U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

48–067 PDF 2009

CATCHING UP: BENEFITS THAT WILL HELP

RECRUIT AND RETAIN FEDERAL EMPLOYEES

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

APRIL 29, 2008

Serial No. 110–136

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

——— ———

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

JIM JORDAN, Ohio

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

LAWRENCE HALLORAN, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL SERVICE, AND THE DISTRICT OF

COLUMBIA

DANNY K. DAVIS, Illinois

ELEANOR HOLMES NORTON, District of

Columbia

JOHN P. SARBANES, Maryland

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio, Chairman

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

KENNY MARCHANT, Texas

JOHN M. MCHUGH, NEW YORK

JOHN L. MICA, Florida

DARRELL E. ISSA, California

JIM JORDAN, Ohio

TANIA SHAND, Staff Director

(III)

C O N T E N T S

Page

Hearing held on April 29, 2008 .............................................................................. 1

Statement of:

Brown, Richard, vice chair, Employee Thrift Advisory Council; and Gregory T. Long, executive director, Federal Retirement Thrift Investment

Board .............................................................................................................. 9

Brown, Richard .......................................................................................... 9

Long, Gregory T. ........................................................................................ 18

Green, Daniel A., Deputy Associate Director for Employee and Family

Support Policy, Strategic Human Resources Policy Division, U.S. Office

of Personnel Management; Colleen M. Kelley, president, National

Treasury Employees Union; Sara R. Collins, assistant vice president,

the Commonwealth Fund; and John Gage, national president, American Federation of Government Employees, AFL–CIO .............................. 39

Collins, Sara R. .......................................................................................... 55

Gage, John ................................................................................................. 83

Green, Daniel A. ........................................................................................ 39

Kelley, Colleen M. ..................................................................................... 46

Letters, statements, etc., submitted for the record by:

Brown, Richard, vice chair, Employee Thrift Advisory Council, prepared

statement of ................................................................................................... 13

Collins, Sara R., assistant vice president, the Commonwealth Fund, prepared statement of ........................................................................................ 57

Davis, Hon. Danny K., a Representative in Congress from the State

of Illinois, various prepared statements ..................................................... 3

Gage, John, national president, American Federation of Government Employees, AFL–CIO, prepared statement of .................................................. 85

Green, Daniel A., Deputy Associate Director for Employee and Family

Support Policy, Strategic Human Resources Policy Division, U.S. Office

of Personnel Management, prepared statement of .................................... 42

Kelley, Colleen M., president, National Treasury Employees Union, prepared statement of ........................................................................................ 48

Long, Gregory T., executive director, Federal Retirement Thrift Investment Board, prepared statement of ............................................................ 20

(1)

CATCHING UP: BENEFITS THAT WILL HELP

RECRUIT AND RETAIN FEDERAL EMPLOYEES

TUESDAY, APRIL 29, 2008

HOUSE OF REPRESENTATIVES, , SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, , COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, , Washington, DC.

The subcommittee met, pursuant to notice, at 2:04 p.m., in room

2154, Rayburn House Office Building, Hon. Danny K. Davis (chairman of the subcommittee) presiding.

Present: Representatives Davis of Illinois, Norton, Cummings,

and Kucinich.

Staff present: Lori Hayman, counsel; and Marcus A. Williams,

clerk/press secretary.

Mr. DAVIS OF ILLINOIS. The subcommittee will now come to

order. Unfortunately, Mr. Marchant’s plane is delayed a little bit

and so he may not arrive. At any rate, though, we welcome you to

the Federal Workforce, Postal Service, and the District of Columbia

hearing on the Thrift Savings Plan and Federal Employees Health

Benefits plan.

The chairman and ranking member and subcommittee members

will each have 5 minutes to make opening statements, and all

Members will have 3 days to submit statements for the record. And

hearing no objection, that will be the order.

Today the subcommittee is holding hearings on two issues that

will ultimately benefit the retirement and health of enrollees in the

Thrift Savings Plan and the Federal Employees Health Benefits

Plan respectively. Under the current law, newly hired Federal employees and members of the Uniformed Services can elect to contribute to the TSP.

The first hearing panel will discuss the legislation that would authorize the automatic enrollment of new and rehired employees and

members of the Uniformed Services in the TSP. Automatically enrolled participants who want to stop participation and have their

contributions returned would have a 90-day period from the date

of deposit of the first contributions in his or her TSP account to terminate contributions.

Automatic enrollment will go a long way in improving the saving

habits of Federal employees. Currently, a new participant account

established in the TSP is defaulted to a 100 percent investment in

the G-Fund.

The TSP panel hearing will also discuss legislation that would

change the default investment fund from the G-Fund to an age-apVerDate 11-MAY-2000 14:32 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 U:\DOCS1\48067.TXT KATIE PsN: KATIE
2

propriate Lifecycle Fund, the L-Fund. While the G-Fund provides

protection against investment loss, long-term investment solely in

the G-Fund is unlikely to provide returns sufficient to meet requirement needs.

Young adults are the fastest growing age group among the uninsured. Almost 400,000 young adults, younger than 23 years old,

will be uninsured upon graduating from college. This is due to the

overwhelming amount of individuals who will be cutoff from their

parents’ or university’s health insurance plan.

A report by the Commonwealth Fund, a private foundation that

aims to promote a high-performing health care system in the

United States showed that two out of five college graduates are uninsured after they leave school.

The second hearing panel will discuss covering young adult dependents between the ages of 22 and 25 under the FEHBP. Last

month, I introduced H.R. 5550 to raise the age young adults would

qualify for health insurance under the FEHBP from 22 to 25 years

of age.

As many of you know, cost is a key factor in what legislation will

be brought to the House floor for consideration. It was just a few

weeks ago that members were debating at the subcommittee and

full committee markups whether the possible costs associated with

legislation that would provide maternity leave for Federal and congressional staff was worth the cost.

Following this hearing, I will offer an amendment in the nature

of a substitute to H.R. 5550 that will address the cost associated

with the bill, while preserving coverage for young adults.

I ask unanimous consent that the written statements of the Federally Employed Women and the Retirement Security Project be included in the record.

[The information referred to follows:]

3

4

5

6

7

8

9

Mr. DAVIS OF ILLINOIS. I want to thank all of the witnesses for

coming and being willing to participate and all of you for being

here.

I’m going to ask Representative Norton if she has any opening

comments she would like to make.

Ms. NORTON. No, Mr. Chairman, no opening comments.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Then we’ll proceed to our first panel of witnesses, and I will introduce the witnesses. Mr. Greg Long serves as the director of

product development for the Federal Investment Board, which is

the agency responsible for administering the Thrift Savings Plan

for Federal employees. Prior to working for the Federal Retirement

Investment Board, Mr. Long served as director of marketing for the

American Bar Association retirement funds with City Street.

And Mr. Richard Brown is the current vice chairman of the Employee Thrift Advisory Council. In addition to his role on the Advisory Council, Mr. Brown is the president of the National Federation of Federal Employees.

Gentlemen, thank you both. And if you would stand and raise

your right hands and be sworn in.

[Witnesses sworn.]

Mr. DAVIS OF ILLINOIS. The record will show that the witnesses

answered in the affirmative. So we thank you gentlemen very

much, and we’ll begin with you, Mr. Brown. Of course, we know the

5-minute statement period. The yellow light indicates that a

minute is left, and we stop at the red. And thank you both very

much. Please proceed.

STATEMENTS OF RICHARD BROWN, VICE CHAIR, EMPLOYEE

THRIFT ADVISORY COUNCIL; AND GREGORY T. LONG, EXECUTIVE DIRECTOR, FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

STATEMENT OF RICHARD BROWN

Mr. BROWN. Thank you, Mr. Chairman, committee members.

Thank you for the opportunity today. My name is Richard M.

Brown. I serve as the national president of the National Federation

of Federal Employees, an affiliate of the IAMAW, as well as the

vice chairman of the Employee Thrift Advisory Council [ETAC].

ETAC is comprised of 15 individuals from 15 different organizations which represent active and retired Federal employees and

Uniformed Services.

ETAC serves as the advisory body to the Federal Retirement

Thrift Investment Board which oversees the Federal Government’s

Thrift Savings Plan [TSP].

It is in my capacity as ETAC vice chair that I appear before you

today. I’m here to address TWO specific Board-proposed legislative

changes to the TSP: an automatic enrollment provision for new employees, and a change in the default for new employees who could

not make an investment decision. It is my intention to accurately

share with you the views of the Council as a whole regarding these

two issues.

First, the automatic enrollment. I will first discuss the issue of

automatic enrollment with the Thrift Savings Plan. The TSP is an

10

opt-in system. Employees who want to participate in the TSP must

complete and submit a contribution election to their specific—respective agency. New employees do not have contributions to the

TSP deducted from their paycheck unless they specifically choose

to do so. Sorry about that.

