Federal Pensions: Judicial Survivors' Annuities System Costs	 
(17-SEP-08, GAO-08-1104).					 
                                                                 
The Judicial Survivors' Annuities System (JSAS) was created in	 
1956 to provide financial security for the families of deceased  
federal judges. It provides benefits to eligible spouses and	 
dependent children of judges who elect coverage within 6 months  
of taking office, 6 months after getting married, 6 months after 
being elevated to a higher court, or during an open season	 
authorized by statute. Active and senior judges currently	 
contribute 2.2 percent of their salaries to JSAS, and retired	 
judges contribute 3.5 percent of their retirement salaries to	 
JSAS. Pursuant to the Federal Courts Administration Act of 1992  
(Pub. L. No. 102-572), GAO is required to review JSAS costs every
3 years and determine whether the judges' contributions fund at  
least 50 percent of the plan's costs during the 3-year period. If
the contributions fund less than 50 percent of these costs, GAO  
is to determine what adjustments to the contribution rates would 
be needed to achieve the 50 percent ratio.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-1104					        
    ACCNO:   A84241						        
  TITLE:     Federal Pensions: Judicial Survivors' Annuities System   
Costs								 
     DATE:   09/17/2008 
  SUBJECT:   Children						 
	     Cost analysis					 
	     Federal employees retirement system		 
	     Financial analysis 				 
	     Financial management systems			 
	     Fund audits					 
	     Funds management					 
	     Judges						 
	     Judicial compensation				 
	     Pensions						 
	     Retirement 					 
	     Retirement income					 
	     Systems analysis					 
	     Systems evaluation 				 
	     Financial management				 
	     Judicial Survivors Annuities Fund			 
	     Judicial Survivors Annuity System			 

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GAO-08-1104

   

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

September 2008: 

Federal Pensions: 

Judicial Survivors' Annuities System Costs: 

GAO-08-1104: 

GAO Highlights: 

Highlights of GAO-08-1104, a report to congressional committees. 

Why GAO Did This Study: 

The Judicial Survivorsï¿½ Annuities System (JSAS) was created in 1956 to 
provide financial security for the families of deceased federal judges. 
It provides benefits to eligible spouses and dependent children of 
judges who elect coverage within 6 months of taking office, 6 months 
after getting married, 6 months after being elevated to a higher court, 
or during an open season authorized by statute. Active and senior 
judges currently contribute 2.2 percent of their salaries to JSAS, and 
retired judges contribute 3.5 percent of their retirement salaries to 
JSAS. 

Pursuant to the Federal Courts Administration Act of 1992 (Pub. L. No. 
102-572), GAO is required to review JSAS costs every 3 years and 
determine whether the judgesï¿½ contributions fund at least 50 percent of 
the planï¿½s costs during the 3-year period. If the contributions fund 
less than 50 percent of these costs, GAO is to determine what 
adjustments to the contribution rates would be needed to achieve the 50 
percent ratio. 

What GAO Found: 

For the 2005 to 2007 time frame covered by this review, the 
participating judges funded approximately 54 percent of JSAS costs, and 
the federal government funded 46 percent. The increase in the 
governmentï¿½s contribution rate over the 3-year period was a result of 
increases in costs. The increase in costs reflected the combined 
effects of changes in actuarial assumptions; lower-than-expected rates 
of return on plan assets; demographic changes such as retirement, 
death, disability, new members, and pay increases; as well as an 
increase in plan benefit obligations. 

Figure: Judgesï¿½ and Federal Share of Costs: 

[refer to PDF for image] 

This figure is a stacked vertical bar graph depicting the following 
data: 

Year: 2005; 
Government's share: 38.9%; 
Judge's share: 61.1%. 

Year: 2006; 
Government's share: 49.7%; 
Judge's share: 50.3%. 

Year: 2007; 
Government's share: 50.5%; 
Judge's share: 49.5%. 

Source: JSAS actuarial valuation reports 2005-2007. 

[End of figure] 

GAO determined that an adjustment to the judgesï¿½ contribution rate was 
not needed because their average contribution share for the 3-year 
period exceeded the 50 percent minimum contribution goal specified by 
law. GAO examined the annual share of normal costs covered by judgesï¿½ 
contributions over a 9-year period and found that, on average, the 
participating judges funded approximately 60 percent of JSASï¿½s costs. 

What GAO Recommends: 

GAO is not making any recommendations in this report. The 
Administrative Office of the United States Courts (AOUSC) believes that 
GAO should be recommending a reduction in the judgesï¿½ rate. GAO 
disagrees with AOUSCï¿½s interpretation of the actï¿½s requirements. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1104]. For more 
information, contact Steven J. Sebastian, (202) 512-3406 
[email protected], Joseph A. Applebaum, (202) 512-6336, 
[email protected]. 

