Hidden agenda

When the Office of Personnel Management introduced a new retirement system

13 years ago, it promised a better deal for federal civil employees. Some

observers say that, in general, OPM has lived up to its promise.

But a recent OPM report shows that the agency had a hidden agenda when it

introduced the Federal Employees Retirement System. Although OPM did not

say so at the time, a goal of FERS was to increase turnover among mid- and

late-career employees to spur the growth of new talent into the work force.

Hidden or not, it appears this agenda didn't pan out.

When FERS was introduced, some observers, including the Congressional Budget

Office, OPM and the General Accounting Office, predicted that it would solve

the problem of "excessive retention of deadwood." This problem plagued the

Civil Service Retirement System (CSRS), the predecessor to FERS.

Little turnover was thought to be a problem because it prevented agencies

from hiring or promoting better-trained or more-skilled employees. It also

dulled the efforts and retention incentives of high-quality junior personnel

because mid- and late-career employees stood in the way of promotion opportunities.

FERS was supposed to alleviate this problem and foster more separations

among those in the middle or latter parts of their careers.

Ironically, the OPM study found that "deadwood" is a larger problem now

than it was before FERS was implemented. For one thing, FERS will induce

more individuals to retire later because recent young hires will face a

higher minimum retirement age of 57 under FERS, compared with 55 under CSRS.

You don't have to be a rocket scientist to understand that if you raise

the retirement age and don't provide cost of living adjustments for retirees

under age 62, you're going to induce feds to work longer. Who would be foolish

enough to retire? Certainly not an incompetent individual who couldn't find

employment elsewhere!

Employees under FERS who participate fully in the Thrift Savings Plan (TSP),

which is the government's 401(k)-type program, enjoy a government match

of 5 percent of their pay and gangbuster stock market returns.

OPM's study found that expected lifetime earnings and retirement wealth

is predicted to be greater under FERS. In my opinion, this assessment is

mainly based on the spectacular performance of the stock market ? and its

impact on the TSP ? since FERS' implementation.

The TSP returns under FERS has given junior and mid-career employees a stronger

incentive to stay than it would have been had they been covered by CSRS.

Separation rates of junior and mid-career civil service personnel covered

by FERS are as much as 45 percent lower than the rates for personnel covered

by CSRS.

My take on this is that if the only way to get rid of "deadwood" is by tinkering

with the retirement system, there's something seriously wrong with the federal

performance management system.

— Zall is a retired federal employee who since 1987 has written the Bureaucratus

column for Federal Computer Week.


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