```

[Senate Report 115-330]
[From the U.S. Government Publishing Office]

                                                      Calendar No. 562
115th Congress       }                                   {      Report
                                 SENATE
 2d Session          }                                   {     115-330

_______________________________________________________________________

                                     

     VOLUNTARY SEPARATION INCENTIVE PAYMENT ADJUSTMENT ACT OF 2017

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 1888

         TO AMEND TITLE 5, UNITED STATES CODE, TO INCREASE THE
           MAXIMUM AMOUNT OF A VOLUNTARY SEPARATION INCENTIVE
  PAYMENT AND TO INCLUDE AN ANNUAL ADJUSTMENT IN ACCORDANCE WITH THE 
                          CONSUMER PRICE INDEX

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               September 4, 2018.--Ordered to be printed

                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
79-010                    WASHINGTON : 2018                 

        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky                  HEIDI HEITKAMP, North Dakota
JAMES LANKFORD, Oklahoma             GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming             MAGGIE HASSAN, New Hampshire
JOHN HOEVEN, North Dakota            KAMALA D. HARRIS, California
STEVE DAINES, Montana                DOUG JONES, Alabama

                  Christopher R. Hixon, Staff Director
                Gabrielle D'Adamo Singer, Chief Counsel
    Courtney J. Allen, Deputy Chief Counsel for Governmental Affairs
               Margaret E. Daum, Minority Staff Director
       Charles A. Moskowitz, Minority Senior Legislative Counsel
                 Katherine C. Sybenga, Minority Counsel
                     Laura W. Kilbride, Chief Clerk

                                                      Calendar No. 562
115th Congress       }                                   {      Report
                                 SENATE
 2d Session          }                                   {     115-330

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

 
     VOLUNTARY SEPARATION INCENTIVE PAYMENT ADJUSTMENT ACT OF 2017

                                _______
                                

               September 4, 2018.--Ordered to be printed

                                _______
                                

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

                              R E P O R T

                         [To accompany S. 1888]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1888), to amend 
title 5, United States Code, to increase the maximum amount of 
a Voluntary Separation Incentive Payment and to include an 
annual adjustment in accordance with the Consumer Price Index, 
reports favorably thereon with an amendment and recommends that 
the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................5
 IV. Section-by-Section Analysis......................................6
  V. Evaluation of Regulatory Impact..................................6
 VI. Congressional Budget Office Cost Estimate........................6
VII. Changes in Existing Law Made by the Bill, as Reported...........13

                         I. Purpose and Summary

    The purpose of S. 1888, the Voluntary Separation Incentive 
Payment Adjustment Act of 2017, is to increase the maximum 
allowable amount of voluntary separation incentive payments 
(VSIP) from $25,000 to $40,000 and to annually adjust the VSIP 
maximum amount based on the Consumer Price Index. This bill 
will also allow certain employees of the Transportation 
Security Administration (TSA) and Federal Air Marshal Service 
to have their law enforcement availability pay credited as 
basic pay for retirement benefit purposes.

              II. Background and the Need for Legislation

Voluntary Separation Incentive Payment

    Since 1993, some Federal agencies have been authorized to 
provide VSIPs to facilitate agency workforce reductions or 
restructuring.\1\ The Federal Workforce Restructuring Act of 
1994 expanded VSIP authority Government-wide and set the 
maximum payment amount at $25,000.\2\ The Clinton 
Administration recommended this VSIP authority ``in order to 
avoid excessive reductions-in-force that are costly, 
disruptive, and disproportionately strike younger workers, many 
of whom are recently hired women and minorities.''\3\ A tool 
for the Clinton Administration's initiative to reduce the 
number of Federal employees, the VSIP authority was created so 
``agencies can target employees in unnecessary high level jobs 
and maximize savings.''\4\
---------------------------------------------------------------------------
    \1\U.S. Gov't Accountability Office, Human Capital: Agencies are 
Using Buyouts and Early Outs With Increasing Frequency to Help Reshape 
Their Workforces, GAO-06-324, 9 (Mar. 2006), available at http://
www.gao.gov/assets/250/249480.pdf. See also National Defense 
Authorization Act for Fiscal Year 1993, Pub. L. No. 102-484, Sec. 4436, 
106 Stat. 2315, 2723-24 (1992).
    \2\Federal Workforce Restructuring Act of 1994, Pub. L. No. 103-
226, Sec. 3, 108 Stat. 111, 112-15 (1994).
    \3\The White House, Statement on Signing the Federal Workforce 
Restructuring Act of 1994 (Mar. 30, 1994), available at https://
www.gpo.gov/fdsys/pkg/WCPD-1994-04-04/pdf/WCPD-1994-04-04-Pg651.pdf.
    \4\Id.
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    Since its creation, Congress has passed legislation to 
strengthen the oversight and objectives of the VSIP authority. 
In 1996, the Omnibus Consolidated Appropriations Act of 1997 
included provisions limiting the VSIP authority by requiring an 
agency to submit a strategic plan that described how the VSIP 
would be used, the number of employees and the VSIP amount that 
would be offered, and how the agency would operate without 
those employees once the VSIP had been implemented.\5\ The law 
required Federal agencies to reduce their number of Federally-
funded employee positions by one position for each vacancy 
created by a VSIP acceptance.\6\ This law also charged the 
Office of Management and Budget (OMB) with overseeing agencies' 
use of VSIPs.\7\
---------------------------------------------------------------------------
    \5\Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 
104-208, Sec. 663, 110 Stat. 3009, 3009-383 (1996).