[End of section] 

Contents: 

Letter: 

Objectives, Scope, and Methodology: 

Results in Brief: 

Background: 

Portion of JSAS Cost Covered by Judges' Contributions Varied: 

No Adjustment Required to Contribution Rates: 

Agency Comments and Our Evaluation: 

Appendix I: Retirement Plans Available to Federal Judges: 

Appendix II: Explanation of the Method Used to Determine the Federal 
Government's Contribution Rate and Lump Sum Payout: 

Appendix III: Comments from the Administrative Office of the United 
States Courts: 

Tables: 

Table 1: Percentage Share of JSAS Normal Costs Borne by Participating 
Judges and the Federal Government, Plan Years 2005 to 2007: 

Table 2: Percentage Share of Contribution for Judges and the Federal 
Government: 

Abbreviations: 

AOUSC: Administrative Office of the United States Courts: 

COLA: cost of living adjustment: 

CSRS: Civil Service Retirement System: 

FERS: Federal Employees' Retirement System: 

JSAS: Judicial Survivors' Annuities System: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

September 17, 2008: 

The Honorable Patrick J. Leahy 
Chairman: 
The Honorable Arlen Specter: 
Ranking Member: 
Committee on the Judiciary: 
United States Senate: 

The Honorable John Conyers, Jr. 
Chairman: 
The Honorable Lamar Smith: 
Ranking Member: 
Committee on the Judiciary: 
House of Representatives: 

This report was prepared in response to the Federal Courts 
Administration Act of 1992,[Footnote 1] which requires that we review 
certain aspects of the Judicial Survivors' Annuities System (JSAS). 
JSAS is a voluntary plan, and it is the only survivor benefit plan 
available to Article III[Footnote 2] judges and certain non-Article III 
judges.[Footnote 3] JSAS provides annuities to surviving spouses and 
dependent children of (1) deceased Supreme Court justices, (2) deceased 
judges of the United States, and (3) other deceased judicial 
officials[Footnote 4] who participated in JSAS. 

The 1992 Act enhanced the benefits available from JSAS and reduced the 
amounts that participating judges were required to contribute toward 
the plan's costs. The act requires us to review JSAS costs every 3 
years and to determine whether the judges' contributions fund at least 
50 percent of the plan's costs. If the contributions fund less than 50 
percent of these costs, we are to determine what adjustments to the 
contribution rates would be needed to achieve the 50 percent ratio. 

The judicial system has determined that JSAS costs are the same as 
normal cost; for this review, we have examined the normal cost rates of 
the plan. The plan's actuary, using the plan's funding method--in this 
case, the aggregate cost method[Footnote 5]--determines the plan's 
normal cost rate and the normal cost for each plan year. The normal 
cost rate is the level percentage of future salaries that will be 
sufficient, along with investment earnings and the plan's assets, to 
pay the plan's benefits. The normal cost for a plan year is the normal 
cost rate multiplied by the participants' salaries for that year. This 
is our fifth report since the passage of the 1992 Act.[Footnote 6] 

Objectives, Scope, and Methodology: 

Our objectives were to determine whether participating judges' 
contributions for the 3 plan years ending on September 30, 2007, funded 
at least 50 percent of the JSAS costs and, if not, what adjustments in 
the contribution rates would be needed to achieve the 50 percent ratio. 
To satisfy our objectives, we used the normal cost rates determined by 
actuarial valuations of the system for each of the 3 fiscal years. We 
also examined participants' contributions, the federal government's 
contribution, and other relevant information in each plan years' JSAS 
actuarial valuation report. An independent accounting firm hired by the 
Administrative Office of the United States Courts (AOUSC) audited the 
JSAS financial and actuarial information included in the JSAS actuarial 
valuation reports, with input from the plan's actuary regarding 
relevant data, such as the actuarial present value of accumulated plan 
benefits. The plan's actuary certified those amounts that are included 
in the JSAS actuarial valuation reports. We discussed the contents of 
the JSAS actuarial valuation reports with officials from AOUSC for the 
3 plan years (2005 through 2007). 

In addition, we discussed with the plan's actuary the actuarial 
assumptions made to project future benefits of the plan. We noted that 
the JSAS actuarial valuation for plan years 2005 through 2007 used a 
0.0 percent salary increase per year, above inflation, in contrast to 
the September 30, 2007, Civil Service Retirement and Disability System 
valuation which used a 0.75 percent salary increase per year, above 
inflation. We determined that the use of 0.0 percent salary increase 
for the JSAS is reasonable, and consistent with a recent trend analysis 
we performed on judicial pay plans.[Footnote 7] We also reviewed the 
qualifications of the plan's actuary who prepared the JSAS actuarial 
valuation reports for plan years 2005 to 2007 and nothing came to our 
attention that would lead us to question the qualifications of the 
actuary. We did not independently audit the JSAS actuarial valuation 
reports or the actuarially calculated cost figures. 

