Public Pensions: Summary of Federal Pension Plan Data (Letter Report,
02/16/96, GAO/AIMD-96-6).
This report--one in a series of three reports on the status of public
pension plan funding--provides summary data on federal government
pension plans. The other two reports in the series address state and
local government pension plans. GAO focuses on federally sponsored
defined benefit and defined contribution plans.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-96-6
TITLE: Public Pensions: Summary of Federal Pension Plan Data
DATE: 02/16/96
SUBJECT: Federal employee retirement programs
Retirement pensions
Trust funds
Government liability (legal)
Budget obligations
Employee benefit plans
Off-budget federal entities
Actuarial tables
Investments
IDENTIFIER: Civil Service Retirement System
Federal Employees Retirement System
Military Retirement System
Federal Thrift Savings Plan
Civil Service Retirement and Disability Fund
Social Security Trust Fund
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO report. Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved. Major **
** divisions and subdivisions of the text, such as Chapters, **
** Sections, and Appendixes, are identified by double and **
** single lines. The numbers on the right end of these lines **
** indicate the position of each of the subsections in the **
** document outline. These numbers do NOT correspond with the **
** page numbers of the printed product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
** A printed copy of this report may be obtained from the GAO **
** Document Distribution Center. For further details, please **
** send an e-mail message to: **
** **
** **
** **
** with the message 'info' in the body. **
******************************************************************
Cover
================================================================ COVER
Report to Congressional Requesters
February 1996
PUBLIC PENSIONS - SUMMARY OF
FEDERAL PENSION PLAN DATA
GAO/AIMD-96-6
Federal Pension Plans
(917621)
Abbreviations
=============================================================== ABBREV
CSRDF - Civil Service Retirement and Disability Fund
CSRS - Civil Service Retirement System
ERISA - Employee Retirement Income Security Act
FERS - Federal Employees' Retirement System
OMB - Office of Management and Budget
TVA - Tennessee Valley Authority
Letter
=============================================================== LETTER
B-261187
February 16, 1996
The Honorable Nancy L. Johnson
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives
The Honorable Sam M. Gibbons
Ranking Minority Member
Committee on Ways and Means
House of Representatives
This report is one in a series of three reports that address your
request that we review the status of public pension plan funding.
This report specifically addresses your request that we provide
summary data on federal government pension plans. The other two
reports in the series address state and local government pension
plans.\1 As agreed, in this report, we focused on federally sponsored
defined benefit and defined contribution plans subject to the
reporting requirements of Public Law 95-595.
We obtained data from these plans related to participation, general
benefit provisions, funding status, and investments. Profiles of
each plan, which summarize the principal financial, actuarial, and
general information as reported by the plan administrators for the
most recent year available, are included in appendix I (for defined
benefit plans) and appendix II (for defined contribution plans).
Selected financial and participant data for the pension plans are
presented in appendix III. A glossary of pension terms is included
after the appendixes. The information in appendixes I through III
was provided by the plan administrators, primarily in the annual
reports under Public Law 95-595. We noted that the information
provided by the plan administrators often varied in the extent of
details presented. Accordingly, appendixes I through III provide
general information only and do not include details necessary for
making specific comparisons among plans. This limitation is
discussed further in the scope and methodology section.
--------------------
\1 See Public Pensions: Section 457 Plans Pose Greater Risk Than
Other Supplemental Retirement Plans (GAO/HEHS-96-38) and Public
Pensions: Extent of State and Local Governments Undercontributing to
Underfunded Plans (GAO/HEHS-96-56).
BACKGROUND
------------------------------------------------------------ Letter :1
Pension plans defer compensation from working years to retirement
years. There are two major types of pension plans. A defined
benefit plan specifies a formula for computing benefits payable at
retirement based on age, length of plan participation, and earnings
history. A defined contribution plan provides a framework within
which the employer and/or employees contribute to individual worker
accounts. The balance in this account at retirement, reflecting
contributions plus investment income, constitutes the source of
retirement benefits from a defined contribution plan. Put simply, a
defined benefit plan specifies benefits, and a defined contribution
plan specifies contributions.
The Employee Retirement Income Security Act (ERISA) of 1974 requires
annual financial and actuarial reporting by most private pension
plans. Public Law 95-595, 31 U.S.C. 9501-9504, enacted on November
4, 1978, extended financial and actuarial reporting requirements to
federal government pension plans. The Comptroller General and the
Office of Management and Budget (OMB) jointly prescribe the form and
content of the annual pension plan reports under Public Law 95-595.
The reports are due 210 days after the last day of each plan's fiscal
year and are to be sent to the Congress and the General Accounting
Office.
Public Law 95-595 defines the term "government pension plan" to mean
a pension, annuity, retirement, or similar plan established or
maintained by an agency for any of its officers or employees,
regardless of the number of participants. The plans subject to
Public Law 95-595 fall into three general categories: agency plans,
nonappropriated fund activity plans, and federal reserve and farm
credit plans. Agency plans cover employees of executive,
legislative, and judicial organizations that are generally recognized
as agencies and are generally funded by annual appropriations.