According to the Board’s proposed plan, all newly eligible Federal

employees who do not affirmatively decline to invest a portion of

their paycheck in TSP would automatically have 3 percent of their

base pay deferred on their behalf, the level at which would receive

100 percent agency match; a 90-day grace period from the date of

the first automatic contribution to include—included in the proposal. Any automatically enrolled participants who did not wish to

participate in the TSP could withdraw the current market value of

their employee contributions at any time during this period. The

withdrawal would be taxable as ordinary income in the first year

it was distributed, but would not be subject to early withdrawal

penalties. A participant could still stop or change their contributions at any time after the grace period expired, but the account

would be subject to normal withdrawal rules.

The Board hired an independent consultancy, Watson Wyatt

Worldwide, to conduct a survey gauging participant satisfaction

with the TSP and input on proposed changes, including automatic

enrollment in the program. The survey revealed strong support for

automatic enrollment of new employees. Nearly two-thirds of all respondents agreed that automatic enrollment of new employees is a

good idea, compared with only 20 percent who disagreed. Neither

age nor income made a large difference in the respondents’ support

for automatic enrollment.

ETAC discussed the automatic enrollment issue at our June 12,

2007 meeting, and there was widespread support for the proposed

change. There was some minimal concern about the administrative

cost and work involved in implementing a change, but the overall

sense of the Council was benefits of automatic enrollment outweighed the implementation costs. Council members made a number of arguments in favor of the automatic enrollment. Starting the

habit of early saving on one’s career increases the likelihood that

an employee will continue contributing throughout his or her career. Through compounding earnings, even a modest automatic 3

percent contribution may lead to a sizable account balance over

time, particularly when 3 percent is combined with the automatic

1 percent agency contribution and an additional 3 percent in

matching funds that the employee will receive.

Initiating automatic enrollment will ensure that those employees

who do not intentionally refrain from investing in the TSP will not

continue to miss out on the dollar-for-dollar matching funds to

which they are entitled. The Council feels that all Federal employees should invest in TSP; however, new hires will be educated on

the change and presented with the necessary information to make

an informed decision about their participation in the plan. We do

not believe this information will be difficult for them to access or

understand, and the grace period and related opt-out provision ensure that they’ll have time to make these decisions without penalty.

11

For all these reasons, the ETAC strongly supports automatic enrollment in the TSP for new employees.

The second change to the TSP proposed by the Board is all new

employee enrollees in the plan who do not make an investment

election would have their contributions defaulted to age-appropriate Lifecycle, or L-Fund.

Currently TSP participants may choose how their money is allocated. They have a number of funds to choose from, specifically the

G, F, C, S and I Funds. When participants do not make allocation

choices, their contributions are automatically invested in the government securities or G-Fund. The G-Fund earns interests and

does not incur any losses, but due to low-level risk may not provide

substantial rate of return to meet the employee’s long-term retirement goals.

According to the Board’s proposed plan, employees would have

the same set of funds to choose from, but the default election would

change from the G-Fund to an age-appropriate L-Fund based on

specific participant’s estimated retirement age. In the L-Fund,

money is allocated more heavily toward stocks for younger participants, which may lead to greater asset fluctuation and more risk,

but are also expected to produce higher rate of return. The closer

a participant gets to retirement, the more heavily the L-Fund is invested in government securities and bonds.

In the previously mentioned survey, respondents were asked

whether the G-Fund or an age appropriate L-Fund should be used

as a default fund for those TSP contributors who do not specifically

know how their funds are to be allocated. The study found that 49

percent of the respondents preferred the L-Fund as the default,

while 27 percent preferred the G-fund and 24 percent had no preference.

When respondents were broken down by age group, all those

under 40 expressed the strongest preference for the L-Fund as the

default; and 55 percent, those 40 to 49, at 53 percent; and those

over 50, at 45 percent. It is worth knowing, though, that every age

group preferred the L-Fund over the G-Fund as a default.

This issue was also addressed by ETAC at our June 12, 2007

meeting. There was some hesitation about changing the default

election to the age-appropriate L-Fund. The primary concerns were

that the L-Fund does not yet have a long history and that the

change would expose enrollees to risk. Participants may lose money

in L-Funds, particularly in the short term. However, ETAC members were largely in favor of the change to the L-Fund for default

allocations.

Committee members expressed support to change the L-Fund default for a number of reasons. Many of us expressed our wish that

they had delivered—diversified our investments and taken more

risk when we were younger. Many of us were initially skeptical of

the plan but were much more supportive after reading the survey

results and talking to our own members.

We are generally supportive of, and understand the change. The

TSP is intended to be a long-term investment, a vehicle for participants. So a default that maximizes a chance for growth in the long

term makes sense. Furthermore, the TSP plan participants are

able to change their future investment allocations to a different

12

fund or funds within the plan as well as move their existing account balances via interfund transfer. Any employee who does not

wish to invest in the L-Fund would be able to easily make a different investment decision.

For all these reasons, the ETAC also supports legislation that

would change the default fund from the G-Fund to the age-appropriate L-Fund for all newly enrolled participants.

This concludes my statement. Once again, thank you very much

for the opportunity to be here today.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Brown.

[The prepared statement of Mr. Brown follows:]

13

14

15

16

17

18

Mr. DAVIS OF ILLINOIS. We’ll go to Mr. Long.

STATEMENT OF GREGORY T. LONG

Mr. LONG. Good afternoon, Chairman Davis and members of the

subcommittee. My name is Greg Long. Mr. Chairman, you had previously noted my title as director of product development. That is

actually my former title. And as of today, I am the executive director of the Federal Retirement Thrift Investment Board. And as

such, I am the managing fiduciary of the Thrift Savings Plan

[TSP]. And I welcome this opportunity to appear before the subcommittee.

The Board is an independent agency with responsibility to act

solely in the interest of TSP participants. Consequently, our statements to the Congress are not submitted for clearance by the Office

of Management and Budget.

You requested my views today on two proposals we transmitted

for consideration by the Congress to improve the Thrift Savings

Plan for Federal employees. We appreciate your holding this hearing to examine these proposals. The Board strongly supports

amending the Federal Employees Retirement System Act of 1986

[FERSA], to authorize automatic enrollment of all newly hired Federal and postal employees into the Thrift Savings Plan; and second,

to change the TSP default for new enrollees from the government

securities investment, or G-Fund, to an age-appropriate L-Fund, or

Lifecycle Fund.

Lifecycle TSP is a retirement savings and investment plan for

Federal and postal employees and members of the Uniformed Services. It is a defined contribution plan that offers the same type of

benefits that many private sector employees receive under 401(k)

plans. The TSP is available to employees covered by the Civil Service Retirement System, the Federal Employees Retirement System

and also members of the Uniformed Services.

Under FERSA, employees and service members who wish to participate in the TSP must submit a contribution election to their employing agency or service. FERSA also requires employing agencies

to create an account for noncontributing FERS employees following

the completion of a statutory waiting period. Agencies must deposit

an amount equal to 1 percent of the FERS employee’s basic pay to

the accounts. Participant contributions by FERS employees are

matched by the agencies, based upon a statutory formula. Since

FERSA designates the G-Fund as the TSP’s default fund, all initial

contributions from the employees and agencies are invested in the

G-Fund. Thereafter, participants may submit a request to direct

their contributions and reallocate their investments among any of

the TSP’s funds. For participants who do not submit a request,

their accounts will remain invested in the G-Fund by default.

Now, following the passage of the Pension Protection Act of 2006

[PPA], the Board undertook a review of the TSP’s policies in light

of that legislation. Particularly we focused on provisions of the PPA

which applied to private-sector qualified plans and 401(k) plans but

not the TSP. This included the automatic enrollment, as well as a

focus on qualified default investment alternatives [QDIAs].

The Board conducted significant research and data collection on

automatic enrollment and QDIAs. The research included an analyVerDate 11-MAY-2000 14:32 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 U:\DOCS1\48067.TXT KATIE PsN: KATIE
19

sis of the 401(k) industry, data and trends, a review of TSP specific

data, consideration of survey findings, consultation with the statutory Employee Thrift Advisory Council, solicitation of feedback

from the agencies and, finally, a cost analysis.

Agency matching contributions provide a strong incentive for employees to contribute their own funds. And the voluntary participation currently stands at 86 percent, which compares very favorably

to private sector 401(k) plans. However, 14 percent of FERS employees and 73 percent of Uniformed Service employees who are

not contributing currently to the TSP are less likely to be financially self-sufficient in retirement than their counterparts who do

contribute.

Further, noncontributing FERS participants are failing to collect

agency matching contributions, which the Congress authorized for

their benefit. The statutory ETAC expressed support for automatic

enrollment in its June meeting and the feedback from the civilian

agencies are generally favorable. Our analysis indicates that the

systems communications and staffing modifications required will be

minimal. That legislative proposal authorizes immediate automatic

contributions from all newly hired employees who did not affirmatively decline to contribute a portion of their pay to the TSP. The

initial contribution rate would be 3 percent of basic pay, but employees may opt-out or change their contribution at any time. Participants would also have a 90-day grace period from the date of

their first contribution in which to withdraw the funds.

I’m aware that under congressional budget rules, the automatic

enrollment proposal could generate a potentially significant cost. I

hope that a way can be found to overcome that obstacle so that

more employees will make full use of the TSP in order to be better

prepared for their retirements.

I can see, Mr. Chairman, that my time has now expired and I

know that my statement has been submitted for the record. With

your concurrence, I can wrap up here or continue.

