise Taxes and Fines......      -13      -29      -40      -55      -73      -94     -117     -145     -177     -212         -210         -955
                                     -------------------------------------------------------------------------------------------------------------------
    Total Changes in Revenues.......       37       50       58       67       82      107      138      185      249      338          294        1,308

                                         NET IMPACT ON THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES

Estimated Deficit Impact\2\               -22      -29      -28      -26      -32      -43      -67     -101     -154     -230         -137        -732
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\In addition, H.R. 1256 would require the Government Accountability Office to conduct a study on cross-border trade in tobacco products. CBO estimates
  that study would cost about $1 million, assuming the availability of appropriated funds.
\2\Negative numbers indicate a reduction in the deficit.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
1256 will be enacted near the start of fiscal year 2010, that 
the full amounts authorized will be collected (starting in 
fiscal year 2010) to fund FDA's regulatory activities 
authorized under the bill, and that outlays will follow 
historical patterns for similar activities.
    H.R. 1256 would authorize FDA to regulate tobacco products. 
Such authority would include:
           Setting national standards for tobacco 
        products, including a ban on cigarettes that contain 
        certain additives or flavors (other than tobacco or 
        menthol) that are a characterizing flavor of the 
        tobacco product or tobacco smoke;
           Implementing new restrictions on the sale, 
        distribution, and marketing of tobacco products;
           Requiring manufacturers of certain tobacco 
        products to submit a marketing application to FDA and 
        requiring manufacturers of certain products that are 
        ``substantially equivalent'' to ones already on the 
        market before a particular date to notify FDA by 
        submitting a report with specified information before 
        entering the market;
           Directing manufacturers and importers of 
        tobacco products to adhere to new labeling requirements 
        and to submit specific information, including health-
        related research, to the FDA about their products;
           Mandating the annual registration of all 
        establishments that manufacture, prepare, compound, or 
        process tobacco products and specifying certain 
        inspection, record-keeping and reporting requirement 
        for manufacturers and importers; and
           Enforcing compliance with requirements 
        specified in the bill.
    H.R. 1256 would establish the Center for Tobacco Products 
within the FDA. It also would require FDA to reinstate certain 
regulations issued in 1996 intended to limit tobacco sales and 
marketing, especially to children. (The Supreme Court ruled in 
2000 that the FDA did not have the authority to issue such 
regulations.) The bill explicitly would prohibit FDA from 
banning certain tobacco products or requiring the reduction of 
nicotine yields of tobacco products to zero. The legislation 
also would require FDA to issue new regulations relating to the 
testing and reporting of tobacco product information.(Such 
regulations could also include requirements for public 
disclosure of that information.) Among other things, H.R. 1256 
would require the Secretary of Health and Human Services (HHS) 
to publish a list of the amounts of harmful and potentially 
harmful constituents of each tobacco product.

Use of tobacco products in the United States

    At least partly as a result of efforts by the federal 
government, state governments, and the public health community, 
cigarette smoking has declined substantially over the past 
decade: in 2005, about 21 percent of adults in the United 
States were smokers, compared to about 25 percent in 1995. The 
recent increase in the federal excise tax on cigarettes as a 
result of the Children's Health Insurance Program 
Reauthorization Act (Public Law 111-3)--from $0.39 to $1.01 per 
pack--is likely to contribute to a continuing decline in 
smoking. CBO expects that consumption of tobacco products in 
the United States would further decline as a result of enacting 
H.R. 1256.
    The effect of regulatory activities authorized under the 
bill on the use of tobacco products is uncertain because 
ongoing initiatives to reduce the use of tobacco products are 
expected to continue under current law. In particular, public 
heath efforts by federal, state, and local governments and by 
private entities have contributed to a substantial reduction in 
underage smoking in recent years. For example, the proportion 
of 17-year-olds who smoke declined from 19 percent in 1995 to 
10 percent in 2005. Significant efforts to reduce underage 
smoking (the group most directly targeted by many of the 
interventions envisioned under the bill) have been taken as a 
result of the Master Settlement Agreement (MSA) in 1998 between 
major tobacco manufacturers and settling states. States and 
localities also continue to pursue public health initiatives 
independent of the MSA to reduce smoking and to limit health 
risks to the public associated with smoking. (However, funding 
for such activities is subject to the fiscal constraints of 
state and local budgets.) Public health efforts funded by 
federal programs and coverage of smoking cessation therapies 
(including those offered under certain public programs) also 
aim to reduce the use of tobacco under current law.
    The expected impact of the legislation on the use of 
tobacco products stems from a combination of regulatory and 
economic factors. The regulatory changes with the largest 
potential to reduce smoking include: restricting access to 
tobacco by youths, requiring an increase in the size of warning 
labels on certain tobacco packaging (and authorizing the 
Secretary of HHS to mandate further changes to enhance warning 
labels), limiting certain marketing and advertising activities 
(especially those that target youths), and requiring FDA 
permission before manufacturers can market tobacco products 
that suggest reduced health risks or exposure to particular 
substances.\1\ In addition, tobacco consumption would decline 
because the assessment of new fees on manufacturers and 
importers of tobacco products would probably result in higher 
prices of tobacco products.
---------------------------------------------------------------------------
    \1\For example, pursuant to a timeline specified in the bill, 
descriptors on a tobacco product such as ``low,'' ``light,'' or 
``mild'' would be prohibited and certain health-related claims not 
allowed unless manufacturers receive FDA's permission to market the 
product with that claim.
---------------------------------------------------------------------------
    Based on information from academic and other researchers, 
CBO estimates that H.R. 1256 would result in a further 
reduction in the number of underage tobacco users of 11 percent 
by 2019. CBO also estimates that implementing H.R. 1256 would 
lead to a further decline in smoking by adults by about 2 
percent after 10 years. CBO has incorporated these projected 
changes in U.S. tobacco consumption into its estimates of the 
impact of the bill on Medicaid spending and on receipts from 
excise taxes on tobacco products.