    \6\Id. at 3009-385.
    \7\Id.
---------------------------------------------------------------------------
    The VSIP authorization process was later reformed by the 
Homeland Security Act of 2002.\8\ That Act required the Office 
of Personnel Management (OPM) to approve VSIP authority for an 
agency based on that agency's strategic plan.\9\ An agency can 
submit for OPM approval either a specific VSIP implementation 
plan or the agency's human capital plan that describes its 
intended use of VSIPs.\10\ The agency's plan for VSIP must 
include:
---------------------------------------------------------------------------
    \8\Homeland Security Act of 2002, Pub. L. No. 107-296, Sec. 1313, 
116 Stat. 2135, 2291-94 (2002).
    \9\Id. at 2292.
    \10\U.S. Off. of Personnel Mgmt., Guide to Voluntary Separation 
Incentive Payments, 6 (Mar. 2017) available at https://www.opm.gov/
policy-data-oversight/workforce-restructuring/voluntary-separation-
incentive-payments/guide.pdf.

          Identification of the specific positions and 
        functions to be reduced or eliminated, identified by 
        organizational unit, geographic location, occupational 
        series, grade level and any other factors related to 
        the position; A description of the categories of 
        employees who will be offered VSIP, identified by 
        organizational unit, geographic location, occupational 
        series, grade level, and any other factors, such as 
        skills, knowledge, or retirement eligibility; . . . The 
        time period during which incentives may be paid; . . . 
        The number and amounts of VSIPs to be offered; A 
        description of how the agency will operate without the 
        eliminated or restructured positions and functions; A 
        proposed organizational chart displaying the expected 
        changes in the agency's organizational structure after 
        the agency has completed the VSIPs; . . . A short 
        explanation of how Voluntary Early Retirement Authority 
        (VERA) will be used in conjunction with VSIP . . . A 
        description of how VSIPs offered under another 
        statutory authority are being used . . . .\11\
---------------------------------------------------------------------------
    \11\Id. at 6-7.

    OPM must also consult with OMB in reviewing the agency's 
strategic plan before issuing any approval for the use of 
VSIP.\12\ The agency must also ensure that employees are not 
coerced into accepting a VSIP or that an employee's acceptance 
of a VSIP is not based on erroneous or misleading 
information.\13\ An employee who leaves Federal service with a 
VSIP, but believes the separation was coerced or involuntary, 
can appeal the separation to the Merit Systems Protection 
Board.\14\
---------------------------------------------------------------------------
    \12\Homeland Security Act of 2002, supra note 8 at 2292.
    \13\U.S. Off. of Personnel Mgmt., supra note 10 at 15.
    \14\Id.
---------------------------------------------------------------------------
    Since fiscal year 2012, OPM approved VSIP authority for 307 
Federal agencies and agency components, including those of the 
Department of Defense.\15\ During this time, 36,910 Federal 
employees resigned from Federal service with a VSIP for a total 
of $903,197,868, an average of $24,470.38 per person.\16\ 
According to OPM, ``agencies with prior VSIP authority reported 
that buyouts were a successful tool that notably increased 
voluntary attrition, particularly for [Voluntary Early 
Retirement Authority] retirements of employees in excess 
positions.''\17\
---------------------------------------------------------------------------
    \15\Email from U.S. Off. of Personnel Mgmt. representative to 
Committee majority staff (Oct. 30. 2017). This data is from the 
beginning of fiscal year 2012 through May 2017.
    \16\Id.
    \17\U.S. Off. of Personnel Mgmt., Workforce Reshaping Operations 
Handbook: A Guide for Agency Management and Human Resource Offices, 12 
(Mar. 2017), available at https://www.opm.gov/policy-data-oversight/
workforce-restructuring/reductions-in-force/workforce_reshaping.pdf.
---------------------------------------------------------------------------
    The $25,000 maximum amount for VSIPs Government-wide has 
remained unchanged since the creation of VSIP authority in 
1994.\18\ Adjusting for inflation, this amount in March 1994, 
when the VSIP authority was first enacted, is worth $41,918.99 
as of September 2017.\19\ In the National Defense Authorization 
Act for Fiscal Year 2017, Congress increased the VSIP maximum 
amount for Department of Defense civilian employees to 
$40.000.\20\ This bill would extend the $40,000 VSIP maximum 
amount Government-wide.
---------------------------------------------------------------------------
    \18\Federal Workforce Restructuring Act of 1994, supra note 2. See 
also 5 U.S.C. Sec. 3523(b)(3)(B).
    \19\U.S. Bureau of Labor Statistics, CPI Inflation Calculator, 
available at https://www.bls.gov/data/inflation_calculator.htm, last 
accessed Oct. 20, 2017.
    \20\National Defense Authorization Act for Fiscal Year 2017, Pub. 
L. No. 114-328, Sec. 1107, 130 Stat. 2000, 2449 (2016).
---------------------------------------------------------------------------
    An increase to $40,000 would help agencies restructure 
their workforces and remove excess job positions by offering a 
higher incentive amount. The VSIP maximum amount would also be 
adjusted annually according to any change in the Consumer Price 
Index from the previous year.

