[Senate Report 117-143]
[From the U.S. Government Publishing Office]


                                                  Calendar No. 481

117th Congress}                                           { Report
                                 SENATE
  2d Session  }                                           { 117-143

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

                      MEMBERS OF CONGRESS OPT OUT 
                            CLARIFICATION ACT

                               __________

                              R E P O R T

                                 OF THE

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              TO ACCOMPANY

                                 S. 471

             TO ALLOW MEMBERS OF CONGRESS TO OPT OUT OF THE
             FEDERAL EMPLOYEES RETIREMENT SYSTEM, AND ALLOW
              MEMBERS WHO OPT OUT OF THE FEDERAL EMPLOYEES
          RETIREMENT SYSTEM TO CONTINUE TO PARTICIPATE IN THE 
                           THRIFT SAVINGS PLAN

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


               September 12, 2022.--Ordered to be printed
               
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
                             WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------                 
               
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   GARY C. PETERS, Michigan, Chairman
THOMAS R. CARPER, Delaware           ROB PORTMAN, Ohio
MAGGIE HASSAN, New Hampshire         RON JOHNSON, Wisconsin
KYRSTEN SINEMA, Arizona              RAND PAUL, Kentucky
JACKY ROSEN, Nevada                  JAMES LANKFORD, Oklahoma
ALEX PADILLA, California             MITT ROMNEY, Utah
JON OSSOFF, Georgia                  RICK SCOTT, Florida
                                     JOSH HAWLEY, Missouri

                   David M. Weinberg, Staff Director
                    Zachary I. Schram, Chief Counsel
            Lena C. Chang, Director of Governmental Affairs
              Devin M. Parsons, Professional Staff Member
                Pamela Thiessen, Minority Staff Director
            Sam J. Mulopulos, Minority Deputy Staff Director
       Cara G. Mumford, Minority Director of Governmental Affairs
                  Andrew J. Hopkins, Minority Counsel
                     Laura W. Kilbride, Chief Clerk





                                                  Calendar No. 481

117th Congress}                                           { Report
                                 SENATE
  2d Session  }                                           { 117-143

======================================================================
 
                    MEMBERS OF CONGRESS OPT OUT 
                          CLARIFICATION ACT

                                _______
                                

               September 12, 2022.--Ordered to be printed

                                _______
                                

        Mr. Peters, from the Committee on Homeland Security and
             Governmental Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 471]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 471) to allow 
Members of Congress to opt out of the Federal Employees 
Retirement System, and allow Members who opt out of the Federal 
Employees Retirement System to continue to participate in the 
Thrift Savings Plan, having considered the same, reports 
favorably thereon with amendments and recommends that the bill, 
as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis of the Bill, as Reported.............3
  V. Evaluation of Regulatory Impact..................................4
 VI. Congressional Budget Office Cost Estimate........................4
VII. Changes in Existing Law Made by the Bill, as Reported............7

                         I. Purpose and Summary

    S. 471, the Members of Congress Pension Opt Out 
Clarification Act, would allow Members of Congress to opt out 
of the defined benefit portion of Federal Employee Retirement 
System (FERS) without also having to opt out of their 
contribution benefit, the Thrift Savings Plan (TSP). In 
addition, the bill would extend the FERS opt-out option to 
include House Members whose first term starts on or after the 
date of the bill's enactment. Currently, House Members who 
began serving before September 30, 2003, and all Senators have 
the ability to opt out of federal retirement benefits.

