Report No: 513
Date: 09/29/2000

OMB COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS

1. LAW NUMBER: P.L.106-265 (H.R. 4040)
2. BILL TITLE: Long-Term Care Security Act and Federal Erroneous Retirement Coverage Corrections Act
3. BILL PURPOSE: (1) Requires the Office of Personnel Management (OPM) to develop and administer a long-term care insurance program for Federal employees and annuitants, active and retired members of the uniformed services, and certain qualified relatives, and (2) Provides for the correction of retirement coverage errors affecting certain Federal employees and their families.
4. OMB ESTIMATE: The Federal Government will not contribute to the premiums paid by those who purchase long-term care insurance and participating insurance carriers will reimburse OPM for the costs of implementing and administering this program. Thus net Federal outlays for this program will be zero in the long run. The initial costs of implementing this program, which OMB estimates will total $23 million for FY 2001 and FY 2002, will be fully reimbursed in FY 2003. Thereafter, the contributions from the carriers will cover OPM's administrative costs for each fiscal year.

P.L. 106-265 also includes a provision to rectify certain retirement coverage errors affecting Federal employees under the Civil Service Retirement System (CSRS) and the Federal Employees' Retirement System (FERS). Under current law, an employee or a retiree is placed into the correct retirement system when an error is discovered. P.L. 106-265 lets employees choose to remain in the erroneous coverage and lets those whose coverage was already corrected to go back to the erroneous coverage. As a result, some employees and retirees now covered by FERS are expected to go back to CSRS. Because the CSRS annuity is higher than the FERS annuity, the benefits paid out from the retirement fund will go up slightly. This provision would also slightly impact Postal Service outlays and Social Security Trust Fund receipts, which are off-budget.

	(Fiscal years; in millions of dollars)
	2000	2001	2002	2003	2004	2005
Net costs..........	0	7	21	-22	1	2

5. CBO ESTIMATE:

	(Fiscal years; in millions of dollars)
	2000	2001	2002	2003	2004	2005
Net costs..........	0	3	23	-16	5	5

6. EXPLANATION OF DIFFERENCES BETWEEN OMB AND CBO ESTIMATES:

OMB and CBO have different assumptions regarding the effect of allowing employees to remain in or return to an erroneous retirement coverage.

7. CUMULATIVE EFFECT OF DIRECT SPENDING AND REVENUE LEGISLATION ENACTED TO DATE:

	(Fiscal years; in millions of dollars)
	2000	2001	2002	2003	2004	2005
Outlay effect..........	34	542	1,334	1,360	1,469	1,536
Receipt effect.........	-8	-620	-698	-746	-781	-768
Net costs..........	42	1,162	2,032	2,106	2,250	2,304

*$500,000 or less.

NOTE: The cumulative effect of direct spending and revenue legislation enacted to date is currently estimated to result in an end-of-session sequester. The Administration looks forward to working with the Congress to ensure that an unintended sequester does not occur.

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