Federal Retirement: Federal and Private Sector Retirement Program
Benefits Vary (Chapter Report, 04/07/97, GAO/GGD-97-40).

Pursuant to congressional requests, GAO reviewed federal and nonfederal
retirement programs, focusing on: (1) an update of the reports on
nonfederal retirement programs GAO completed for Congress when the
Federal Employees Retirement System (FERS) was being designed; and (2) a
comparison of current nonfederal programs with FERS and the Civil
Service Retirement System (CSRS). GAO did not independently verify the
accuracy of the Watson Wyatt Worldwide database or the benefit amounts
calculated.

GAO noted that: (1) the results of GAO's review revealed that there is
no clear, bottom-line answer to the question of whether FERS and CSRS
offer greater benefits, or smaller benefits, than private sector
retirement programs; (2) the benefits available from FERS and CSRS can
be smaller, similar, or greater than the average of the programs in the
contractor's private sector employer database, depending on a number of
factors and how these factors interact with the retirement programs'
designs; (3) chief among these factors are the: (a) ages at which
employees retire and at which programs provide unreduced benefits; (b)
extent to which employees and employers contribute to the defined
contribution plans that are integral components of FERS and most private
sector programs; and (c) impact of cost-of-living adjustment practices
on benefit amounts over the long term; (4) in fact, FERS and CSRS can
provide quite different benefit amounts because of their different
designs; and (5) as a rule, greater benefits are available from FERS
than from CSRS, but FERS employees must contribute higher percentages of
their salaries to receive the greater benefit amounts.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-97-40
     TITLE:  Federal Retirement: Federal and Private Sector Retirement 
             Program Benefits Vary
      DATE:  04/07/97
   SUBJECT:  Employee retirement plans
             Retirement pensions
             Non-government enterprises
             Federal employees
             Cost of living
             Federal employee retirement programs
             Payments
             Social security benefits
IDENTIFIER:  Civil Service Retirement System
             Federal Employees Retirement System
             Social Security Program
             Federal Thrift Savings Plan
             Civil Service Retirement Offset System
             Consumer Price Index
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1997

FEDERAL RETIREMENT - FEDERAL AND
PRIVATE SECTOR RETIREMENT PROGRAM
BENEFITS VARY

GAO/GGD-97-40

Federal and Private Retirement Benefits

(410014)


Abbreviations
=============================================================== ABBREV

  BLS - Bureau of Labor Statistics
  CBO - Congressional Budget Office
  COLA - cost-of-living adjustment
  CPI - Consumer Price Index
  CSRS - Civil Service Retirement System
  DB - defined benefit
  DC - defined contribution
  FERS - Federal Employees Retirement System
  IRS - Internal Revenue Service
  MRA - minimum optional retirement age
  OPM - Office of Personnel Management
  TSP - Thrift Savings Plan

Letter
=============================================================== LETTER


B-271057

April 7, 1997

The Honorable Ted Stevens
Chairman, Committee on Appropriations
United States Senate

The Honorable Fred Thompson
Chairman, Committee on Governmental Affairs
United States Senate

The Honorable John L.  Mica
Chairman, Subcommittee on Civil Service
Committee on Government Reform and Oversight
House of Representatives

This report is in response to requests by the Chairmen of the former
Senate Subcommittee on Post Office and Civil Service and the House
Subcommittee on Civil Service that we make a series of analyses of
federal and nonfederal retirement programs.  As part of the requests,
we were asked to (1) update the reports on nonfederal retirement
programs we completed for Congress when the Federal Employees
Retirement System (FERS) was being designed and (2) compare current
nonfederal programs with FERS and the Civil Service Retirement System
(CSRS).  As agreed with the Subcommittees, this report provides
comparative information on the features and benefit levels of
retirement programs offered by primarily large private sector
employers, FERS, and CSRS.  We are not making any recommendations in
this report. 

As agreed with your representatives, unless you publicly 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 (1) the Ranking Minority Members of the
Senate Committees on Appropriations and Governmental Affairs and of
the House Subcommittee on Civil Service, (2) other appropriate
congressional committees, (3) the Director of the Office of Personnel
Management, (4) the Executive Director of the Federal Retirement
Thrift Investment Board, and (5) other interested parties.  We will
also make copies available to others on request. 

Major contributors to this report were Robert E.  Shelton, Assistant
Director, and Laura G.  Shumway, Senior Evaluator.  Please contact me
at (202) 512-8676 if you or your staff have any questions concerning
this report. 

L.  Nye Stevens
Director, Federal Management and
 Workforce Issues


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Over the years, considerable debate has occurred over how retirement
programs for federal employees compare with the programs available to
other employees in the United States.  The Chairmen of the former
Senate Subcommittee on Post Office and Civil Service and the House
Subcommittee on Civil Service asked GAO to compare the features and
benefit levels of the federal government's two largest retirement
programs for its civilian employees--the Federal Employees Retirement
System (FERS) and the Civil Service Retirement System (CSRS)--with
those of private sector retirement programs. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

Thousands of private sector retirement programs exist, covering
millions of employees.  According to the Bureau of Labor Statistics,
over 75 percent of the full-time employees in private establishments
with 100 or more employees and about one-half of the full-time
employees in private establishments with 99 or fewer employees are
covered by at least one retirement program to which their employers
contribute in addition to the Social Security program.  The remaining
employees are covered by Social Security, but not by retirement
programs to which their employers contribute. 