Nonappropriated fund activity plans cover employees of organizations,
such as post exchanges and commissaries, that provide morale,
welfare, and recreation services to military components. In large
part, these organizations are designed to be self-sufficient and
operate with revenues generated from their activities. Finally, the
federal reserve and farm credit plans cover employees of federal
reserve and farm credit system entities, which also operate with
revenues generated from their activities.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
Highlights of the most recent federal government pension plan filings
include the following.
More than 10 million individuals were enrolled in 34 defined
benefit plans, and 2.2 million individuals were enrolled in 17
defined contribution plans. Generally, employees participated
in defined contribution plans to supplement retirement benefits
they earned under defined benefit plans.
Federal government defined benefit plans provide retirement,
survivor, and disability benefits to their participants. As of
the latest plan filings, participants in the defined benefit
plans had accumulated more than
$1.2 trillion in total retirement benefits. The retirement
benefit provisions of the different plans vary significantly.
Total retirement benefits depend heavily on factors such as age
and salary at retirement, years of service, and eligibility for
Social Security benefits.
Differences exist in the funding of federal government defined
benefit plans. Most agency plans have trust funds to account
for government and employee contributions, investments, and
benefits paid. The agency trust funds, with one exception,
invest in special issue Treasury securities, which are
nonmarketable. The Treasury must obtain the necessary money
through tax receipts or borrowing to pay plan benefits to
annuitants when those benefits are due. This financing approach
enables the federal government to defer obtaining the money
until it is needed to pay the benefits.
Most agency plans are underfunded--that is, the estimated obligation
for benefits exceeds plan assets. However, of the largest federal
pension programs, the Federal Employees' Retirement System is fully
funded or nearly fully funded under different actuarial measures, and
statutory provisions for the future elimination of the unfunded
benefit obligations of the Civil Service Retirement System and the
Military Retirement System have already been enacted.
The provisions for eliminating these unfunded liabilities will
provide sufficient budget authority to cover the future benefit
payments but will not reduce the federal government's liability for
the benefit obligations because the plan assets are invested in
special issue Treasury securities, as are assets of other federal
trust funds. Because the plan assets are invested in this way,
whether this obligation is funded or unfunded has no effect on
current budget outlays. Also, the plan's obligation is not a measure
of the government's ability to pay retirement benefits in the future.
A primary effect of not fully funding most agency pension plans is
that the agencies' budgets have not included the full cost of the
pensions. Because contributions to most agency plans, under
applicable requirements, have covered less than the full accruing
cost of retirement benefits to covered employees, the agencies'
budgets have not reflected the full cost of government programs.
The nonappropriated fund activity and federal reserve and farm credit
defined benefit plans have generally set aside money or marketable
securities in trust funds that would be sufficient to fully fund
their estimated accumulated benefit obligations.
By definition, because defined contribution plans do not specify the
retirement benefits an individual will receive, the obligation to pay
benefits is limited to contributions made and any earnings on those
contributions. As of the latest plan filings, the 17 defined
contribution plans had investment balances totaling more than $28
billion, of which $26 billion was held by the Thrift Savings Plan.
The Plan invests employee designated contributions to its government
securities fund in special-issue Treasury securities under the
financing approach used for agency defined benefit plans. Therefore,
the Treasury must obtain the necessary money through tax receipts or
borrowing to pay plan benefits to these employees.
PARTICIPANTS IN FEDERAL PENSION
PLANS
------------------------------------------------------------ Letter :3
The agencies, nonappropriated fund activities, and federal reserve
and farm credit entities offer 34 defined benefit pension plans,
which cover more than 10 million current employees, separated
employees entitled to benefits, and retirees. Fifteen of the 34
defined benefit plans are agency plans. Nonappropriated fund
activities and federal reserve and farm credit entities operate the
other 19. Specifically, nonappropriated fund activities have 8
defined benefit plans for civilian employees who provide services to
the Army, Navy, Air Force, Marines, and Coast Guard; the Federal
Reserve System has a defined benefit plan for employees of the
federal reserve banks and the Board of Governors; and the Farm Credit
System\2 has 10 defined benefit plans for employees of the various
district banks. Approximately 5.8 million active employees
participate in the 34 federal government defined benefit plans. In
addition, the plans provide benefits to 4.1 million annuitants, and
another 119,000 separated employees are entitled to deferred
retirement benefits.
The defined benefit plans range in number of participants from the
Civil Service Retirement and Disability Fund (CSRDF), with 5.2
million participants, to several plans which have fewer than 25
participants. Participants in the two largest plans, CSRDF and the
Military Retirement System, constitute 97 percent of participants in
the 34 federal defined benefit plans. CSRDF consists of the Civil
Service Retirement System (CSRS) and the Federal Employees'
Retirement System (FERS). The Congress closed CSRS to new
participants at the end of 1983, and employees hired since 1983
generally are covered by FERS.\3 Appendix III, table 1, lists the
number of participants for each of the defined benefit plans.
The federal government also offers defined contribution plans,
generally to supplement the deferred compensation employees earn
under defined benefit plans. According to the most recent pension
plan filings, 2.2 million individuals participate in 17 defined
contribution plans sponsored by agencies, nonappropriated fund
activities, and federal reserve and farm credit entities. The
largest federal defined contribution plan is the Thrift Savings Plan,
which has 2.1 million participants, or 97 percent of the participants
enrolled in federal government defined contribution plans. Appendix
III, table 5, lists the number of participants for each of the
defined contribution plans.
