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RETIREMENT CREDIT FOR CERTAIN GOVERNMENT SERVICE PERFORMED ABROAD:
A Request for Help to Have the Administration Implement PL 107-228

September 24, 2003


THE ISSUE: The Administration is seeking the repeal of Section 321 of PL 107-228, passed by the Congress last year authorizing the "buyback" of retirement credit for certain government service performed abroad. The section that the Administration seeks to repeal is intended, as stated in the Conference Report, to remedy an "inequity by permitting individuals with creditable service as PIT appointees between 1989 and 1998 to receive credit and make a deposit into the Federal Employees Retirement System for all or part of that period. It also recognizes the value added by PIT appointees, who are generally the dependents of Foreign Service or U.S. Armed Forces members, to official operations abroad. The Managers believe that this remedy addresses a basic inequity, however unintended, created by various changes to federal retirement law."
The American Foreign Service Association (AFSA) and the Associates of the American Foreign Service Worldwide (AAFSW) request (1) the rejection of the Administration's request to repeal current law and (2) instead insist upon the implementation of Section 321 of Public Law 107-228 .

CURRENT STATUS: On September 30, 2002, President Bush signed H.R. 1646, the Foreign Relations Authorization Act for Fiscal Year 2003, which became PL 107-228. Despite Administration objection, the PL 107-228 included Section 321, "Retirement credit for certain government service performed abroad." This provision is identical to H.R. 1496 (107th Congress) sponsored by Representative James Moran and cosponsored by Representatives Tom Davis, Frank Wolf, Steny Hoyer, Albert Wynn, James McGovern, and Constance Morella, and to S. 1138 by Senator George Allen and supported by Senators Paul Sarbanes and George Voinovich.
Because of the Administration's objection to this section, the Office of Personnel Management (OPM), the implementing agency, has not met with the State Department nor seems to intend to issue regulations as specified in Section 321, which would implement this section. In response to OPM's position, both the House and Senate's versions of the Foreign Relations Authorization Act, H.R. 1950 and S. 925 respectively, contain provisions requiring OPM to issue implementing regulations within 60 days of enactment.
On August 26, 2003, OPM sent a legislative proposal to both the Majority Leader of the Senate and the Speaker of the House of Representatives "To eliminate inequities in the compensation of certain Federal employees stationed outside the United States, and for other purposes." Specifically, the legislative proposal seeks the repeal of Section 321 of Public Law 107-228.
The American Foreign Service Association (AFSA) and the Associates of the American Foreign Service Worldwide (AAFSW) request (1) the rejection of the OPM request to repeal Section 321 and (2) instead the implementation of Section 321 of Public Law 107-228.

BACKGROUND: The Conference Report for H.R. 1646, H.Rept. 107-671, explains Sec. 321 by saying:
"Because of changes made in 1986 to federal retirement law, individuals who worked for the Department of State in U.S. missions abroad under part-time, intermittent or temporary ("PIT") appointments after January 1, 1989, were not eligible to pay into a federal retirement system for that service, or receive credit for that service, in order to improve their future retirement situations. The Department of State amended its regulations in 1998 to cover PIT appointees…. This section is intended to remedy [an] inequity by permitting individuals with creditable service as PIT appointees between 1989 and 1998 to receive credit and make a deposit into the Federal Employees Retirement System for all or part of that period. It also recognizes the value added by PIT appointees, who are generally the dependents of Foreign Service or U.S. Armed Forces members, to official operations abroad. The Managers believe that this remedy addresses a basic inequity, however unintended, created by various changes to federal retirement law."

Like many American families living in the United States, Foreign Service and military families serving abroad find that they need two incomes. However, regardless of education, training, or skills, they faced limited employment options because of local laws in the host country or the lack of necessary language skills. In effect, there was no other option for these family members of U.S. government employees assigned to our embassies and consulates except to work under a Part time, Intermittent or Temporary (PIT) appointment at their U.S. missions. Records show that despite the term PIT, they often worked in continuous service under a string of temporary, one-year appointments, often on a full-time basis. Family members who worked under PIT appointments prior to 1989 have the option of making a deposit into FERS to receive FERS credit for such service. However since 1989, under 5 USC 8411(b)(3), temporary appointments of one year or less are excluded from consideration for credit under FERS.
In May 1998, the Department of State created a new 5-year limited noncareer appointment, the Family Member Appointment (FMA), which allowed for retirement and TSP benefits. Thus, as explained in the Managers Statement, with the passage of PL 107-228, family members who were employed overseas under PIT appointments from 1989 through 1998 would have the same retirement benefits as those working under a PIT appointment prior to 1989 and those working under a FMA after 1998.

THE POSTION OF THE OFFICE OF PERSONNEL MANAGEMENT:

1. Section 321 of Public Law 107-228 gave certain State Department employees an unwarranted benefit under the Federal Employees' Retirement System (FERS) that is not available to any other employees who are covered by that retirement system…."