[The prepared statement of Mr. Long follows:]

20

21

22

23

24

25

26

27

28

29

30

Mr. DAVIS OF ILLINOIS. Thank you both very much, gentlemen.

We appreciate your testimony.

Let me begin with you, Mr. Brown. Could you think of any reasons that employees would want to opt-out of enrolling in the TSP?

Mr. BROWN. Just so I understand ‘‘opt-out,’’ want to get out;

could I think of a reason?

Mr. DAVIS OF ILLINOIS. Yeah.

Mr. BROWN. I don’t know; it is all based on personal individuality. Maybe they were—if they had some sort of personal hardship

or something, they may want to opt-out. And in today’s stressful

economic time, I could see that probably happening, especially with

junior employees and people that have not reached up through the

career ladder. But I can tell you at least from the position of this

Union and so forth, and being a TSP participant myself, we would

strongly urge them to remember to save some for the long haul and

be part of that three-legged stool, if you will, of retirement; you

know, Social Security, your pension, and this thing. It would be

TSP, obviously, and personal savings.

Mr. LONG. I think I can add to Rick’s comment there by saying

in looking at the data from the 401(k) world—and many plans have

adopted automatic enrollment. There are a small percentage of people that opt-out, far less than those who do not affirmatively sign

up. But why that happens is because some people who literally

cannot afford it. But what we’re trying to get is of the 14 percent

of FERS employees that don’t participate, there might be 2 or 3

percent that really are living hand-to-mouth, paycheck-to-paycheck,

and can’t afford it. And we have created a mechanism for them to

opt-out. They can do that. It is the percentage in between that we

believe are not opting-in simply because of inertia. And what automatic enrollment does is, it uses inertia to encourage retirement

savings.

Mr. DAVIS OF ILLINOIS. The employees expressed an interest in

automatic enrollment in TSP and the automatic default to the

Lifecycle Fund on the survey. Are you aware of any other expressed interests in implementing changes or improvements in the

TSP? Are there recommendations or suggestions that employees

have provided that they might think would improve the TSP?

Mr. LONG. Well, we do get comments on a regular basis of things

that people would like to have different, sure. And we, as part of

our normal course of business, consider those. There are certainly

some changes that we have made recently. One of which is we have

decided to send out on an annual basis a statement to all of our

participants, almost 4 million people, that aids with our educational efforts. We also created an ability to have spousal accounts

so that a spouse can inherent the account of a participant. There

are other recommendations and ideas that we get from—that are

participant-based and we consider them all the time.

Mr. DAVIS OF ILLINOIS. What would be the impact on the retirement funds of Federal employees enrolled in FERS if they do not

participate or contribute to the TSP?

Mr. BROWN. What would be the impact to themselves personally?

Mr. DAVIS OF ILLINOIS. Yes.

Mr. BROWN. They would wind up at the end of their career without any type of saving if they didn’t participate. And I think that

31

would be probably devastating to anyone. I mean, if I could just caveat on what Greg has said, part of the things that we have done

and looked at other issues as trying to help out participants, one

of the main things is the ability to in and opt-out. That in and of

itself is an excellent vehicle for these folks, whoever wants to participate.

What we also try to do is look at investments and changes to

TSP, keeping the overhead low, thus making the return on the employees’ investments higher. Across the board, even though we are

15 other organizations, we try to act collectively to ensure that dollar-for-dollar that the Federal Employees Retirement System is offering the best quality-requirement for their hard-earned dollars

they invest.

Mr. DAVIS OF ILLINOIS. What would be the impact if employees

kept most of their dollars—investment dollars, that is—in the GFund?

Mr. LONG. Long term, the G-Fund is a fund that never has a bad

day and it also never has an especially good day. Long term, the

equity markets have shown that they have better performance. So

likely—there are no guarantees in life—but likely over the long

term, somebody in the G-Fund will make a smaller return than

somebody who invests in the L-Funds. That translates to less

money after a 20, 30 or 40-year career and therefore a lower quality of life. We’re trying to turn that on its head. We are trying to

improve the quality of life for our retirees.

Mr. DAVIS OF ILLINOIS. Do these operate on the basis of the

greater the risk, the greater the reward?

Mr. LONG. That is the intention, yes. And the capital markets

are built on that assumption, that you don’t want to avoid risk, you

want to manage risk and take an appropriate level of risk for your

particular goals. The Lifecycle Funds are built on that assumption.

So that somebody who has a 30-year window, 30-year horizon for

when they actually need the money, can invest more heavily toward stocks than somebody who is going to retire and withdraw

the money in 4 or 5 years.

Mr. DAVIS OF ILLINOIS. So the individuals who are the more cautious investors, realizing that they have the assurance of the protection of their investment would want to do the G-Fund?

Mr. LONG. Uh-huh.

Mr. DAVIS OF ILLINOIS. And those who are a little more open,

that kind of reminds me of the parables in the Bible where these

individuals were given different sets of talents and, of course, the

ones who did the most investing ended up with the most return.

But I guess they weren’t so worried about the assurance of making

sure that everything was there.

Mr. LONG. I can assure you that we are well aware of the participants’ desire for safety, especially in these volatile times in the

marketplace. And therefore the G-Fund will always remain a

choice that anybody can put all of their money in at any time. The

desire for the change in the default from the G-Fund to the

Lifecycle is again about inertia, and we have unfortunately, a significant amount of people that their money goes to the G-Fund initially when they might only be 25 or 30 years old, and they sit

there for an awfully long time and they sit out on the potential to

32

get that return that I know many of Rick’s members have unfortunately missed out on, and we’re trying to fix that.

Mr. DAVIS OF ILLINOIS. Thank you very much.

Delegate Norton.

Ms. NORTON. Mr. Chairman, I think your first question, did we

know why people would opt-out in the first place is an important

one, because it is hard to believe that people truly understand the

one for one. Doubling your money up to 4 percent is a pretty sure

bet. Did your survey cover people who had opted out?

Mr. LONG. Yes, it did. And we were actually surprised about this.

I’m speaking from memory here. But we did segregate the survey

between people who only got the 1 percent and that was their only

contribution, therefore they were not participating, and asked them

about the automatic enrollment. And they were—that group was

still in favor of it, which was actually a little bit surprising to us.

Ms. NORTON. Have they been asked why they opted out in the

first place? If they are simply conferring what they have already

done, if you ask them should you have to contribute, this is money

they have to put forward. But I am wondering if they have been

specifically surveyed as to why in the first place, which would give

some sense of whether they had a full understanding that they are

losing money.

Mr. BROWN. Speaking for our Union, nothing—I have spoken to

many members around the country. I have never spoken to someone that opted out or chose not to.

Ms. NORTON. That’s why I’m asking, since you have been surveying people, and you surveyed people about opting out for this—as

reported to the subcommittee. I’m trying to find out what you know

about people who opt-out.

Mr. BROWN. I would guess—and this is just a guess—but from

talking to the folks and being a participant myself, maybe because

they didn’t get the value of it or the whole process explained to

them very well by their particular agencies. You know, in speaking

on behalf of the Union and not as the ETAC Vice, the more that

is explained to them at their local agency, regardless of who they

work for, the more informed they are, they seem to be more diversified in their investment portfolio, if you will. And they also participate without opting out when they are explained that they can borrow against it or they can add more or specific funds and how they

operate.

The smarter the folks are—that’s why—on the ETACs of the

House we’ve gone and have taken farther steps not only with the

Web site and DVDs and pamphlets and literature, but we rely

heavily on a lot of the managers at the various agencies to explain

it to them properly. I think if you looked at why they might optout, only because it wasn’t explained to them properly. Not that

they can’t know, they just didn’t know.

Ms. NORTON. Mr. Brown, I really believe that what you’re saying

is in fact the case. It is more likely to be the case than not. I also

think that managers are more likely to put—everybody does—his

or her own business first and foremost and prioritize what is important.

So I suspect that there are a lot of people who simply do not understand, particularly since it is the agency. And I am not sure the

33

extent to which unions are involved in explaining this matter, but

I’m very concerned to know who these people are who are opting

out. I would assume that if there is knowing opting out, that it

does have to do with what, I think, you, Mr. Long, said about how

they can’t even afford to put that away. And I’m sure there are

such people, and certainly such people work for the Federal Government. Can you opt to put in less than a certain amount?

Mr. LONG. Yes. And I do want to—I misspoke earlier when I said

that 14 percent of the people opted out. That is actually—those are

the 14 people among the first group that didn’t opt-in because——

Ms. NORTON. Yeah. And I would expect that. See, that I would

expect. But you haven’t—for me at least—gotten to the people who

never participated, who would be expected, it seemed to me when

questioned, to want to continue to do as they have before. And it

does seem to me there is some obligation to find out more—that’s

a large number as far as I’m concerned. And this is a matter of free

choice. So nobody is going to say you have to do it, even—you yourself are allowing people to opt-out. But I do believe that some obligation—particularly if you want them in—to—for example, not rely

only on anecdotal evidence, to in fact—it is not hard to think of a

survey that one could do where one could actually ask the specific

questions: Did you know if you put in $5, the Federal Government

adds to that and puts in $10, and go on down the line until you

get to the point where you might know something about this group.