              II. Background and Need for the Legislation

    Coverage under FERS consists of three components: (1) 
Social Security; (2) a defined benefit basic annuity plan meant 
to complement Social Security; and (3) the Thrift Savings Plan, 
a defined contribution plan similar to a 401(k).\1\ Currently, 
Members of Congress entering into office are automatically 
covered under the FERS program. If they are serving in the 
Senate, Members can choose to opt out of and forgo both the 
basic annuity plan and Thrift Savings Plan under FERS.
---------------------------------------------------------------------------
    \1\Office of Personnel Management, Retirement Services: FERS 
Information (www.opm.gov/retirement-services/fers-information/) 
(accessed on July 21, 2022); Congressional Research Service, Federal 
Retirement Plans: Frequently Asked Questions (R47084) (May 2, 2022).
---------------------------------------------------------------------------
    Since the passage of the Social Security Amendments of 
1983, all Members of Congress are covered by and are required 
to pay into Social Security.\2\ The additional components of 
FERS coverage were established a few years after 1983 with the 
passage of the Federal Employees' Retirement System Act of 
1986.\3\ Per this legislation, Members of Congress whose 
service began in 1984 or later are covered under the FERS plan 
unless they elect by written notice not to participate.\4\ By 
definition, such an election also means opting out of the 
Thrift Savings Plan, established as a part of FERS in the same 
Act.\5\ A provision within the Legislative Branch 
Appropriations Act, 2004, amended the underlying statute to 
exclude Members of the House of Representatives entering into 
office on or after September 30, 2003 from the option of 
declining FERS coverage.\6\
---------------------------------------------------------------------------
    \2\Social Security Amendments of 1983, Pub. L. No. 98-21; Social 
Security Administration, FAQS (www.ssa.gov/history/hfaq.html) (accessed 
July 21, 2022).
    \3\Federal Employees' Retirement System Act of 1986, Pub. L. No. 
99-335; Congressional Research Service, Retirement Benefits for Members 
of Congress (Aug. 8, 2019).
    \4\Federal Employees' Retirement System Act of 1986, supra note 3, 
at 7 (hereinafter ``Federal Employees' Retirement'').
    \5\Federal Employees' Retirement, supra note 3, at 28.
    \6\Legislative Branch Appropriations, 2004, Pub. L. 113-239, Sec. 
104 (2003); 5 U.S.C. Sec. 8401(20).
---------------------------------------------------------------------------
    Legislation over the years has led to adjustments in the 
required employee contribution level toward the FERS annuity 
plan. Since 2014, Members of Congress and other federal 
employees who enter into FERS coverage must contribute 4.4% of 
their salary.\7\ Members are eligible to receive their annuity 
at age 62 or older if they have completed at least 5 years of 
service; at age 50 or older if they have completed at least 20 
of years of service; or at any age if they have completed 25 
years of service.\8\ The annuity benefit accrual rate has also 
changed over time and depends on when a Member first started 
serving. Since 2014, the accrual rate for Members and other 
federal employees entering into service has been 1% per year of 
service, and increased to 1.1% if the individual serves for at 
least 20 years and until at least age 62.\9\ The pension amount 
equates to the retiree's highest average basic pay earned 
during three consecutive years of service multiplied by the 
number of years of service and the accrual rate.\10\
---------------------------------------------------------------------------
    \7\5 U.S.C. Sec. 8422(a).
    \8\5 U.S.C. Sec. 8412(f); 5 U.S.C Sec. 8412(c).
    \9\5 U.S.C. Sec. 8415.
    \10\Federal Employees' Retirement, supra, at 9.
---------------------------------------------------------------------------
    In addition, Members of Congress and other federal 
employees covered under FERS are automatically enrolled into a 
TSP defined contribution plan. The employing agency 
automatically contributes 1% of basic pay per pay period into 
each TSP account of FERS employees.\11\ FERS participants, 
including Members of Congress, receive matching contributions 
from their employing agency on the first 5% of basic pay that 
each individual contributes per pay period.\12\
---------------------------------------------------------------------------
    \11\Thrift Savings Plan, Contribution Types: Regular Employee 
Benefits (www.tsp.gov/making-contributions/contribution-types/) 
(accessed July 21, 2022).
    \12\Id.
---------------------------------------------------------------------------
    The Members of Congress Pension Opt Out Clarification Act 
would amend the definitions section of the FERS statute in 
title 5 so that a Member's written election to not participate 
in FERS does not also apply to the Member's participation in a 
TSP. In addition, the bill strikes language in the definitions 
section added by the Legislative Branch Appropriations Act, 
2004, that excludes Members of the House of Representatives 
entering into office on or after September 30, 2003 from the 
option of declining FERS coverage. The bill states that the 
change related to Members of the House of Representatives 
applies only to individuals who first serve on or after the 
date of the bill's enactment.

                        III. Legislative History

    Senator Mike Braun (R-IN) introduced S. 471, the Members of 
Congress Pension Opt Out Clarification Act on February 25, 
2021, with original co-sponsor Senator Rick Scott (R-FL). The 
bill was referred to the Committee on Homeland Security and 
Governmental Affairs.
    The Committee considered S. 471 at a business meeting on 
May 25, 2022. The bill was ordered reported favorably by voice 
vote en bloc with Senators Peters, Hassan, Sinema, Rosen, 
Padilla, Ossoff, Portman, Lankford, Romney, Scott, and Hawley 
present and with Senator Padilla recorded as ``No.''

        IV. Section-by-Section Analysis of the Bill, as Reported


Section 1. Short title

    This section establishes the short title of the bill as the 
``Members of Congress Opt Out Clarification Act.''