Spending subject to appropriation

    CBO estimates that implementing H.R. 1256 would increase 
spending subject to appropriation, on net, by $0.1 billion over 
the 2010-2014 period and by $0.8 billion over the 2010-2019 
period, assuming the appropriation action consistent with the 
bill. The effect on discretionary spending by federal programs 
reflects the authorized funding relating to the federal 
regulation of tobacco products and federal agency costs 
associated with changes to the Thrift Savings Plan (TSP) 
specified in the bill.
    The costs for FDA to administer the new regulatory 
activities authorized under the legislation--$2.1 billion over 
the 2010-2014 period and $5.3 billion over the 2010-2019 
period--would be covered by fees assessed on manufacturers and 
importers of tobacco products, resulting in a very small net 
impact on discretionary spending over the next 10 years (and no 
net impact over time). CBO estimates that automatic enrollment, 
under the bill, of new TSP participants would increase the cost 
for federal civilian agencies relating to their matching 
contributions for employees. The estimated TSP costs would sum 
to $0.9 billion over the 2010-2019 period, assuming the 
appropriation of the necessary amounts.
    Collection of New Fees. H.R. 1256 would establish a program 
to assess fees to fund FDA's administrative costs for new 
regulatory activities relating to tobacco products authorized 
by the bill. The legislation would authorize the quarterly 
assessment of fees on manufacturers and importers of such 
products. It would authorize the appropriation of assessments 
equal to $85 million in 2009, $235 million in 2010, $450 
million in 2011, $477 million in 2012, $505 million in 2013, 
$534 million in 2014, $566 million in 2015, $599 million in 
2016, $635 million in 2017, $672 million in 2018, and $712 
million in 2019 and each subsequent year.
    Fees authorized by the bill would be collected and made 
available for obligation only to the extent and in the amounts 
provided in advance in appropriation acts. As a result, those 
collections would be credited as an offset to discretionary 
spending.
    Spending of Fees by FDA to Regulate Tobacco Products. 
Spending of the new fees assessed by FDA to regulate tobacco 
products also would be classified as discretionary spending 
because the authorized amounts would be available for 
obligation subject to appropriation action. Amounts collected 
would be available to cover FDA's administrative costs to 
regulate tobacco products at any point in the future.
    Given the uncertainty surrounding how the FDA would 
implement such a large expansion of its regulatory activities, 
it is difficult to estimate the resources necessary--
particularly in the early years--to implement the bill. We 
anticipate that, over the initial five-year period after 
enactment, FDA would actively develop the necessary 
infrastructure to operate the new tobacco program and that its 
ability to enter into obligations and disburse funds would grow 
rapidly. The legislation would limit the budget for the new 
program to the aggregate amount of fees collected for such 
purpose, and there would likely be some lag (at least 
initially) between when fees are collected and when they are 
spent.
    Assuming appropriation action consistent with the bill, CBO 
estimates that implementing the program to assess fees to cover 
new FDA costs associated with regulating tobacco would reduce 
net discretionary outlays by $149 million over the 2010-2014 
period and by $70 million over the 2010-2019 period, because 
the spending of fees would lag behind their collection.
    Thrift Savings Plan. The bill would require that newly 
hired federal employees who are eligible for the TSP be 
automatically enrolled in that program. The automatic 
enrollment of participants in TSP would increase the matching 
contributions of the civilian agencies that employ them (which 
are paid from personnel budgets and are usually considered 
spending subject to appropriation) by creating a greater and 
earlier participation rate of employees in the program. 
According to data from a 2006 survey conducted by the Federal 
Thrift Retirement Investment Board, 52 percent of employees 
enrolled in the Federal Employees Retirement System (FERS) 
voluntarily contribute to the TSP in their first year of 
eligibility, but 86 percent contribute by their sixth year. 
(Although federal employees covered by the Civil Service 
Retirement System (CSRS) are also eligible to participate in 
the TSP, they would not be affected by automatic enrollment.) 
Using information from that survey, CBO expects that under 
automatic enrollment more than 90 percent of eligible new 
entrants would contribute to the TSP in their first year and 
that a similar proportion would continue to contribute by their 
10th year (some would opt out in the beginning and others would 
likely change their status in the future).
    For the uniformed services, the characteristics of 
potential participants differ. The current average rate for 
voluntary participation of new enlistees is approximately 25 
percent, and unlike civilian employees, the uniformed services 
do not currently contribute on behalf of their members. Based 
on lower voluntary enrollment rates and the lack of agency 
contributions, CBO expects that under automatic enrollment more 
than 40 percent of eligible new entrants would contribute.
    Assuming that the bill becomes effective in October 2009 
and that civilian agencies would not begin matching 
contributions for an additional six months, participants would 
receive an increase in matching agency contributions of 3 
percent of their basic pay for the third quarter of fiscal year 
2010 and 3 percent per year thereafter. CBO estimates that 
enacting H.R. 1256 would increase agency contributions by 
nearly $0.9 billion over the 2010-2019 period.
    Federal Trade Commission (FTC). The bill would authorize 
the FTC to enforce provisions in the bill relating to 
advertising that would be considered unfair or deceptive trade 
practices under the Federal Trade Commission Act. Currently, 
the FTC enforces certain laws governing warnings printed on 
labels of cigarettes and smokeless tobacco, among other things. 
Based on information from the FTC, CBO expects that the FTC's 
new enforcement activities under H.R. 1256 would replace some 
of its current enforcement activities that would be transferred 
to FDA under the bill. CBO estimates that any additional costs 
to the FTC would be insignificant.
    Other Provisions. H.R. 1256 would require the Government 
Accountability Office to conduct a study on cross-border trade 
in tobacco products. CBO estimates that conducting the study 
would cost about $1 million, assuming the availability of the 
necessary funds. CBO also anticipates that any additional costs 
for other federal agencies that might assist FDA with 
implementing certain requirements relating to the regulation of 
tobacco specified in the bill would not be significant.