Transportation Security Administration Law Enforcement Availability Pay 
        Reform

    Signed into law on November 19, 2001, the Aviation and 
Transportation Security Act (ATSA) allows TSA to set its own 
compensation system outside of the statutory provision--Title 5 
of the United States Code--that governs most of the Federal 
workforce.\21\ Under ATSA, TSA employees can be compensated 
above the annual pay limitation to which the rest of the 
Federal workforce is subject.\22\ However, TSA employees 
receive the same retirement benefits as Federal employees 
through the Civil Service Retirement System (CSRS) Federal 
Employee Retirement System (FERS).\23\
---------------------------------------------------------------------------
    \21\Aviation and Transportation Security Act, Pub. L. No. 107-71, 
Sec. 101, 115 Stat. 597, 601 (2001). See 49 U.S.C. Sec. 114(n); 49 
U.S.C. Sec. 40122(g).
    \22\49 U.S.C. Sec. 40122(g)(2).
    \23\49 U.S.C. Sec. 40122(g)(2)(G).
---------------------------------------------------------------------------
    Under CSRS and FERS, certain types of employee compensation 
are credited towards retirement annuity calculations, and some 
types of compensation are not.\24\ One type of credited pay is 
unscheduled overtime pay for criminal investigators, also known 
as LEAP pay.\25\ For Federal criminal investigators, 
eligibility for LEAP pay is governed by Title 5 but is still 
subject to the annual pay limitation for Federal employees.\26\ 
Although TSA employees' compensation is not governed by Title 
5, the TSA Core Compensation System allows TSA criminal 
investigators and Federal air marshals to be compensated for 
unscheduled overtime under an identical LEAP payment.\27\
---------------------------------------------------------------------------
    \24\5 U.S.C. Sec. 8331(3).
    \25\5 U.S.C. Sec. 8331(3)(E). See also 5 U.S.C. Sec. 5545a.
    \26\5 U.S.C. 5545a. See also 5 U.S.C. Sec. 5547. Federal employees 
receiving LEAP pay are also exempt from the minimum wage and maximum 
hours requirements of the Fair Labor Standards Act of 1938, as amended. 
See 29 U.S.C. Sec. 213(a)(16).
    \27\Transp. Security Admin., TSA Management Directive 1100.53-7 
Handbook: Setting Pay Upon Appointment, 4 (June 25, 2017).
---------------------------------------------------------------------------
    On July 1, 2016, OPM issued a letter to TSA explaining that 
the LEAP pay provided to TSA criminal investigators would no 
longer be considered creditable as basic pay for retirement 
annuity calculations and that LEAP pay would be subject to 
annual pay limitations for retirement credibility purposes.\28\ 
Former OPM Acting Director Beth Cobert wrote:
---------------------------------------------------------------------------
    \28\Letter from Beth Cobert, Acting Director, Off. of Personnel 
Mgmt., to Huban Gowadia, Deputy Administrator, Transp. Security Admin. 
(July 1, 2016).

          [B]ecause TSA created its own personnel and 
        compensation system, TSA's criminal investigators are 
        not actually paid [LEAP pay] under [title 5.] Their 
        payment scheme looks the same in many respects, but 
        they are not paid under title 5; they are paid under 
        TSA's own authority contained in title 49. . . . [W]ith 
        respect to TSA criminal investigators, OPM's position 
        is that we do not presently have authority to credit 
        any amount of [LEAP] pay for retirement purposes in the 
        computation of TSA criminal investigators' annuities, 
        because they are not receiving their [LEAP] pay ``under 
        [title 5].''\29\
---------------------------------------------------------------------------
    \29\Id.

---------------------------------------------------------------------------
    For Federal air marshals, Cobert wrote:

          [LEAP] pay for air marshals is creditable as part of 
        basic pay for purposes of retirement, but only to the 
        extent it is subject to the restrictions and earning 
        limitations imposed on criminal investigators under 
        [title 5]. . . . [N]otwithstanding TSA's authority to 
        establish its own compensation system, it must comply 
        with existing retirement laws in title 5 unless and 
        until Congress provides otherwise.\30\
---------------------------------------------------------------------------
    \30\Id.

    As a result of this decision, OPM prepared, and in a few 
instances delivered, debt notices to TSA criminal investigators 
and Federal air marshals who received retirement annuity 
payments based on previous calculations that included LEAP 
pay.\31\ OPM also issued notices to those TSA annuitants 
explaining that their monthly annuity payments would be 
recalculated and reduced based on new calculations that exclude 
LEAP pay and that exclude any compensation in excess of the 
annual pay limitation for the Federal workforce under Title 
5.\32\ TSA and OPM estimate that approximately 200 TSA criminal 
investigators and Federal air marshals are affected by this OPM 
decision.\33\
---------------------------------------------------------------------------
    \31\Information provided to Committee staff by Off. of Personnel 
Mgmt. (Sept. 26, 2017).
    \32\Letter from Off. of Personnel Mgmt. representative to Transp. 
Security Admin. annuitant (May 26, 2016).
    \33\Information provided by Committee staff by U.S. Off. of 
Personnel Mgmt. (Sept. 26, 2017).