I also would like to know who they are. I would like to know

their GS ratings, I would like to know, you know, where they work.

That is too large a number simply to report. So I would ask you,

since I believe you also believe that the more the merrier, as it

were, that a rather simple survey be designed to find out more

about those who are not going to opt-in—not about those who are

going to opt-out—once again, I would say, because they have already opted out—but about why they have chosen not to participate. I think you would learn a great deal more about the program

if you learned more about them. You learn from those who made

a deliberate choice not to participate because some of those reasons

might help you improve the program and you would certainly learn

whether or not there are a large group of people who are not

spending the time to find out because they think this is just another piece of paper from the government.

The government doesn’t pass out many pieces of paper that

amount to money in your hands and the notion that this one will

be picked up and understood seems to me too much of an assumption to make, given the large number who are not participating.

So I would request that you endeavor to find out more about who

they are, what their reasons are, in order to perhaps encourage

them to come to the program, particularly given Mr. Brown’s testimony that when in fact the matter is explained sufficiently, more

and more people look like they come into the program. Then, of

course, once you found out who they were by survey indicated, you

know, how they opt-out of a program, why they are not opting-in,

would tell you what you need to know about how to get more information to people and whether Web sites are enough—these people

aren’t going to your Web site because they have already opted-out.

So you’re preaching to the converted when there are, you know, 14

34

percent, large numbers, who may want to come to church too, but

don’t know that when you put your money in this collection box,

the preacher gives you back some before you go home. So I’m interested in expanding the program in that way, if you would——

Mr. BROWN. I think part of that, and as we touched on earlier

is the—you know, the centralizing of the personnel functions and

the various agencies. They don’t have people to stand out there and

meet with the new employees, or even existing employees, and inform them of their benefits. And we have spoken against that on

many occasions because not only just for your TSP, but the rest of

your benefits and entitlements for working for the Federal Government.

And I would say most people, they don’t spend as much time in

the personnel department with the employees they’ve done. I’ve

seen it, I’ve witnessed it. I’ve been involved in the Federal Government since 1985 and I have seen the various agencies draw down

their personnel departments. It is critical to explain these benefits

to these folks. And they are not doing it; they are centralizing the

personnel systems, this way divesting themselves of personal contact, and an employee winds up losing because of that. And I think

if you——

Ms. NORTON. And who loses? The employee and, frankly, the program.

Mr. BROWN. That’s right.

Ms. NORTON. That’s why I would like to put the burden on the

program. I don’t think any preaching to the managers is going to

work. I do believe most of them are doing very difficult jobs and

regard this as in people’s best interest and therefore perhaps they

are not giving it the kind of time they should. For them it may

seem too paternalistic to go beyond simply informing them of the

program. It may be. I don’t know enough about these people to

know who we are talking about in the first place.

But one more question in that regard. Could one reason be the

difficulty of getting money out? Would you recall for me what it

takes to get your money out in case you need some of the money

that is in a Thrift Savings Program?

Mr. LONG. There are loans that you can take out a loan. There

are two loans available. So if somebody wants to purchase a residence, or for any other reason, a general purpose loan, you can

take out a loan. It does require you to pay it back. And this is a

common feature in 401(k) plans, and that is designed so that people who put their money in can take some comfort that they can

get the money back if they need it.

There is a secondary option, and that is a hardship withdrawal

that can be done in-service. So let’s say you’re a Federal employee

and you—because of medical reasons or any other reasons, you encounter a financial hardship, you can take that money out. There

are, depending upon your age, penalties.

Ms. NORTON. There are what? I’m sorry.

Mr. LONG. Depending upon your age, there can be penalties that

you need to be concerned about.

Ms. NORTON. What kind of penalty? How great——

35

Mr. LONG. IRS tax penalties. Ten percent usually is what occurs.

And then, of course, you have to pay taxes on the money because

you have not yet paid taxes on those moneys.

I think I can also shed some light on your earlier comment, that

is the——

Ms. NORTON. See, if I can just respond to that answer. I think

it is an important answer. I’m not sure they understand that. I

would say that perhaps that is one of the reasons and, of course,

it is important for people to have that information too. But I suspect that they haven’t gotten that far to know that if you, in fact,

have to take your money out, there is a 10 percent penalty or, for

that matter, they should know about the loans which probably are

at a rate that would be favorable. But I suspect that they don’t get

past not getting in the program in the first place. Go ahead.

Mr. LONG. Getting that 14 percent down to as small a number

as possible is exactly why we are here. So we are of the same mind

here. We want to get as many Federal employees participating. We

are doing two things. Automatic enrollment, I think, is the most

important thing that can shrink that number down. The second—

right now——

Ms. NORTON. But that would still leave 14 percent, or the

present number, out of the program.

Mr. LONG. Yes. This is a go-forward perspective provision, that

is correct. What we’re doing now is we know those people who are

receiving that 1 percent automatic but not participating. And starting this year, we’re sending them a statement. Every single person

will get one every year. The people who are not participating, we

have a customized message on there that speaks to the fact that

if you’re not participating, you’re missing out on matching dollars.

We’re trying to use our educational efforts to encourage participation.

Also yesterday, here, actually over on the Senate side, the TSP

staff held a financial fair because we know that there are some

people who work in Congress that don’t participate. So we use our

efforts and our resources to deliver educational efforts to the staff

on the Hill.

Ms. NORTON. What percentage of those who are staff of the Congress do not participate?

Mr. LONG. I have to tell you, I don’t know. I can certainly find

out.

Ms. NORTON. I’d like to have that information as well. I would

like to have that information as well.

Mr. LONG. Yeah, we can get that.

Ms. NORTON. Thank you very much, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Thank you very much. Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I want to

thank you for this hearing. I’m just wondering, just following—I

have just one question with regard to what Congresswoman Norton

was talking about. We know there are a group of people who don’t

opt-in; is that right?

Mr. LONG. Yes.

Mr. CUMMINGS. And we—but we don’t know why they don’t optin. We’re guessing; is that right? Have we done any surveys or anything?

36

Mr. LONG. We have done a survey.

Mr. CUMMINGS. You have?

Mr. LONG. Yes.

Mr. CUMMINGS. And what have they said?

Mr. LONG. Among the first group, and this is the group that receives the matching, the Federal Employees Retirement System.

The most significant reason—and this comes at 24 percent—of that

14 percent is they don’t have the money.

Mr. CUMMINGS. They don’t have the money. So they need every

dime—basically what they are saying is I need every dime of my

pay and I’m not anxious to put this money in there and get

matched; is that right?

Mr. LONG. Yeah, that’s correct.

Mr. CUMMINGS. Have you all ever tried to navigate your Web

site?

Mr. LONG. Yes.

Mr. CUMMINGS. Well, let me just talk about that for a moment.

Because if nothing else happens out of this hearing, I want to deal

with your Web site. The other day I went to the Web site and, literally, it is not the easiest thing to navigate. I’m just telling you.

And I have heard that from other people also. I have heard it from

constituents and staff. And I want you to just take a look at it. I

mean, in other words, get some experts to look at it and talk to

some just regular everyday people, not people that, you know, that

work in your office. Maybe just some regular folks and ask them—

I’d like you to do a little survey and check into that. I literally had

to—Mr. Brown, I see your expression, but I’m telling you what I

feel and what I have observed, OK?

Mr. BROWN. No. That——

Mr. CUMMINGS. But let me just be clear. Because you all are here

today talking about suggestions for trying to improve and have a

more open situation for people to come into. Well, the fact is that

if it is difficult to navigate your Web site, that is a problem. And

all I’m asking you to do is to take a look at it and get some folk

who—just regular people, and just find out what they think and

how they think it can be improved.

Sometimes I think we do things because we have been doing

them. And sometimes I think we need to take a look at, you know,

situations. I literally had to go to Member Services to get somebody

to help me get through the Web site, because I wanted to do—try

to make some changes and find out exactly where my money and

was, that kind of thing.

And so I know that if I’m going through it, I’m sure other people

are going through it, too. Do you all do surveys or anything like

that with regard to the Web site?

Mr. LONG. I think I have some good news for you.

Mr. CUMMINGS. I can’t hear you. I’m sorry.

Mr. LONG. I think I have some very good news for you.

Mr. CUMMINGS. You have some good news for me? Let’s make

sure the press hears this. Now, what is the good news?

Mr. LONG. I accepted your recommendation and we are doing exactly that. About 3 months ago, I hired a consultant and their job

is specifically to aid us, first of all, in conducting focus groups, and

we’ll be redesigning the Web site. I’m familiar that our Web site

37

is functional, although it needs to be updated and the navigation

issues are real.

Mr. CUMMINGS. They are very real. I was so frustrated, I’m serious, I was so frustrated, I wouldn’t even be bringing this up if it

were not for my frustration. I sat there for half an hour trying to

figure this thing out, and ended up having to call Member Services.

And then we got on the phone and went through it together to figure out, you know, how to do what I had to do.

All right, Mr. Brown.