--------------------
\2 The Farm Credit System is a congressionally chartered nationwide
network of cooperatively owned banks and their related associations
that provides billions of dollars of credit and services to eligible
farmers, ranchers, producers, cooperatives, and others in rural
America.
\3 The retirement program covering most federal civilian employees
was reformed with the establishment of FERS, which differs
significantly from CSRS. The history of CSRS and FERS, as well as an
overview of each, is described in Overview of Federal Retirement
Programs (GAO/T-GGD-95-172, May 22, 1995).
RETIREMENT BENEFITS
------------------------------------------------------------ Letter :4
The vast majority of defined benefit plans sponsored by the federal
government offer retirement, survivor, and disability benefits to
their participants. As of the most recent plan filings, participants
in the 34 defined benefit plans had accumulated more than $1.2
trillion in total retirement benefits, the vast majority in the 15
agency plans. The various federal government plans provide
significantly different retirement benefits to their members,
depending on factors such as age and salary at retirement, years of
service, election of survivor annuities, and cost-of-living
adjustments. In addition, some defined benefit plans are
supplemented with defined contribution plans and Social Security
benefits, and others are not. Certain defined benefit plans provide
different levels of benefits for different employee groups.\4
A general description of basic retirement benefits for each of the
federal defined benefit plans is provided in the plan profiles in
appendix I. These descriptions provide general information only and
do not include details for determining or comparing actual benefit
amounts. Actual benefit amounts for individual defined benefit plan
participants may differ significantly as a result of early
retirement, disability benefits, survivor benefit elections, and
other factors applicable to specific circumstances.
The majority of federal government defined contribution plans provide
employer matches to employee contributions. Contribution percentages
for each of the defined contribution plans are listed in the plan
profiles in appendix II and are summarized in appendix III, table 5.
--------------------
\4 For example, CSRS and FERS provide different levels of benefits
for law enforcement officers and firefighters, air traffic
controllers, congressional staff, members of the Congress, and
general employees.
FUNDING OF PLANS
------------------------------------------------------------ Letter :5
Differences exist in the funding of federal government defined
benefit plans. Of these 34 plans, 28 use trust funds, while 6 of the
agency plans are referred to as pay-as-you-go plans. Trust funds are
separate accounting entities established to account for government
and employee contributions, investments, and benefits paid. The
pay-as-you-go plans do not have trust funds to accumulate assets to
pay plan benefits. For these six plans, benefits are paid to
annuitants from appropriations in the year in which the benefits are
due.
Trust funds for agency defined benefit plans, with the exception of
the Tennessee Valley Authority (TVA), invest in special issue
Treasury securities, which are nonmarketable.\5
The primary purpose of the trust funds is not to provide a source of
cash for the government to pay benefits, but to provide budget
authority to allow the Treasury to disburse monthly annuity checks
without annual appropriations. Because these securities represent
assets of the trust funds and offsetting liabilities of the Treasury,
under accounting procedures, the trust fund assets are eliminated in
the governmentwide financial statements. Accordingly, these trust
fund assets are not included in the governmentwide financial
statements, which include the federal government's $1.2 trillion
liability for the benefit obligations of the 15 agency plans.
The defined benefit plans of the nonappropriated fund activities and
federal reserve and farm credit entities, as well as TVA, use trust
funds to set aside money or marketable assets during employees'
working years for the accruing cost of their retirement benefits.
A defined benefit pension plan's status as fully funded or
underfunded is determined by comparing its net assets to the
actuarial present value of its benefit obligations. The agency
defined benefit plans generally are underfunded--that is, the present
value of benefit obligations exceeds plan assets. As discussed more
fully in the retirement system financing section below, statutory
provisions are in place for the future elimination of the unfunded
benefit obligations of CSRS and the Military Retirement System.
A principal effect of not fully funding most agency pension plans is
that agencies' budgets have not included the full cost of the
pensions. Because contributions to most agency plans, under
applicable requirements, have covered less than the full accruing
cost of retirement benefits to covered employees, the agencies'
budgets have not reflected the full cost of government programs.\6
The defined benefit plans of the nonappropriated fund activities and
the federal reserve and farm credit entities, as well as TVA, have
generally contributed amounts sufficient to set aside money or
marketable assets in trust funds to fully fund their estimated
accumulated benefit obligations.
--------------------
\5 Most assets of the agency plans are required by law to be invested
in U.S. government obligations. In addition to assets of the agency
plans, most assets of the Social Security trust fund and various
other federal insurance and trust funds are invested in nonmarketable
special issue Treasury securities.
\6 This matter is discussed further in Overview of Federal Retirement
Programs (GAO/T-GGD-95-172, May 22, 1995) and Federal Retirement
System Financing (GAO/T-GGD-95-197, June 28, 1995).
MEASURES OF PLAN FUNDING
---------------------------------------------------------- Letter :5.1
One measure of a defined benefit pension plan's obligation for
benefits is represented by the present value of accrued benefits.
This actuarial measure is referred to as the Accumulated Benefit
Obligation. It applies to private sector defined benefit plans in
accordance with Statement of Financial Accounting Standards No. 35
and also was used in the federal government's prototype
governmentwide financial statements for fiscal year 1993. It
reflects all accrued benefits due under the plan as if the entity
ceased as a going concern. The Accumulated Benefit Obligation is a
"static" measure because it does not consider anticipated pay
increases, cost-of-living adjustments, or future contributions.