---------------------------------------------------------------------------
    For TSA criminal investigators, this bill would provide 
parity in the treatment of their LEAP pay compared to that of 
other Federal criminal investigators receiving LEAP pay under 
title 5. For those TSA criminal investigators and Federal air 
marshals who have paid retirement contributions above the 
annual pay limitation under Title 5, this bill will allow their 
compensation that exceeded the limitation to also be credited 
to their retirement annuities. TSA criminal investigators and 
Federal air marshals who have not paid retirement contributions 
above the annual pay limitation would be subject to the 
limitation for the purposes of calculating retirement 
annuities.

                        III. Legislative History

    S. 1888, the Voluntary Separation Incentive Payment 
Adjustment Act of 2017, was introduced on September 28, 2017, 
by Senator James Lankford. The bill was referred to the 
Committee on Homeland Security and Governmental Affairs. The 
Committee considered S. 1888 at a business meeting on October 
4, 2017.
    During the business meeting, Chairman Ron Johnson offered 
an amendment allowing the law enforcement availability pay for 
certain TSA employees to be creditable for retirement benefits. 
The Committee adopted the amendment by voice vote and ordered 
the bill, as amended, reported favorably by voice vote en bloc 
with Senators Johnson, Lankford, Daines, McCaskill, Tester, 
Heitkamp, Hassan, and Harris present.

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

Section 1. Short title

    This section establishes the short title of the bill as the 
``Voluntary Separation Incentive Payment Adjustment Act of 
2017.''

Section 2. Voluntary separation incentive pay increase

    This section increases the authorized amount an agency, 
including the Department of Defense, can provide as a VSIP to a 
Federal employee from $25,000 to $40,000. This section also 
requires OPM to adjust this amount annually based on the 
percentage increase in the Consumer Price Index.

Section 3. Retirement-credible basic pay

    This section allows the LEAP pay earned by TSA criminal 
investigators and Federal air marshals to be credited for 
purposes of calculating the employees' basic pay for retirement 
annuities. OPM is required to implement this credibility within 
90 days of enactment of this bill. OPM must also immediately 
begin refunding any TSA criminal investigator or Federal air 
marshal who made a debt collection payment as a result of the 
July 1, 2016, OPM decision.

                   V. Evaluation of Regulatory Impact

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

             VI. Congressional Budget Office Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 29, 2018.
Hon. Ron Johnson,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1888, the Voluntary 
Separation Incentive Payment Adjustment Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dan Ready.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

S. 1888--Voluntary Separation Incentive Payment Adjustment Act of 2017

    Summary: S. 1888 would increase from $25,000 to $40,000 the 
amount that federal agencies can offer to employees as part of 
a separation incentive. That amount would rise annually to 
account for inflation.
    The bill also would clarify the treatment of law 
enforcement availability pay (LEAP) for federal air marshals 
and criminal investigators of the Transportation Security 
Administration (TSA). A recent review of the relevant federal 
statutes by the Office of Personnel Management (OPM) found that 
LEAP has been incorrectly applied to the retirement benefit 
calculations for certain TSA criminal investigators and federal 
air marshals, resulting in benefit payments that are higher 
than authorized under current law. S. 1888 would hold harmless 
the retirees and current employees who are affected by OPM's 
findings and would clarify the treatment of LEAP for future 
retirees.
    CBO estimates those changes would, assuming appropriation 
of the necessary amounts, increase discretionary outlays by 
$698 million over the 2019-2023 period. In addition, direct 
spending would increase by $314 million and revenues would 
increase by $1 million over the 2019-2028 period.
    Because enacting S. 1888 would affect direct spending and 
revenues, pay-as-you-go procedures apply.
    CBO estimates that enacting S. 1888 would not increase net 
direct spending by more than $2.5 billion or on-budget deficits 
by more than $5 billion in any of the four consecutive 10-year 
periods beginning in 2029.
    S. 1888 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated Cost to the Federal Government: The estimated 
budgetary effects of S. 1888 are shown in Table 1. The costs of 
the legislation stemming from estimated increases in 
authorization levels fall within all budget functions that have 
personnel accounts. The direct spending costs fall within 
budget functions 550 (health) and 600 (income security).

                                                    TABLE 1.--SUMMARY OF BUDGETARY EFFECTS OF S. 1888
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     By fiscal year, in millions of dollars
                                                      --------------------------------------------------------------------------------------------------
                                                        2018   2019   2020   2021   2022   2023   2024   2025   2026   2027   2028  2019-2023  2019-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     INCREASES IN SPENDING SUBJECT TO APPROPRIATION
 
Estimated Budget Authority...........................      0     73     81     91    226    236   n.a.   n.a.   n.a.   n.a.   n.a.       707       n.a.
Estimated Outlays....................................      0     70     81     91    221    235   n.a.   n.a.   n.a.   n.a.   n.a.       698       n.a.
 
                                                              INCREASES IN DIRECT SPENDING
 
Estimated Budget Authority...........................      0      6     15     18     27     40     44     43     41     40     38       107        314
Estimated Outlays....................................      0      6     15     18     27     40     44     43     41     40     38       107        314
 
                                                                  INCREASES IN REVENUES
 
Estimated Revenues...................................      0      0      1      0      0      0      0      0      0      0      0         1          1
 
                                        NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
 
Effect on the Deficit................................      0      6     14     18     27     40     44     43     41     40     38       106        313
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components do not sum to totals because of rounding; n.a. = not applicable.

