Health Care Issues

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National Active and Retired Federal Employees
Association (NARFE) Legislative Priorities in
the 110th Congress (2007-2008)
By Dan Adcock Assistant Legislative Director
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Legislative Priorities

• Protecting Federal Retirement
• Premium Conversion
• Government Retiree Social Security Offsets

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Job Number One

• Protecting Earned
• Existing Benefits

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Budget Situations Impact on Federal Retirement

• No Legislated Retirement Cuts Since 1993
• If the Past is Prologue
• 50 Billion Cut in 1980s Early 90s
• 2.3 Billion in FY 2005 Budget Resolution
• 38.3 Billion in FY 2005 Budget Resolution
• Calls for an Entitlement Commission
• RSCs Operation Offset
• Base Retiree FEHBP Premiums of Length of Service
• Highest 5 Years of Salary

Rep. Mike Pence (R-IN)
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Presidents FY 2008 Budget

• Health Savings Accounts (HSAs) in Federal
  Employees Health Benefit Program (FEHBP).
• Base Retiree FEHBP Premiums on Length of Service.

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Congressional Budget Resolutions

• No plans to cut Federal Retirement in House or
  Senate Budget Resolutions.

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Setting the Bar High

• The Fight for
• Premium
• Conversion

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How Premium Conversion Works

• Paying for Health Insurance With Pre-Tax Salary
  (Premium Conversion)
• Annual Salary 32,000
• Enrollee Premium Share
  3,491
• Reported Income 28,509
• Combined Federal/State Tax Rate 19
• Income Taxes Paid 5,416

• Paying for Health Insurance With After-Tax Salary
  (w/o Premium Conversion)
• Annual Salary 32,000
• Enrollee Premium Share
  3,491
• Reported Income 32,000
• Combined Federal/State Tax Rate 19
• Income Taxes Paid 6,080

Total Savings with Premium Conversion in this
example 664
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Premium Conversion

• Rep. Tom Davis (R-VA)
• H.R. 1110
• 168 Cosponsors, including
• Majority Leader Hoyer (D-MD)
• Oversight Govt Reform Committee Chairman
  Waxman (D-CA)
• 23 Members of Ways and Means (13 Ds 10 Rs)

As of May 16, 2007
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Premium Conversion

• Senators John Warner (R-VA) Jim Webb
• S. 773
• 29 Cosponsors
• 6 Finance Committee members (Rockefeller, Lott,
  Snowe, Cantwell, Crapo Bunning, .

As of May 16, 2007
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So Whats New About...

• Premium Conversion in the 110th Congress
  (2007-2008)?

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Whats New? Committee Chairman

• House Ways and Means Committee

• Senate Finance Committee

Charles Rangel (D-NY) Chairman
Jim McCrery (R-LA) Ranking Member
Charles Grassley (R-IA), Ranking Member
Max Baucus (D-MT), Chairman
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Whats New?Budget Rule

• Pay As You Go (a.k.a. Paygo)
• Tax Relief Must be Offset by
• Revenue Increases, or
• Program Cuts

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Whats Old?

• Premium Conversion Costs 12 billion
• 248 billion Federal Budget Deficit 06
• Unknown costs of Wars Homeland Security.
• The Impending Fiscal Tsunami

These guys will need a lot of Social Security
benefits, health care long-term care
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What Else is Leftover?Politics of Premium
Conversion

• Many lawmakers would like to support PC.
• But, they have to consider how non-feds feel.
• No Retirees Anywhere Receive PC tax benefit.
• Under H.R. 1110 S. 773, Retired Members of
  Congress get Premium Conversion too.
• Legislators concern about giving themselves a tax
  break other retirees wont get.

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How NARFE Should Respond

• NARFE Sen. Warner Cutting PCs 12 billion
  cost
• Cap benefit with no effect on relief for 7-8
  years.
• Annuitants get benefit through an Flexible
  Spending Account.
• Open PC to all retirees
• No retirees private or public have PC
• Cost goes up, but PC for all removes one obstacle.