Another measure of benefit obligations is represented by the present
value of future benefits, net of the present value of future normal
cost contributions. This actuarial measure is referred to as the
Actuarial Accrued Liability. It is a "dynamic" measure because it
considers estimated future service and salary changes, as well as the
present value of future normal cost contributions. The Federal
Accounting Standards Advisory Board issued an exposure draft entitled
Accounting for Liabilities of the Federal Government (November 7,
1994). Its provisions would require that the Actuarial Accrued
Liability of federal government defined benefit plans be reflected in
federal government financial statements.\7
--------------------
\7 The Federal Accounting Standards Advisory Board exposure draft
would prescribe the use of the aggregate entry age normal actuarial
cost method, or a method which produces similar results, in
calculating the Actuarial Accrued Liability. In addition, its
provisions would require that assets of federal pension plans be
carried at cost, adjusted for amortization, if appropriate.
RETIREMENT SYSTEM FINANCING
---------------------------------------------------------- Letter :5.2
For the most recent plan filings, 21 of the 34 federal government
defined benefit plans--3 of the 15 agency plans and 18 of the 19
plans sponsored by the nonappropriated fund activities and federal
reserve and farm credit entities--were fully funded under the static
Accumulated Benefit Obligation measure. Those filings also indicate
that 15 of the 34
plans--5 agency plans and 10 others--were fully funded under the
dynamic Actuarial Accrued Liability measure. Of the largest federal
pension programs, FERS is fully funded under the Accumulated Benefit
Obligation measure and nearly fully funded under the Actuarial
Accrued Liability measure, and statutory provisions for the future
elimination of the unfunded benefit obligations of CSRS\8 and the
Military Retirement System have already been enacted. Under current
law, the government will amortize its unfunded actuarial accrued
liabilities by increasing the amount of special issue government
securities issued by the Treasury to the trust funds. (See footnote
5.)
The special issue Treasury securities represent that portion of
estimated future retirement benefit obligations of the agency defined
benefit plans that the government has recognized on paper by
providing budget authority to cover future benefit payments. The
unfunded obligation of an agency plan is that portion of estimated
future benefit obligations that has no paper backing in the form of
special issue Treasury securities. Therefore, because special issue
Treasury securities are used, whether the obligation is funded or
unfunded has no effect on current budget outlays. Also, the
obligation is not a measure of the government's ability to pay
retirement benefits in the future. The Treasury must obtain the
necessary money through tax receipts or borrowing to pay plan
benefits to annuitants when those benefits are due for plans having
trust funds invested in special issue Treasury securities and for
pay-as-you-go plans. This financing approach enables the federal
government to defer obtaining the money until it is needed to pay the
benefits.\9
Appendix III, table 3, lists the Accumulated Benefit Obligation for
each defined benefit plan. Appendix III, table 4, lists the
Actuarial Accrued Liability, and the plan profiles in appendix I
describe the applicable provisions for eliminating unfunded benefit
obligations.
By definition, because defined contribution plans do not specify the
retirement benefits an individual will receive, their obligation to
pay benefits is limited to the contributions made by or on behalf of
each individual and any earnings on those contributions.
--------------------
\8 The statute which established FERS provided for appropriations to
amortize over 30 years the shortfall in the fund supporting CSRS and
FERS. FERS was designed to require contributions sufficient to fund
the full accruing cost of all its benefits.
\9 For more detail on how the government finances federal retirement,
see Federal Retirement System Financing (GAO/T-GGD-95-197, June 28,
1995).
RETIREMENT SYSTEM INVESTING
---------------------------------------------------------- Letter :5.3
The 15 federal agency defined benefit plans have a total of $464
billion in investments, the vast majority of which are required by
law to be invested in U.S. government obligations. These
investments consist primarily of nonmarketable special issue U.S.
Treasury securities, as described in the preceding sections.
The defined benefit plans of the nonappropriated fund activities and
federal reserve and farm credit entities reported that they are not
restricted to investments in government obligations. The plans of
these 19 entities have a combined investment portfolio of $7 billion,
of which 88 percent is invested in assets other than U.S. government
obligations. The investments consist primarily of corporate stocks
and bonds. Appendix III, table 2, lists the investments of each
defined benefit plan.
Assets in the 17 federal government defined contribution plans are
primarily invested in various marketable stock, bond, and government
security funds. Investments in these 17 plans totaled more than $28
billion as of the latest plan filings, of which $26 billion was held
by the Thrift Savings Plan. The Thrift Savings Plan invests employee
designated contributions to the plan's government securities fund in
special issue Treasury securities. Under this financing approach,
which is used for the agency defined benefit plans as described in
the preceding section, the Treasury must obtain the necessary money
through tax receipts or borrowing to pay plan benefits when those
benefits are due. However, for the Thrift Savings Plan, budget
outlays are recorded for employer and employee contributions as they
are made each pay period. Outlays are recorded because the Thrift
Savings Plan is not included in the U.S. budget, unlike agency
defined benefit plans.\10 Appendix III, table 5, lists the total
investment balance for each federal government defined contribution
plan.