The designs of private sector retirement programs vary greatly,
although all have the Social Security program as their base.  Some
employers' programs have both defined benefit and defined
contribution plans.  Defined benefit plans specify formulas for
computing benefit amounts payable at retirement typically based on an
employee's age, length of plan participation, and salary history.  In
contrast, defined contribution plans specify amounts that the
employer (and employees, if required) will contribute to the plan. 
The accumulated contributions, plus investment earnings, constitute
the source of employee retirement benefits from a defined
contribution plan.  Also, some employers' programs have defined
benefit plans only, and others have defined contribution plans only
in addition to Social Security. 

Together, FERS and CSRS covered about 2.8 million federal employees
at the beginning of fiscal year 1995.  The design of FERS consists of
three parts--Social Security; a defined benefit plan; and a defined
contribution plan, the Thrift Savings Plan (TSP), to which the
federal government and most of its employees contribute.  CSRS is a
stand-alone defined benefit plan.  Employees in CSRS may contribute
to the FERS defined contribution plan, but the government does not
make any contributions to their accounts.  Employees in CSRS are not
covered by Social Security through their federal employment.  In
general, FERS covers employees who first entered federal service
after 1983, and CSRS covers employees who entered earlier. 

GAO and the Congressional Budget Office (CBO) contracted at different
times with Watson Wyatt Worldwide, a company that collects benefits
data from a wide range of employers, to obtain information on the
features and benefit levels of the private sector retirement programs
included in this report.  Watson Wyatt provided this information to
GAO and CBO from its 1993 COMPARISON database, which was the latest
database available at the time the GAO contract was awarded.  The
database contained information on the retirement programs of
primarily large private sector employers.  About one-half of these
employers were Watson Wyatt clients; the remainder were from a survey
of U.S.  employers included in Fortune magazine's list of 1,000 top
employers.  Therefore, the features and benefit levels developed from
the database could not be generalized to the private sector as a
whole. 

The database described the features of 661 employers' retirement
programs.  Of these programs, sufficient information was available to
allow the contractor to determine the benefit amounts provided by 435
employers' programs.  Of the 435 employers, 61 percent had 2,500 or
more employees, and 37 percent had fewer than 2,500 employees.  The
remaining 2 percent of the employers did not provide size
information.  About 70 percent of the 435 employers provided both
defined benefit and defined contribution plans, about 24 percent of
the employers had defined contribution plans only, and about 6
percent had defined benefit plans only. 

To see how employees with varying ages and years of service would
fare under FERS, CSRS, and private sector retirement programs, the
contractor calculated the benefit amounts potentially available to
five illustrative employees at three different salary levels.  In
making these calculations, the contractor included the benefit
amounts from the defined benefit and defined contribution plans to
which employers made contributions as well as the amounts from Social
Security.  For private sector employers, the contractor made and then
averaged separate calculations for each of the 435 private sector
retirement programs.  Because defined contribution plan benefits
accumulate as individual account balances, the contractor converted
these balances to annuities so they could be compared with the
benefits provided by defined benefit plans.  Also the benefit amounts
calculated were based on a single set of assumptions about salary
histories, return on investments, the conversion of defined
contribution plan amounts, and the rate of inflation after
retirement. 

GAO believes the assumptions used are reasonable because they either
were those used by the Office of Personnel Management (OPM) in its
latest actuarial valuations, were based on standards used in the
benefits field, or were necessary to provide a common basis of
comparison.  However, different assumptions would change the relative
magnitude of results between programs and the absolute magnitude over
all programs.  By varying the assumptions, it could also be possible
in some circumstances to change the relative rankings between
programs.  For example, if the salary histories included other types
of compensation in addition to base pay, the private sector benefit
amounts could have been greater because at least one-half of the 435
private sector retirement programs would include overtime, bonuses,
and commissions in their benefit calculations.  Also, if the rate of
salary growth in the last years of employees' careers had been
greater, the benefit amounts from FERS, CSRS, and the private sector
programs could have been smaller.  However, because FERS and CSRS use
the average of the highest 3 years' salaries in their benefit
calculations and about one-half of the 435 private sector programs
use the highest 5 years' salaries, the benefit amounts from FERS and
CSRS would not decrease as much as the private sector amounts. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The results of GAO's review revealed that there is no clear,
bottom-line answer to the question of whether FERS and CSRS offer
greater benefits, or smaller benefits, than private sector retirement
programs.  The benefits available from FERS and CSRS can be smaller,
similar, or greater than the average of the programs in the
contractor's private sector employer database, depending on a number
of factors and how these factors interact with the retirement
programs' designs.  Chief among these factors are (1) the ages at
which employees retire and at which programs provide unreduced
benefits, (2) the extent to which employees and employers contribute
to the defined contribution plans that are integral components of
FERS and most private sector programs, and (3) the impact of
cost-of-living adjustment practices on benefit amounts over the long
term (see ch.  2).  In fact, FERS and CSRS can provide quite
different benefit amounts because of their different designs.  As a
rule, greater benefits are available from FERS than from CSRS, but
FERS employees must contribute higher percentages of their salaries
to receive the greater benefit amounts. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      COMPARATIVE BENEFITS DEPEND
      GREATLY ON THE AGES AT WHICH
      EMPLOYEES RETIRE
-------------------------------------------------------- Chapter 0:4.1

One factor that exerts a major influence on the comparative benefit
amounts available from FERS, CSRS, and private sector programs is the
age at which employees retire.  Both federal programs and virtually
all of the private sector programs in the contractor's database allow
employees to retire as early as age 55.  However, FERS and CSRS were
designed to provide unreduced benefits at age 55 to employees who
serve at least a 30-year career in the federal service.  In contrast,
few of the private sector programs provide unreduced benefits at age
55, regardless of length of service.  Because the private sector
defined benefit plans generally impose reductions in accrued benefits
for employees who elect to retire at age 55, greater benefits are
generally available under the federal programs at age 55 with 30
years of service than the average of the benefits available under the
private sector programs in the database. 