OMB Director Portman Senator Cardin (D-MD)
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Premium ConversionOur Best Arguments

• The cost is not out of line with how the tax code
  is being used on health care.
• Federal civilian and military retirees should be
  reward for their sacrifices to our country.
• Improvements in health care are incremental
• H.R. 1110/S. 773 are a foot in the door for other
  retirees.

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Government Pension Offset (GPO)andWindfall
Elimination Provision (WEP)
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NARFEs Priority Bills to Repeal GPO WEP

• S. 206, Sen. Dianne Feinstein (D-CA)
• Cosponsors 29

• H.R. 82, Rep. Howard Berman (D-CA)
• Cosponsors 297

As of May 16, 2007
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Chances for GPO/WEP Bills

• Total repeal costs over 60 billion.
• SSA opposition.
• Reform bills have better shot.
• Odds improve if GPO/WEP bills are added to Social
  Security overhaul legislation.

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GOVERNMENT PENSION OFFSET

• Question Why has Republican Democratic SSA
  opposed GPO/WEP repeal?
• Answer GPO Repeal would be unfair to
  private-sector retirees subject to the dual
  entitlement rule.

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GPO How Are They Affected?

• Edna
• Monthly Government Annuity 900

• Seymour
• Husband

Social Security Widows
Benefit Before GPO 500 Two-thirds of annuity of
900 600 SS Widows Benefit After GPO 0
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Dual Entitlement RuleGPO vs. Non-GPO

• GPO Edna
• Monthly Government Annuity 900
• Widows Benefit Before GPO 500
• Two-thirds of annuity of 900 600
• SS Widows Benefit After GPO 0
• Total Retirement Income 900

• Non-GPO Selma
• Social Security Benefit Before Spouses Death
  900
• Social Security Widows Benefit 900
• Total Widows benefit payable 900
• Employer Sponsored Pension ?
• Total Retirement Income 900

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What Percentage of A Government Annuity Social
Security?
More Accurate Social Security 1/3 of Annuity
GPO Current Law Social Security 2/3 of Annuity
100 of Pie Charts Equals Total Government
Retiree Annuity
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GPO Reduction2/3 vs. 1/3

• GPO 1/3 Reduction
• Monthly Government Annuity 900
• Widows Benefit Before GPO 500
• One-thirds of annuity of 900 300
• SS Widows Benefit After GPO 200
• Total Retirement Income 1,100

• GPO 2/3 Reduction
• Monthly Government Annuity 900
• Widows Benefit Before GPO 500
• Two-thirds of annuity of 900 600
• SS Widows Benefit After GPO 0
• Total Retirement Income 900

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Mikulski-Voinovich GPO Reform Bill

• S. 1254
• Lessens the burden of the Government Pension
  Offset (GPO) on retired public servants,
  including federal retirees.
• Targets retirees with lower annuities.

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Bipartisan SSA Opposition to WEP Repeal

• Social Security Formula
• Designed to artificially provide low wage earners
  a larger benefit.
• Government Workers
• Some barely qualify for SS, but they were not
  necessarily low wage workers.
• Formula treats them like low wage earner.
• SSA Says WEP repeal would provide unfair
  advantage to govt retirees.
• We say WEP drafted to achieve savings, not
  fairness.

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WINDFALL ELIMINATION PROVISIONREFORM BILL

• H.R. 726
• Exempts retirees whose combined Social Security
  earned benefits and public pension are less than
  2,000 a month.
• Gradually phase in WEP for those receiving
  combined benefits between 2,000 and 3,000 per
  month.
• Above 3,000 a month, the full WEP would still
  apply.

Rep. B. Frank (D-MA)
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Join NARFE!

• Call 1-800-627-3394 or 703/838-7760
• Visit www.narfe.org

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110th Congress Legislative Priorities
QUESTIONS AND ANSWERS