We conducted this performance audit in accordance with generally 
accepted government auditing standards. Those standards require that we 
plan and perform the audit to obtain sufficient, appropriate evidence 
to provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We performed our review in Washington, D.C., from June 2008 
through August 2008. We made a draft of this report available to the 
Director of AOUSC for review and comment. 

Results in Brief: 

For the 3 years covered by our review, the participating judges' 
contributions funded about 54 percent of JSAS normal costs-slightly 
more than 61 percent and 50 percent of JSAS normal costs during the 
plan years 2005 and 2006, respectively and slightly less than 50 
percent during plan year 2007. The federal government's share of JSAS 
normal costs over the 3-year period amounted to, on average, 
approximately 46 percent. While the judges' contribution rate remained 
fixed at 2.2 percent and 3.5 percent of salaries for active 
participants and retired judges, respectively, the federal government 
contribution rate increased from 1.48 percent of salaries in plan year 
2005, to 2.5 percent of salaries in plan year 2006, and to 2.59 percent 
of salaries in plan year 2007. 

The increase in the federal government's contribution rate was the 
result of increases in JSAS normal costs. The increase in normal costs 
resulted from several combined factors, such as changes in the 
actuarial assumptions; lower than expected returns on plan assets; 
demographic changes such as retirement, death, disability, new members, 
and pay increases; as well as an increase in plan benefit obligations. 

We determined that no adjustment to the judges' contribution rate was 
needed because the judges' average contribution share for the 
statutorily designated 3 year period was approximately 54 percent, 
which exceeded the 50 percent contribution goal specified by law. From 
plan year 1999 through plan year 2007, the proportion of normal costs 
funded by judges' contributions has averaged approximately 60 percent. 

In commenting on a draft of this report, the AOUSC raised the issue of 
parity between the participating judges and the federal government with 
respect to funding of JSAS. It also noted that we did not propose a 
reduction in the contribution rates of judges given that their share of 
JSAS costs for the 3-year period covered by this report exceeded 50 
percent of the total normal costs of the program. We disagree with 
AOUSC's view as to the purpose of section 201 (i) of the Federal Courts 
Administration Act of 1992.[Footnote 8] Since enactment, we have 
interpreted this section as providing a minimum percentage of the costs 
of the program to be borne by its participants because the statute 
requires us to recommend adjustments when the judges' contributions 
have not achieved 50 percent of the costs of the fund. 

Background: 

Depending on the circumstances, judicial participants may be eligible 
for some combination of five retirement plans, including the Civil 
Service Retirement System (CSRS) or the Federal Employees' Retirement 
System (FERS). Three other separate retirement plans, described in 
appendix I, apply to various groups of judges in the federal judiciary, 
with JSAS being available to participants in all three retirement plans 
to provide annuities to their surviving spouses and children. 

History of JSAS: 

JSAS was created in 1956 to help provide financial security for the 
families of deceased federal judges. It provides benefits to surviving 
eligible spouses and dependent children of judges who participate in 
the plan. Judges may elect coverage within 6 months of taking office, 6 
months after getting married, if they were not married when they took 
office, 6 months after being elevated to a higher court, or during an 
open season authorized by statute. Active and senior judges[Footnote 9] 
currently contribute 2.2 percent of their salaries to JSAS, and retired 
judges contribute 3.5 percent of their retirement salaries to JSAS. 
Upon a judge's death, the surviving spouse is to receive an annual 
annuity that equals 1.5 percent of the judge's average annual salary 
during the 3 highest consecutive paid years (commonly known as the high-
3) times the judge's years of creditable service. The annuity may not 
exceed 50 percent of the high-3 and is guaranteed to be no less than 25 
percent. Separately, an unmarried dependent child under age 18, or 22 
if a full-time student, receives a survivor annuity that is equal to 10 
percent of the judge's high-3 or 20 percent of the judges' high- 3 
divided by the number of eligible children, whichever is smaller. JSAS 
annuitants receive an annual adjustment in their annuities at the same 
time, and by the same percentage, as any cost-of-living adjustment 
(COLA) received by CSRS annuitants. Spouses and children are also 
eligible for Social Security survivor benefits. 

Since its inception in 1956, JSAS has been amended several times. 
Because of concern that too few judges were participating in the plan, 
Congress made broad reforms effective in 1986 with the Judicial 
Improvements Act of 1985.[Footnote 10] The 1985 act (1) increased the 
annuity formula for surviving spouses from 1.25 percent to the current 
1.5 percent of the high-3 for each year of creditable service and (2) 
changed the provisions for surviving child benefits to relate benefit 
amounts to judges' high-3 rather than the specific dollar amounts 
provided in 1976 by the Judicial Survivors' Annuities Reform Act. 
[Footnote 11] In recognition of the significant benefit improvements 
that were made, the 1985 act increased the amounts that judges were 
required to contribute from 4.5 percent to 5 percent of their salaries, 
including retirement salaries. 

