69–006 

110TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 110–770 

CLARIFYING THE METHOD FOR COMPUTING CERTAIN 

ANNUITIES UNDER THE CIVIL SERVICE RETIREMENT 

SYSTEM BASED ON PART-TIME SERVICE 

JULY 24, 2008.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. WAXMAN, from the Committee on Oversight and Government 

Reform, submitted the following 

R E P O R T 

together with 

[To accompany H.R. 2780] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Oversight and Government Reform, to whom 

was referred the bill (H.R. 2780) to amend section 8339(p) of title 

5, United States Code, to clarify the method for computing certain 

annuities under the Civil Service Retirement System which are 

based on part-time service, and for other purposes, having considered the same, report favorably thereon with an amendment and 

recommend that the bill as amended do pass. 

CONTENTS 

Page 

Purpose and Summary ............................................................................................ 2 

Background and Need for Legislation .................................................................... 2 

Legislative History .................................................................................................. 3 

Section-by-Section .................................................................................................... 3 

Explanation of Amendments ................................................................................... 4 

Committee Consideration ........................................................................................ 4 

Rollcall Votes ............................................................................................................ 4 

Application of Law to the Legislative Branch ....................................................... 4 

Statement of Oversight Findings and Recommendations of the Committee ...... 4 

Statement of General Performance Goals and Objectives .................................... 4 

Constitutional Authority Statement ...................................................................... 4 

Federal Advisory Committee Act ............................................................................ 5 

Unfunded Mandates Statement .............................................................................. 5 

Earmark Identification ............................................................................................ 5 


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Budget Authority and Congressional Budget Office Cost Estimate .................... 5 

Changes in Existing Law Made by the Bill, as Reported ..................................... 7 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. COMPUTATION OF CERTAIN ANNUITIES BASED ON PART-TIME SERVICE. 

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.’’. 

SEC. 2. APPLICABILITY. 

The amendment made by this Act 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. 

PURPOSE AND SUMMARY

H.R. 2780, a bill to adjust the method for computing certain annuities which are based on part-time service, was introduced by 

Rep. James Moran on June 19, 2007. The bill 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 because it can 

lead individuals who are eligible to retire, or who will shortly be 

eligible, to avoid working on a part-time basis, even if it would otherwise be in the government’s interest. 

BACKGROUND AND NEED FOR LEGISLATION

H.R. 2780 addresses an issue created by a 1986 law (Sec. 15204 

of P.L. 99–272, the Consolidated Omnibus Budget Reconciliation 

Act of 1985) affecting federal employees in the Civil Service Retirement System (CSRS). The law was enacted to end a practice under 

which federal employees who had worked on a part-time basis 

throughout most of their careers were allowed to switch to full-time 

employment at the very end of their careers and calculate their annuity based on their salary from just those full-time salary years. 

This practice resulted in inappropriately high annuities for some 

part-time federal employees. The 1986 law fixed that problem but 

created another. 

Under the 1986 law, federal employees who work on a part-time 

basis at the end of their careers but who worked most of their careers on a full-time basis could receive a reduction in their annuity 

computation for some of the years in which they worked full-time. 

This is because the law provides that the annuity for the years of 

service performed prior to 1986 is calculated based on a part-time 

salary even if the employee worked full-time in those years. As a 

result, the value of pre-1986 service in the annuity computation is 

significantly greater if the employee works full-time at the end of 

their career. 

A hypothetical example may help illustrate the problem. Two 

employees started full-time federal employment in 1969. Each has 

an identical career, retiring in 2003 after 34 years of service, except 


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that each worked part-time for three years at a different point during their career. Employee A worked half-time from 1998 through 

2000 and employee B worked half-time at the very end of her career, from 2001 through 2003. 

Each employee in this hypothetical has the same high-three used 

in the computation of the annuity for the post-86 service. The fulltime salary for each was $100,000 per year during their final three 

years of service, and $80,000 for the preceding three year period. 

The system produces equal annuities for the post-86 service, approximately $31,000. 

However, the computation of the annuity for the 17 years of pre1986 service will be very different. Each employee will be entitled 

to about 30% of high-three for that period of service. The problem 

is that because the pre-86 rules will apply, they will have different 

high-three average salaries. Under the pre-86 rules, because employee A worked full-time during the high-three period, his highthree is $100,000. Thus, the annuity for his pre-86 service will be 

$30,000. 

However, employee B will be much worse off. Under the pre-86 

rules, the average salary for the last three years will be only 

$50,000 because she was working a $100,000 job half time. Thus, 

the actual high-three period to be used will be the preceding threeyear period for which the average is only $80,000. Under the pre86 rules, because employee B worked half-time during the final 

three-year period, the annuity for her pre-86 service will be only 

$24,000, (approximately 30% of $80,000). 

The total annuity of employee A will be $61,000, while the total 

annuity of employee B will be about $55,000. This anomaly is illogical and unfair. H.R. 2780 would simply require the use of the 

same high-three for all pre-86 service. This would create fairness, 

and eliminate the current disincentive for CSRS covered employees 

to work on a part-time basis near the end of their careers. 

H.R. 2780 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, eliminate the adverse effect of parttime service performed late in an employee’s career, and provide a 

simplified annuity computation in cases involving part-time service. 

