H.R. 3813: Securing Annuities for Federal Employees Act of 2012 & The PIONEERS Act

H.R. 3813

Securing Annuities for Federal Employees Act of 2012 & The PIONEERS Act

February 15, 2012 (112th Congress, 2nd Session)

Staff Contact

Floor Situation

On Wednesday, February 15, 2012, the House will likely consider H.R. 3813 and H.R. 3408, subject to a rule. A summary of the rule and any amendments made in order will be distributed when available. These bills would be considered as components of H.R. 7, the American Energy and Infrastructure Jobs Act of 2012. Provisions of H.R. 7 will be debated in separate pieces, allowing each major component of the plan to be debated and amended more openly, rather than as a single bill with limited debate and limited opportunity for amendment. H.R. 3813 and H.R. 3408 will likely be considered on Wednesday, February 15, and consideration of H.R. 7 will begin on Thursday, February 16. A Legislative Digest summarizing the provisions of H.R. 7 is forthcoming.

H.R. 3813 was introduced on January 24, 2012, by Rep. Dennis Ross (R-FL) and referred to the Committee on Oversight and Government Reform. On February 7, 2012, the Committee held a mark-up and reported the bill, as amended, by a vote of 22-16.

H.R. 3408 was introduced on November 11, 2011, by Rep. Doug Lamborn (R-CO) and referred to the Committee on Natural Resources. On February 1, 2012, the Committee held a mark-up and reported the bill, as amended, by a vote of 27-16.

Bill Summary

H.R. 3813—Securing Annuities for Federal Employees Act of 2012

H.R. 3813 would increase the required contribution rate paid by federal employees and Members of Congress for their retirement pension by 1.5 percent of salary, phased in over three years (0.5 percent per year), beginning in January 2013. In addition, the bill would increase the FERS contribution for new federal employees hired after December 31, 2012, to 4 percent, an increase of 3.2 percent. The employee contribution for special occupational groups and Members of Congress would also be increased by a total of 3.2 percent, from 1.3 percent to 4.5 percent. This bill would also change the FERS pension formula salary base for new employees to the highest-five years’ of average salary. Existing CSRS and FERS employees’ pensions would remain subject to a highest-three years’ of average salary base. Finally, the bill would change the FERS pension formula multiplier for basic retirees to 0.7 percentage points, instead of 1 percent.

By reforming federal workforce retirement programs and bringing them more in line with private sector retirement programs, the legislation would reduce the deficit by approximately $44 billion over ten years, according to CBO.

Retirement Contributions: The bill would increase the employee contribution to the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) by 1.5 percent over the course of three years. The bill would phase in the increase at 0.5 percent each year beginning in 2013.  Under current law, employees covered by FERS contribute 0.8 percent of their pay to the Civil Service Retirement and Disability Fund, while the federal government contributes an amount equal to 11.9 percent of their pay. For workers hired before 1984 and participating in the CSRS, their contribution is 7 percent of pay, according to CRS.  

Secure Annuity Employees: For federal employees entering service after December 31, 2012, the bill would establish a new pension formula. H.R. 3813 would set FERS contributions for new federal and Congressional employees, as well as Members of Congress, at 4 percent of their salary. The bill would require employees in certain occupational groups who receive a higher pension benefit to contribute 4.5 percent. For new employees the bill would calculate pensions using the average of an employee's highest five years of salary. Current CSRS and FERS employees would continue to have their pensions calculated using the average of their highest three years of salary. In addition, the bill would reduce the multiplier used in the annuity calculations by 0.3 percentage points, from 1.0 percent to 0.7 percent of salary, for most new employees. The formula for calculating retirement benefits for most new employees under H.R. 3813 would be the average high-5 year salary multiplied by number of years of service, multiplied by 0.7.

Eliminate the FERS Annuity Supplement: H.R. 3813 would eliminate the FERS supplement that employees who are not subject to mandatory retirement and retire before the age of 62 receive to equal what they would receive from the Social Security Administration if they were eligible for Social Security benefits at the time of retirement. Under current law, certain FERS employees who retire before the age of 62 receive a supplement to their annuity that is intended to equal what they would receive from Social Security. The supplement ends when the retiree turns 62 or becomes eligible to receive actual Social Security benefits. According to CBO, approximately 7,600 new retirees each year receive an annual supplement of just under $8,000. This provision would reduce direct spending by $1.9 billion over ten years.

Leave Payout Contributions to the Thrift Savings Plan: H.R. 3813 would allow any employee of the federal government who is eligible to make contributions to the Thrift Savings Plan (TSP) to contribute to it any payment received for accumulated annual leave. Such contributions would be subject to the annual limits that otherwise apply. Under current law, annual contributions are limited to $17,000 for individuals ages 49 or younger and $22,500 for individuals ages 50 or older.

H.R. 3408—PIONEERS Act

The Protecting Investment in Oil Shale the Next Generation of Environmental, Energy, and Resource Security Act (PIONEERS Act) would push forward the development of oil shale which began with the enactment of the Energy Policy Act of 2005.

Specifically, the legislation would codify the rules published in 2008 by the Department of Interior for the commercial development of oil shale.  One of the largest hindrances to increased investment in oil shale development is an unclear dynamic of what the costs and government burden will be.  This will likely provide regulatory certainty to companies looking to invest in oil shale.