Benefits available from FERS could be 65 percent of an employee's
final salary at age 55 with 30 years of service; CSRS benefits would
be 53 percent of final salary, which is also the equivalent of 56.25
percent of the average of the highest 3 years' salaries.  Benefits
available from the private sector programs in the database averaged
19 percent of an employee's final salary at age 55 with 30 years of
service for programs with defined benefit plans only, 26 percent for
programs with defined contribution plans only, and 45 percent for
programs with both defined benefit and defined contribution plans. 
Benefits available from FERS at age 55 are greater than benefits
available from CSRS primarily because the FERS defined benefit plan
adds a "Social Security supplement" to the benefits paid to employees
who retire before age 62.  (See fig.  2.1.)

Although FERS and CSRS provide unreduced retirement benefits to
employees who retire at age 55 with 30 years of service, federal
employees, on average, have been considerably older than age 55 when
they retired.  According to OPM, in 1995 employees who retired under
CSRS averaged about age 62 with 30 years of service, and employees
who retired under FERS averaged about age 63 with 14 years of
service.  The contractor's database did not include information on
the ages at which employees choose to retire in the private sector
programs. 

The relative benefit amounts available to federal and private sector
employees who elect to wait to retire at age 62 or older, or who are
not eligible to retire at earlier ages, change considerably from the
age 55 comparisons.  When employees retire at age 62 or older with 30
years of service, which is the actual average for employees who
retired under CSRS in 1995, the relative benefit amounts available
from CSRS are generally comparable to those available from private
sector programs that include defined benefit or defined contribution
plans only.  However, the CSRS benefit amounts available with 30
years of service are smaller than those available from FERS and the
average of the private sector programs that include both defined
benefit and defined contribution plans.  The benefits available from
CSRS for employees who retire with 30 years of service are about 53
percent of final salary. 

Regardless of program design, the average benefits available at
retirement from the private sector programs in the contractor's
database were greater than CSRS benefits for employees who retired at
age 62 or older with 20 years of service.  For example, CSRS benefits
for employees who retired at age 62 with 20 years of service were 36
percent of an employee's final salary, while the benefits available
from private sector programs averaged 63 percent for programs with
both defined benefit and defined contribution plans, 43 percent for
programs with defined contribution plans only, and 40 percent for
programs with defined benefit plans only.  This is the case because
Social Security benefits are available to private sector retirees at
age 62, while CSRS retirees receive no Social Security benefits from
their federal employment.  (See figs.  2.2 through 2.5.)

Benefits available from FERS for employees who retire at age 62 or
older are generally comparable to the average benefits available from
private sector programs that include both defined benefit and defined
contribution plans--as did about 70 percent of the employers in the
contractor's database.  The FERS benefits are greater than the
average benefits from private sector programs that include defined
benefit or defined contribution plans only.  The benefits available
from FERS for employees who retire at age 62 with 20 years of service
are about 66 percent of an employee's final salary, and the benefits
available from FERS for those employees who retire at age 62 with 30
years of service are about 81 percent.  (See figs.  2.2 through 2.5.)


      BENEFIT AMOUNTS VARY BY HOW
      MUCH EMPLOYEES CONTRIBUTE TO
      DEFINED CONTRIBUTION PLANS
-------------------------------------------------------- Chapter 0:4.2

A second factor that has a major influence on benefit amounts
actually paid by FERS and the private sector programs that include
defined contribution plans is the amounts employees elect to
contribute to defined contribution plans during their working years. 
The FERS defined contribution plan and most private sector defined
contribution plans provide for employer-matching of some portion of
employee contributions.  Therefore, employees who contribute the
amounts necessary to receive maximum employer contributions will
receive greater benefits at retirement than employees who elect not
to contribute to the defined contribution plan or who contribute
smaller amounts to the plan.  GAO estimates that the average
retirement benefits from the TSP component of FERS and the defined
contribution plan component of private sector programs in the
contractor's database could be 10 times higher for employees who
contribute enough to receive maximum employer contributions
throughout their careers than the benefits earned by employees who
make no contributions to their defined contribution plans (see table
2.1).  For example, employees who retire under FERS at age 62 with 30
years of service and who contributed enough throughout their careers
to receive the maximum employer contributions to the FERS defined
contribution plan would receive about 80 percent of their final
salaries at retirement--30 percent would be from the defined
contribution plan, 31 percent from the defined benefit plan, and 19
percent from Social Security.  If those same employees made no
contributions to the FERS defined contribution plan, they would
receive about 53 percent of final salary at retirement--3 percent
would be from the defined contribution plan, 31 percent from the
defined benefit plan, and 19 percent from Social Security (see fig. 
2.14). 

CSRS requires most employees to contribute 7 percent of their
salaries toward program costs.  In contrast, employees in FERS
generally are required to contribute 0.8 percent of their salaries to
the defined benefit portion of the program, and over 90 percent of
the private sector defined benefit plans in the contractor's database
required no employee contributions.  However, FERS participants and
private sector employees are required to contribute 6.2 percent of
their salaries to Social Security, up to the Social Security salary
ceiling, which tends to make these employees' total required
contributions to Social Security and defined benefit plans generally
comparable to the amounts most employees contribute under CSRS.  In
addition, for employees to receive maximum employer contributions to
their defined contribution plans, FERS employees would need to
contribute 5 percent of their salaries and the private sector
employees covered by programs in the contractor's database would need
to, on average, contribute 6 percent of their salaries to receive
maximum employer contributions to their defined contribution plans. 
Accordingly, FERS and private sector employees in programs that
include both defined benefit and defined contribution plans must
generally contribute higher amounts to receive maximum employer
contributions to their retirement benefits than do CSRS employees. 