Mr. BROWN. Part of my—you made a comment about my facial

expressions. I was trying to remember—I know we had discussed

that at one of the ETAC meetings about—because—before it was

even started up, before there was even such a thing as a Web site

or even before it was able—other than just informational at best,

and trying to be able to invest over the Internet and so forth. And

as I was sitting here, I was trying to think that—because all Web

designs, including the one that our unit has, and another one has,

can always be improved and can always be made more simplistic

and more time efficient and so forth.

As I was sitting here and as you were speaking, I was trying to

think that we—I don’t have the minutes in front of me, but I know

that we had discussed that. I’m sure we did. So I was kind of wondering in my mind when we did it. I know it was sometime ago.

So you saw the look on my face—it wasn’t——

Mr. CUMMINGS. I was trying to read your mind, and I shouldn’t

have done that.

Mr. BROWN. There is very little to read.

Mr. CUMMINGS. Because I just think that—I just think that in

today’s world, if something is inviting and if the person can easily

navigate, I think that helps, I really do. And I think we have to—

I think it needs to be—I know your consultant is going to tell you

what to do, but you have also got to keep in mind there is an older

generation who have learned how to deal with computers from 5

and 6-year-olds. Keep that in mind also. And that is real.

And I just think that like I said, I think you will do a big favor

by trying to improve that. Now, is there a—is there a timetable in

that, Mr. Long?

Mr. LONG. We are expecting a report back from the consultant

within about 3 months. But then comes the technology part, then

comes the building.

Mr. CUMMINGS. Whoa, whoa, whoa. Let’s rewind. You said you’ve

been doing it for 3 months. They have been looking at your Web

site for 3 months. And—now—all right. So when are you expecting

them to come back?

Mr. LONG. There are significant parts to this. I expect them to

come back to us with final recommendations and design and markups within 3 months. Over the summer.

Mr. CUMMINGS. OK. And then how long do you think it will take

to, you know, actually put them into effect?

Mr. LONG. I don’t have an estimate for you on that.

Mr. CUMMINGS. Well, can—Mr. Chairman, can we kind of hold

them to something? I mean, we—let me just tell you—let me just

tell you what I’m concerned about. Since I have been in Congress,

I have these—I chair some hearings, and one of the things I have

38

noticed is that people will come before us—not you, others—will

come before us and tell us they are going to do things, right? And

then we don’t have another hearing about it until the next Congress or maybe two Congresses later. Players have changed, the

chairman has changed, and a lot of times things have not gotten

done.

And I would really like for you to give our chairman of our committee—I mean, when you get back—I’m not trying to force you to

come up with a date right now. But we need to be dealing with

some deadlines, because I think if you recognized 3 months ago or

longer that there was a problem, then that means that, just based

on what you have just said, 6 months are going to go by, at least,

where we haven’t done anything about this problem. And I am convinced that government can move faster. I really am.

And I think government should move very fast when it comes to

people’s money, particularly in this day and age. And I think that

all the thrift folks who have money in there in your plan would be

elated. I think we sometimes need to move as fast as private industry would move.

I know it is hard. I know you have some things to jump over. But

let me tell you something. What you come in here and said to us

and I think, by the way—I agree with you, we need to do the

things that you have said. I agree with you a million percent. But

at the same time, I just think that there are certain things you all

need to do, too, and need to do faster.

With that, Mr. Chairman—and if you would kindly give us a

date that we can hold you to. And then we can at least, you know,

just make sure that date doesn’t pass by.

Mr. LONG. We’ll work on correspondence back to you.

Mr. CUMMINGS. You’re going to get me some correspondence?

Mr. LONG. Exactly.

Mr. CUMMINGS. You said you’ll work on it.

Mr. LONG. I don’t think I can—I will get you some correspondence.

Mr. CUMMINGS. Yes. OK. And how soon can you get me that?

How soon can you get me that, what you’ve just said?

Mr. LONG. I think it would be reasonable to assume I could do

that within a week.

Mr. CUMMINGS. Good. I’m going to hold you to that.

Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Cummings.

I think it would be very helpful if before certainly we were

recessing or ending our work leading up to the Presidential election

with the idea that we are going to start kind of fresh and new, at

least with the executive branch, that we have this information—

that information, so that individuals could use it as we are getting

down to closing out the year, if they wanted to try to make some

changes. I think it would be very helpful.

Gentlemen, thank you very much. I have no further questions.

And we appreciate your testimony. We will prepare for our second

panel.

And we are very pleased to have Mr. Daniel Green, who is the

Deputy Associate Director for Employee and Family Support Policy, Strategic Human Resources Policy Division, U.S. Office of Personnel Management. Mr. Green is currently responsible for develVerDate 11-MAY-2000 14:32 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 U:\DOCS1\48067.TXT KATIE PsN: KATIE
39

oping Federal employee benefits policy, covering the multibilliondollar retirement and insurance programs administered by OPM.

And we have Ms. Colleen Kelley, who is the president of the National Treasury Employees Union, the Nation’s largest independent

Federal sector Union representing employees at 31 different government agencies. As the Union’s top elected official, she leads

NTEU’s efforts to achieve the dignity and respect Federal employees deserve. Ms. Kelley represents NTEU before Federal agencies,

in the media, and testifies before Congress on issues of importance

to NTEU members and Federal employees.

We have Dr. Sara Collins, who is currently the assistant vice

president of the Commonwealth Fund and an economist by trade.

Dr. Collins oversees and manages the program on the future of

health insurance at the Commonwealth Fund. And we thank you,

Dr. Collins.

Mr. John Gage is the national president of the American Federation of Government Employees, AFGE AFL–CIO. Mr. Gage watches

over the rights of some 600,000 Federal and D.C. Government employees. Mr. Gage was elected national president at AFGE’s 2003

National Convention in Las Vegas, NV.

Thank you all for coming. And if you would stand and raise your

right hands to be sworn in.

[Witnesses sworn.]

Mr. DAVIS OF ILLINOIS. The witness will show that—I mean the

record will show that the witnesses answered in the affirmative.

We thank you all for being with us. We will follow our usual procedure of 5 minutes for a summary statement. Your full statements

are in the record. The yellow light indicates that you have a minute

left and, of course, the red light means that our time is up. Thank

you all for being here. We will begin with Mr. Green.

STATEMENTS OF DANIEL A. GREEN, DEPUTY ASSOCIATE DIRECTOR FOR EMPLOYEE AND FAMILY SUPPORT POLICY,

STRATEGIC HUMAN RESOURCES POLICY DIVISION, U.S. OFFICE OF PERSONNEL MANAGEMENT; COLLEEN M. KELLEY,

PRESIDENT, NATIONAL TREASURY EMPLOYEES UNION;

SARA R. COLLINS, ASSISTANT VICE PRESIDENT, THE COMMONWEALTH FUND; AND JOHN GAGE, NATIONAL PRESIDENT, AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL–CIO

STATEMENT OF DANIEL A. GREEN

Mr. GREEN. Chairman Davis and distinguished members of the

committee, I am pleased to be here today to discuss the issue of

health insurance coverage for young adult dependents of Federal

employees and retirees. The Office of Personnel Management offers

numerous tools for Federal agencies to recruit and retain an effective civilian work force. At OPM we believe that success in our mission helps the total work force succeed at theirs: safeguarding the

health, security and well-being of all Americans. Good personnel

policies and practices just make good business sense.

Overall, the government provides excellent comprehensive benefit programs, with care for employee dependents being an important aspect of an effective work force. OPM administers the Federal

40

Employees Health Benefits Program, which covers approximately 8

million Federal employees, retirees and their dependents. The

FEHB program offers competitive health benefit products for Federal workers by contracting with private sector health plans. We

emphasize flexibility and consumer choice as important features of

the program. In addition to the 283 plan choices offered under the

program, Federal enrollees may choose between self-only or family

coverage. Dependents under family coverage are spouses and unmarried children under 22 years of age, including adopted, foster

and stepchildren. At age 22, young adult dependents lose FEHB

coverage. They may enroll in temporary continuation of coverage

for the full cost of premium, plus a 2 percent administrative fee.

TCC enrollments may be continued for up to 36 months following

loss of eligibility. Therefore TCC currently assists young adult dependent children with additional insurance coverage to age 25.

TCC allows dependents the choice to enroll in a different health

plan than their parents’ family coverage. Dependents may therefore enroll in a lower-cost plan.

The average FEHB premium for self-only coverage in 2008 is $433 per month, including both government and enrollees’ shares.

However, the Mail Handlers Value Option has a 2008 self-only premium of $178 a month.

In addition, some FEHB carriers offer affinity products which are

not administered by OPM, but which provide enrollees with standalone dependent coverage for young adults over the age of 22. For

example, one of the FEHB carriers offers an affinity product with

dependent coverage for young adults up to age 27 at $184 per

month.

We understand that Chairman Davis will be introducing a substitute for the current H.R. 5550. It would be premature for the administration to state a position ahead of the substitute’s introduction. Nonetheless, we have considered this general topic in the past

and offered the following observations regarding extended dependent coverage for young adult children. Simply changing the age of

dependent children under family enrollments, as proposed in the

current H.R. 5550, would raise total premium costs for the government and all enrollees to offer additional benefits for only part of

the population.