The 1985 act also changed the requirements for government contributions 
to the plan. Under the 1976 Judicial Survivors' Annuities Reform Act, 
the government matched the judges' contributions of 4.5 percent of 
salaries and retirement salaries. The 1985 act modified this by 
specifying that the government would contribute the amounts necessary 
to fund any remaining cost over the future lifetime of current 
participants. That amount is limited to 9 percent of total covered 
salary each year. 

In response to concerns that required contributions of 5 percent may 
have created a disincentive to participate, Congress enacted the 
Federal Courts Administration Act of 1992. Under this act, 
participants' contribution requirements were reduced to 2.2 percent of 
salaries for active and senior judges and 3.5 percent of retirement 
salaries for retired judges. The 1992 act also significantly increased 
benefits for survivors of retired judges. This increase was 
accomplished by including years spent in retirement in the calculation 
of creditable service and the high-3 salary averages.[Footnote 12] 
Additionally, the 1992 act allowed judges to stop contributing to the 
plan if they ceased to be married and granted benefits to survivors of 
any judge who died in the interim between leaving office and the 
commencement of a deferred annuity.[Footnote 13] 

As of September 30, 2007, there were 1,303 active and senior judges, 
223 retired judges, and 333 survivor annuitants covered under JSAS, 
according to the JSAS actuarial valuation report for plan year 2007. 

Calculation of Federal Share: 

JSAS is financed by judges' contributions and direct appropriations in 
an amount estimated to be sufficient to fund the future benefits paid 
to survivors of current and deceased participants.[Footnote 14] The 
plan's actuary, using the plan's funding method--in this case, the 
aggregate cost method--determines the plan's normal cost rate and the 
normal costs for each plan year. The normal cost rate is the level 
percentage of future salaries that will be sufficient, along with 
investment earnings and the plan's assets, to pay the plan's benefits 
for current participants and beneficiaries. Normal cost calculations 
are estimates and require that many actuarial assumptions be made about 
the future, including, but not limited to mortality rates, turnover 
rates, and returns on investment, salary increases, and COLA increases 
over the life spans of current participants and beneficiaries. There 
are many acceptable actuarial methods for calculating normal cost. 
Regardless of which cost method is chosen, the expected total long-term 
cost of the plan should be the same; however, year-to-year costs may 
differ, depending on the cost method used. The expected annual federal, 
actuarially recommended contribution is the product of the federal 
government's contribution rate and the participating judges' salaries. 
However, the actual federal government contribution is approved through 
annual appropriations which have varied, both above and below the 
actuarially recommended amount. 

To determine the actuarially recommended annual contribution of the 
federal government, AOUSC, which is responsible for the administration 
of the JSAS, engages an enrolled actuary[Footnote 15] to perform the 
calculation of funding needed based on the difference between the 
present value of the expected future benefit payments to participants 
and the present value of net assets in the plan. Appendix II provides 
more details on the methodology used to determine the federal 
government's contribution rate and lump sum payments. 

Portion of JSAS Cost Covered by Judges' Contributions Varied: 

For JSAS plan years 2005 through 2007, the participating judges 
contributed, on average, about 54 percent of the plan's costs. In plan 
years 2005 and 2006, participating judges paid slightly more than 61 
percent and 50 percent of JSAS normal costs, respectively, and in plan 
year 2007, they paid slightly less than 50 percent of JSAS normal 
costs. 

Table 1 shows the judges' and the federal government's contribution 
rates and shares of JSAS' normal costs (using the aggregate cost 
method, which is discussed in appendix II) for the period covered in 
our review. 

Table 1: Percentage Share of JSAS Normal Costs Borne by Participating 
Judges and the Federal Government, Plan Years 2005 to 2007: 

Source of contributions: Judges; 
JSAS normal cost rates and shares: 2005: Rate[A]: 2.32; 
JSAS normal cost rates and shares: 2005: Share[B]: 61.1; 
JSAS normal cost rates and shares: 2006: Rate[A]: 2.53; 
JSAS normal cost rates and shares: 2006: Share[B]: 50.3; 
JSAS normal cost rates and shares: 2007: Rate[A]: 2.54; 
JSAS normal cost rates and shares: 2007: Share[B]: 49.5; 
2005-2007 Average: share[C]: 53.6. 