    Basis of estimate: For this estimate, CBO assumes that S. 
1888 will be enacted at the beginning of fiscal year 2019 and 
that future appropriations will be increased by the amount of 
the estimated authorizations.

Spending Subject to Appropriation

    S. 1888 would permanently increase, to $40,000, the maximum 
amount of lump-sum payments that federal agencies can offer to 
employees as an incentive to separate voluntarily from federal 
service earlier than they otherwise would. In addition, that 
new maximum amount would rise annually with inflation, reaching 
$45,000 by 2023, CBO estimates. Under current law, most federal 
agencies are authorized to make separation payments of no more 
than $25,000. The Department of Defense (DoD) has temporary 
authority--through 2021--to offer up to $40,000 for such 
payments. The proposed changes would increase federal spending 
for voluntary separations by raising the costs of separations 
that would have occurred under current law and by inducing more 
people to voluntarily separate from federal service. CBO 
estimates that implementing S. 1888 would effectively authorize 
additional appropriations totaling $707 million over the 2019-
2023 period.
    Using information from OPM, CBO estimates that in 2016 and 
2017 about 2,100 employees at DoD and 2,000 employees at all 
other agencies received a voluntary separation incentive 
payment (sometimes called a ``buyout'') each year. CBO expects 
that nearly all employees who will receive a buyout under 
current law would see an increased payment under S. 1888. 
Buyout recipients at DoD would see small increases averaging a 
little over $1,000 each year through 2021. All other employees 
would see an increase of about $16,000, on average, through 
that year. Following the expiration of DoD's temporary 
authority to pay higher amounts, both defense and nondefense 
employees would see much larger payments--about $18,000 in 2022 
and $20,000 through 2023. CBO estimates that the incremental 
increase in the costs of buyouts paid to employees who would 
have separated under current law would total $365 million over 
the 2019-2023 period.
    CBO also expects that a number of people would be induced 
to separate by the higher payments under S. 1888. Using 
information from DoD and OPM, CBO estimates that about 1,000 
additional people would separate from the federal workforce 
through 2021. In 2022, that number would jump to 2,500 
additional people each year. The amounts paid to those people 
would range from $40,000 in 2019 to $45,000 in 2023. In total, 
those additional payments would cost the federal government 
$342 million over the 2019-2023 period. Those additional 
separations would probably lead to some employees retiring 
sooner than they would have under current law. The cost of 
those early retirements are discussed below under the heading 
``Direct Spending and Revenues.''
    Increased buyouts could have other effects on personnel 
costs. For example, if an agency hired lower paid employees to 
replace those who separated, it might save on personnel costs, 
even after considering the costs of hiring and training those 
new employees. However, those potential savings could be offset 
by other personnel decisions, such as promoting current 
employees into vacated, higher-paying positions; hiring 
additional people to fill agency needs in other areas; or 
rewarding high-performing employees with bonuses.
    Ultimately, enacting S. 1888 would not fundamentally alter 
any agency's mission or legal obligations. Without a reduction 
in the amount of work required of an agency, CBO assumes 
agencies would shift any resources freed up by buyouts to boost 
the level of service it would otherwise be able to provide, 
instead of allowing those resources to lapse. Therefore, CBO 
does not estimate any changes in spending resulting from other 
personnel decisions related to employee buyouts.

Direct Spending and Revenues

    As shown in Table 2, enacting S. 1888 would increase direct 
spending by $314 million over the 2019-2028 period. That 
increase arises from two changes in law. First, the provisions 
of S. 1888 that would increase the maximum amount agencies can 
pay employees to leave the workforce would cause some employees 
to retire sooner than they would under current law. CBO 
estimates those induced retirements would increase benefits for 
retirees by $302 million. Second, the bill would hold harmless 
certain current and former employees of the TSA for an error 
the agency made when calculating their pension benefits. 
Because of that change, those employees would receive $12 
million more than they would under current law. In addition, 
the TSA provisions would increase revenues by $1 million.
    Retirement Effects of Voluntary Separation Incentive 
Payments. In total, CBO estimates that direct spending for 
annuities and health insurance premiums for retired federal 
employees would increase by $302 million under S. 1888. As 
discussed above, those costs arise because S. 1888 would 
permanently increase the maximum amount of lump-sum payments 
that federal agencies can offer to employees to entice them to 
separate from federal service, which would, in CBO's 
estimation, induce employees to retire, on average, 1.5 years 
sooner than they otherwise would have. Using information from 
OPM and DoD, CBO estimates that over the 2019-2021 period, an 
annual average of about 300 employees would receive their 
retirement annuities sooner than they would under current law, 
which would rise to 700 such employees in 2022, after DoD's 
temporary authority expires.
    However, the annuities of individuals who accept the buyout 
would be smaller than what those workers would have otherwise 
received, because retirement benefits are based on the number 
of years of service that the annuitant worked; that number 
would be somewhat lower as a result of the decision to accept 
an earlier retirement. Nevertheless, CBO estimates the net 
effect of those early retirements would increase spending for 
retirement annuities by $196 million over 2019-2028 period.