The bill would also express that it is the intent of Congress that:

  • “This Act will support a healthy and growing United States domestic energy sector that, in turn, helps to reinvigorate American manufacturing, transportation, and service sectors by employing the vast talents of United States workers to assist in the development of energy from domestic sources;
  • “Ensure a robust oil shale industry and ensure that the benefits of development support local communities, under this Act, the Secretary shall make every effort to promote the development of oil shale in a manner that will support the long-term commercial development of oil shale, and shall take into consideration the socioeconomic impacts, infrastructure requirements, and fiscal stability for local communities located within areas containing oil shale resources; and
  • “The Congress will monitor the deployment of personnel and material onshore to encourage the development of American technology and manufacturing to enable United States workers to benefit from this Act through good jobs and careers, as well as the establishment of important industrial facilities to support expanded access to American resources.”

The bill would require that, when possible and practicable, the Secretary of the Interior should encourage the use of United States workers and equipment manufactured in the United States in all construction related to mineral resource development.


H.R. 3813—Securing Annuities for Federal Employees Act of 2012

Most civilian federal employees who were hired before 1984 are covered by the Civil Service Retirement System (CSRS). Federal employees hired in 1984 or later are covered by the Federal Employees' Retirement System (FERS). Both CSRS and FERS require participants to contribute toward the cost of their pensions through a payroll tax. Employees who are covered by CSRS contribute 7 percent of pay to the Civil Service Retirement and Disability Fund (CSRDF). Employees enrolled in FERS contribute 0.8 percent of their pay to the retirement fund.

According to House Report 112-394, under CSRS, most federal employees are required to contribute 7 percent of their salaries to the retirement fund and the employing agency, with the exception of the United States Postal Service, matches the employee contribution.  The Office of Personnel Management (OPM) estimates the normal of CSRS retirement program to be 26 percent of an employee’s salary. As such, the 14 percent combined employee and employer contribution is not enough to fully fund the retirement benefits provided under CSRS, leaving a shortfall that is covered by taxpayers through a transfer from the General Fund to the CSRDF. For FY 2011 and 2010, the government paid a combined $64.5 billion to cover the shortfall.

In 1986, Congress established FERS in part to help address the unfunded liability created by the CSRS. For most federal employees, the individual contribution rate is 0.8 percent of their basic pay. For Members of Congress, congressional employees, and other special occupational groups such as law enforcement, this amount equals 1.3 percent of basic pay. The employing agency is responsible for paying the remaining normal cost not covered by the employee contribution. For most federal employees, the employing agency currently pays 11.9 percent of the salary. For congressional employees, the employer pays 16.7 percent. For Members of Congress, the employer pays 18.3 percent.

H.R. 3408—PIONEERS Act

According to House Report 112-392, H.R. 3408 would facilitate the production of our Nation's oil shale to create American jobs and advance our Nation's energy security.  The bill would direct the Secretary of the Interior to conduct both commercial and research, development, and demonstration leasing sales for oil shale.  The bill would also codify the 2008 Bureau of Land Management Final Programmatic Environmental Impact Statement (PEIS) and Resource Management Plan (RMP) amendments that allow for oil shale development on public land.

While the Congressional Budget Office estimated that H.R. 3408 would not generate any new revenue to the federal government, it is important to note that the PIONEERS Act would begin to create American jobs shortly after its enactment.  While CBO estimates that in the ten year baseline budget H.R. 3408 would not create new revenue, it would ensure increased revenue earlier in the budget than originally projected.  This means that the federal government will both receive these revenues sooner and, most importantly, thousands of jobs will be created now rather than far off into the future.  Creating jobs now and boosting the federal budget sooner has tremendous positive economic impacts on the nation as a whole.  In contrast, the Administration is rewriting regulations and imposing policies that will block and delay job creation and oil shale development.  The Administration is actively working to close prime areas in the West from leasing for oil shale development and to inject uncertainty and risk to job creators through new oil shale regulations.  This bill would set a clear path, a clear plan and provides real opportunities for job creation, domestic investment and energy production that does not currently exist in law.

Under the Obama Administration, the Department of the Interior has essentially withdrawn its support of the provisions in Energy Policy Act of 2005 that supported the commercial leasing of oil shale and has made little progress on the industry's advancement.  Admittedly in 2009, the Bureau of Land Management (BLM) solicited a second round of 160-acre oil shale Research Demonstration and Development (RD&D); however, the lease terms were less than favorable to oil shale production.  The initial potential for 5,120 acres of commercial development pending a successful project was decreased to 480 acres.  Because of this, there was a lack of interest in the second round of BLM leases as many firms believed a commercial project could not be established on such a small footprint.  Therefore, it is not surprising that only two proposals were submitted.  These RD&D leases have yet to be issued, as BLM continues to hold public meetings and conduct reviews on the proposals and has not indicated when a decision will be made.

Additionally, as a result of a legal settlement, in February the Obama Administration announced it would be re-reviewing the Bush Administration era rules for commercial oil shale leasing, adding further delays to an already unreasonably prolonged process.  H.R. 3408 would codify the Bush Administration's oil shale leasing regulations to provide certainty and allow oil shale development in the United States to move forward.  As a result of the current Administration's delays and inconsistent policies regarding oil shale, companies continue to invest in oil shale research and development, but in foreign nations rather than here in the United States.  Ensuring that there are clear commercial rules and a sound research and development program will help drive jobs and investment here in the U.S.


H.R. 3813—Securing Annuities for Federal Employees Act of 2012

According to CBO, implementing the legislation would increase revenues by $42 billion and decrease direct spending by $2 billion over the 2012-2022 period.

H.R. 3408—PIONEERS Act

According to CBO, based on information provided by the Department of the Interior (DOI) and individuals working in the oil shale industry, CBO estimates that enacting H.R. 3408 would affect direct spending; therefore, pay-as-you-go procedures apply.  However, CBO estimates that the net effects would not be significant over the 2012-2022 period.  Enacting the legislation would not affect revenues.  CBO estimates that additional administrative costs to implement the leasing program under the bill would be small and subject to the availability of appropriated funds.