Direct spending

    CBO estimates that enacting H.R. 1256 would increase direct 
spending, on net, by $0.2 billion over the 2010-2014 period and 
by $0.6 billion over the 2010-2019 period. That estimate 
primarily reflects two effects of the bill:
           Authorizing FDA regulation of tobacco 
        products and changes relating to such products required 
        by the bill would lower consumption of tobacco and 
        would generate savings to the Medicaid program; and
           Changing the calculation of federal 
        retirement benefits under the Federal Employees 
        Retirement System to reflect accrued sick leave hours 
        would raise average retirement benefits paid to 
        individuals.
    Impact of FDA Regulation of Tobacco on Medicaid. CBO 
anticipates that FDA's regulation of tobacco products will lead 
to a decline in smoking among pregnant women. That decline will 
reduce health care spending on pregnancies because women who 
refrain from smoking during pregnancy are less likely to give 
birth to children with low birth weights--such children have 
relatively high costs both at birth and afterwards--or 
experience other complications during pregnancy. Part of the 
savings from reduced complications is offset by costs 
associated with the additional live births resulting from a 
decline in miscarriages. CBO estimates federal spending for 
Medicaid would decrease by $0.1 billion over the 2010-2019 
period. (That savings is an estimated increment above savings 
previously estimated and credited to Public Law 111-3, which 
contains an increase in federal excise taxes on tobacco 
products.)
    A decline in smoking could affect health care spending for 
many other medical conditions. An individual who stops smoking 
is less likely to suffer a heart attack or stroke over a given 
period of time compared to one who continues to smoke, so a 
potential reduction in utilization of acute care services for 
those or other conditions could lead to cost savings. The 
magnitude and timing of such savings are uncertain, however. 
Also, a reduction in smoking may add to costs in many cases by 
increasing the lifespans of persons who would incur health care 
costs over longer periods. In those cases, government spending 
for other benefits such as Social Security, Medicare, and from 
other retirement and mandatory spending programs would also 
increase. CBO continues to examine the impact of smoking 
related legislation on public and private payers. This cost 
estimate does not include potential effects on federal spending 
other than the estimated impact on Medicaid of reduced smoking 
levels on pregnancies.
    Effects on Civil Service Retirement. Currently, the 
retirement benefit calculation for federal employees in FERS 
does not incorporate any accrued sick leave hours. Under H.R. 
1256, eligible federal employees who retire after enactment 
would add 100 percent of their remaining sick leave hours to 
their total years of service when calculating the retirement 
benefit owed. CBO estimates that an average of about three 
months would be added to employees' length of service as a 
result of including sick leave hours. That addition is 
estimated to boost the average retirement benefit by about $150 
per year, increasing direct spending over the 2010-2019 period 
by $0.6 billion.
    H.R. 1256 contains several other provisions that would 
affect federal retirement benefits for certain employees. Such 
provisions include: allowing FERS employees who reenter 
government service after an absence to ``buy back'' the credit 
towards federal retirement benefits for their prior government 
service (for those employees who had received a refund of their 
employee contributions toward retirement when they left 
government service); altering the formula for calculating 
retirement benefits for CSRS employees with part-time service; 
adjusting retirement eligibility calculations for certain FERS 
employees with qualifying pre-1997 service in the District of 
Columbia; and exempting certain CSRS employees from paying 
interest on repaid contributions towards retirement benefits. 
In total, CBO estimates those provisions would increase direct 
spending by $0.1 billion over the 2010-2019 period.
    Other Effects on Direct Spending. Under H.R. 1256, FDA 
would have the discretion to impose criminal fines on entities 
convicted of violating certain new requirements established by 
the bill. Collections of criminal fines are recorded in the 
budget as revenues, deposited in the Crime Victims Fund, and 
later spent. Such expenditures are classified as direct 
spending. CBO expects that relatively few cases would result in 
such criminal fines. Therefore, CBO estimates that enacting 
H.R. 1256 would not have a significant effect on revenues or 
direct spending from the collection of criminal fines over the 
2010-2019 period.