    Federal employees also participate in the Federal Employees 
Health Benefits (FEHB) program. When those employees retire, 
the federal government pays a portion of their health insurance 
premiums; those payments are classified as direct spending. CBO 
estimates that the government's share of those premiums for 
each retiree will average $11,000 in 2019, rising to $17,000 by 
2028. Because of the early retirements resulting from S. 1888, 
the legislation also would increase the federal government's 
contributions for annuitants under the FEHB program. CBO 
estimates that those contributions would increase direct 
spending by $106 million over the 2019-2028 period.

                                                      TABLE 2.--DIRECT SPENDING EFFECTS OF S. 1888
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                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2018   2019   2020   2021   2022   2023   2024   2025   2026   2027   2028  2019-2023  2019-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              INCREASES IN DIRECT SPENDING
 
Retirement Effects of Voluntary Separation Incentive
 Payments:
    Estimated Budget Authority.......................      0      6     14     17     25     39     43     42     40     39     37       101        302
    Estimated Outlays................................      0      6     14     17     25     39     43     42     40     39     37       101        302
TSA LEAP Authority:
    Estimated Budget Authority.......................      0      1      1      1      1      1      1      1      1      1      1         6         12
    Estimated Outlays................................      0      1      1      1      1      1      1      1      1      1      1         6         12
    Total Changes:...................................
        Estimated Budget Authority...................      0      6     15     18     26     40     44     43     41     40     38       107        314
        Estimated Outlays............................      0      6     15     18     26     40     44     43     41     40     38       107        314
 
                                                                  INCREASES IN REVENUES
 
TSA LEAP Authority:
    Estimated Revenues...............................      0      0      1      0      0      0      0      0      0      0      0         1          1
 
                                        NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
 
Effect on the Deficit................................      0      6     14     18     27     40     44     43     41     40     38       106        313
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components do not sum to totals because of rounding; TSA = Transportation Security Administration; LEAP = law enforcement availability pay.

    TSA LEAP Authority. The bill would allow TSA criminal 
investigators and federal air marshals who, at the time of 
enactment, are paid above the premium pay cap to include above-
the-cap salary amounts in the calculation of their future 
retirement annuities. Upon their retirement, employees whose 
salaries do not exceed the cap as of enactment would have their 
annuities calculated subject to the cap. In addition, the bill 
would authorize TSA's criminal investigators to receive LEAP. 
Enacting S. 1888 would increase net direct spending by $12 
million over the 2019-2028 period. That increase would be 
partially offset by increased revenues from the cancellation of 
refunds of employee retirement contributions that are expected 
under current law.
    Background. In 2016, OPM issued a notice to TSA that LEAP 
was being improperly incorporated into the retirement benefit 
calculations for two categories of employees at TSA: federal 
air marshals and criminal investigators. LEAP is a type of 
premium pay (that pays an additional 25 percent of base salary) 
provided to certain law enforcement officers whose positions 
require a substantial amount of unscheduled duty. Employees of 
federal agencies that use the General Schedule pay scale and 
are subject to provisions of title 5 of the U.S. Code have a 
statutory limit on LEAP: An employee's total biweekly pay (base 
pay plus LEAP) cannot exceed the premium pay cap--the rate 
payable for GS-15, step 10.
    TSA has the authority to administer its own compensation 
system--the agency is exempt from many of the provisions of 
title 5, and its employees are not paid under the General 
Schedule. Under TSA's authority, criminal investigators and air 
marshals at TSA can receive a salary including LEAP that 
exceeds the premium pay cap. (However, OPM has determined that 
TSA's criminal investigators are not properly authorized to 
receive LEAP.) Before OPM's review of the governing statutes, 
TSA had been including all earned LEAP in the calculation of 
annuities for retiring air marshals and criminal investigators. 
OPM concluded that TSA has the authority to pay salaries that 
exceed the premium pay cap but that OPM's statutory authority 
to administer the civil service retirement system requires it 
to apply the cap when calculating retirement annuities. Thus, 
in OPM's view, the annuity calculations for TSA's criminal 
investigators and air marshals should not include LEAP amounts 
that exceed the premium pay cap.
    After it provided notice to TSA, OPM began to calculate 
annuities for new retirements of criminal investigators and air 
marshals on the basis of the premium pay cap and the exclusion 
of LEAP from the benefit calculation for criminal 
investigators' annuities. In addition, OPM will recalculate 
benefits for existing retirees and refund contributions that 
were based on the higher pay to retirees and current employees. 
OPM has not yet pursued those actions, but CBO expects that it 
will shortly. Under those actions:
           All criminal investigators and federal air 
        marshals who retired before 2016 with salaries in 
        excess of the premium pay cap at the time of retirement 
        (or, in the case of TSA criminal investigators, that 
        contained any LEAP amounts) have been paid retirement 
        benefits in excess of what they should have received. 
        Retroactively adjusting retirement benefits will reduce 
        those retirees' future benefits and also require them 
        to repay OPM the portion of benefits received that was 
        based on salary amounts over the cap.
           Those retirees and any current criminal 
        investigators and air marshals who are earning salaries 
        over the premium pay cap have paid retirement 
        contributions in excess of what is required to fund 
        their future benefits. Those contributions are recorded 
        in the budget as revenues. They are owed refunds for 
        the contributions paid on the portions of their 
        salaries that have been deemed not creditable toward 
        retirement. (In addition, TSA has paid the required 
        agency share of retirement contributions on the portion 
        of employee salaries that is not creditable toward 
        retirement and is owed a refund of those amounts from 
        OPM.)