      COST-OF-LIVING ADJUSTMENT
      PRACTICES CAUSE DIFFERENCES
      IN LONG-TERM BENEFIT AMOUNTS
-------------------------------------------------------- Chapter 0:4.3

The third and final factor GAO examined that exerts a major influence
on the benefit amounts available to employees during their retirement
under federal and private sector retirement programs is
cost-of-living adjustment practices.  Significant differences exist
within and among the federal and private sector programs regarding
the adjustment practices.  Social Security benefits, which are part
of the retirement programs for FERS and private sector employees, are
adjusted annually by the full increase in the Consumer Price Index
(CPI).  This adjustment practice can provide greater increases in
benefits than the adjustment practices applicable to the FERS defined
benefit plan and private sector defined benefit plans, on average. 
The CSRS statute requires benefit adjustments to maintain retirees'
purchasing power in the same manner as Social Security.  However,
limitations on CSRS benefit adjustments over a 10-year period in the
1980s and 1990s caused the adjustments actually given retirees to
cover about 80 percent of the increase in the CPI during this same
period.  By their nature, the FERS and private sector defined
contribution plan benefits are not subject to cost-of-living
adjustments. 

In private sector programs, wide variation exists in how
cost-of-living adjustments are provided.  According to the
contractor, available cost-of-living adjustment information for
private sector defined benefit plans indicates that retirees have not
received adjustments that cover the full increase in the CPI. 
Retirees covered by the retirement programs of the 50 largest
employers in the contractor's database, on average, received
adjustments that offset less than 20 percent of the price increase
over 20 years of retirement.  Nevertheless, the total benefits
available from FERS and the average of the private sector programs
that have both defined benefit and defined contribution plans
continued to exceed the benefit amounts paid from CSRS 20 years after
employees retired at age 62 or older with 20 years of service, even
though full CSRS adjustments were made over the 20 years. 

For example, with retirement at age 62 with 20 years of service, the
private sector employees covered by programs in the contractor's
database with both defined benefit and defined contribution plans
began retirement with benefits that were 27 percent of final salary
higher than the CSRS benefits and that continued to be higher 20
years later by 3 percent of final salary.  The benefits available
from FERS also continued to be higher than CSRS 20 years later by
about 9 percent.  With retirement at age 65 with 20 years of service,
the private sector retiree began retirement with benefits that were
35 percent of final salary higher than CSRS benefits and that
continued to exceed CSRS by 8 percent of final salary after 20 years. 
The total benefits available after 20 years of retirement for FERS
employees who retired at age 65 with 20 years of service were higher
by about 8 percent of final salary than the benefits available to
their private sector counterparts who were covered by programs in the
database with both defined benefit and defined contribution plans. 
(See figs.  2.17 and 2.18.)

For employees who retired at age 62 or older with 30 years of
service, the benefits available at retirement were higher under FERS
and the private sector programs that include both defined benefit and
defined contribution plans than the benefits available under CSRS. 
However, the following data show that this higher benefit level was
not maintained after 10 and 20 years of retirement: 

  -- Ten years after employees retired at age 62 with 30 years of
     service, FERS benefits continued to exceed CSRS benefits by
     about 14 percent of final salary, while the benefits available
     from the private sector programs in the database were similar to
     the CSRS benefits. 

  -- Twenty years after employees retired at age 62 with 30 years of
     service, the benefits available from FERS and CSRS were similar,
     but both FERS and CSRS benefits exceeded the benefits available
     from the private sector programs with both defined benefit and
     defined contribution plans by about 10 percent of final salary. 

  -- Twenty years after employees retired at age 65 with 30 years of
     service, the benefits available from CSRS and the private sector
     programs with both defined benefit and defined contribution
     plans were similar at about 50 percent of final salary, but FERS
     continued to exceed them at about 60 percent.  (See figs.  2.19
     and 2.20.)

For employees who retired before age 62, benefits available from FERS
were again higher by nearly 10 percent of final salary than the
average benefits available from private sector programs with defined
benefit and defined contribution plans after 10 and 20 years of
retirement, but these benefits were about 4 percent of final salary
lower than the fully adjusted CSRS benefits by the 20-year point. 
However, if the limitations imposed on CSRS adjustments during much
of the 1980s and 1990s continue to be made in the future, CSRS
benefits for pre-age 62 retirees after 20 years of retirement (1)
would be lower than benefits available from FERS by 4 percent of
final salary and (2) would exceed by 6 percent of final salary the
average benefits available from private sector programs with defined
benefit and defined contribution plans.  (See fig.  2.16.)


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO is not making any recommendations in this report. 


   AGENCY AND CONTRACTOR COMMENTS
   AND GAO'S EVALUATION
---------------------------------------------------------- Chapter 0:6

Watson Wyatt Worldwide and the Federal Retirement Thrift Investment
Board (the Thrift Board) provided oral comments on the draft of this
report, and OPM provided written comments.  The Watson Wyatt official
said that GAO's use and interpretations of their database and
analyses were accurate and appropriate.  The officials of Watson
Wyatt, the Thrift Board, and OPM agreed with GAO's conclusion that
there is no definitive answer to the question of whether federal
retirement programs offer greater or smaller benefits than private
sector programs.  The Thrift Board and OPM officials noted that it is
very difficult to compare varied federal and private sector
retirement programs.  They said, and GAO agrees, that GAO's analyses
and conclusions are dependent on (1) the database used; (2) the age
and service characteristics of the illustrative employees; and (3)
the assumptions made about salary histories, return on investments,
the conversion of defined contribution plan amounts at retirement to
annuities, and the rate of inflation. 