Source of contributions: Government; 
JSAS normal cost rates and shares: 2005: Rate[A]: 1.48; 
JSAS normal cost rates and shares: 2005: Share[B]: 38.9; 
JSAS normal cost rates and shares: 2006: Rate[A]: 2.50; 
JSAS normal cost rates and shares: 2006: Share[B]: 49.7; 
JSAS normal cost rates and shares: 2007: Rate[A]: 2.59; 
JSAS normal cost rates and shares: 2007: Share[B]: 50.5; 
2005-2007 Average: share[C]: 46.4. 

Source of contributions: Total normal costs; 
JSAS normal cost rates and shares: 2005: Rate[A]: 3.80; 
JSAS normal cost rates and shares: 2005: Share[B]: 100.0; 
JSAS normal cost rates and shares: 2006: Rate[A]: 5.03; 
JSAS normal cost rates and shares: 2006: Share[B]: 100.0; 
JSAS normal cost rates and shares: 2007: Rate[A]: 5.13; 
JSAS normal cost rates and shares: 2007: Share[B]: 100.0; 
2005-2007 Average: share[C]: 100.0. 

Source: JSAS actuarial valuation reports, 2005-2007. 

[A] Normal cost expressed as a percentage of the present value of 
participant's future salaries. 

[B] Percentage of total normal cost. 

[C] This represents the average of the annual share of JSAS normal 
costs. 

[End of table] 

The judges' and the federal government's contribution rates for each of 
the 3 years shown in Table 1 were based on the actuarial valuations 
that occurred at the end of the prior year. For example, the judges' 
contribution rate of 2.32 percent and the federal government's 
contribution rate of 1.48 in plan year 2005 were based on the September 
30, 2004, valuation contained in the plan year 2005 JSAS report. 

The total normal costs expressed as a percentage of the present value 
of participant's future salaries shown in table 1 increased from 3.8 
percent in plan year 2005 to 5.13 percent in plan year 2007. The 
judges' share of the JSAS normal costs decreased from approximately 61 
percent in plan year 2005, to approximately 50 percent in plan years 
2006 and 2007. The federal government's share of JSAS normal costs 
increased, from approximately 39 percent in plan year 2005, to 
approximately 50 percent in plan years 2006 and 2007. During those same 
years, the government's contribution rates increased from 1.48 percent 
of salaries in plan year 2005 to 2.5 percent of salaries in plan year 
2006, and then to 2.59 percent in plan year 2007. The increase in the 
federal government's contribution rates was a result of the increase in 
normal costs resulting from several combined factors, such as changes 
in actuarial assumptions; lower-than-expected investment experience on 
plan assets; demographic changes--retirement, death, disability, new 
members, pay increases; as well as an increase in plan benefit 
obligations. However, the majority of the increase in the federal 
government's contribution rate is because of changes in actuarial 
assumptions and a lesser degree the government's contributing less than 
the actuarially recommended amounts, in plan years 2005, 2006, and 
2007. 

No Adjustment Required to Contribution Rates: 

Based on our review of the judges' contribution rates for the JSAS, we 
determined that there was no need for any adjustments in the judges' 
contribution rate. JSAS actuarial reports for the 3 years under review 
show that participating judges' contributed at least 50 percent of JSAS 
normal costs as required by the Federal Courts Administration Act for 
plan years 2005 and 2006, and slightly below half for plan year 2007. 
As shown in Table 1 above, the judges' average contribution for JSAS 
normal costs for this review period was approximately 54 percent, which 
exceeded the 50 percent contribution goal for judges. 

Table 2 provides a summary of the percentage share of contribution for 
judges and the federal government over the past 9 years. 

Table 2: Percentage Share of Contribution for Judges and the Federal 
Government: 

Aggregate normal costs[B]; 
Plan year: 1999: 3.92; 
Plan year: 2000: 5.04; 
Plan year: 2001: 5.07; 
Plan year: 2002: 3.66; 
Plan year: 2003: 2.97; 
Plan year: 2004: 3.00; 
Plan year: 2005: 3.80; 
Plan year: 2006: 5.03; 
Plan year: 2007: 5.13; 
Average share[A]: 100.0. 

Government's contribution rate[B]; 
Plan year: 1999: 1.50; 
Plan year: 2000: 2.60; 
Plan year: 2001: 2.60; 
Plan year: 2002: 1.34; 
Plan year: 2003: .65; 
Plan year: 2004: .68; 
Plan year: 2005: 1.48; 
Plan year: 2006: 2.50; 
Plan year: 2007: 2.59; 
Average share[A]: [Empty]. 

Judges' contribution rate[B]; 
Plan year: 1999: 2.42; 
Plan year: 2000: 2.44; 
Plan year: 2001: 2.47; 
Plan year: 2002: 2.32; 
Plan year: 2003: 2.32; 
Plan year: 2004: 2.32; 
Plan year: 2005: 2.32; 
Plan year: 2006: 2.53; 
Plan year: 2007: 2.54; 
Average share[A]: [Empty]. 