--------------------
\10 This matter is discussed in detail in a May 29, 1987, letter
(B-227344) to Representative Willis D. Gradison, Jr., in which we
concluded that the Thrift Savings Plan should not be included in the
budget.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :6
To summarize information on pension plans of the federal government,
we reviewed the most recent filings by 51 federal pension plans under
Public Law 95-595 received as of the end of our fieldwork, July 21,
1995, including several small plans which had not previously filed.
In addition, we contacted the plan administrators to obtain
additional plan data pertaining to Social Security coverage,
investment restrictions, and financial statement audits. Under
Public Law 95-595, the plan filings are not due until 210 days after
the plan's fiscal year-end. Therefore, the most recent plan filing
available for most plans was the plan year ending in 1993.
Accordingly, legislative initiatives or other subsequent events not
included in the information received through July 21, 1995, are not
reflected in this report or accompanying appendixes.
Also, we consulted with OMB to verify that it had not received
filings for additional federal government pension plans. Finally,
certain federal benefit programs are excluded from this report
because they are not subject to the disclosure requirements of Public
Law 95-595. The Central Intelligence Agency pension plan, as well as
Social Security and Railroad Retirement benefits, are excluded from
the requirements of Public Law 95-595. In addition, the monetary
allowance provided to former Presidents is not covered.
The Department of Veterans Affairs does not file reports under Public
Law 95-595 for its Veterans Compensation and Pension Programs.
Veterans and their dependents receive compensation benefits for
service connected disabilities or death and pension benefits for
nonservice connected disabilities or death. Neither the entitlement
to nor the amount of compensation and pension benefits is based on
age and length of service. Rather, compensation and pension benefits
are based on the occurrence of specified events. In addition,
benefits for nonservice connected disabilities or death are subject
to specific income limitations. Thus, the Compensation and Pension
Programs differ significantly from the defined benefit plans for
which reports are filed under Public Law 95-595.
Several limitations exist in the summary information presented in the
report. The summary of pension plan data is a compilation we
prepared from the plan reports and additional plan data provided by
the plan administrators. We did not independently verify the
information in the plan reports and additional data that the plan
administrators provided to us and we do not assure their accuracy on
matters of fact or law. Except where indicated in the pension plan
profiles in appendixes I and II, the plan financial reports were not
audited by independent auditors.\11 In addition, where plans had
multiple retirement provisions for certain specialized employees, we
listed the retirement benefits provided to the majority of the plan
participants.
The projections in the plan profiles and tables are highly dependent
on the actuarial cost method and the actuarial assumptions used.
Several acceptable actuarial cost methods exist. The actuarial
assumptions vary by plan because they are based on the best estimate
of anticipated experience under the plan made by each plan actuary.
These assumptions can have a significant impact on estimates of
future costs.
In addition, we found that the information provided by plan
administrators often varied in the extent of details presented. For
example, some plan filings described all significant economic
assumptions used in the actuarial valuations, but others provided
fewer details about the assumptions. In some cases, because some
plans provided more extensive information than others, it might
appear that such information was not applicable to the plans which
provided less information. That is not always the case. For
example, the provisions of the Military Retirement System are
substantially the same as those of the separate Coast Guard Military
Retirement System, Public Health Service Commissioned Corps
Retirement System, and the National Oceanic and Atmospheric Corps
Retirement System. Because the administrators of each plan described
some provisions of the plan differently, the fact that the provisions
are actually the same may not always be apparent.
Similarly, the extent of financial and cost information provided by
the plans varied. For example, the Retirement Annuity Plan for
Employees of the Army and Air Force Exchange (Exchange Service plan)
provides substantially the same benefits as the Civil Service
Retirement System, except that Exchange Service plan benefits are
reduced by a "Social Security offset."\12 The normal cost reported
for the CSRS is 25.14 percent of salary, whereas the Exchange Service
plan reported normal cost of 9.81 percent of salary. Part of the
difference in normal cost may be caused by differing economic
assumptions used by the plans' actuaries, but the primary reason for
the difference is that employees in the Exchange Service plan are
also covered by Social Security while CSRS employees are not. Thus,
the offset provision cuts plan benefits and reduces plan costs
accordingly. However, in order to compare the total costs of all
benefits provided to participants covered by these two programs,
additional details would be needed. For example, an erroneous
conclusion might result unless the costs of providing Social Security
benefits to Exchange Service employees were added to the reported
plan costs; similarly, detailed information about the Social Security
benefits to Exchange Service employees would be required in order to
compare the benefits under these programs.
The scope of this report did not include analyzing and comparing the
provisions of the various plans. However, we have been asked by the
Chairman of the Senate Committee on Governmental Affairs to compare,
in detail, the provisions of retirement programs for federal
personnel. We will provide each of you a copy of the report on the
results of that work when it is completed.
We conducted our review from April 1995 through August 1995 in
accordance with generally accepted government auditing standards. We
requested comments on drafts of each plan profile from the applicable
plan officials. We incorporated those comments in the plan profiles
as appropriate.
--------------------
\11 As indicated in appendix I, certain financial statements of the
two largest plans, the Civil Service Retirement and Disability Fund
and the Military Retirement System, have been audited.
\12 Under the offset provision, pension benefits are reduced by 75
percent of the Social Security benefits for retirees who worked 30
years under the plan.