Revenues

    CBO estimates that enacting H.R. 1256 would increase 
federal revenues, on net, by $0.3 billion over the 2010-2014 
period and by $1.3 billion over the 2010-2019 period. That 
estimate primarily reflects two effects of the bill:
           Authorizing FDA oversight of tobacco 
        products and changes relating to such products required 
        by the bill would lower consumption of tobacco and 
        reduce receipts of federal excise taxes on those 
        products, and
           Establishing a Roth contribution program 
        would increase tax revenues because of the tax 
        treatment of employee's contributions.
    In addition, revenues may increase slightly from the 
collection of fines associated with violations of new 
requirements imposed by the bill.
    Excise Taxes. As noted earlier, CBO expects that enacting 
H.R. 1256 would reduce the consumption of tobacco products in 
the United States, which in turn would reduce the collection of 
federal excise taxes. As a result, CBO estimates that the 
legislation would reduce federal revenues, by $0.2 billion over 
the 2010-2014 period and $1.0 billion over the 2010-2019 
period, net of changes to income and payroll taxes. Over the 
10-year period, the reduction in receipts would amount to less 
than 1 percent of receipts from excise taxes on tobacco 
expected under current law.
    Effects of TSP Changes on Revenues. Enacting H.R. 1256 
would increase revenues by an estimated $2.3 billion over the 
2010-2019 period. Establishing a Roth contribution program (in 
which contributions to the retirement accounts would be made on 
an aftertax basis) would result in some TSP participants 
electing to contribute after-tax income to their retirement 
plan rather than contributing pre-tax amounts, thereby boosting 
income tax revenues by an estimated $3.3 billion over the 10-
year period. However, because income taxes are deferred on 
regular TSP contributions, the anticipated increase in 
participants' contributions from automatic enrollment would 
offset part of the revenue increase, reducing receipts by $1.0 
billion over the 2010-2019 period.
    Collection of Fines. The effects on federal revenues also 
include relatively small effects from provisions that would 
allow the Secretary of HHS to levy fines against sponsors of 
misbranded and adulterated tobacco products, sellers of tobacco 
to underage individuals, and for other violations. The FTC 
would also be authorized to assess fines for certain violations 
of tobacco-related requirements enforced by the commission. We 
estimate that revenues associated with the collection of civil 
fines authorized under H.R. 1256 would be roughly $1 million 
annually.
    Estimated impact on state, local, and tribal governments: 
H.R. 1256 contains intergovernmental mandates as defined in 
UMRA. CBO estimates that the costs of those mandates to state, 
local, and tribal governments would be small and would not 
exceed the threshold established in UMRA ($69 million in 2009, 
adjusted annually for inflation).
    The bill would preempt state laws governing tobacco 
products that are different from or in addition to the federal 
regulations authorized by the bill, including laws governing:
           Product standards,
           Premarket review,
           Adulteration,
           Misbranding,
           Labeling,
           Registration,
           Good manufacturing standards, or
           Modified-risk tobacco products.
    That preemption would be an intergovernmental mandate as 
defined in UMRA. However, because the preemption would simply 
limit the application of state and local laws, CBO estimates 
that it would not impose significant costs on state or local 
governments.
    H.R. 1256 would require tobacco manufacturers to register 
annually with the FDA and pay fees assessed by the agency. The 
bill would require both tobacco manufacturers and distributors 
of tobacco products to comply with federal regulations relating 
to the content, labeling, and marketing of tobacco products. 
CBO has identified two tribal governments that manufacture and 
distribute tobacco products. Because those governments would be 
required to comply with federal regulations authorized by the 
bill, they would face intergovernmental mandates as defined in 
UMRA. Based on information from tribal and federal officials, 
CBO estimates that the costs to tribal governments to comply 
with the bill would be small and would not exceed the UMRA 
threshold for intergovernmental mandates.