    Retirement Annuities. Using data provided by TSA, CBO 
estimates that enacting S. 1888 would increase the average 
retirement benefit by about $10,000 a year for a TSA criminal 
investigator and by about $2,000 a year for an affected federal 
air marshal. (The effect is much larger for the criminal 
investigators because of OPM's determination that criminal 
investigators are not eligible to receive LEAP under current 
law--LEAP increases an employee's base salary by 25 percent.)
    Retirees. CBO estimates that the effect of including salary 
amounts that exceed the cap in the retirement benefit 
calculation for the identified population of current retirees--
53 TSA criminal investigators and 63 federal air marshals--
would increase direct spending for retirement benefits 
scheduled to be paid over the 2019-2028 period by about $7 
million.
    In addition, under current law, those retirees will be 
expected to repay the difference between their recalculated 
annual retirement benefit (based on the capped salary) and 
their prior annual benefit (which included salary amounts over 
the premium pay cap) for all years in which an annuity payment 
was received. According to data provided by TSA, the average 
length of retirement for affected TSA criminal investigators 
and federal air marshals is 5 years and 3 years, respectively.
    Overpayments to annuitants are generally recovered by OPM 
on an installment basis and CBO expects that such payments will 
occur over the 2020-2025 period. Enacting S. 1888 would 
eliminate those expected recoveries, which CBO estimates would 
reduce offsetting receipts (which are recorded in the federal 
budget as a decrease in direct spending) by about $3 million 
over the 10-year period.
    Employees. S.1888 also would increase benefits for future 
retirees--the 47 TSA criminal investigators and 84 federal air 
marshals who are currently in service and are expected to earn 
a salary in excess of the salary cap at the time of enactment. 
Using retirement eligibility data provided by TSA, CBO 
estimates that about 75 of the 131 identified employees would 
retire over the 2019-2028 period. The increase in benefits 
associated with including salary amounts over the premium pay 
cap in the annuity calculation for those future retirements 
would increase direct spending by an estimated $2 million over 
the same period.
    Retirement Contributions. Under current law, OPM is 
expected to refund the portion of retirement contributions that 
were withheld from paychecks for salaries that exceeded the 
premium pay cap to 100 retired and current TSA criminal 
investigators and to 147 retired and current federal air 
marshals. Enacting S. 1888 would stop those payments. According 
to TSA, the average overpayment of retirement contributions per 
employee is about $5,500 for a TSA criminal investigator and 
about $500 for a federal air marshal. (In most cases, those 
employees pay 1.3 percent of salary toward their future federal 
retirement.) CBO estimates that canceling those refunds would 
increase revenues by about $1 million in 2020.
    Under current law, OPM also is expected to refund to TSA 
the portion of the agency's share of retirement contributions 
that has been paid for salaries over the cap. Data from TSA 
show that the agency's average overpayment for a TSA criminal 
investigator is about $110,000 and for a federal air marshal is 
about $11,000. (The percentage of an employee's salary that 
federal agencies contribute toward their employees' federal 
retirement is adjusted from time to time based on actuarial 
calculations by OPM; the average rate contributed by TSA for 
the affected population is about 25 percent.) CBO estimates 
that the overpayment from TSA to OPM totals $12 million. Under 
S. 1888 OPM would not refund that amount to TSA. Because 
payments between TSA and OPM are intragovernmental transfers, 
those transactions do not affect the deficit.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

 TABLE 3.--CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1888, AS ORDERED REPORTED BY THE SENATE COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                                                                   ON OCTOBER 4, 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2018   2019   2020   2021   2022   2023   2024   2025   2026   2027   2028  2018-2023  2018-2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact.......................      0      6     14     18     27     40     44     43     41     40     38       106        313
Memorandum:
    Increases in Direct Spending.....................      0      6     15     18     27     40     44     43     41     40     38       107        314
    Increases in Revenues............................      0      0      1      0      0      0      0      0      0      0      0         1          1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Components do not sum to totals because of rounding.

    Intergovernmental and private-sector impact: S. 1888 
contains no intergovernmental or private-sector mandates as 
defined in UMRA.
    Increase in long-term direct spending and deficits: CBO 
estimates that enacting S. 1888 would not increase net direct 
spending or on-budget deficits by more than $5 billion in any 
of the four consecutive 10-year periods beginning in 2029.
    Previous CBO estimate: On June 8, 2018, CBO transmitted an 
estimate for S. 2987, the John S. McCain National Defense 
Authorization Act for Fiscal Year 2019. Section 1123 of that 
bill would have authorized voluntary separation payments up to 
$40,000 and linked them to inflation in the same manner as 
would S. 1888. The estimated budgetary effects for those 
provisions are the same.
    Estimate prepared by: Federal costs: Dan Ready, Amber 
Marcellino; Impact on State, local, and tribal governments and 
the Private sector: Susan Willie.
    Estimate reviewed by: Christina Hawley Anthony, Chief, 
Projections; H. Samuel Papenfuss, Deputy Assistant Director for 
Budget Analysis.