---------------------------------------------------------- Letter :6.1
As agreed with your office, unless you announce its contents earlier,
we plan no further distribution of this report until 30 days after
its issue date. At that time, we will send copies of this report to
the Director of the Office of Management and Budget and interested
congressional committees. Copies will be made available to others on
request.
If you or your staffs have any questions concerning this report,
please contact me at (202) 512-9406 or H. Kent Bowden, Assistant
Director, at (202) 512-5270. Major contributors to this report are
listed in appendix IV.
Robert W. Gramling
Director, Corporate Audits
and Standards
FEDERAL DEFINED BENEFIT PENSION
PLAN PROFILES
=========================================================== Appendix I
CONTENTS
Page
Civil Service Retirement and Disability Fund (CSRS and FERS) 20
Military Retirement System 31
Coast Guard Military Retirement System 36
Foreign Service Retirement and Disability Fund 40
Public Health Service Commissioned Corps Retirement System 49
National Oceanic and Atmospheric Administration Corps
Retirement System 53
Comptrollers' General Retirement Plan 57
Court of Federal Claims Judges' Retirement System 61
U.S. Court of Veterans Appeals Judges' Retirement Plan 65
Judicial Officers' Retirement Fund 69
Judicial Retirement System 73
Judicial Survivors' Annuities System 77
United States Tax Court Retirement Plan 81
United States Tax Court Survivors' Annuity Plan 85
Tennessee Valley Authority Retirement System 89
Retirement Annuity Plan for Employees of Army and Air Force
Exchange Service 93
Supplemental Deferred Compensation Plan for Members of
the Executive Management Program (Army and Air Force
Exchange Service) 97
U.S.A.F. Nonappropriated Fund Retirement Plan for
Civilian Employees 102
United States Army Nonappropriated Fund Retirement Plan 106
Retirement Plan for Civilian Employees of United States Marine
Corps Morale, Welfare, and Recreation Activities and Miscellaneous
Nonappropriated Fund Instrumentalities 111
Navy Exchange Service Command Retirement Plan 116
U.S. Navy Nonappropriated Fund Retirement Plan for
Employees of Civilian Morale, Welfare, and Recreation Activities 121
Norfolk Naval Shipyard Pension Plan 125
Federal Reserve Employees' Benefits System 129
Western Farm Credit District Employees' Retirement Plan 134
Ninth Farm Credit District Pension Plan 138
Farm Credit District of Springfield Group Retirement Plan 142
Farm Credit District of Baltimore Retirement Plan 147
Seventh Farm Credit District Retirement Plan 151
First South Production Credit Association Retirement Plan 155
Farm Credit District of Columbia, SC Retirement Plan 160
Farm Credit District of Texas Pension Plan 165
Twelfth Farm Credit District Retirement Plan 169
National Bank for Cooperatives Retirement Plan 173
This appendix lists the principal financial, actuarial, and general
terms for each of the 34 federal government defined benefit plans.
The actuarial data include two presentations of the benefit
obligation and the related funding status for each federal government
defined benefit plan.
(1) Accumulated Benefit Obligation--Statement of Financial Accounting
Standards (SFAS) No. 35, Accounting and Reporting by Defined Benefit
Plans, prescribes the measure by which private sector defined benefit
pension plans calculate the net present value of future benefit
payments. Under this actuarial measure, the obligation for future
benefits is primarily based on employees' history of pay and service
up to the date that the obligation information is reported. The
benefit obligation determined in accordance with SFAS 35 is referred
to as the Accumulated Benefit Obligation. Comparing the assets
available for plan benefits to the Accumulated Benefit Obligation
(the actuarial present value of accumulated benefits, less assets
available for benefits) yields one measure of plan funding. In
appendix I, a zero or negative total (that is, net assets available
for benefits equal or exceed the Accumulated Benefit Obligation)
indicates that the plan is fully funded, and, as such, the assets of
the plan would satisfy the actuarial present value of accumulated
plan benefits if the entity were to cease operations.
(2) Actuarial Accrued Liability--Because it is assumed that the
federal government will not cease as a going concern, a second
actuarial measure of the obligation for future benefits is presented.
It is referred to as the Actuarial Accrued Liability. The Federal
Accounting Standards Advisory Board (FASAB),\1 issued an exposure
draft, Accounting for Liabilities for the Federal Government, which
would require the use of the Actuarial Accrued Liability for those
federal government pension plans subject to FASAB standards. The
Actuarial Accrued Liability represents the present value of benefits
expected to be paid in the future to current employees and
annuitants, net of the present value of future normal cost
contributions expected to be made for and by current employees. It
includes the projected future salary increases that reflect an
estimate of the compensation levels of the individual employees
involved (including future changes attributable to general price
level, seniority, promotion, and other factors). Comparing the plan
assets to the Actuarial Accrued Liability yields a second measure of
plan funding. In appendix I, a zero or negative total (that is, plan
assets equal or exceed the Actuarial Accrued Liability) indicates
that the plan is fully funded, and, as such, assets in the
fund plus the present value of future normal cost contributions would
satisfy the actuarial present value of projected benefits to current
employees and annuitants, including estimated future salary
increases.