Judges' share[C]; 
Plan year: 1999: 61.7; 
Plan year: 2000: 48.4; 
Plan year: 2001: 48.7; 
Plan year: 2002: 63.4; 
Plan year: 2003: 78.0; 
Plan year: 2004: 77.3; 
Plan year: 2005: 61.1; 
Plan year: 2006: 50.3; 
Plan year: 2007: 49.5; 
Average share[A]: 59.8. 

Government's share[C]; 
Plan year: 1999: 38.3; 
Plan year: 2000: 51.6; 
Plan year: 2001: 51.3; 
Plan year: 2002: 36.6; 
Plan year: 2003: 22.0; 
Plan year: 2004: 22.7; 
Plan year: 2005: 38.9; 
Plan year: 2006: 49.7; 
Plan year: 2007: 50.5; 
Average share[A]: 40.2. 

Source: JSAS actuarial valuation reports, 1999-2007. 

[A] This represents the average of the annual share of JSAS normal 
costs. 

[B] Normal cost expressed as a percentage of the present value of 
participant's future salaries. 

[C] Percentage of total normal cost. 

[End of table] 

As shown above, the judges' contribution share, in any given year, may 
vary from the 50 percent contribution goal, either exceeding or not 
meeting this goal. The judges' average contribution share for the 9- 
year period was approximately 60 percent. Therefore, there is no reason 
to modify the judges' contribution rates at this time. 

Agency Comments and Our Evaluation: 

We requested comments on a draft of this report from the Director of 
AOUSC or his designee. In a letter dated September 10, 2008, the 
Director provided written comments on the report, which we have 
reprinted in appendix III. AOUSC also provided technical comments, 
which we have incorporated as appropriate. 

In its comments, AOUSC stated that our report showed that for a third 
consecutive triennial cycle, judges have paid a greater share of the 
cost of this system. AOUSC stated that our report showed that over the 
past 9 years, judges' contributions have funded approximately 60 
percent of the costs of JSAS. In AOUSC's view, we did not present in 
our report the downward adjustment that would be needed to the 
participating judges' contribution rates to attain the 50 percent 
level, and this omission is not consistent with Congress's intent in 
enacting the Federal Courts Administration Act of 1992. 

We disagree with AOUSC's view as to the purpose of section 201(i), of 
the Act. Since enactment, we have interpreted this section as providing 
a minimum percentage of the costs of the program to be borne by its 
participants because the statute requires us to recommend adjustments 
when the judges' contributions have not achieved 50 percent of the 
costs of the fund. We do not view the section as calling for parity 
between the participants and the federal government with respect to 
funding the program. For the 3-years covered by this review, we 
determined and reported that judges' contributions represented 
approximately 54 percent of the normal costs of JSAS, and therefore, an 
adjustment to the judges' contribution rates was not needed under the 
existing legislation because the judges' contribution achieved 50 
percent of JSAS costs. We have consistently applied this interpretation 
of the Act's requirements in all of our previously mandated reviews. 

However, if one were to interpret the Act as calling for an equal 
sharing of the program's cost between participants and the government, 
then, on the basis of the information contained in the JSAS actuarial 
reports over the last 9 years, participating judges' future 
contributions would have to decrease a total of 0.32 percentage points 
below the current 2.2 percent of salaries for active judges and senior 
judges and 3.5 percent for retired judges in order to fund 50 percent 
of JSAS costs over the last 9 years. If the decrease were distributed 
equally among the judges, those currently contributing 2.2 percent of 
salaries would have to contribute 1.88 percent, and those currently 
contributing 3.5 percent of retirement salaries would have to 
contribute 3.18 percent. 

We have not declined to include downward adjustment information, as 
AOUSC states, but we are not recommending such an adjustment because of 
our interpretation of the statute's requirements. 

We are sending copies of this report to interested congressional 
committees and the Director of AOUSC. Copies of this report will be 
made available to others upon request. This report is also available at 
no charge on the GAO Web site at [hyperlink, http://www.gao.gov]. 
Please contact Steven J. Sebastian at (202) 512-3406 
[email protected], or Joseph A. Applebaum at (202) 512-6336 
[email protected], if you or your staff have any questions concerning 
this report. Contact points for our Offices of Congressional Relations 
and Public Affairs may be found on the last page of this report. Key 
contributors to this report were Julie Phillips, Assistant Director; 
Jehan Abdel-Gawad; and Kwabena Ansong. 

Signed by: 

Steven J. Sebastian: 
Director: 
Financial Management and Assurance: 

Signed by: 

Joseph A. Applebaum: 
Chief Actuary: 
Applied Research and Methods: 

[End of section] 

Appendix I: Retirement Plans Available to Federal Judges: 

The Administrative Office of the United States Courts (AOUSC) 
administers three retirement plans for judges in the federal judiciary. 