Sec. 2. Making FERS optional for Members

    Subsection (a) amends the definition of ``Member'' in 
chapter 84 of title 5, United States Code. It strikes language 
that excludes Members of the House of Representatives who have 
not served as a Member prior to September 30, 2003 from the 
FERS opt-out option. Changes made by this subsection will apply 
to individuals who first serve in the House of Representatives 
on or after the date of the bill's enactment.
    Subsection (b) further amends the definition of ``Member'' 
in Chapter 84 of title 5, United States Code. Currently, the 
definition of ``Member'' for the purposes of Chapter 84 does 
not include individuals who choose to opt out of FERS, which 
applies to the subchapter on TSP. The bill specifies that for 
the FERS subchapter on TSP, the definition of Member still 
includes individuals who have chosen to opt out of FERS. 
Changes made by this subsection will take effect on or after 
the date of the bill's enactment.

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 21, 2022.
Hon. Gary Peters,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 471, the Members of 
Congress Pension Opt Out Clarification Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Amber 
Marcellino.
            Sincerely,
                                         Phillip L. Swagel,
                                                          Director.
    Enclosure.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    The bill would:
           Allow Members of the House of 
        Representatives elected after enactment to opt out of 
        the Federal Employee Retirement System (FERS)
           Allow Senators to participate in the Thrift 
        Savings Plan even if they opt out of FERS participation
    Estimated budgetary effects would mainly stem from:
           Eliminating employee contributions from 
        Members who opt out of FERS
           Eliminating future retirement benefits for 
        Members who opt out of FERS
           Reducing employer contributions made on 
        behalf of Members who opt out of FERS
    Bill summary: S. 471 would allow Members of the House of 
Representatives who are elected after enactment and all 
Senators, including those elected before enactment, to opt out 
of the Federal Employee Retirement System (FERS) but allow them 
to participate in the Thrift Savings Plan (TSP). Under current 
law:
           Members of the House of Representatives who 
        entered office in fiscal year 2004 or later may not opt 
        out of FERS. Members who entered office before that 
        date can opt out, but if they do so, they also lose 
        their ability to participate in the TSP.
           Senators can opt out of FERS, regardless of 
        when they entered office, but are then unable to 
        participate in the TSP.
    Estimated Federal cost: The estimated budgetary effect of 
S. 471 is shown in Table 1. The costs of the legislation fall 
within budget functions 600 (income security) and 800 (general 
government).

                                                     TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF S. 471
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   By fiscal year, millions of dollars--
                                                 -------------------------------------------------------------------------------------------------------
                                                   2022   2023   2024   2025   2026   2027   2028    2029    2030    2031    2032   2022-2027  2022-2032
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Increases or Decreases (-) in Direct Spending
 
Estimated Budget Authority......................      0      *      *      *      *      *       *       *       *       *       *         *          *
Estimated Outlays...............................      0      *      *      *      *      *       *       *       *       *       *         *          *
                                                                Decreases (-) in Revenues
 
Estimated Revenues..............................      0      *      *      *      *      *       *      -1      -1      -1      -1        -1         -4
                                Net Increase or Decrease (-) in the Deficit From Changes in Direct Spending and Revenues
 
Effect on the Deficit...........................      0      *      *      *      *      *       *       1       1       1       1         1          4
                                                   Decreases (-) in Spending Subject to Appropriation
 
Estimated Authorization.........................      0      *     -1     -1     -1     -1    n.e.    n.e.    n.e.    n.e.    n.e.        -4       n.e.
Estimated Outlays...............................      0      *     -1     -1     -1     -1    n.e.    n.e.    n.e.    n.e.    n.e.        -4       n.e.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components may not sum to totals because of rounding; n.e. = not estimated; * = between -$500,000 and $500,000.