For both measures described above, plan asset amounts generally are
based on fair value. For the Accumulated Benefit Obligation measure,
the plan assets generally are valued at the amount that the plan
could reasonably expect to receive in a current exchange for those
assets. Most plans used the same asset amount for the Actuarial
Accrued Liability measure. However, a few plans determined the
actuarial value of their assets in a different manner for the
Actuarial Accrued Liability measure. For example, for its Actuarial
Accrued Liability measure, the Military Retirement System stated the
actuarial value of its assets at amortized cost (book value).
Note: The calculations presented in appendixes I and II may not add
due to rounding.
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
--------------------
\1 FASAB was established jointly by the Secretary of the Treasury,
the Comptroller General, and the Director of the Office of Management
and Budget to recommend accounting and reporting standards for
federal agencies.
FEDERAL DEFINED CONTRIBUTION
PENSION PLAN PROFILES
========================================================== Appendix II
CONTENTS
Page
Thrift Savings Plan (CSRS and FERS) 178
Retirement Savings Plan and Trust for Employees
of the Army and Air Force Exchange Service 181
Tennessee Valley Authority Savings and Deferral Retirement Plan 183
Federal Reserve System Thrift Plan 185
Western Farm Credit District's Thrift Deferred
Compensation Plan 187
Ninth Farm Credit District Thrift Plan 189
Farm Credit District of Springfield Thrift Plan 191
Farm Credit District of Baltimore Thrift Plan 193
Seventh Farm Credit District Retirement Savings Plan 195
Farm Credit District of Columbia, South Carolina Employee
Thrift Plan 197
Farm Credit Bank of Texas Thrift Plus Plan 200
Twelfth Farm Credit District Thrift Plan 202
Eighth Farm Credit District Employee Benefit Trust 204
National Bank for Cooperatives (CoBank) Retirement
Savings Plan 206
Uniformed Services University of the Health Sciences 208
Smithsonian Institution Defined Contribution Retirement Plan 211
USDA Graduate School Plan 213
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
DATA ON FEDERAL PENSION PLANS
========================================================= Appendix III
CONTENTS
Page
Table 1: Federal Government Defined Benefit
Plans Participants 216
Table 2: Summary of Types of Investments for Federal
Defined Benefit Plans 218
Table 3: Summary of Defined Benefit Pension Plans:
Actuarial Present Value of Accumulated Plan Benefits 220
Table 4: Summary of Defined Benefit Pension Plans:
Actuarial Present Value of Future Benefits 222
Table 5: Summary of Defined Contribution Pension Plans 226
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
H. Kent Bowden, Assistant Director
DALLAS REGIONAL OFFICE
Patrick Cogley, Auditor-In-Charge
James Smoak, Senior Auditor
Michael Coy, Auditor
Ruth Joseph, Auditor
Pamela Valentine, Auditor
GLOSSARY
=========================================================== Appendix 0
ACCRUED BENEFIT (UNIT
CREDIT) COST METHOD
------------------------------------------------------- Appendix 0:0.1
An actuarial cost method in which future service benefits are funded
as they accrue. Thus, normal cost is the present value of the units
of future benefits credited to employees for service in that year.
Prior service cost is the present value at the valuation date of the
units of future benefits credited to employees for service prior to
the valuation date. Annual normal cost for an individual for an
equal unit of benefits each year increases because the period to the
employee's retirement continually shortens and the probability of
reaching retirement increases. For a mature employee group, the
normal cost would tend to be the same each year as older employees
are replaced by younger ones.
ACCUMULATED BENEFIT
OBLIGATION
------------------------------------------------------- Appendix 0:0.2
The actuarial present value of pension benefits attributed by the
pension benefit formula to employee service rendered before a
specified date and based on service and compensation prior to that
date.
ACCUMULATED PLAN BENEFITS
------------------------------------------------------- Appendix 0:0.3
Benefits that are attributable under the provisions of a pension plan
to employees' service rendered up to the benefit information date.
ACTUARIAL ACCRUED LIABILITY
------------------------------------------------------- Appendix 0:0.4
The portion of the present value (as of the benefit information date)
of a pension plan's projected future benefit costs and administrative
expenses that exceeds the present value of future normal cost
contributions.
ACTUARIAL ASSUMPTIONS
------------------------------------------------------- Appendix 0:0.5
Estimates of future conditions affecting pension cost; for example,
mortality rate, employee turnover, compensation levels, and
investment earnings.
ACTUARIAL COST METHOD
------------------------------------------------------- Appendix 0:0.6
A recognized technique used in establishing the amount of annual
contributions or accounting charges for pension cost under a pension
plan.
ACTUARIAL PRESENT VALUE
------------------------------------------------------- Appendix 0:0.7
The current worth of amounts payable or receivable in the future. If
payment or receipt is certain, the present value is determined by
discounting the future amount or amounts at a predetermined rate of
interest. If payment or receipt is contingent on future events (for
example, survival), further discounting is necessary for the
probability that payment or receipt will occur.
ACTUARIAL VALUATION
------------------------------------------------------- Appendix 0:0.8
The process by which an actuary estimates the present value of
benefits to be paid under a pension plan and calculates the amounts
of employer contributions or accounting charges for pension cost.