Other impacts

    CBO also estimates that the amount of tax revenues and 
settlement funds collected by state and local governments would 
decline as a result of the federal regulations authorized by 
this bill because of lower consumption of tobacco products. 
However, those declines in revenues, estimated to total over $1 
billion during the 2010-2014 period, would not result from 
intergovernmental mandates. Rather, the decline in revenues 
would be an indirect effect on state and local governments 
resulting from the new federal regulations imposed on companies 
that manufacture or import tobacco products.
    In 2008, state and local governments collected about $19 
billion in revenues from excise and general sales taxes levied 
on tobacco products. CBO estimates that this bill would lower 
consumption of those products and that excise taxes collected 
by state and local governments would fall by about $20 million 
in 2010, with that reduction growing to over $330 million in 
2014. Similarly, CBO estimates that state and local governments 
would see a decline in sales-tax revenues of about $170 million 
over the 2010-2014 period.
    Forty-six states, the District of Columbia, and five U.S. 
territories receive annual payments from tobacco manufacturers 
that are parties to the tobacco Master Settlement Agreement 
(MSA). In 2008, those payments totaled over $8 billion. Under 
the terms of the MSA, those payments are adjusted annually to 
account for changes in the volume of cigarette sales in the 
United States of participating manufacturers. Because CBO 
estimates that enacting this legislation would result in lower 
consumption of tobacco products, CBO estimates that the annual 
payments to states under the MSA also would decline by over 
$160 million over the 2010-2014 period.
    A decline in smoking among pregnant individuals is expected 
to result in a reduction of low-weight births. As a result, 
state spending for Medicaid would decrease by an estimated $17 
million over the 2010-2014 period, with additional savings in 
subsequent years.
    Estimated impact on the private sector: H.R. 1256 would 
impose a number of private-sector mandates, as defined in UMRA, 
on companies that manufacture or import tobacco products. CBO 
estimates that the total direct cost of these mandates would 
exceed the threshold established by UMRA ($139 million in 2009, 
adjusted annually for inflation) in each year, beginning with 
2010.
    The bill would assess a fee on manufacturers and importers 
of tobacco products to cover the cost to FDA of regulating 
those products. The aggregate payments would sum to $235 
million in 2010, and rise to more than $500 million a year by 
2013.
    The bill would impose new requirements related to the 
labeling and advertising of cigarette and smokeless tobacco 
products. New warnings on packaging and advertisements would 
have to be larger. The bill would also prohibit cigarettes or 
any of their component parts from containing certain additives 
or flavors (other than tobacco or menthol) that are a 
characterizing flavor of the tobacco product or tobacco smoke. 
CBO has not been able to determine whether the direct cost of 
these provisions would be significant.
    The bill would require that FDA publish a final rule on 
tobacco products that would be similar to part 897 of the 
tobacco regulations promulgated by the Secretary of HHS in 1996 
and subsequently invalidated by the Supreme Court. Certain 
restrictions that would be in that rule already exist under 
current federal and state law or are included in the 1998 
Master Settlement Agreement between major tobacco manufacturers 
and settling states. As a result, and based on information from 
industry sources, CBO estimates that the incremental direct 
cost of these restrictions to manufacturers and importers of 
tobacco products would be small.
    In addition, the bill would give FDA the authority to 
regulate the sale, distribution, advertising, promotion and use 
of tobacco products if such actions would be in the interest of 
the public health. FDA would also have the authority to set 
product standards that reduce quantities of nicotine and other 
harmful constituents allowed in tobacco products or otherwise 
alter the composition and testing of such products. CBO cannot 
estimate the potential cost of these provisions because the 
cost would depend on future actions by the Secretary of HHS.
    Finally, the bill would require companies that manufacture 
or import tobacco products to disclose information about those 
products to the Secretary of HHS. That information, among other 
things, would include a listing of all ingredients and 
additives, a description of nicotine content, delivery, and 
form, and a listing of all potentially harmful constituents 
found in the tobacco product. At the discretion of the 
Secretary of HHS, those companies would also be required to 
disclose any or all documents regarding research on risks to 
health of tobacco products, methods for reducing those risks, 
and the effectiveness of marketing practices used by companies 
that manufacture or distribute tobacco products. Such 
information would include both research activities and the 
findings associated with that research. CBO estimates that the 
direct cost of complying with these requirements would be 
small.
    Previous CBO estimate: On March 16, 2009, CBO transmitted a 
cost estimate for H.R. 1256 as ordered reported by the House 
Committee on Energy and Commerce on March 4, 2009. This version 
is nearly identical to the earlier legislation, except for the 
addition of provisions that affect retirement benefits for 
certain employees of the federal government. The version of 
H.R. 1256 approved by the Committee on Oversight and Government 
Reform reflects changes that would add $106 million in 
estimated direct spending over the 2010-2019 period, as 
compared to the version of the bill approved by the Committee 
on Energy and Commerce.
    Estimate prepared by: Federal Spending: Food and Drug 
Administration--Julia Christensen, Medicaid--Ellen Werble and 
Colin Baker, Federal Retirement--Amber Marcellino, Thrift 
Savings Plan--Jared Brewster, Federal Trade Commission--Susan 
Willie; Federal Revenues: Grant Driessen and Barbara Edwards; 
Impact on State, Local, and Tribal Governments: Lisa Ramirez-
Branum; Impact on the Private Sector: Patrick Bernhardt.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
titles IV and V of the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

                      TITLE 5, UNITED STATES CODE




           *       *       *       *       *       *       *
PART III--EMPLOYEES

           *       *       *       *       *       *       *


SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *


CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *



SUBCHAPTER III--CIVIL SERVICE RETIREMENT

           *       *       *       *       *       *       *



Sec. 8334. Deductions, contributions, and deposits

  (a) * * *

           *       *       *       *       *       *       *

  (d)(1)(A) Each employee or Member who has received a refund 
of retirement deductions under this or any other retirement 
system established for employees of the Government covering 
service for which he may be allowed credit under this 
subchapter may deposit the amount received, with interest. 
Credit may not be allowed for the service covered by the refund 
until the deposit is made.
  (B) No interest under subparagraph (A) shall be required in 
the case of any deposit to the extent that it represents the 
amount of any refund that was made to an employee or Member 
during the period beginning on October 1, 1990, and ending on 
February 28, 1991.

           *       *       *       *       *       *       *


Sec. 8339. Computation of annuity

  (a) * * *

           *       *       *       *       *       *       *

  (p)(1) * * *

           *       *       *       *       *       *       *

  (3) In the administration of paragraph (1)--
          (A) subparagraph (A) of such paragraph shall apply 
        with respect to service performed before, on, or after 
        April 7, 1986; and
          (B) subparagraph (B) of such paragraph--
                  (i) shall apply with respect to that portion 
                of any annuity which is attributable to service 
                performed on or after April 7, 1986; and
                  (ii) shall not apply with respect to that 
                portion of any annuity which is attributable to 
                service performed before April 7, 1986.

           *       *       *       *       *       *       *


            CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

                    SUBCHAPTER I--GENERAL PROVISIONS

Sec
8401. Definitions.
     * * * * * * *

                      SUBCHAPTER II--BASIC ANNUITY

     * * * * * * *
[8422. Deductions from pay; contributions for other service.]
8422. Deductions from pay; contributions for other service; deposits.
     * * * * * * *

                   SUBCHAPTER III--THRIFT SAVINGS PLAN

     * * * * * * *
8432d. Qualified Roth contribution program.