In 2005, at the request of Congress, OPM reviewed the potential

costs associated with adding coverage for dependent full-time students up to age 25. We found that adding those dependents alone

would increase FEHB costs by over $200 million a year. Approximately $160 million would be borne by the government with the remainder of the cost paid by enrollees through increased premiums.

Chairman Davis’ substitute for H.R. 5550 proposes to offer extended dependent coverage for employees with young adult children over the age of 22 as a voluntary enrollment option. The proposed legislation would allow health insurance companies to bid

competitively to offer such coverage to dependents of FEHB enrollees. Premiums for the voluntary option would not include a government contribution, and dependents would need to have been covered under the FEHB program up to age 22 to qualify. We estimate

there are about 245,000 dependents, students and nonstudents, in

the target age group.

41

In 2006, OPM actuaries estimated the cost of extending FEHB

benefits to unmarried, full-time student dependents under 23 years

of age at about $1,640 per member per year, or roughly $135 per

month. This cost estimate was based on experience data from one

of our largest fee-for-service health plans; therefore, we believe this

represents the low end of any cost estimate.

Mr. Chairman, I appreciate the opportunity to testify before the

subcommittee on this issue. OPM will be pleased to work you and

the rest of the Congress on addressing this issue, and I will be glad

to answer any questions you or other Members may have.

Mr. DAVIS OF ILLINOIS. Thank you very much, Dr. Green.

[The prepared statement of Mr. Green follows:]

42

43

44

45

46

Mr. DAVIS OF ILLINOIS. We will proceed to Ms. Kelley.

STATEMENT OF COLLEEN M. KELLEY

Ms. KELLEY. Thank you very much, Chairman Davis, Representatives Norton and Cummings, for the opportunity to address this

important issue to Federal employees.

NTEU supports H.R. 5550, the bipartisan bill to extend FEHB

coverage for child dependents up to age 25. This bill takes a simple

approach to solve a large problem. Right now, young people who receive health insurance through their parents FEHB family policies

lose it when they turn 22. These young adults are frequently in college or out of school, but with no job, or a job with no benefits.

They are part of a growing segment of society who are not financially independent of their families and cannot afford health insurance on their own. NTEU believes they should have coverage.

Research data shows that young adults ages 19 to 29 are the

largest and fastest growing segment of the population without

health insurance. There are numerous precedents in the States and

in the private sector for care independence past age 21.

According to the National Association of Insurance Commissioners, most health insurance policies cover full-time student dependents until age 23, a full year longer than FEHB. In recent

years, 17 States have required coverage for dependents in private

plans up to ages 24, 25, 26 or, in one case, to age 30.

In Massachusetts, young adults are considered dependents for insurance purposes up to age 25, or for 2 years after they are no

longer claimed on their parents’ tax returns, whichever comes first.

And Maryland enacted a law last year requiring plans to cover unmarried young people who reside with the policyholder until age

25. It is not surprising, then, that Federal employees and retirees

who participate in FEHB are disappointed that the Federal Government is far behind.

If the States require private policies to carry dependents past age

22, why not the Federal Government? Private insurers offer coverage for young people out there in the States, yet one of the largest health insurance plans in the country, one that serves almost

9 million people, is way behind the curve. If employees working in

the private sector can have their dependents covered well beyond

the time they turn 22, then surely the Federal Government, with

the largest risk pool in the country, should be able to do the same.

Let’s have the Federal Government lead on this issue rather than

follow.

Barely a day goes by without an article about the pending retirement ‘‘tsunami’’ and the need to attract and retain talent in the

Federal work force. The bill before us is an excellent place to begin.

Increasing the age for young adults’ health coverage is a move toward personnel competitiveness, recruiting and retaining talent,

and realizing work force equity in the Federal sector. Let me provide two brief examples.

A daughter of one of our Members lost her insurance at age 22,

and while in college and at the same time working for a company

that did not offer health insurance, she fell down her stairs, broke

her jaw and had to have teeth removed and repaired. Her parents

could not afford to carry a separate policy on her. The daughter inVerDate 11-MAY-2000 14:32 Apr 21, 2009 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 U:\DOCS1\48067.TXT KATIE PsN: KATIE
47

curred a debt of $25,000 in medical expenses. Needless to say, as

a young person, she could not readily pay this, and she was required to get a full-time job to pay off her debt and put college on

hold.

As OPM has noted, FEHB offers temporary continuation of coverage, TCC, to those who lose insurance. But as OPM noted, enrollees must pay the full cost of the premium, the enrollee and the

government share, for a total of 100 percent plus a 2 percent administrative fee. This essentially puts it out of reach for young people when they are dropped, even when parents help to pay.

Another example is an NTEU member who took TCC for his daughter. He was required to pay $457 a month for TCC, plus paying his daughter’s deductible, plus the family’s own FEHB premiums. The father wrote this to us in an e-mail, ‘‘I would be better

off working for a private employer in New Jersey. I have worked

almost 33 years with the IRS. And this insurance issue might be

the one that forces me to leave before I wanted to. I might have

to find another job in the private sector.’’

As to cost, to my knowledge, there has not been an in-depth examination by impartial experts, but common sense would suggest

that infusing a large number of young and generally healthy individuals into a risk pool of government employees who are older or

retired should not cost much. OPM did a cursory three-page paper

in 2005 and came up with a 0.7 percent increase in premiums.

I find even a small increase hard to believe, and I urge the subcommittee to authorize an impartial study of the issue in its entirety.

Let me reaffirm NTEU’s support for H.R. 5550. It is good public

policy, one which would certainly help the Federal Government retain its talented work force and attract new employees.

We very much appreciate your leadership on this issue, Mr.

Chairman, and I look forward to working with you to make it happen. Thank you.

Mr. DAVIS OF ILLINOIS. Thank you very much, Ms. Kelley.

[The prepared statement of Ms. Kelley follows:]

48

49

50

51

52

53

54

55

Mr. DAVIS OF ILLINOIS. Dr. Collins.

STATEMENT OF SARA R. COLLINS, Ph.D.

Ms. COLLINS. Thank you, Mr. Chairman, for this invitation to

testify on providing health insurance coverage to young adults enrolled as dependents in the Federal Employees Health Benefits

Program. The subcommittee is to be commended to explore ways to

stem the growing tide of uninsured young adults in the United

States.

Adults ages 19 to 29 are the fastest growing age group among

people who lack health insurance in the United States, as you stated in your opening comments. The number of uninsured young

adults, 19 to 29, climbed to 13.7 million in 2006; this is up from

13.3 million in 2005. Young adults are disproportionately represented among people who lack health insurance, accounting for

30 percent of the 46 million nonelderly uninsured people, even

though they comprise just 17 percent of the population.

Why do young adults become uninsured?

The most gaping hole in our voluntary, employment-based health

insurance system occurs when people do not have access to employer coverage and have incomes that are too high to qualify for

Medicaid and the State Children’s Health Insurance Program.

The individual insurance program has proven to be a largely inadequate substitute for employer coverage because of underwriting

and the fact that people face the full cost of the premium.

Young people making the transition from childhood to adulthood

fall into this gap in greater frequency than any other age group.

Young adults are at risk of losing access to employer coverage or

public insurance programs at two critical transition points: 19th

birthdays or graduation from high school and graduation from college.

Young adults covered as dependents on their parents’ employer

policies often lose their eligibility for that coverage at 19 or graduation from high school, particularly if they don’t go on to college.

Medicaid and SCHIP reclassify all teenagers as adults on their

19th birthday, meaning that most lose coverage.

As a result of these changes, uninsured rates drop sharply at age

19, rising from 11 percent among children under age 18 to 30 percent among young adults 19 to 29. Low-income young adults are

particularly at risk of losing coverage: Among those in families

with incomes under poverty, more than half are uninsured compared to about one in five low-income children.

Half of young adults who graduate from high school, but do not

go on to college are uninsured for some time during the year following their graduation. This is twice the rate for young adults who

attend college.

Among young adults who go to college, the year following their

college graduation can also be perilous. As new entrants to the

labor force, they can confront hazards that reduce their likelihood

of having coverage like those faced by high school graduates: waiting periods, temporary positions, low-wage jobs, employment at

small firms and job turnover. Nearly two of five college graduates

can expect to spend at least some time uninsured in the year just

after graduation.

56

What are the consequences of going without health insurance?

While young adults are, on average, in better health than older

adults, losing coverage disrupts their access to health care and

leaves them and their families at risk of high out-of-pocket costs.

Health risks that are prevalent among young adults include obesity, which increased by 70 percent in this age group in the 1990’s.

There are 31⁄2 million pregnancies each year in this age group.

One-third of all HIV diagnoses are made among young adults. Injury-related visits to emergency rooms are far more common among

young adults than they are among either children or older adults.

The Commonwealth Fund Biennial Health Insurance Survey

found that half of uninsured young adults, 19 to 29, because of

costs, had either failed to fill a prescription, not gone to a doctor

or specialist when they were sick, or skipped a recommended medical test, treatment or followup visit. This is compared to about 30

percent of young adults who are insured all year.

Just one-third of uninsured young adults, 19 to 29, have a regular doctor, compared with 81 percent of those who are insured.