    Basis of estimate: For this estimate, CBO assumes the bill 
will be enacted near the end of fiscal year 2022.
    Revenues: A historical review indicates that, on average, 
43 new Members begin serving in each session of Congress. Based 
on that information, CBO expects that, on average, 11 Members 
(or 25 percent of new Members in each session) would opt out of 
FERS under S. 471. If Members chose not to enroll, the portion 
of their salaries that would have been deposited as revenues 
into the Civil Service Retirement and Disability Fund (CSRDF) 
would instead be paid to them directly, and federal revenue 
collections would decline, on net. The required contribution 
rate for newly elected Members is 4.4 percent of salary 
(salaries currently are set at $174,000 for Members not in 
leadership roles). Thus, eliminating those contributions would 
reduce revenues by $4 million over the 2022-2032 period, CBO 
estimates, although that amount would change if the number of 
Members opting out was larger or smaller than CBO's estimate.
    Direct spending: On net, CBO estimates that enacting S. 471 
would reduce direct spending by less than $500,000 over the 
2022-2032 period.
    For most Members who opt out, the reduction in direct 
spending from eliminating future payments for benefits under 
FERS would occur after the 2022-2032 period; the average length 
of service for Members retiring under FERS is about 16 years. 
Members who are age 62 or older can retire with as few as five 
years of service, although annuities associated with such short 
periods of service are relatively small. Thus, CBO estimates, 
enacting the bill would reduce direct spending over the 2022-
2032 period by less than $500,000.
    Enacting S. 471 would increase direct spending on behalf of 
any current Senators who choose to opt out of FERS because of 
the bill's provision to allow their continued participation in 
the TSP. Those Senators would receive a refund of any 
contributions made to FERS before they opted out; the refunds 
would be recorded as increases in direct spending. CBO expects 
that only a small number of recently elected Senators would be 
in the group opting out. As a result, the increase in direct 
spending from refunded contributions would be less than 
$500,000 over the 2022-2032 period and would probably be 
smaller than the reductions in direct spending from the 
eliminated retirement benefits.
    Spending subject to appropriation: Opting out of FERS would 
eliminate the retirement contributions paid by the employing 
House of Congress on behalf of Members, reducing spending 
subject to appropriation by $4 million over the 2022-2027 
period, CBO estimates. However, those contributions (currently 
paid at a rate of 16.6 percent of salary) are recorded as 
intragovernmental transactions, which have no net effect on the 
deficit: They are paid from Congressional salaries and expenses 
accounts and deposited into the CSRDF as offsetting receipts 
(reductions in direct spending). (The effect on direct 
spending, however, is not attributed to the cost estimate 
because the deposit of those receipts is subject to future 
appropriation action.)
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in Table 1.
    Increase in long-term deficits: CBO estimates that enacting 
S. 471 would not increase on-budget deficits by more than $5 
billion in any of the four consecutive 10-year periods 
beginning in 2033.
    Mandates: None.
    Previous CBO estimate: On October 16, 2019, CBO transmitted 
a cost estimate for S. 439, the End Plush Retirements Act, as 
ordered reported by the Senate Committee on Homeland Security 
and Governmental Affairs on July 24, 2019. The language of the 
two bills is identical; CBO's estimate for S. 471 reflects an 
increase in the agency contribution rate paid by the two Houses 
of Congress on behalf of Members and the number of new 
Congresses expected to convene during the 10-year estimating 
window.
    Estimate prepared by: Federal Costs: Amber Marcellino; 
Mandates: Andrew Laughlin.
    Estimate reviewed by: Christina Hawley Anthony, Chief, 
Projections Unit; H. Samuel Papenfuss, Deputy Director of 
Budget Analysis; Theresa Gullo, Director of Budget Analysis.

       VII. Changes in Existing Law Made by the Bill, as Reported


UNITED STATES CODE

           *       *       *       *       *       *       *


TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

           *       *       *       *       *       *       *


PART III--EMPLOYEES

           *       *       *       *       *       *       *



Subpart G--Insurance and Annuities

           *       *       *       *       *       *       *



CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *



Subchapter I--General Provisions

           *       *       *       *       *       *       *



SEC. 8401. DEFINITIONS.

    For the purpose of this chapter--
          (1) the term ``account'' means an account established 
        and maintained under section 8439(a) of this title;

           *       *       *       *       *       *       *

          (20) the [term ``Member'' has the same meaning as 
        provided in] term ``Member''--
                  (A) has the same given the term ``Member of 
                Congress'' under section 2106, except that, 
                subject to subparagraph (B), such term does not 
                include an individual who irrevocably elects, 
                by written notice to the official by whom such 
                individual is paid, not to participate in the 
                Federal Employees' Retirement System, [and who 
                (in the case of an individual who is a Member 
                of the House of Representatives, including a 
                Delegate or Resident Commissioner to the 
                Congress) serves as a Member prior to the date 
                of the enactment of the Legislative Branch 
                Appropriations Act, 2004]; and
                  (B) for purposes of subchapter III, has the 
                meaning given the term ``Member of Congress'' 
                under section 2106, without regard to whether 
                the individual elects not to participate in the 
                Federal Employees' Retirement System;

           *       *       *       *       *       *       *


Subchapter III--Thrift Savings Plan

           *       *       *       *       *       *       *



SEC. 8431. CERTAIN TRANSFERS TO BE TREATED AS A SEPARATION.

    (a) For purposes of this subchapter, except as provided in 
section 8401(20)(B), separation from Government employment 
includes a transfer from a position that is subject to one of 
the retirement systems described in subsection (b) to a 
position that is not subject to any of them.

                           [all]