                    SUBCHAPTER I--GENERAL PROVISIONS

Sec. 8401. Definitions

  For the purpose of this chapter--
          (1) * * *

           *       *       *       *       *       *       *

          (19) the term ``lump-sum credit'' means the 
        unrefunded amount consisting of--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) amounts deposited by an employee, Member, 
                or survivor under section [8411(f);] 8411(f) or 
                8422(i); and

           *       *       *       *       *       *       *


SUBCHAPTER II--BASIC ANNUITY

           *       *       *       *       *       *       *


Sec. 8415. Computation of basic annuity

  (a) * * *

           *       *       *       *       *       *       *

  [(k) In computing] (l)(1) In computing an annuity under this 
subchapter, the total service of an employee who retires from 
the position of a registered nurse with the Veterans Health 
Administration on an immediate annuity, or dies while employed 
in that position leaving any survivor entitled to an annuity, 
includes the days of unused sick leave to the credit of that 
employee under a formal leave system, except that such days 
shall not be counted in determining average pay or annuity 
eligibility under this subchapter.
  (2) Except as provided in paragraph (1), in computing an 
annuity under this subchapter, the total service of an employee 
who retires on an immediate annuity or who dies leaving a 
survivor or survivors entitled to annuity includes the days of 
unused sick leave to his credit under a formal leave system, 
except that these days will not be counted in determining 
average pay or annuity eligibility under this subchapter. For 
purposes of this subsection, in the case of any such employee 
who is excepted from subchapter I of chapter 63 under section 
6301(2)(x)-(xiii), the days of unused sick leave to his credit 
include any unused sick leave standing to his credit when he 
was excepted from such subchapter.
  [(l)] (m) In the case of any annuity computation under this 
section that includes, in the aggregate, at least 2 months of 
credit under section 8411(d) for any period while receiving 
benefits under subchapter I of chapter 81, the percentage 
otherwise applicable under this section for that period so 
credited shall be increased by 1 percentage point.

           *       *       *       *       *       *       *


[Sec. 8422. Deductions from pay; contributions for other service]

Sec. 8422. Deductions from pay; contributions for other service; 
                    deposits

  (a) * * *

           *       *       *       *       *       *       *

  (c) The amounts deducted and withheld under this section 
shall be deposited in the Treasury of the United States to the 
credit of the Fund under such procedures as the Secretary of 
the Treasury may prescribe. Deposits made by an employee, 
Member, or survivor also shall be credited to the Fund.
  (d)(1) * * *
  (2) Deposit may not be required for days of unused sick leave 
credited under [section 8415(k)] paragraph (1) or (2) of 
section 8415(l) .

           *       *       *       *       *       *       *

  (i)(1) Each employee or Member who has received a refund of 
retirement deductions under this or any other retirement system 
established for employees of the Government covering service 
for which such employee or Member may be allowed credit under 
this chapter may deposit the amount received, with interest. 
Credit may not be allowed for the service covered by the refund 
until the deposit is made.
  (2) Interest under this subsection shall be computed in 
accordance with paragraphs (2) and (3) of section 8334(e) and 
regulations prescribed by the Office. The option under the 
third sentence of section 8334(e)(2) to make a deposit in one 
or more installments shall apply to deposits under this 
subsection.
  (3) For the purpose of survivor annuities, deposits 
authorized by this subsection may also be made by a survivor of 
an employee or Member.

           *       *       *       *       *       *       *


Sec. 8424. Lump-sum benefits; designation of beneficiary; order of 
                    precedence

  (a) Subject to subsection (b), an employee or Member who--
          (1) * * *

           *       *       *       *       *       *       *

is entitled to be paid the lump-sum credit. Except as provided 
in section 8420a, payment of the lump-sum credit to an employee 
or Member voids all annuity rights under this subchapter, and 
subchapters IV and V of this chapter, based on the service on 
which the lump-sum credit is [based.] based, until the employee 
or Member is reemployed in the service subject to this chapter.