GAO believes that the database and illustrative employees used and
the assumptions made are reasonable because they either were those
used by OPM in its latest actuarial valuations, were based on
standards used in the benefits field, or were necessary to provide a
common basis of comparison.  GAO made minor modifications to this
report to clarify that the use of different databases, illustrative
employees, and assumptions would have changed the relative magnitude
of benefits available among retirement programs as well as the levels
of benefits provided by all programs.  Using such data could
possibly, in some circumstances, change the relative rankings between
programs.  However, while GAO believes that no one database or set of
assumptions could fully capture the range of private sector programs
and employees' experiences, it also believes that using different
databases and assumptions would not have changed GAO's conclusion
that no definitive answer exists to the question of whether federal
programs offer greater or smaller benefits than private sector
programs. 

OPM also commented that the GAO analyses and conclusions might be
better understood if additional information on the database,
illustrative employees, and the assumptions were provided in the
report ( i.e., the executive summary and chapter 1 of the report). 
GAO agreed that additional information would help the reader
understand its analyses and conclusions and provided more details in
the executive summary and the objective, scope, and methodology
section of chapter 1. 

Officials of Watson Wyatt and the Thrift Board provided editorial and
technical comments that GAO incorporated in the report as
appropriate. 


INTRODUCTION
============================================================ Chapter 1


   BACKGROUND
---------------------------------------------------------- Chapter 1:1

Thousands of private sector retirement programs exist, and they cover
millions of employees.  According to information available from the
Bureau of Labor Statistics (BLS), in 1992, 16.1 million full-time
employees (47 percent) in small private establishments with 99 or
fewer employees were covered by at least one retirement program to
which their employers contributed.  BLS also reported that, in 1993,
22.4 million full-time employees (78 percent) in medium and large
private establishments with 100 or more employees were covered by
retirement programs.\1

The remaining employees are covered by Social Security, but not by
retirement programs to which their employers contribute. 

The designs of private sector retirement programs and their
individual plans vary greatly.  All programs include Social Security,
while some also include defined benefit (DB) plans only, some include
defined contribution (DC) plans only, and others include a
combination or variation of DB and DC plans. 

DB plans specify formulas for computing benefit amounts that are
payable at retirement and are typically based on an employee's age,
length of plan participation, and salary history.  In contrast, DC
plans specify amounts the employer (and employees, if required) will
contribute to the plan.  The accumulated contributions, plus
investment earnings, constitute the source of retirement benefits
from a DC plan.  In summary, a DB plan specifies benefit amounts, and
a DC plan specifies contribution amounts. 

The Federal Employees Retirement System (FERS) and the Civil Service
Retirement System (CSRS) are the two largest retirement programs for
federal civilian employees.  Together, they covered about 2.8 million
employees at the beginning of fiscal year 1995.\2 Several other
retirement programs for specific groups of federal civilian employees
exist, but these programs are much smaller than FERS and CSRS.\3

CSRS was established in 1920 and is a DB plan that predates the
Social Security system by several years.  When the Social Security
system was established, Congress decided that employees in CSRS would
not be covered by Social Security through their federal employment. 
CSRS provides employees the option to retire with unreduced benefits
at age 55 with 30 years of service, at age 60 with 20 years of
service, and at age 62 with 5 years of service. 

At the beginning of fiscal year 1995, CSRS covered about 1.4 million
employees and, during that year, paid annuities of almost $38 billion
to about 2.3 million retired employees and survivor annuitants.\4
CSRS was closed to new entrants after December 31, 1983.  When all
covered employees and annuitants are deceased, the program will end. 
According to OPM actuaries, the program is projected to end about
2070. 

FERS was implemented in 1987 and generally covers those employees who
first entered federal service after 1983.  The primary impetus for
the new program was the Social Security Amendments of 1983, which
required all federal employees hired after December 1983 to be
covered by Social Security.\5 FERS is a three-part retirement program
and includes the following:  (1) Social Security, (2) a DB plan, and
(3) a DC plan--the Thrift Savings Plan (TSP)--to which the government
and most employees contribute.  In FERS, the minimum optional
retirement age (MRA) has been increased from the CSRS' age 55 to age
57 for FERS employees born after 1969.\6 FERS provides employees with
the option to retire with unreduced benefits at their MRA with 30
years of service, at age 60 with 20 years of service, and at age 62
with 5 years of service.  FERS continued the CSRS objective of
encouraging employees to spend their working careers in federal
service by making unreduced benefits available at the MRA only to
employees who serve 30 or more years with the government.  FERS has
another provision that is intended to serve as an incentive for
employees to extend their careers beyond the MRA.  This provision
allows FERS employees who retire at age 62 or older and who have
completed at least 20 years of service to receive retirement benefits
calculated at a formula that provides a 10-percent greater benefit
amount than the formula applied to employees who retire before age
62.  However, FERS also provides employees the option to retire with
reduced benefits at their MRA with 10 years of service.  This
provision is not available to employees covered by CSRS. 

At the beginning of fiscal year 1995, FERS covered about 1.4 million
employees and, during that year, paid annuities of about $474 million
to 48,000 retired employees and survivor annuitants.\7

(See app.  I for additional details on CSRS and FERS participants.)

