[Federal Register Volume 85, Number 66 (Monday, April 6, 2020)]
[Notices]
[Pages 19174-19175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07105]


-----------------------------------------------------------------------

OFFICE OF PERSONNEL MANAGEMENT


Federal Employees' Retirement System; Normal Cost Percentages

AGENCY: Office of Personnel Management.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is providing notice 
of revised normal cost percentages 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, 
2020. Agency appeals of the normal cost percentages must be filed no 
later than October 6, 2020.

ADDRESSES: Send or deliver agency appeals of the normal cost 
percentages and requests for actuarial assumptions and data to the 
Board of Actuaries, care of Gregory Kissel, Senior Actuary, Office of 
Healthcare and Insurance, Office of Personnel Management, Room 4316, 
1900 E Street NW, Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT: Karla Yeakle, (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 portion 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 
practices and standards (using dynamic assumptions). The normal cost 
calculations depend on economic and demographic assumptions. Subpart D 
of part 841 of title 5, Code of Federal Regulations, regulates how 
normal costs are determined.
    In its meeting on April 12, 2018, the Board of Actuaries of the 
Civil Service Retirement System (the Board) recommended revisions to 
the long term economic assumptions and recommended changes to the 
demographic assumptions used in the actuarial valuations of CSRS and 
FERS, based on revised regulations OPM published on October 25, 2017. 
The demographic assumptions include assumed rates of mortality, 
employee withdrawal, retirement, and merit and longevity pay increases. 
OPM has adopted the Board's recommendations.
    The revised regulations that OPM published on October 25, 2017, 
related to the calculation of the FERS normal cost percentages and 
added a category of normal cost percentage for employees of the U.S. 
Postal Service based on assumptions specific to the expected experience 
of postal employees. As a result of the revised regulations requiring 
postal-specific rates, OPM first established separate normal cost 
percentages for the Postal Service when agency contribution rates were 
previously revised, effective October 1, 2019. Those normal cost 
percentages for Postal Service employees reflected the postal-specific 
demographic assumptions recommended at the Board's April 12, 2018 
meeting, with the economic assumptions determined by the Board at its 
June 1, 2017 meeting. For all other categories of employees, the normal 
cost percentages effective October 1, 2019, were calculated using the 
demographic and economic assumptions determined by the Board at its 
June 1, 2017 meeting. The normal cost percentages effective October 1, 
2020, for all categories of employees are based on the demographic and 
economic assumptions determined by the Board at it April 12, 2018 
meeting.
    With regard to the economic assumptions described under section 
841.402 of title 5, Code of Federal Regulations, used in the actuarial 
valuations of FERS, the Board concluded that it would be appropriate to 
assume a rate of investment return of 4.25 percent, a reduction of 0.25 
percent from the existing rate of 4.50 percent. In addition, the Board 
determined that the assumed inflation rate should remain at 2.50 
percent, that the assumed rate of FERS annuitant Cost of Living 
Adjustments should remain at 80 percent of the assumed rate of 
inflation, and that the projected rate of General Schedule salary 
increases should remain at 2.75 percent. These salary increases are in 
addition to assumed within-grade increases. These assumptions are 
intended to reflect the long term expected future experience of the 
Systems.
    The demographic assumptions are determined separately for each of a 
number of special groups, in cases where separate experience data is

[[Page 19175]]

available. Based on the demographic and economic assumptions described 
above, OPM has determined the normal cost percentage for each category 
of employees under section 841.403 of title 5, Code of Federal 
Regulations.
    Section 5001 of Public Law 112-96, The Middle Class Tax Relief and 
Jobs Creation Act of 2012, established provisions for FERS Revised 
Annuity Employees (FERS-RAE). The law permanently increases the 
retirement contributions by 2.30 percent of pay for these employees. 
Subsequently, Section 401 of Public Law 113-67, the Bipartisan Budget 
Act of 2013, created another class of FERS coverage, FERS-Further 
Revised Annuity Employee (FERS-FRAE). Employees subject to FERS-FRAE 
must pay an increase of 1.30 percent of pay above the retirement 
contribution percentage set for FERS-RAE. Separate normal cost 
percentages apply for employees covered under FERS-RAE and for 
employees covered under FERS-FRAE.
    Section 211 of Title II, Division E of Public Law 116-94, the 
Further Consolidated Appropriations Act of 2020, provides for separate 
normal cost percentages for certain members of the Capitol Police as 
distinct from other Congressional Employees. Prior rules provided for a 
combined normal cost percentage for members of the Capitol Police and 
other Congressional Employees.
    The normal cost percentages for each category of employee, 
including the employee contributions, are as follows:

 Normal Cost Percentages for FERS, FERS-Revised Annuity Employee (RAE), and FERS-Further Revised Annuity (FRAE)
                                                     Groups
----------------------------------------------------------------------------------------------------------------
                                                                    FERS Normal      FERS-RAE        FERS-FRAE
                              Group                                    cost         normal cost     normal cost
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Members.........................................................            24.4            18.6            18.8
Capitol Police covered under 5 U.S.C. 8412(d) and 5 U.S.C.                  37.1            37.6            37.8
 8425(c)........................................................
Other Congressional employees...................................            25.6            18.6            18.8
Law enforcement officers, members of the Supreme Court Police,              37.1            37.6            37.8
 firefighters, nuclear materials couriers, customs and border
 protection officers, and employees under section 302 of the
 Central Intelligence Agency Retirement Act of 1964 for certain
 employees......................................................
Air traffic controllers.........................................            37.0            37.5            37.7
Military reserve technicians....................................            20.9            21.3            21.6
Employees under section 303 of the Central Intelligence Agency              25.6            26.2            26.4
 Retirement Act of 1964 for certain employees (when serving
 abroad)........................................................
Other employees of the United States Postal Service.............            16.5            16.9            17.1
All other regular FERS employees................................            18.1            18.6            18.8
----------------------------------------------------------------------------------------------------------------

    Under section 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, 2020.
    The time limit and address for filing agency appeals under sections 
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.
Alexys Stanley,
Regulatory Affairs Analyst.
[FR Doc. 2020-07105 Filed 4-3-20; 8:45 am]
 BILLING CODE 6325-38-P