Any spouse (State, Military, USAID, Commerce, Agriculture) who worked at an overseas post was already in a unique - and inequitable - position that Section 321 was designed to address. We agree that it would create a special pocket of employees who would be allowed to "buyback" time and credit for their federal retirement fund. We disagree that it is unwarranted because of the conditions under which these PIT appointments were accepted.

There are many reasons why individuals working in the United States might seek a federal temporary position. For them it might not be the best option, but it is still an option. That is not the case for Foreign Service family members who worked as PITs in our posts and missions abroad. While they also were part of families that needed two incomes, they did not have the same options. Regardless of their education level, skills, and talents, in most cases, the only jobs available to these people at that time were under PIT appointments in our posts and missions abroad. They were limited by a wide variety of circumstances, including language needs and host-country laws and regulations establishing work prohibitions, in determining what the nature of their employment would be. However, even though the appointment under which they were employed was called "part time, intermittent, temporary," the work they did was important to the smooth operation and success of our missions and, indeed, was often on a full-time basis and for an extended period, effected through a continuous series of one-year appointments. These important jobs, filled by PIT appointees, were not in actuality temporary but rather continuous. Because of the mobility of Foreign Service life, the appointment mechanism used was the temporary appointment. But in fact, many family members worked in the same job for several years, receiving a series of temporary appointments, while their spouse was assigned to that post.
The conditions of employment and the lack of alternatives to working as PIT appointees abroad creates a unique circumstance separate from other temporary federal employees that needed to be addressed.

2. Section 321 allows only this group of employees to pay a deposit into the Civil Service Retirement Fund to have this employment credited in the computation of their retirement benefits. No other
employees covered by FERS are permitted to pay a deposit to acquire credit for past service that was not covered by FERS at the time it was performed.

This argument is incomplete and misleading. We agree that the repayment is retroactive, but since the inequity took place between 1989 and 1998, to correct the inequity would require retroactive consideration.
However, Congress has demonstrated that it is prepared to correct actions that have unintended consequences. In the Consolidated Appropriations Act for FY 2001 (PL 106-554), Congress moved the effective date of the "Department of State Special Agents Retirement Act of 1998," PL 105-382, back to cover more retired Special Agents under the Law Enforcement Officers retirement system and recalculate their annuity. Further, Public Law 106-265 sought to correct administrative decisions that assigned federal employees, including many Foreign Service employees, to an incorrect retirement system in the mid-to-late 1980s when the Federal Employment Retirement System/Foreign Service Personnel System was being implemented. It is correct and appropriate to correct unforeseen past errors.

3. When it enacted legislation creating FERS, Congress decided that the system was to be fully funded on a current basis. Therefore, Congress decided not to allow employees whose service is not covered by retirement deductions from their pay to pay deposits later in order to receive credit under FERS for the service in question.

We too are concerned about the viability of the retirement trust funds. It is for this reason that Sec. 321 requires repayment with interest plus the Department of State's employer contribution to equal the amount that would have been in the trust fund had payments been allowed. Further, the "window" in which application for the "buyback" right would be for only three years from enactment to ensure that there could not be an unending possible call on the trust fund. The retirement trust funds provide for the security of our families, and we along with our colleagues in the Federal workforce seek their viability.

4. Though not in the August 26th letter, previously in expressing its opposition to the enactment of Sec. 321, OPM argued that though they may not have had other options, individuals who would benefit from this provision accepted their employment without any expectation that they would ever receive retirement credit.

It is questionable whether there was such knowledge. It is not explained in PIT appointment documentation, and it would depend on the administrative or human resources officer at post explaining that although at one time PITs were allowed to buy creditable time, after 1989, they would not be allowed to. Foreign Service Generalists who serve as administrative officers are rarely technical human resources experts, and instructions and changes are not always clearly followed or understood. For instance, when FERS was being implemented in the mid-1980s, there were thousands of people assigned to the wrong retirement system even in Washington. There were cases in the Foreign Service also where people were assigned to the wrong system while serving abroad. Further, in a recent mailing by the Department of State discussing retirement benefits statements, the Department had to send a second message (January 10, 2001 #005308) correcting an earlier mailing because they had counted 1989-1998 PIT hours.

CONCLUSION: The American Foreign Service Association and the Associates of the American Foreign Service Worldwide agree that a distinct group of employees hired under PIT appointments is established under Section 321. However, they are distinct because (1) they accompanied their Foreign Service or uniformed service spouse abroad to keep the family together, and (2) in so doing, regardless of the education and skills they possessed, they were limited in their employment possibilities to accepting PIT appointments. Unlike those who accepted a temporary position in the United States, those spouses living abroad and seeking work to help support their families and support overseas operations had no other options but to work under PIT appointments.

For these reasons, we seek the rejection of the Administration's request to repeal Section 321 of Public Law 107-228, and instead urge the implementation of Section 321.