LEGISLATIVE HISTORY

On August 31, 2007, the Subcommittee on Federal Workforce, 

Postal Service, and the District of Columbia held a hearing on H.R. 

2780. On September 18, 2007, the Subcommittee reported H.R. 

2780 with an amendment striking the provision that provided for 

the re-computation of the annuities for federal employees who retired prior to enactment of the bill, with an estimated savings of 

$2.1 billion dollars. 

SECTION-BY-SECTION

Section 1: Computation of certain annuities based on part-time service 

This section would amend section 8339(p) of title 5, United 

States Code, by adding at the end a new paragraph 3. This new 

paragraph provides that subparagraph (B) of paragraph (p)(1), 


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which deals with the computation annuities for part-time service, 

shall not apply to that portion of any annuity which is attributable 

to service performed before April 7, 1986. 

Section 2: Applicability 

This section provides that the amendment made by this Act shall 

be effective with respect to any annuity which is based on a separation from service occurring on or after the date of enactment of this 

Act. 

EXPLANATION OF AMENDMENTS

No amendments were offered during Committee consideration of 

H.R. 2780. 

COMMITTEE CONSIDERATION

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. 

ROLLCALL VOTES

No rollcall votes were held. 

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 terms and conditions of employment or access to public 

services and accommodations. The bill does not relate to employment or access to public services and accommodations. 

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 and include an inequity in the 

calculation of annuities for certain federal employees. 

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, including improving the effectiveness of the civil service. 

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 H.R. 2780. Article I, section 8, clause 18 of the Constitution of 

the United States grants the Congress the power to enact this law. 


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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 MANDATES STATEMENT

Section 423 of the Congressional Budget and Impoundment Control Act (as amended by section 101(a)(2) of the Unfunded Mandates Reform Act, P.L. 104–4) requires a statement on 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

H.R. 2780 does not include 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 H.R. 

2780. 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. 2780 

from the Director of the Congressional Budget Office: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, July 10, 2008. 

Hon. HENRY A. WAXMAN, 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. 2780, a bill to amend section 

8339(p) of title 5, United States Code, to clarify the method for 

computing certain annuities under the Civil Service Retirement 

System which are based on part-time service. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sam Papenfuss. 

Sincerely, 

PETER R. ORSZAG. 


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Enclosure. 

H.R. 2780—A bill to amend section 8339(p) of title 5, United States 

Code, to clarify the method for computing certain annuities 

under the Civil Service Retirement System which are based on 

part-time service. 

H.R. 2780 would alter the way retirement benefits under the 

Civil Service Retirement System (CSRS) are calculated for workers 

with part-time service. The bill would apply to workers who performed work prior to April 7, 1986, and who retire from part-time 

service after the bill is enacted. 

CBO estimates that the change would increase direct spending by $1 million in 2009 and $63 million over the 2009–2018 period. 

The estimated budgetary impact of H.R. 2780 is shown in the following table. The costs of this legislation fall within budget function 600 (income security). Implementing the bill would not have 

a significant effect on discretionary spending. Enacting the bill 

would not affect revenues. 

By fiscal year, in millions of dollars— 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009– 

2013 

2009– 

2018 

Estimated Budget Authority ......................... 1 2 4 5 6 7 8 9 10 11 18 63 

Estimated Outlays ........................................ 1 2 4 5 6 7 8 9 10 11 18 63 

Under current law, benefits for CSRS workers with part-time 

service are calculated using a two-step process—the calculation of 

an annuity for service prior to April 7, 1986, and a separate calculation related to service on or after that date. The worker’s retirement benefit is the sum of those two annuities. 

For workers who were employed prior to April 7, 1986, the current formula uses the worker’s actual earnings over his or her entire career (whether full-time or part-time) to determine which 

three years’ salaries are counted in calculating the annuity for 

service prior to the above date. Thus, years of part-time service 

might not be used for that calculation, even though the hourly salary in those years might be among the highest three. 

For work on or after April 7, 1986, the formula uses a deemed 

salary (what the worker would have been earning if the worker had 

been working full time) to determine benefits and applies a prorata factor to adjust for part-time service. Because salaries tend to 

increase over time, part-time service at the end of a career is likely 

to have a higher hourly rate than part-time service at the beginning of a career. Thus, the current formula effectively treats new 

retirees with part-time service early in their careers more favorably 

than those whose part-time service comes at the end of their careers. 

Under H.R. 2780, CSRS benefits would be calculated by treating 

all part-time service according to the formula currently used to determine benefits for service performed on or after April 7, 1986. To 

ensure that benefits under the new formula would not be smaller 

than benefits calculated under the current formula, part-time service performed prior to April 7, 1986, would be credited as full time. 

CBO estimates this provision would affect benefits for several thousand new CSRS retirees each year and that more federal workers 

would shift to part-time service before retiring. Depending on an 


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individual employee’s work history, benefits for those retirees could, on average, increase by up to $2,000 in 2009; that average 

increase would decline to about $500 in 2018. 

H.R. 2780 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

impose no costs on state, local, or tribal governments. 

The CBO staff contact for this estimate is Sam Papenfuss. This 

estimate was 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 the bill, 

as reported, are shown as follows (new matter is printed in italic 

and 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 

* * * * * * * 

§ 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. 

* * * * * * * 

Æ 


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