Forty-six percent of uninsured young adults in the Commonwealth

Fund Survey reported problems with their medical bills, including

having trouble making payments, being contacted by a collection

agency because of inability to pay bills, significantly changing their

way of life in order to pay bills or pay off medical bills over time.

This is compared to about a quarter of young adults who had coverage and reported such problems.

Federal action to expand affordable, comprehensive health insurance to everyone would help ensure that young adults would avoid

gaps in their health insurance. Massachusetts has led the Nation

on expanding health insurance to all and has included policies targeted to ensure that young adults stay enrolled.

In addition, 18 other States have passed legislation that increases the age of dependency for young adults for purposes of private insurance coverage. New ages of dependency range from 24 in

Delaware, Indiana and South Dakota to age 30 in New Jersey.

Twelve States have settled on age 25.

In the absence of universal coverage at the Federal level, three

targeted policy changes would help cover more young adults, extend eligibility for Medicaid and SCHIP beyond age 18. This would

have by far the biggest impact on reducing the number of uninsured young adults, extending eligibility for dependents under private coverage beyond 18 or 19, as 19 States have done and which

this committee is considering for FEHB. Even increasing the age

to 23 could cover an estimated 1.4 million unmarried dependent

young adults.

And finally, States could ensure that all colleges and universities

require full-time and part-time students to have health insurance

and that they offer coverage to both.

Thank you.

Mr. DAVIS OF ILLINOIS. Thank you very much.

[The prepared statement of Ms. Collins follows:]

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

Mr. DAVIS OF ILLINOIS. Mr. Gage.

STATEMENT OF JOHN GAGE

Mr. GAGE. Thank you, Mr. Chairman, Congresswoman Norton.

On behalf of the more than 600,000 Federal employees represented

by AFGE, I thank you for the opportunity to testify today.

Extending health insurance coverage through the FEHB to dependents up to age 25 has long been a priority for AFGE’s members. Many children of Federal employees are forced to delay completion of college degrees because they must work to earn the

money necessary to pay ever-increasing college tuition. Some young

adults may be pursuing the advanced degrees which are increasingly necessary even for entry-level jobs at some professional occupations.

Finally, a large number of young adults whose parents are Federal employees are working but hold jobs that provide either no

employer-sponsored health insurance or health insurance options

that are entirely unaffordable. According to the Robert Wood Johnson Foundation, as of 2004, approximately 13.7 million Americans

between the ages of 19 and 29 were uninsured. Unless they are

full-time students or their parents, full-time caregivers, they lose

eligibility for coverage under their parents’ family coverage.

In FEHB, unmarried children can be covered up until age 22.

FEHB will not cover dependents over age 22 unless the child is incapable of supporting him or herself because of a disability that

began before age 22.

At least 14 States have passed legislation that redefines ‘‘dependent’’ for purposes of family health insurance coverage, and most of

those have extended coverage to the age of 25 and beyond.

The legislation introduced by you, Mr. Chairman, H.R. 5550, was

an attempt to bring the Federal Government up to the standards

set by these progressive States and other employers against whom

the Federal agencies compete to recruit and retain employees.

AFGE strongly supports H.R. 5550, because it provides a straightforward answer to the problem of insurance coverage for the young

adult dependents of Federal employees.

The actual cost to FEHB of extending family coverage to those

in the age interval of 22 to 25 are likely to be negligible, but the

benefits to families would be substantial.

The compromise bill before us today would have OPM make

available for purchase a separate insurance policy for the young

adult dependents. While certainly no one means for this compromise to be a model for future efforts to improve health insurance for Federal employees and their families, it is important to

note that employee-pay-all insurance products are not employee

benefits.

It is unclear how many Federal employees would be able to afford coverage for their dependents, age 22 to 25. But since thousands of Federal employees remain uninsured, all together, because

they cannot afford FEHB premiums, we can only conclude that

there are many thousands more in the lower grades of the general

schedule and the Federal wage system who can barely afford their

current plan and could not possibly afford to purchase additional

individual plans for their young adult dependents.

84

For the government to claim it cannot afford to extend their current FEHB family coverage to dependents is especially frustrating

to hear, since the Bush administration continues to refuse to take

advantage of rebates made available under the Medicare Modernization Act. This law, establishing the Medicare Part D prescription drug program, allowed subsidies for employers who provide their retirees with prescription drug coverage. According to a

recent GAO study, if OPM were to apply for these rebates, all

FEHB premiums would be cut immediately by roughly 2 percent

and future premium growth would be reduced as well.

It is not too late for OPM to apply for and receive the Medicare

Part D subsidy. Federal employees pay, on average, 30 percent of

premiums, and in each of the past 3 years the enrollees share of

premiums has risen by a higher percentage than the agency share.

AFGE strongly urges the Congress to require OPM to obtain the

maximum amount available to FEHB under Medicare’s Part D employer subsidy provision. We believe that these funds are adequate

to pay for both an extension in eligibility for dependent coverage

to age 25, as provided in H.R. 5550, and the improvement in FEHB

financing that is provided for in H.R. 1256.

In closing, we commend the chairman for introducing H.R. 5550;

and we hope that many Federal employees will be able to afford

the plans that OPM chooses to make available for this age group

and that, soon, Congress and a new administration will be successful in addressing in a more comprehensive way the many problems

of health care in America.

That concludes my statement, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Thank you very much.

[The prepared statement of Mr. Gage follows:]

85

86

87

88

89

Mr. DAVIS OF ILLINOIS. And I thank each one of you.

Mr. Green, let me ask you, in your testimony, you state that the

cost of the underlying bill, H.R. 5550, would be $200 million a year.

Could you tell us how you arrived at that cost figure?

Mr. GREEN. Yes, sir. The cost could be more than that depending

upon the final bill and how it is proposed. It is simple math, however.

Our actuaries tell us that the average medical expense for young

adults that are in the FEHB—that are covered in the FEHB, the

21-year olds, 20-year olds—while they, indeed, use less health care

than do older employees, they still cost about, at last check, $1,640

a year. Since there would be no offsetting revenue to pay for that

additional expense, you multiply 1,640 times the number of children, adult children, that would continue to be covered, and that

is how you come up with the expense.

Mr. DAVIS OF ILLINOIS. I noticed in your statement you indicated

that OPM couldn’t really take a position on the substitute because

it had not been introduced, and you didn’t really know exactly what

might very well be in it.

Does OPM have a position on the concept of providing coverage

for this category of young people, essentially, that we are talking

about?

Mr. GREEN. OPM has the position that what is of concern to Federal employees, to their health and welfare and their families’

health and welfare, is of concern to us. This has been an issue, and

we know it is of concern to Federal employees and to Members of

Congress. We have heard from them; we have heard from Members

of Congress.

We know ourselves, in our own life, that it is an issue. And so,

yes, of course, we are open to discussing any and all ways that the

issue can be dealt with fairly for all, and that includes people with

and without young dependent children—or young adult children.

Mr. DAVIS OF ILLINOIS. Even if, let’s say, the beneficiaries had

to pay the cost themselves—and I know it is difficult to project, but

would you venture an opinion as to where OPM might be on the

bill if that was the way we ended up suggesting that it be paid for?

Mr. GREEN. Well, fortunately, we have had some experience with

that recently.

OPM implemented the dental and vision law for Federal employees, and as you know, it has been very popular with enrollees, with

both employees and retirees. I think, at last check, over 700,000

people had been enrolled in one or the other or both programs.

So we have some experience with that, and if such a bill became

law, we would certainly implement it as effectively as we know

how, because I do think that it would be a challenge, but nonetheless doable to come up with a balance of premium and benefits that

made it attractive to people that needed that kind of coverage.

It is correct that the TCC is relatively expensive, although it is

a godsend—I can say to that personally—that it is a godsend for

folks because it is automatic issue. You don’t need to take—it isn’t

underwritten; you don’t need to take a medical exam to be covered.

Mr. DAVIS OF ILLINOIS. Well, thank you very much.

90

Ms. Collins, let me ask you: You indicated in your testimony, certainly that there is a need to insure young adults between the ages

of 19 and 29.

If we ended up covering this group that we are talking about, 22

to 25, and they had to pay the cost themselves, would you view

that as being preferable to them having no coverage at all?

Ms. COLLINS. Considering the only option is really the individual

market or this continuation policy, the CP is certainly a better option. The larger group you can buy into, the better, the lower your

premium will likely be; so it would be a better option.

At least, of course, it would be better for these families if the premiums were subsidized and some of the costs were offset, but it

would be much more preferable to buying on the individual market.

Mr. DAVIS OF ILLINOIS. Thank you.

Let me ask you, Ms. Kelley and Mr. Gage, I understand that

both your organizations would prefer that the government absorb

the cost of the young adult health coverage. Of course, you also

know that we must abide by the PAYGO rules whether we are

talking about $50 or whether we are talking about $200 million. I

mean, those rules are in effect.

Do either of you have any recommendations that could perhaps

offset the cost of H.R. 5550, as introduced?

