[Federal Register Volume 62, Number 75 (Friday, April 18, 1997)]
[Notices]
[Pages 19152-19153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10081]


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OFFICE OF PERSONNEL MANAGEMENT


Federal Employees Retirement System; Normal Cost Percentages

AGENCY: Office of Personnel Management.

ACTION: Notice.

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SUMMARY: The Office of Personnel Management (OPM) is providing notice 
of revised normal cost percentage for employees covered by the Federal 
Employees Retirement System (FERS) Act of 1986.

DATES: The revised normal cost percentages are effective at the 
beginning of the first pay period commencing on or after October 1, 
1997.
    Agency appeals of the normal cost percentages must be filed no 
later than October 20, 1997.

ADDRESSES: Send or deliver agency appeals of the normal cost 
percentages to the Board of Actuaries, care of William E. Flynn, III, 
Associate Director for Retirement and Insurance, Office of Personnel 
Management, Room 4A10, 1900 E Street, NW., Washington, DC 20415.
    Send requests for actuarial assumptions and data to the Office of 
the Actuary, Room 4307 STOP, Office of Personnel Management, 
Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT: Harold L. Siegelman, (202)-606-0299.

SUPPLEMENTARY INFORMATION: The FERS Act of 1986, Public Law 99-335, 
created a new retirement system intended to cover most Federal 
employees hired after 1983. Most Federal employees hired before 1984 
are under the older Civil Service Retirement System (CSRS). Section 
8423 of title 5, United States Code, as added by the FERS Act of 1986, 
provides for the payment of the Government's share of the cost of the 
retirement system under FERS. Employees' contributions are established 
by law and constitute only a small fraction of the cost of funding the 
retirement system; employing agencies are required to pay the remaining 
costs. The amount of funding required, known as ``normal cost,'' is the 
entry age normal cost of the provisions of FERS that relate to the 
Civil Service Retirement and Disability Fund (Fund). The normal cost 
must be computed by OPM in accordance with generally accepted actuarial 
practice and standards (using dynamic assumptions). Subpart D of Part 
841 of Title 5, Code of Federal Regulations, regulates how normal costs 
are determined.
    The Board of Actuaries of the Civil Service Retirement System 
approved a revised set of economic assumptions for use in the dynamic 
actuarial valuations of CSRS and FERS. These assumptions were adopted 
after the Board reviewed statistical data prepared by the OPM actuaries 
and considered trends that may affect future experience under the 
Systems.
    Based on its analysis, the Board concluded that it would be 
appropriate to continue to assume a 7% rate of investment return, while 
reducing the anticipated rate of inflation from 4.5% to 4% and lowering 
the projected rate of General Schedule salary increases from 4.5% to 
4.25%. These salary increases are in addition to assumed in-grade 
increases that reflect past experience.
    In setting the new inflation assumption, the Board took into 
account technical changes in the calculation of the Consumer Price 
Index that were announced on April 1, 1996. It has been estimated that 
these changes will lower the annual rate of increase in the Index by 
about .25 of a percentage point.
    The new assumptions anticipate that over the long term the annual 
rate of investment return will exceed inflation by 3% and General 
Schedule salary increases will exceed inflation by .25% a year, as 
compared to 2.5% and 0%,

[[Page 19153]]

respectively, under the previous assumptions.
    The Board also adopted new demographic or ``non-economic'' 
assumptions. The new demographic rates are based on methodology adopted 
by the Board in December 1995, in conjunction with its comprehensive 
review of an extensive 10-year experience study prepared by the OPM 
actuaries.
    The normal cost calculations depend on both the economic and 
demographic assumptions. The demographic assumptions are determined 
separately for each of a number of special groups, in cases where 
separate experience data is available. Based on the new economic 
assumptions and demographic factors, OPM has determined the normal cost 
percentage for each category of employees under Sec. 841.403 of Title 
5, Code of Federal Regulations. The Government-wide normal cost 
percentages, including the employee contributions, are as follows:

Members...........................................................16.5%
Congressional employees...........................................16.7%
Law enforcement officers, firefighters, and employees under 
section 302 of the Central Intelligence Agency Act of 1964 for 
Certain Employees 24.6%
Air traffic controllers...........................................23.1%
Military reserve technicians......................................11.9%
Employees under section 303 of the Central Intelligence Agency 
Act of 1964 for Certain Employees (when serving abroad)...........16.3%
All other employees...............................................11.5%

    Under Sec. 841.408 of Title 5, Code of Federal Regulations, these 
normal cost percentages are effective at the beginning of the first pay 
period commencing on or after October 1, 1997.
    The time limit and address for filing agency appeals under 
Secs. 841.409 through 841.412 of Title 5, Code of Federal Regulations, 
are stated in the DATES and ADDRESSES sections of this notice.

    Office of Personnel Management.
James B. King,
Director.
[FR Doc. 97-10081 Filed 4-17-97; 8:45 am]
BILLING CODE 6325-01-M