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

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows: (existing law 
proposed to be omitted is enclosed in brackets, new matter is 
printed in italic, and existing law in which no change is 
proposed is shown in roman):

UNITED STATES CODE

           *       *       *       *       *       *       *

TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

           *       *       *       *       *       *       *

Part III--Employees

           *       *       *       *       *       *       *

Subpart B--Employment and Retention

           *       *       *       *       *       *       *

   Chapter 35--Retention Preference, Voluntary Separation Incentive 
Payments, Restoration, and Reemployment

           *       *       *       *       *       *       *

Subchapter II--Voluntary Separation Incentive Payments

           *       *       *       *       *       *       *

SEC. 3523. AUTHORITY TO PROVIDE VOLUNTARY SEPARATION INCENTIVE 
                    PAYMENTS.

    (a) * * *
    (b) * * *
          (1) * * *
          (2) * * *
          (3) * * *
                  (A) * * *
                  (B) an amount determined by the agency head, 
                not to exceed [$25,000] $40,000, as adjusted in 
                accordance with subsection (c);

           *       *       *       *       *       *       *

    (c) Consumer Price Index Adjustment.--
          (1) In general.--On March 1 of each year, the 
        Director of the Office of Personnel Management shall 
        adjust the amount under subsection (b)(3)(B) by the 
        amount determined by the Secretary of Labor to reflect 
        the percentage increase between--
                  (A) the Consumer Price Index (all items; 
                United States city average) published for 
                December of the preceding year; and
                  (B) the Consumer Price Index (all items 
                United states city average) published for 
                December of the year before the preceding year.
          (2) Rounding.--In making an adjustment under 
        paragraph (1), the Director of the Office of Personnel 
        Management shall--
                  (A) round the percentage increase to the 
                nearest 1/10 of 1 percent; and
                  (B) round the amount of adjustment to the 
                nearest multiple of $1,000.

           *       *       *       *       *       *       *

Subpart G--Insurance and Annuities

           *       *       *       *       *       *       *

CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *

Subchapter III--Civil Service Retirement

           *       *       *       *       *       *       *

SEC. 8331. DEFINITIONS.

          (1) * * *
          (2) * * *
          (3) * * *
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) * * *
                          (i) * * *
                          (ii) received after September 11, 
                        2001, by a Federal air marshal or 
                        criminal investigator (as defined in 
                        section 5545a(a)(2)) of the 
                        Transportation Security Administration, 
                        subject to all restrictions and earning 
                        limitations imposed on criminal 
                        investigators receiving such pay under 
                        section 5545a, including the premium 
                        pay limitations under section 5547;

           *       *       *       *       *       *       *

Subpart I--Miscellaneous

           *       *       *       *       *       *       *

CHAPTER 99--DEPARTMENT OF DEFENSE PERSONNEL AUTHORITIES

           *       *       *       *       *       *       *

SEC. 9902. DEPARTMENT OF DEFENSE PERSONNEL AUTHORITIES.

    (a) * * *

           *       *       *       *       *       *       *

    (f) * * *
          (1) * * *

           *       *       *       *       *       *       *

          (5)(A)
                  (i) * * *
                  (ii) [$25,000] an amount determined by the 
                Secretary, not to exceed $40,000, as adjusted 
                in accordance with subparagraph (D).
          (B) * * *
          (C) * * *
          (D) * * *
                  (i) On March 1 of each year, the Secretary of 
                Defense shall adjust the amount under 
                subparagraph (A)(ii) by the amount determined 
                by the Secretary of Labor to reflect the 
                percentage difference between--
                          (I) the Consumer Price Index (all 
                        items; United States city average) 
                        published for December of the preceding 
                        year; and
                          (II) the Consumer Price Index (all 
                        items; United States city average) 
                        published for December of the year 
                        before the preceding year.
                  (ii) In making an adjustment under clause 
                (i), the Secretary of Defense shall--
                          (I) round the percentage increase to 
                        the nearest 1/10 of 1 percent; and
                          (II) round the amount of the 
                        adjustment to the nearest multiple of 
                        $1,000.

           *       *       *       *       *       *       *

TITLE 29--LABOR

           *       *       *       *       *       *       *

CHAPTER 8--FAIR LABOR STANDARDS

           *       *       *       *       *       *       *

SEC. 213. EXEMPTIONS.

      (a) * * *
          (1) * * *

           *       *       *       *       *       *       *

          (16) a criminal investigator who [is paid] is 
        entitled to availability pay under section 5545a of 
        title 5, or a Federal air marshal or criminal 
        investigator employed by the Administrator of the 
        Transportation Security Administration who is entitled 
        to availability pay as described in section 
        8331(3)(E)(ii) of such title (where entitlement is 
        determined before the application of any premium pay 
        limitation;

           *       *       *       *       *       *       *

      (b) * * *
          (1) * * *

           *       *       *       *       *       *       *

          (30) a criminal investigator who [is paid] is 
        entitled to availability pay under section 5545a of 
        title 5, or a Federal air marshal or criminal 
        investigator employed by the Administrator of the 
        Transportation Security Administration who is entitled 
        to availability pay as described in section 
        8331(3)(E)(ii) of such title (where entitlement is 
        determined before the application of any premium pay 
        limitation).

                                  [all]
```