           *       *       *       *       *       *       *


SUBCHAPTER III--THRIFT SAVINGS PLAN

           *       *       *       *       *       *       *


Sec. 8432. Contributions

  (a) * * *
  (b)(1)(A) * * *
  (B) The amount to be contributed pursuant to an election 
under subparagraph (A) [(or any election allowable by virtue of 
paragraph (4))] shall be the percentage of basic pay or amount 
designated by the employee or Member.
  [(2) Under the regulations--
          [(A) an employee or Member who has not previously 
        been eligible to make an election under this subsection 
        shall not become so eligible until the date (described 
        in paragraph (1)) beginning after the date of 
        commencing service as an employee or Member;
          [(B) an employee or Member whose appointment or 
        election to a position or office in the Federal 
        Government follows a previous period of service during 
        which that individual met the requirements of 
        subparagraph (A) shall be eligible to make an election 
        under this subsection notwithstanding any period of 
        separation;
          [(C) an employee or Member who elects under 
        subparagraph (D) to terminate contributions shall not 
        again become eligible to make an election under this 
        subsection until the date (described in paragraph (1)) 
        commencing after the election to terminate; and
          [(D) an election to terminate may be made under this 
        subparagraph at any time as provided under paragraph 
        (1).
  [(3) An employee or Member who elects to become subject to 
this chapter under section 301 of the Federal Employees' 
Retirement System Act of 1986 may make the first election for 
the purpose of subsection (a) during the period prescribed for 
such purpose by the Executive Director. The period prescribed 
by the Executive Director shall commence on the date on which 
the employee or Member makes the election to become subject to 
this chapter.
  [(4) The Executive Director shall prescribe such regulations 
as may be necessary to carry out the following:
          [(A) Notwithstanding subparagraph (A) of paragraph 
        (2), an employee or Member described in such 
        subparagraph shall be afforded a reasonable opportunity 
        to first make an election under this subsection 
        beginning on the date of commencing service or, if that 
        is not administratively feasible, beginning on the 
        earliest date thereafter that such an election becomes 
        administratively feasible, as determined by the 
        Executive Director.
          [(B) An employee or Member described in subparagraph 
        (B) of paragraph (2) shall be afforded a reasonable 
        opportunity to first make an election under this 
        subsection (based on the appointment or election 
        described in such subparagraph) beginning on the date 
        of commencing service pursuant to such appointment or 
        election or, if that is not administratively feasible, 
        beginning on the earliest date thereafter that such an 
        election becomes administratively feasible, as 
        determined by the Executive Director.
          [(C)(i) Notwithstanding the preceding provisions of 
        this paragraph, contributions under paragraphs (1) and 
        (2) of subsection (c) shall not be payable with respect 
        to any pay period before the earliest pay period for 
        which such contributions would otherwise be allowable 
        under this subsection if this paragraph had not been 
        enacted.
          [(ii) Notwithstanding subparagraph (A) or (B), 
        contributions under paragraphs (1) and (2) of 
        subsection (c) shall not begin to be made with respect 
        to an employee or Member described under paragraph 
        (2)(A) or (B) until the date that such contributions 
        would have begun to be made in accordance with this 
        paragraph as administered on the date preceding the 
        date of enactment of the Thrift Savings Plan Open 
        Elections Act of 2004.
          [(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2), 
        8440c(a)(2), and 8440d(a)(2) shall be applied in a 
        manner consistent with the purposes of subparagraphs 
        (A) and (B), to the extent those subparagraphs can be 
        applied with respect thereto.
          [(E) Nothing in this paragraph shall affect paragraph 
        (3).]
  (2)(A) The Board shall by regulation provide for an eligible 
individual to be automatically enrolled to make contributions 
under subsection (a) at the default percentage of basic pay.
  (B) For purposes of this paragraph, the default percentage 
shall be equal to 3 percent or such other percentage, not less 
than 2 percent nor more than 5 percent, as the Board may by 
regulation prescribe.
  (C) The regulations shall include provisions under which any 
individual who would otherwise be automatically enrolled in 
accordance with subparagraph (A) may--
          (i) modify the percentage or amount to be contributed 
        pursuant to automatic enrollment, effective from the 
        start of such enrollment; or
          (ii) decline automatic enrollment altogether.
  (D) For purposes of this paragraph, the term ``eligible 
individual'' means any individual who, after any regulations 
under subparagraph (A) first take effect, is appointed, 
transferred, or reappointed to a position in which that 
individual is eligible to contribute to the Thrift Savings 
Fund.
  (E)(i) Subject to clause (ii), sections 8351(a)(1), 
8440a(a)(1), 8440b(a)(1), 8440c(a)(1), 8440d(a)(1), and 
8440e(a)(1) shall be applied in a manner consistent with the 
purposes of this paragraph.
  (ii) The Secretary concerned may, with respect to members of 
the uniformed services under the authority of such Secretary, 
establish such special rules as such Secretary considers 
necessary for the administration of this subparagraph, 
including rules in accordance with which such Secretary may--
          (I) provide for delayed automatic enrollment; or
          (II) preclude or suspend the application of automatic 
        enrollment.

           *       *       *       *       *       *       *


Sec. 8432d. Qualified Roth contribution program

  (a) Definitions.--For purposes of this section--
          (1) the term ``qualified Roth contribution program'' 
        means a program described in paragraph (1) of section 
        402A(b) of the Internal Revenue Code of 1986 which 
        meets the requirements of paragraph (2) of such 
        section; and
          (2) the terms ``designated Roth contribution'' and 
        ``elective deferral'' have the meanings given such 
        terms in section 402A of the Internal Revenue Code of 
        1986.
  (b) Authority To Establish.--The Board shall by regulation 
provide for the inclusion in the Thrift Savings Plan of a 
qualified Roth contribution program, under such terms and 
conditions as the Board may prescribe.
  (c) Required Provisions.--The regulations under subsection 
(b) shall include--
          (1) provisions under which an election to make 
        designated Roth contributions may be made--
                  (A) by any individual who is eligible to make 
                contributions under section 8351, 8432(a), 
                8440a, 8440b, 8440c, 8440d, or 8440e; and
                  (B) by any individual, not described in 
                subparagraph (A), who is otherwise eligible to 
                make elective deferrals under the Thrift 
                Savings Plan;
          (2) any provisions which may, as a result of 
        enactment of this section, be necessary in order to 
        clarify the meaning of any reference to an ``account'' 
        made in section 8432(f), 8433, 8434(d), 8435, 8437, or 
        any other provision of law; and
          (3) any other provisions which may be necessary to 
        carry out this section.

           *       *       *       *       *       *       *


Sec. 8438. Investment of Thrift Savings Fund

  (a) * * *
  (b)(1) The Board shall establish--
          (A) * * *

           *       *       *       *       *       *       *

          (D) a Small Capitalization Stock Index Investment 
        Fund as provided in paragraph (3); [and]
          (E) an International Stock Index Investment Fund as 
        provided in paragraph (4)[.]; and
          (F) a self-directed investment window, if the Board 
        authorizes such window under paragraph (5).

           *       *       *       *       *       *       *

  (5)(A) The Board may authorize the addition of a self-
directed investment window under the Thrift Savings Plan if the 
Board determines that such addition would be in the best 
interests of participants.
  (B) The self-directed investment window shall be limited to--
          (i) low-cost, passively-managed index funds that 
        offer diversification benefits; and
          (ii) other investment options, if the Board 
        determines the options to be appropriate retirement 
        investment vehicles for participants.
  (C) The Board shall ensure that any administrative expenses 
related to use of the self-directed investment window are borne 
solely by the participants who use such window.
  (D) The Board may establish such other terms and conditions 
for the self-directed investment window as the Board considers 
appropriate to protect the interests of participants, including 
requirements relating to risk disclosure.
  (E) The Board shall consult with the Employee Thrift Advisory 
Council (established under section 8473) before establishing 
any self-directed investment window.