* The Judicial Retirement System automatically covers United States 
Supreme Court justices; federal circuit and district court judges; and 
territorial district court judges; and is available, at their option, 
to the Administrative Assistant to the Chief Justice; the Director of 
AOUSC; and the Director of the Federal Judicial Center. 

* The Judicial Officers' Retirement Fund is available to bankruptcy and 
full-time magistrate judges. 

* The United States Court of Federal Claims Judges' Retirement System 
is available to the United States Court of Federal Claims judges. 

Also, judges who are not automatically covered under the Judicial 
Retirement System may opt to participate in the Federal Employees' 
Retirement System (FERS)[Footnote 16] or elect to participate in the 
Judicial Retirement System for bankruptcy judges, magistrate judges, or 
United States Court of Federal Claims judges. 

Judges who retire under the judicial retirement plans generally 
continue to receive the full salary amounts that were paid immediately 
before retirement, assuming the judges met the age and service 
requirements. 

Retired territorial district court judges generally receive the same 
cost-of-living adjustment that Civil Service Retirement System retirees 
receive, except that their annuities cannot exceed 95 percent of an 
active district court judge's salary. United States Court of Federal 
Claims judge retirees continue to receive the same salary payable to 
active United States Court of Federal Claims judges. 

Those in the Judicial Retirement System and the United States Court of 
Federal Claims Judges' Retirement System are eligible to retire when 
the number of years of service and the judge's age total at least 80, 
with a minimum retirement age of 65, and service ranging from 10 to 15 
years. Those in the Judicial Officers' Retirement Fund are eligible to 
retire at age 65 with at least 14 years of service or may retire at age 
65 with 8 years of service, on a less than full salary retirement. 
Participants in all three judicial retirement plans are required to 
contribute to and receive Social Security benefits. 

[End of section] 

Appendix II: Explanation of the Method Used to Determine the Federal 
Government's Contribution Rate and Lump Sum Payout: 

Aggregate funding method. This method, as used by the Judicial 
Survivors' Annuities System (JSAS) plan, defines the normal cost rate 
as the level percentage of future salaries that will be sufficient, 
along with investment earnings and the plan's assets, to pay the plan's 
benefits for current participants and beneficiaries. The following 
discussion is intended to illustrate the use of the aggregate funding 
method. 

For plan year 2007, the JSAS's actuary estimated the present value of 
future benefits for participating judges and beneficiaries was 
$649,628,473 and the JSAS had assets amounting to $491,788,627. The 
difference between these amounts, $157,839,846, must be financed 
through future contributions to be paid by the participating judges and 
the federal government. Using the same assumptions as used to estimate 
the present value of future benefits, the actuary estimated the present 
value of participating judges' future salaries to be $3,078,464,410 so 
that the amount to be financed represented 5.13% ($157,839,846 divided 
by $3,078,464,410) of the future participating judges' salaries. This 
percentage is the JSAS's normal cost rate. If all the actuarial 
assumptions proved exactly correct, then a total contribution of 5.13% 
of the participating judges' salaries annually would make up the 
difference between the JSAS's future payments and its assets (the 
$157,839,846 mentioned above). The JSAS's actuary also estimated the 
present value of participating judges' future contributions to be 
$78,123,909. Thus the federal government's share for plan year 2007 is 
the difference between $157,839,846 and $78,123,909, or $79,715,937. 

Federal government's actuarially recommended contribution rate. The 
federal government's actuarially recommended contribution rate is equal 
to the federal government's share of future financing ($79,715,937) 
divided by the present value of the participating judges' future 
salaries ($3,078,464,410). For the plan year 2007 the rate was 2.59% 
($79,715,937 divided by $3,078,464,410). Thus, the actuarially 
recommended federal contribution is the product of the federal 
government's actuarially recommended contribution rate and the 
participating judges' salaries. The federal government's contribution 
is approved through an annual appropriation. It has varied, both above 
and below the actuarially recommended amount. 

Lump sum payout. Under JSAS, a lump sum payout may occur upon the 
dissolution of marriage either through divorce or death of spouse. 
Payroll contributions cease, but previous contributions remain in JSAS. 
Also, if there is no eligible surviving spouse or child upon the death 
of a participating judge, the lump sum payout to the judge's designated 
beneficiaries is computed as follows: 

* Lump sum payout equals the total amount paid into the plan by the 
judge plus 3 percent annual interest accrued, less 2.2 percent of 
salaries for each participating year (forfeited amount). 

In effect, the interest plus any amount contributed in excess of 2.2 
percent of judges' salaries will be refunded. 

