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Pension Reform: HR 3136

Mr. Chairman and Members of the Subcommittee:

I. INTRODUCTION

My name is Ronald G. Bernoski. I am an Administrative Law Judge ("ALJ") who has been hearing Social Security disability cases at the Office of Disability Adjudication and Review (ODAR) of the Social Security Administration ("SSA") in Milwaukee, Wisconsin, for over 25 years.

I am the President of the Association of Administrative Law Judges ("AALJ"). Our organization represents the administrative law judges employed in the Social Security Administration and the Department of Health and Human Services ("DHHS"). One of the stated purposes of the AALJ is to promote and preserve full due process hearings in compliance with the Administrative Procedure Act for those individuals who seek adjudication of program entitlement disputes within the SSA. The AALJ represents about 1100 of the approximate 1400 administrative law judges in the Federal government.

This statement is made on behalf of all Federal administrative law judges. Administrative law judges handle cases that go to the heart of the economic and social structure of our nation. Typically, these cases present complex legal and factual issues involving laws and regulations related to subject matter such as; agriculture, banking, energy, labor, transportation, new medications, Medicare and social security

II. STATEMENT

This statement is presented to the Subcommittee on behalf of all administrative law judges in support of the Administrative Law Judges Retirement Act of 2007 (H. R. 3136). This legislation addresses the present inequity in the pensions of Federal administrative law judges. The proposed system provides retirement benefits at the same level as that now received by members of Congress, Congressional staff and law enforcement officers. The bill will allow for a Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) annuity enhancement to the amounts of 2.5% and 1.7% respectively for a limited number of years. Notably, Administrative law judges will individually pay an increased contribution for this pension benefit.

This change is needed because most administrative law judges enter government service late in their professional careers. The lack of an adequate pension is causing a large and increasing number of administrative law judges to work until advanced age to achieve a Federal pension based on the government-wide average of 30 years of service. This is particularly true for administrative law judges who enter government service from the private practice of the law without an existing adequately funded retirement program. This legislation addresses this problem. The proposed pension benefit will allow more administrative law judges to retire at a dignified age and not require them to work into old age. Without this correction, many administrative law judges from the private practice of law will be required to work until the age of mid-80 to obtain a pension based on 30 years of government service. This is because many of these judges enter government service for the first time after age 45. For example, the last class of Social Security Administration new judges had an average age of 56.7 years. One result of this legislation will be to create a younger more efficient administrative law judge corps with judges who will be more accustomed to working in the emerging "electronic" environment of the modern government workplace.

Administrative law judges should receive a fair pension for the same reasons they are provided to other judges, judicial officers and select Federal employees: to attract superior candidates, retain highly experienced adjudicators, and assure the public of the independence and integrity of their decision-makers. Administrative law judge pensions should be sufficiently adequate to attract superior attorneys to the position. Administrative law judges not only provide due process adjudications to the American people, but are the first and only experience for a large segment of the public in formal governmental proceedings. Administrative law judges provide the only "day in court" for millions of Americans. Therefore, it is important that administrative law judges be competent and highly qualified by attracting outstanding candidates. The administrative law judge position must provide for a just pension and must have the same safeguards of judicial independence as other members of the judiciary. In the Administrative Procedure Act, the Congress established this independence and in doing so, recognized its importance to the America people.

An overall fair pension was intended when Congress enacted FERS. The small size of the pension for FERS employees, compared to the CSRS pension, was justified when enacted by Congress on the grounds that the Social Security retirement benefits ("RSI") and proceeds from the Thrift Savings Plan ("TSP") would make up for the large difference in CSRS and FERS pensions. Congress expected that RSI alone would replace 34% to 37% of the average Federal employees' annual earnings. This expectation has proven erroneous for retired administrative law judges and other federal employees with high salaries. RSI does not, as Congress intended, make up for the reduction of the pension benefit in FERS compared to CSRS. The reason for the shortfall in RSI is an administrative law judge has earnings that exceed the maximum earnings level that is subject to the Social Security tax. The RSI component of an administrative law judge's retirement under FERS is therefore capped. This means that the same maximum RSI benefit that is worth 24% of salary at the maximum benefit threshold is worth only about 15% of salary to an administrative law judge because of the cap on earnings subject to taxation. The proposed FERS pension enhancement in this legislation will help to close most of the RSI gap to ensure a retirement for administrative law judges at a standard of living commensurate with their salaries, and as intended by Congress when it created FERS.

The Administrative Law Judges Retirement Act of 2007 (H.R. 3136) will have little, if any, cost associated with its passage. In September 2003, regarding a similar bill, the Congressional Budget Office prepared a Cost Estimate for the bill which projected a 2004-2013 ten year net direct cost for the pension bill of only $14 million, or an average of $1.4 million per year. The current legislation has been modified from the prior bill to lower the cost, and we anticipate that it will certainly have this impact, and further, it could well result in no cost.

The retirement age of Federal administrative law judges is, on average, 10 years greater than other Federal employees. The age of many of our current administrative law judges is between 70 to 80 years. As noted earlier, delayed retirement is often not a voluntary decision for administrative law judges. Rather, they are forced to work into their 70's and 80's as an earlier retirement with only a partial retirement benefit would result in financial hardship. That is, an administrative law judge appointed at age 60 who retires at age 75 would have a substantially reduced pension. For this individual, the need for a full retirement benefit may well require this judge to work until age 90. The minimal cost associated with the administrative law judge pension reform bill would serve as an incentive to administrative law judges with significant Federal service to retire sooner. However, if there is a minimal cost, it would to a degree be offset by payroll savings from newly appointed judges whose pay would often begin at the first level of a seven tier pay schedule established by the Office of Personnel Management. This will result in a short term savings for the agency through lower salaries. Thus, once an administrative law judge retires, the Federal agencies no longer are paying the administrative law judge's compensation; rather, it is paid from the CSRS and FERS Retirement Fund that is administered by the Office of Personnel Management.

An unintended consequence of a fair and equitable pension benefit would be the appointment of younger administrative law judges who will likely have much greater experience with the use of technology in an adjudication setting. As the Federal government transitions to expansive use of new technology to accommodate its goal of progressing to an electronic work environment, judges more experienced with these technological changes may well be more efficient and effective with its use. Obviously, this experience would benefit the American people. This change will have a substantial impact on the ability of the Social Security Administration to address its current disability case backlog of over 700,000 cases.

III. SUMMARY

On behalf of the Federal administrative law judiciary, I respectfully ask for your support of this important legislation. The Administrative Law Judges Retirement Act of 2007 (H. R. 3136) will permit administrative law judges to retire in early old age with a dignified pension. This improvement will allow a "turn over" of administrative law judges and it will provide for a younger Corps of administrative law judges who are better suited to work in the modern work environment. The bill is low cost and according to a prior CBO estimate it will cost about $1.4 million per year. The legislation will also result in a short term reduction in administrative law judge salary costs for the agencies, especially the Social Security Administration.

Respectfully submitted by,

Ronald G. Bernoski on behalf of

The Association of Administrative Law Judges
The Federal Administrative Law Judge Conference
The FORUM of United States Administrative Law Judges