The government automatically contributes an amount equal to 1 percent
of salary each pay period to the TSP for each FERS-covered employee
whether or not the employee contributes to the TSP.  In addition,
FERS employees may contribute up to 10 percent of their salaries and
receive government-matching contributions on the first 5 percent.\8
CSRS-covered employees may also contribute up to 5 percent of their
salaries to the TSP, but the government does not make matching
contributions for them.\9

Employees in FERS and the private sector paid 6.2 percent of their
salaries to the Social Security system (excluding Medicare) on
earnings of up to $65,400 in 1997.  FERS-covered employees receive
the same Social Security benefits as private sector employees. 
Social Security benefits payable at retirement are designed to
replace a higher proportion of earnings for lower-paid employees than
for higher-paid employees (see table II.4). 


--------------------
\1 See U.S.  Department of Labor, Bureau of Labor Statistics,
Employee Benefits in Medium and Large Private Establishments, 1993,
Bulletin 2456 (November 1994) and Employee Benefits in Small Private
Establishments, 1992, Bulletin 2441 (May 1994).  According to BLS,
the results presented in these bulletins are representative of
employees in private nonagricultural industries (i.e., employees with
public sector establishments, farms, and private households and the
self-employed are excluded).  Also, adjustments were not made to the
results for some types of missing data.  For example, if data had
been supplied for all sampled occupations included in Bulletin 2456,
the results would represent 39.4 million full- and part-time
employees instead of the 34.3 million actually represented; and in
Bulletin 2441, the results would represent 47.9 million employees
instead of the 44.1 million actually represented.  BLS did not
publish in either bulletin the percentages of part-time employees who
were covered by retirement programs. 

\2 See United States Office of Personnel Management, Annual Report of
the Civil Service Retirement and Disability Fund for Fiscal Year 1995
(May 1996). 

\3 See Public Pensions:  Summary of Federal Pension Plan Data
(GAO/AIMD-96-6, Feb.  16, 1996).  For example, the Foreign Service
has two retirement programs--the CSRS-like Foreign Service Retirement
and Disability System and the FERS-like Foreign Service Pension
System.  These two programs covered about 12,000 employees in 1993. 
Another retirement program is the Judicial Retirement System, which
covered just over 700 employees in 1993. 

\4 Another 26,000 former employees were covered by CSRS and will be
eligible to receive benefits in the future. 

\5 CSRS was closed to new entrants after December 31, 1983.  Most new
federal employees hired after that date, or employees who were
rehired and had a break in CSRS coverage of more than 1 year, have
mandatory Social Security coverage.  On January 1, 1987, the new FERS
started and most federal employees were covered by either CSRS or
FERS.  However, Congress, in the FERS legislation, created the CSRS
Offset plan.  Typically, the Offset plan covers employees who (1) had
a break in service that exceeded 1 year and ended after 1983 and (2)
had 5 years of creditable civilian service on January 1, 1987.  The
Offset plan also covers employees hired before January 1, 1984, who
acquired CSRS coverage for the first time after that date, and who
had at least 5 years of creditable service by January 1, 1987. 
Employees in the Offset plan are covered by both CSRS and Social
Security.  The amounts they pay to CSRS are reduced, or offset, by
the Social Security taxes they pay.  When these employees retire,
their CSRS benefits will be calculated under the same rules as other
CSRS retirees.  However, when the retirees in the Offset plan become
eligible for Social Security benefits, their CSRS benefits will be
offset by the portion of their Social Security benefits earned during
the years they were covered by both CSRS and Social Security.  At the
beginning of fiscal year 1995, about 74,000 of the 1.4 million
CSRS-covered employees were in the Offset plan. 

\6 The FERS MRA is age 55 for employees born before January 1, 1948. 
The MRA gradually increases until it reaches age 57 for employees
born after December 31, 1969. 

\7 Another 89,000 former employees were covered by FERS and will be
eligible to receive benefits in the future. 

\8 The government will make matching contributions to the TSP
accounts of FERS-covered employees in the following manner:  on the
first 3 percent of salary that an employee contributes, the
government contributes $1.00 for each $1.00 the employee contributes;
on the next 2 percent of salary, the government contributes $0.50 for
each $1.00 the employee contributes; and on the next 5 percent of
salary, the government contributes nothing. 

\9 The contributions of FERS and CSRS employees to the TSP are
limited by the Internal Revenue Service (IRS).  The IRS limit was
$9,500 in 1997. 


   OBJECTIVE, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:2

In response to the requests of the Chairmen of the former Senate
Subcommittee on Post Office and Civil Service and the House
Subcommittee on Civil Service, our objective in preparing this report
was to compare FERS, CSRS, and private sector retirement programs. 
These retirement programs can be compared in a number of ways.  One
possible way is to compare the average benefit amounts different
programs paid to their retirees in a given year.  In this method, the
"typical" benefits paid by each program would be presumed to be
indicative of the relative benefits offered by the programs. 
However, such a comparison approach would ignore differences in ages,
salary levels, years of service, and other factors that cause benefit
amounts to differ for individual retirees under the programs. 
Another possible comparison method is to compare program features,
such as age and service requirements for retirement eligibility,
benefit calculation formulas, salary amounts used in the benefit
calculations, and how pension plan benefits are integrated with
Social Security benefits.  This method would provide useful
information on how the various programs are designed, but it would
not compare the actual benefit amounts available under the programs. 

Although a number of other comparison methods exist, the method we
used in this report was to determine the benefit amounts federal and
private sector programs would pay to employees who retire at the same
ages with the same years of service and salary histories.  In using
this method, we avoided the benefit differences that could be caused
by variances in individual employees' circumstances.  Also, this
method allowed us to (1) compare federal retirement benefits with the
average benefits available under private sector programs for
employees in the same circumstances and (2) provide a measure of the
extent to which differences in the features of federal and private
sector retirement programs cause differences in the relative benefit
amounts available from the programs.  However, this method does not
consider what portions of the benefits are financed by the employee
and the employer. 