AGGREGATE COST METHOD
------------------------------------------------------- Appendix 0:0.9
An actuarial cost method in which the entire unfunded cost of future
pension benefits (including benefits to be paid to employees who have
retired as of the date of the valuation) is spread over the average
future service lives of employees who are active as of the date of
valuation. In most cases this is done by the use of a percentage of
payroll. Past service cost is included in normal cost.
BENEFIT INFORMATION DATE
------------------------------------------------------ Appendix 0:0.10
The date as of which the actuarial present value of accumulated plan
benefits is presented.
CONTRIBUTORY PLAN
------------------------------------------------------ Appendix 0:0.11
A pension plan under which participants bear part of the cost.
COVERED COMPENSATION
------------------------------------------------------ Appendix 0:0.12
Moving average of the Social Security wage base computed when a
member attains normal retirement age. Some plans offer additional
retirement benefits to highly compensated employees who exceed the
average Social Security wage base.
DECREMENTS
------------------------------------------------------ Appendix 0:0.13
Assumptions as to rates of plan participants' withdrawal from the
plan, retirement, disability, and death used in making actuarial
projections.
DEFINED BENEFIT PENSION PLAN
------------------------------------------------------ Appendix 0:0.14
A pension plan that specifies a determinable pension benefit, usually
based on factors such as age, years of service, and salary.
DEFINED CONTRIBUTION PENSION
PLAN
------------------------------------------------------ Appendix 0:0.15
A pension plan that specifies the amount of contribution to be made
to the plan for each employee. Benefits at retirement are those
contributions plus whatever has been earned on them.
ENROLLED ACTUARY
------------------------------------------------------ Appendix 0:0.16
An actuary enrolled under 29 U.S.C. 1242 by a Joint Board for the
Enrollment of Actuaries established by the Secretaries of Labor and
the Treasury.
ENTRY-AGE NORMAL COST
------------------------------------------------------ Appendix 0:0.17
An actuarial cost method which assigns a "level normal cost" to each
year of service for each participant. The assumption is made under
this method that every employee entered the plan (entry age) at the
time of initial employment or at the earliest eligibility date, if
the plan had been in existence, and that contributions have been made
from the entry age to the date of the actuarial valuation.
FROZEN INITIAL LIABILITY
COST METHOD
------------------------------------------------------ Appendix 0:0.18
A variation of the entry-age normal actuarial cost method which
maintains the initial unfunded liability rather than recomputing it
each year, adjusting it only for plan amendments or changes in
actuarial assumptions.
FUTURE BENEFITS
------------------------------------------------------ Appendix 0:0.19
An estimate of the total benefits payable at retirement, including
benefits anticipated to accrue in the future as well as those
accruing before the benefit information date. Future benefits may
depend on total length of service but with pay averaged over only a
limited number of years (often the final 3 years of service).
INDIVIDUAL LEVEL PREMIUM
COST METHOD
------------------------------------------------------ Appendix 0:0.20
An actuarial cost method which assigns the cost of each employee's
pension in level annual amounts, or as a level percentage of the
employee's compensation, over the period from the inception date of a
plan (or the date of his entry into the plan, if later) to his
retirement date. Thus, past service cost is included in normal cost.
NET ASSETS AVAILABLE FOR
BENEFITS
------------------------------------------------------ Appendix 0:0.21
The difference between a plan's assets and its liabilities. For
purposes of this definition, a plan's liabilities do not include
participants' accumulated plan benefits.
NONCONTRIBUTORY PLAN
------------------------------------------------------ Appendix 0:0.22
A pension plan under which participants do not make contributions.
NORMAL COST
------------------------------------------------------ Appendix 0:0.23
The annual cost assigned, under the actuarial cost method in use, to
years subsequent to the inception of a pension plan.
PARTICIPANT
------------------------------------------------------ Appendix 0:0.24
Member of a pension plan, including active employees covered by the
plan, separated employees entitled to benefits, and retiree and
survivor annuitants.
PAY-AS-YOU-GO
------------------------------------------------------ Appendix 0:0.25
A method of paying pension benefits to retired employees as they come
due out of appropriations.
PLAN YEAR
------------------------------------------------------ Appendix 0:0.26
Calendar, policy, or fiscal year chosen by the plan on which the
records of the plan are kept.
PROJECTED BENEFIT OBLIGATION
------------------------------------------------------ Appendix 0:0.27
The actuarial present value as of a date of all benefits attributed
by the pension benefit formula to employee service rendered prior to
that date, including recognition of changes in future compensation
levels if appropriate.
SPONSOR
------------------------------------------------------ Appendix 0:0.28
In the case of a pension plan established or maintained by a single
employer, the employer; in the case of a plan established or
maintained jointly by two or more employers, an association,
committee, joint board of trustees, or other group of representatives
of the parties who have established or who maintain the pension plan.
UNALLOCATED INSURANCE
CONTRACT
------------------------------------------------------ Appendix 0:0.29
A contract with an insurance company under which related payments to
the insurance company are accumulated in an unallocated fund to be
used to meet benefit payments, either directly or through the
purchase of annuities, when employees retire. Funds in an
unallocated contract may also be withdrawn and otherwise invested.
UNFUNDED ACTUARIAL ACCRUED
LIABILITY
------------------------------------------------------ Appendix 0:0.30
The amount by which the present value of future benefits exceeds the
amount in the pension fund and the present value of future normal
cost contributions.
*** End of document. ***