[End of section] 

Appendix III: Comments from the Administrative Office of the United 
States Courts: 

Administrative Office Of The United States Courts: 
"A Tradition Of Service To The Federal Judiciary" 
James C. Duff, Director: 
Washington, D.C. 20544: 

September 10, 2008: 

Mr. Steven J. Sebastian: 
Director, Financial Management and Assurance: 
U.S. Government Accountability Office: 
441 G Street, N.W.
Washington, D.C. 20548: 

Dear Mr. Sebastian: 

Thank you for the opportunity to review the draft report entitled 
Federal Pensions: Judicial Survivors' Annuities System Costs (GAO-08-
1104). The report accurately reflects the government's and 
participating judges' contribution rates into the Judicial Survivors' 
Annuities System (JSAS), and shows that for a third consecutive 
triennial cycle judges have paid a greater share of the cost of this 
system. 

As reported over the past nine years, judges' contributions have funded 
approximately 60 percent of the cost of JSAS. The report states that 
GAO's responsibility is to recommend a change if judges' contributions 
are less than 50 percent; however, Section 201(i) of Public Law 102-
572, the "Federal Courts Administration Act of 1992," directs the 
Comptroller General to report to Congress at the end of each three-
fiscal-year period as to whether the judges' contributions account for 
50 percent of the costs of the Judicial Survivors' Annuities Fund and 
to determine what adjustments would be needed to achieve the 50 percent 
figure. In view of the plain language of section 201(i), it would be 
useful to include an explanation as to why GAO has declined to 
determine the appropriate downward adjustment to judges' contribution 
rates to attain the 50 percent level. 

Additionally, we have provided separately a few technical comments. 

We appreciated the review team's professionalism in working with the 
Judiciary on this study. 

Sincerely, 

Signed by: 

James C. Duff: 
Director: 

[End of section] 

Footnotes: 

[1] Pub. L. No. 102-572, 106 Stat. 4506 (Oct. 29, 1992). 

[2] This refers to judicial positions defined under Article III of the 
U.S. Constitution which establishes the judicial branch as one of the 
three separate and distinct branches of the federal government. The 
other two are the legislative and executive branches. 

[3] Non-Article III judges are judges of the U.S. territories, 
bankruptcy and magistrate judges, and judges of the U.S. Court of 
Federal Claims. 

[4] As noted in appendix I, virtually all of those eligible to 
participate in JSAS are judges. For simplicity, we will refer to the 
collective group of judicial participants as "judges" throughout this 
report. 

[5] The aggregate cost method is essentially the spreading of any 
unfunded present value of future benefits as a level percentage of the 
future payroll. 

[6] GAO, Federal Pensions: Judicial Survivors' Annuities System Costs, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-955] (Washington, 
D.C.: September 16, 2005); GAO, Federal Pensions: Judicial Survivors' 
Annuities System Costs, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-763] (Washington, D.C.: June 26, 2002); Federal 
Pensions: Judicial Survivors' Annuities System Costs, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-00-125] (Washington, D.C.: 
May 25, 2000); and Federal Pensions: Judicial Survivors' Annuities 
System Costs and Benefit Levels, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/GGD-97-87] (Washington, D.C.: June 27, 1997). 

[7] GAO, Human Capital: Trends in Executive and Judicial Pay, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-708] (Washington, 
D.C.: June 2006). 

[8] Section 201 (i) says: "the Comptroller General of the United States 
shall, at the end of each 3-fiscal year period, determine whether the 
contributions by judicial officialsï¿½during that 3-year period accounted 
for 50 percent of the costs of the Judicial Survivors' Annuities fund 
and if not, then what adjustments in the contribution ratesï¿½should be 
made to achieve that 50 percent figure." See 28 U.S.C. ï¿½376 (w). 

[9] Article III judges, who are eligible to retire but continue to hear 
cases on a full or part-time basis, are referred to as senior judges. 

[10] Pub. L. No. 99-336, 100 Stat. 633 (June 19, 1986). 

[11] Pub. L. No. 94-554, 90 Stat. 2603 (Oct. 19, 1976). 

[12] The 1992 Act changes include senior judges and judges who resign 
from their offices. 

[13] A judge who is not entitled to receive an immediate annuity upon 
leaving office, but who is eligible to receive a deferred annuity at a 
later date, may--upon written notification--remain in JSAS by 
contributing a sum equal to 3.5 percent of the deferred annuity. 

[14] JSAS investments are made only in U.S. Treasury securities. 

[15] An enrolled actuary is an individual who has been licensed by the 
Joint Board for the Enrollment of Actuaries to perform a variety of 
actuarial tasks that the Employee Retirement Income Security Act of 
1974 mandates for private sector defined benefit pension plans in the 
United States. 

[16] FERS is open and available to new federal employees including 
judges. The Civil Service Retirement System (CSRS) has been closed to 
new employees since December 31, 1983. However, a newly appointed judge 
who had prior federal service (at least 5 years of service before 
January 1, 1987) may still elect CSRS. 

[End of section] 

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