We and the Congressional Budget Office (CBO) contracted, at different
times, with Watson Wyatt Worldwide, a company that collects benefits
data from a wide range of employers, to obtain the information on the
features and benefit levels of private sector retirement programs
included in this report.  Watson Wyatt provided this information from
its 1993 COMPARISON database, which was the latest database available
at the time our contract was awarded.  The database contained
information on the retirement programs of primarily large private
sector employers and that, by design, excluded employers who had no
retirement programs other than Social Security.  About one-half of
the employers were Watson Wyatt clients; the remainder were from a
survey of U.S.  employers included in Fortune magazine's list of
1,000 top employers.  Therefore, the features and benefit levels
developed from the database could not be generalized to the private
sector as a whole. 

The database described the features of 661 employers' retirement
programs.  Of these programs, sufficient information was available to
allow the contractor to determine the benefit amounts provided by 435
employers' programs.  Of the 435 employers, 61 percent had 2,500 or
more employees.  Another 22 percent had 1,000 to 2,499 employees;
about 15 percent had 999 or fewer employees.  The remaining 2 percent
of the employers did not provide size information.  About 70 percent
of the 435 employers provided both defined benefit and defined
contribution plans, whereas about 24 percent of the employers had
defined contribution plans only and about 6 percent had defined
benefit plans only.  Appendix I contains more detailed information on
the sizes and program designs of the employers in the contractor's
database as well as information on the industries and geographical
areas that the employers represented. 

To show how employees with varying ages and years of service would
fare under FERS, CSRS, and private sector retirement programs, we
asked the contractor to calculate the benefit amounts potentially
available to three illustrative employees (i.e., age 55 with 30 years
of service, age 62 with 20 years of service, and age 65 with 20 years
of service) at three different final salary levels (i.e., $25,000,
$40,000, and $60,000).  (See app.  II for the salary histories and
the actual dollar amounts used to calculate the benefit amounts.)

Because of limited contract funds, we were limited to three
illustrative employees.  We chose the specific ages and years of
service in the following manner:  (1) age 55 with 30 years of service
since that is the earliest age at which general employees in CSRS can
choose to retire,\10 (2) age 62 with 20 years of service since
reduced Social Security retirement benefits are first available at
that age, and (3) age 65 with 20 years of service since full Social
Security benefits are available at this age.  We chose 20 years of
service to reflect the shortening of federal careers that may occur
under FERS.\11

Subsequently, CBO contracted with Watson Wyatt to obtain the benefit
amounts potentially available to an additional two illustrative
employees--age 62 with 30 years of service and age 65 with 30 years
of service.  CBO chose age 62 with 30 years of service since that was
the average for employees who retired under CSRS' optional retirement
provisions in fiscal year 1995; they chose age 65 with 30 years of
service to show the effect of the 30-year career on the age 65
comparisons.  The results provided under the CBO contract were based
on the same methodology and the same assumptions as the results
provided under our contract.\12 We did not independently verify the
accuracy of the Watson Wyatt database or the benefit amounts
calculated.  However, the results from its database and calculations
were consistent with results we reported in 1985 and with results
reported more recently by others in the benefits field.\13 Also,
Watson Wyatt's calculations for FERS and CSRS were consistent with
FERS and CSRS calculations we had made. 

The benefit amounts in this report are expressed as "replacement
rates." A replacement rate is the annual retirement benefit amount
divided by an employee's salary amount in the final year of
employment.  For example, an employee who earned $40,000 in the final
year of his or her employment and received retirement benefits of
$20,000 a year would have a replacement rate of 50 percent. 

Because the amounts of benefits employees can receive from DC plans
are determined in large part by the amounts they and their employers
contribute to the plans, we calculated replacement rates for benefits
from the FERS and private sector DC plans using the following three
levels of assumed employee contributions:  (1) employees contributed
amounts necessary to receive maximum employer contributions, (2)
employees contributed amounts necessary to receive one-half of the
maximum employer contributions available, and (3) employees made no
contributions to their DC plans. 

To examine the effects of cost-of-living adjustment practices that
the retirement programs provide to restore lost purchasing power, we
also calculated, in constant dollars, the replacement rates that
would be available after 10 and 20 years of retirement.\14

The replacement rates presented in chapter 2 of this report are for
five illustrative employees at a final salary of $40,000.  Appendix
III shows the results of the replacement rate analyses for these five
employees if they retired at the final salaries of $25,000, $40,000,
and $60,000. 

While the relative replacement rates available from federal and
private sector retirement programs for the five illustrative
employees and salary levels used in our analyses are meaningful
measures of how the various programs compare, they do not necessarily
represent employees' actual experiences under the programs.  For
example, employees in CSRS and FERS, on the average, are considerably
older than age 55 when they retire.  In fiscal year 1995, employees
retiring under CSRS' optional retirement provisions averaged age 62
with 30 years of service.  Employees retiring under FERS' optional
retirement provisions averaged age 63 with 14 years of service.\15

The contractor's database did not contain information on the ages at
which employees choose to retire in the private sector programs. 

In making the replacement-rate calculations, the contractor included
the benefit amounts from the defined benefit and defined contribution
plans to which employers made contributions as well as the amounts
from Social Security.  For private sector employers, the contractor
made and then averaged separate calculations for each of the 435
private sector retirement programs.  Therefore, the replacement rates
presented represent averages of the benefits available from all
programs of the same design.  They do not represent the actual
benefits that are available from any individual employer's retirement
program.  Rather, some programs will provide replacement rates that
are higher than the average, and other programs will provide
replacement rates that are lower than the average. 