Ms. KELLEY. Well, from a cost offset standpoint, I would be willing to work with the subcommittee and look for that. But I guess

I have to say that my biggest concern about the cost right now is

that when I think about the cost of a stand-alone plan that employees or their families would have to buy for them versus amending

the current FEHB, it seems that the cost is going to be more in

a stand-alone plan.

And it also seems to me that there is a lot of successful experience out there in these States that everyone has cited, and I have

never seen any kind of analysis on what the States have done to

either minimize or eliminate the additional cost, or what success

they have had. That is one of the reasons we would like to work

with the subcommittee on having some kind of an impartial expert

actually look at these numbers.

I understand the OMB did the numbers, and it is either a threepage report, or it is referred to as ‘‘simple math.’’ But I have to say,

usually when it is a Federal employee issue, OPM’s solution to it

is a new plan with 100 percent of the premium borne by the employees, and that is not one, as you noted, that we would normally

support.

So I believe there are probably some other options out there of

how this can be costed or priced, and I don’t think that analysis

or research has been appropriately done by an impartial expert;

and that is what I would ask the subcommittee’s help in having

done.

Mr. DAVIS OF ILLINOIS. Thank you.

Mr. Gage, do you have a——

Mr. GAGE. Yes, sir. We suggested that OPM take full advantage

of the Medicare Part D subsidy. Of course, that shifts it to Medicare.

But I am a poster child for this. I have two kids in college now,

two just out of it, four kids between those ages, and I can tell you—

91

one just back from Iraq—and I can tell you what a strain it is on

them not to have health insurance coverage. So I would like to

work with the subcommittee.

I don’t think it is a matter of simple math. I don’t know how

these States—Maryland, for instance—can cover students through

25, and not see an appreciable premium increase for the other participants in the plan. So I think we ought to put everything on the

table here and recognize that this is a huge problem for Federal

employees and their families and make sure that—I just can’t believe in actuarial numbers, in underwriting, that this is a simple

matter of multiplying the number of potentials times the cost for

young adults who should be very good, very good underwriting

risks.

So I, too, would like to work with the subcommittee on this. But

I do think that the time is now for this. This problem is getting

worse.

Ms. KELLEY. If I could add, Mr. Chairman, one of our concerns

is this stand-alone plan versus FEHB; and, you know, maybe there

is a way to figure it out so that it stays as an amendment or addendum to FEHB, not as a stand-alone plan; and that would go a long

way to ensuring that the risk pool isn’t so small that only those

who know they have some kind of serious medical condition would

opt into whatever this new plan is, which would defeat the whole

purpose of trying to provide insurance for all of the dependents,

ages 22 to 25.

So I don’t think it has to be an either/or, but again it would take

some real neutral cost analysis to look at that from a State perspective and their experience, as well as the FEHB pool.

Mr. DAVIS OF ILLINOIS. Yes.

Ms. COLLINS. I also had a question, too, for Mr. Green, whether

adding this less-expensive group to this large-risk pool, what it

would do to the overall premiums for this risk pool. So has that

been taken into account, too? Rather than selling it as a separate—

having it off as a separate plan, what does just adding this

healthier group into the pool do to the premiums?

Mr. DAVIS OF ILLINOIS. Well, thank you very much. Let me just

shift over to Ms. Norton.

Ms. NORTON. Well, thank you very much, Mr. Chairman, for a

very important hearing. And I want to thank these witnesses for

excellent and informed testimony.

The chairman is right that we have to go on PAYGO, but if you

are dealing with insurance, calculating extra cost is very different

from the way we do for most Federal programs. So I am skeptical,

along with some of you, about additional costs and how it is done.

I think a stand-alone plan is absurd. They could do their own

stand-alone plans. I think it is absurd at a time when Republicans

and Democrats are saying that the entire country should have access to the FEHB.

That is the big plan that people run around the country with and

have been talking about, now, for at least a decade, that one of the

ways to give health care to everybody is to let them into this large

pool. And the whole point is, you get a more diverse pool than the

Federal employees, who tend to be older, and you get the efficiencies that the FEHB has.

92

So what we do, if you will forgive me, stupidly, is to force committees like this to go to more expensive ways to do what needs

to be done.

So I am very concerned about denying access to FEHBP, when

consistently we hear from Members of Congress on both sides of

the aisle that denying access to FEHBP for relatives, people who

are already in and already part of it, so it would only be for them

beyond the age where they are now already part of the plan.

And I am very concerned, as well, Mr. Chairman, because I am

not certain that CBO, or whoever, has calculated the cost, is actuarially intelligent. I don’t know if, for example, they have figured

out what it would mean to the increasingly older work force of the

Federal Government to have an influx of new young bodies who

would add to the pool; that, actuarially, it seems to me, would have

a salutary effect on the pool for everybody who is in it.

And I think we do need an independent study, but I think it

needs to be done by insurance experts. It needs to be done by people who would look at our pool and talk about what would adding

new people between the ages we are talking about—they are rather

small in number—what it would mean, so that at least we would

know there is a figure and what the figure is.

So I am very bothered by being forced, as the chairman has been

forced, because we don’t have any other information. And we know

what the rules are and we have to abide by them.

I believe that the bill itself, the wisdom of the bill itself, cannot

be doubted. Here is a country that is unwilling to provide health

care for these youngsters. We are talking about people who get out

of school, where they are almost automatically low-wage people—

very often they are temps—where even out of what they earn they

have to pay for their own health care. That is a reason right there

to save money.

They are on something close to stand-alone plans. You find yourself a pool through some health insurance plan that does not give

you nearly the benefits that going into our FEHB would. They have

lower wages. Some of them are still in school, for goodness sakes.

They are carrying loans; many of them are carrying loans from college.

And then I say to you—there is a professor of law at Georgetown,

who teaches one course there every year—that they are also carrying their law school loans. We are already making it impossible for

these young people. They go back home to live because of the cost

of housing compared with wages that have been stagnant even for

people with skills and for families.

We want them to go to school and graduate school, and yet we

don’t want to provide a way for their health care to be taken care

of. And there is very little incentive for people who have low wages

or no wages, because they are still in school and are overage for

the plan, to take from meager wages to pay for what families and

people who are on larger salaries today find they are unable to pay

for, even with the kind of subsidy they get from their employers.

So I just think we are stuck way on stupid now. We are going

to, it looks like, provide health care only incrementally to people.

That is why we went to children last year, got vetoed four times

93

just for trying to add funds for children. And we were trying to go

that route.

Here are some more children, although somewhat over the age,

many of whom have the wages of children, if you would forgive me,

who are still in school. So I am very bothered by the fact that we

have to go this way, although I don’t see any way consistent with

what we know now but your suggestion is that we need to find out,

and we need to find out far more than we know.

I also want to suggest that we are talking to employees who are

dealing with the same Federal contribution to their Federal health

care plan; in memory, I can’t remember when this was raised. I

think it is what it always has been, that it has never been raised.

So the burden would be terrifically on the parent or the person on

whom the dependent was depending. But again I think most people

would understand the danger of not being in health care.

And I would just think that for those of us—the chairman is one

of them, Mr. Cummings is another—who have sponsored the bill to

increase the employer share in FEHB, you would think that at

least this small increase, whatever it is, should be what the Federal Government would be willing to do at a time when it has been

unwilling to increase its own contribution—while, in fact, inflation

with health care premiums has certainly not avoided us anymore

than it has avoided others—forcing employees to pay a greater percentage of their own health care.

Mr. Chairman, what we are seeing is the scattering of Federal

Government employees even before they are retired. The government should 1 day sit down and try to figure out the cost of the

loss of this skilled work force; then it might figure out something

to do about their health care. They are going to take the skills that

they got in the Federal Government and they are going to go to

contractors or to the private sector and do quite well, thank you.

Meanwhile, we are left with the investment in them and no way

to keep them; and as your hearings have shown, Mr. Chairman, no

way to attract an equal pool of the pool that is now retiring and

very often leaving before retirement, leaving us before the retirement program. We have to find ways, even if they are small, incremental ways, to keep these employees with us and to reduce the

hardships on them. This would seem to me to be an obvious and

intelligent way to do it.

I strongly support the chairman’s amendment and hope that we

can do some more work before we have to go along with the plan

that will cost everybody more, who is involved.

And finally, Mr. Chairman, may I say one thing? I am—excuse

me—sick and tired of every time we offer something more to Federal employees we say, You can have it if you pay 100 percent: You

can have certain kinds of dental health; you can have certain kinds

of help for vision; and let us all give us ourselves a pat on the back

because you can have that. You can even have a long-term health

plan for long-term illness.

All of that, we, your Federal employer, is proud to give you if you

pay 100 percent of it. Compared to what? Compare that to what

the private sector is offering young people, and you will see why

we are having trouble recruiting young people to join the Federal

work force, especially those at the rank we need, and you will see

94

why so many Federal employees have figured out that they can get

out of Dodge, and it is best to do so now even before retirement.

Thank you very much, Mr. Chairman.

Mr. DAVIS OF ILLINOIS. Thank you.

Mr. Cummings.

Oh, Elijah left.

Let me thank you all for coverage and for sharing with us. I have

no further questions, and you are excused. Thank you.

[Whereupon, at 3:45 p.m., the subcommittee was adjourned.]

Æ