           *       *       *       *       *       *       *


Sec. 8439. Accounting and information

  (a) * * *

           *       *       *       *       *       *       *

  [(d)] (d)(1) Each employee, Member, former employee, or 
former Member who elects to invest in [the Common Stock Index 
Investment Fund, the Fixed Income Investment Fund, the 
International Stock Index Investment Fund, or the Small 
Capitalization Stock Index Investment Fund, defined in 
paragraphs (1), (3), (5), and (10), respectively, of section 
8438(a) of this title] any investment fund or option under this 
chapter, other than the Government Securities Investment Fund, 
shall sign an acknowledgement prescribed by the Executive 
Director which states that the employee, Member, former 
employee, or former Member understands that an investment in 
[either such Fund] any such fund or option is made at the 
employee's, Member's, former employee's, or former Member's 
risk, that the employee, Member, former employee, or former 
Member is not protected by the Government against any loss on 
such investment, and that a return on such investment is not 
guaranteed by the Government.
  (2)(A) In the case of an investment made under section 
8438(c)(2) in any fund or option to which paragraph (1) would 
otherwise apply, the participant involved shall, for purposes 
of this subsection, be deemed--
                  (i) to have elected to invest in such fund or 
                option; and
                  (ii) to have executed the acknowledgement 
                required under paragraph (1).
  (B)(i) The Executive Director shall prescribe regulations 
under which written notice shall be provided to a participant 
whenever an investment is made under section 8438(c)(2)(B) on 
behalf of such participant in the absence of an affirmative 
election described in section 8438(c)(1).
  (ii) The regulations shall ensure that any such notice shall 
be provided to the participant within 7 calendar days after the 
effective date of the default election.
  (C) For purposes of this paragraph, the term ``participant'' 
has the meaning given such term by section 8471(3).

           *       *       *       *       *       *       *


SUBCHAPTER VII--FEDERAL RETIREMENT THRIFT INVESTMENT MANAGEMENT SYSTEM

           *       *       *       *       *       *       *


Sec. 8477. Fiduciary responsibilities; liability and penalties

  (a) * * *

           *       *       *       *       *       *       *

  (e)(1)(A) * * *

           *       *       *       *       *       *       *

  (C)(i) A fiduciary shall not be liable under subparagraph (A) 
with respect to a breach of fiduciary duty under subsection (b) 
committed before becoming a fiduciary or after ceasing to be a 
fiduciary.
  (ii) A fiduciary shall not be liable under subparagraph (A), 
and no civil action may be brought against a fiduciary--
          (I) for providing for the automatic enrollment of a 
        participant in accordance with section 8432(b)(2)(A);
          (II) for enrolling a participant in a default 
        investment fund in accordance with section 
        8438(c)(2)(B); or
          (III) for allowing a participant to invest through 
        the self-directed investment window or for establishing 
        restrictions applicable to participants' ability to 
        invest through the self-directed investment window.

           *       *       *       *       *       *       *


                            ADDITIONAL VIEWS

                              ----------                              


            Additional Views of Ranking Member Darrell Issa

    There is a great deal of urgency in the Majority to move 
this bill through the Committee, since it raises money to be 
used on tobacco programs unrelated to federal retirement. Given 
the recent and dramatic decline in the stock market and the 
significant impact this has had on individuals' retirement 
accounts, our first priority should be helping people save more 
for retirement and not using the federal Thrift Savings Program 
(TSP) to pay for Members pet projects.
    Instead, the Majority has set its sights on the portion of 
the bill before us (Title IV), as a way to fund expanded 
government programs, and targeted fixes for favorite 
constituencies. But I cannot support funding expanded 
government programs on revenues raised by a federal retirement 
program.
    This Committee reported similar legislation last Congress. 
Since that time, the financial markets have declined and 
Congress is funding multiple bailouts. Although this Committee 
has a new Chairman, and new Ranking Member, and nine new 
members, we did not have the benefit of a hearing on this 
legislation this year.
    As the Majority considers new ways to spend the millions of 
dollars raised by this legislation, we should take this 
opportunity to ensure our military personnel have the soundest 
retirement program available. I offered two amendments in an 
effort to improve this bill.
    One amendment provides a sense of Congress regarding the 
importance of a match for military personnel. Currently, 
military participants contribute pre-tax dollars to the TSP but 
do not receive a contribution match. Federal civilian employees 
receive a generous government match for their contributions 
under the TSP. In addition, military pensions vest only after a 
participant serves twenty years, and those who serve less 
receive nothing. Civilian federal employees under Federal 
Employees Retirement System (FERS) vest after five years, and 
are guaranteed a pension once they reach age 62. For military 
personnel who serve fewer than twenty years, the TSP account 
may be the only retirement they receive, other than social 
security.
    Congress should make a match for military personnel a 
priority. Instead, the Majority has elected to fund a number of 
special fixes for select groups in this legislation, and they 
are directing the bulk of the revenue raised by this bill to 
fund tobacco legislation from another Committee.
    My second amendment modifies the automatic enrollment 
provision for military personnel. As originally drafted, the 
bill provided for automatic enrollment of participants and 
required those who do not wish to participate to opt-out. Newly 
enlisted military personnel have to make many decisions in a 
short period of time. We should encourage participation but 
allow them to take the time to affirmatively decide if a 
retirement contribution makes sense. This amendment would give 
the service Secretaries the option of (1) not participating in 
automatic enrollment, (2) establishing delayed enrollment, and 
(3) establishing special rules for reserve personnel. It will 
provide some flexibility reflecting the unique nature of 
military service.

                                                      Darrell Issa.

                                  
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