The benefit amounts calculated were based on a single set of
assumptions about salary histories, return on investments, the
conversion of defined contribution plan amounts at retirement to
annuities, and the rate of inflation after retirement.  We had the
contractor assume 4.5 percent annual increases in long-term inflation
and the CPI and a 7-percent annual return on investments.  These are
the same assumptions the Office of Personnel Management (OPM) used in
its latest actuarial valuation of FERS and CSRS.  Because defined
contribution plan benefits accumulate as individual account balances,
the contractor converted these balances to life annuities using the
1983 Group Annuity Mortality table with a 3-year age setback so they
could be compared with the benefits provided by defined benefit
plans.  We had the contractor assume that all of an employee's years
of service were with the same employer who was the last employer
before retirement; and that, for Social Security benefit
calculations, employees had no earnings in the years before hire and
after retirement. 

We also had the contractor assume that the salary histories for the
illustrative employees included base pay only so that they would have
a common compensation structure.  Although base pay is generally the
only type of compensation used in FERS and CSRS to calculate benefit
amounts, at least one-half of the 435 programs in the contractor's
database included base pay and other types of compensation, such as
overtime pay, bonuses, and commissions, in their benefit
calculations.  We did not include these other types of compensation
in the salary histories because (1) benefit calculations for FERS and
CSRS do not include them and (2) the contractor did not collect data
on the amounts of compensation, by type, that are typically provided
to employees covered by the programs in the database.  However, had
we assumed the illustrative employees had other types of compensation
in addition to the base pay represented in the salary histories, the
replacement rates available from FERS and CSRS would have remained
the same and the averages of the replacement rates available from the
private sector programs could have increased.  Also, had we assumed
that the rate of salary growth in the last years of employees'
careers had been greater, the replacement rates available from FERS,
CSRS, and the private sector programs could have been smaller. 
However, because FERS and CSRS use the average of the highest 3
years' salaries in their benefit calculations, while about one-half
of the 435 private sector programs use the highest 5 years' salaries,
the replacement rates available from FERS and CSRS would not decrease
as much as the private sector replacement rates. 

We believe these assumptions are reasonable because they either were
those used by OPM in its latest actuarial valuations, were based on
standards used in the benefits field, or were necessary to provide a
common basis of comparison.  However, different assumptions would
change the relative magnitude of results between programs and the
absolute magnitude over all programs.  It could also be possible in
some circumstances to change the relative rankings between programs. 
For example, an assumed annual return of 9.5 percent, rather than 7.0
percent, on DC plan investments could mean that a 30-percent increase
in replacement rates would be available from DC plans after 20 years
of service.  Over 30 years, a 9.5 percent annual return could
generate a 50-percent increase in DC plan benefits. 

To calculate the benefit amounts 10 and 20 years after retirement,
the contractor needed estimates of the cost-of-living adjustments
(COLA) provided in the DB plan portion of private sector employers'
programs.  Wide variation exists in how COLAs are provided.  The
adjustments tend to be ad hoc, and their size and frequency tend to
vary by employer size.  The contractor routinely tracks COLAs given
by 50 large companies, but neither we nor the contractor are aware of
any data sources that accurately track COLAs given by private sector
DB plans, overall.  In the absence of more complete data on DB plan
COLAs in the private sector, we had the contractor use the 50
companies' COLA experiences to represent all private sector DB plans
in calculating replacement rates available from private sector
programs 10 and 20 years after retirement. 

We limited the federal and private sector benefit comparisons
presented in this report to the benefits available to career
employees under the "optional" or "regular" retirement provisions of
employers' retirement programs.  Accordingly, we did not include the
following in our comparisons: 

  -- other program provisions, such as early involuntary retirement,
     disability retirement, or survivor benefits;

  -- special benefits that are available in FERS and CSRS, such as
     the benefits that are provided to Members of Congress and
     congressional staff, law enforcement officers and firefighters,
     and air traffic controllers;

  -- extra benefits that private sector programs may provide to top
     executives; and

  -- spousal or children's benefits that may be paid by Social
     Security in addition to benefit amounts paid to retirees. 

Our findings may have been different if another private sector
database had been used in the benefit comparisons because our
contractor's database could not be generalized to the private sector
as a whole.  Over one-half of the employers in the contractor's
database have 2,500 or more employees.  A number of small employers
are in the database, but not in proportion to their overall
representation among private sector employers with retirement
programs in 1993.  About 99 percent of the employers with retirement
programs in 1993 had fewer than 2,500 employees.  Also, about 24
percent of the employers in the contractor's database had retirement
programs that included DC plans only.  In an earlier report, we
described the retirement program designs of all U.S.  private sector
employers who offered pensions in 1993.\16 Overall, a higher
proportion (88 percent) of these employers sponsored only DC plans
than the employers in the contractor's database.  However, the
percentage of all employers with 2,500 or more employees that
sponsored both DB and DC plans increased from 1984 to 1993, and
nearly one-half of the employers with 2,500 or more employees
sponsored DB plans in 1993. 

We did our review in Washington, D.C., from October 1995 to January
1997 in accordance with generally accepted government auditing
standards.  We requested comments on a draft of this report from
Watson Wyatt Worldwide and the heads of OPM and the Federal
Retirement Thrift Investment Board (the Thrift Board) or their
designees.  The Research Actuary of Watson Wyatt's Research and
Information Center in Washington, D.C., and the Thrift Board's
Director of External Affairs provided us with oral comments.  The
Director of the Office of Personnel Management provided written
comments.  Both the oral and written comments are presented and
evaluated in the executive summary and chapter 4.  The OPM comments
are reprinted in appendix VI. 


--------------------
\10 For this report, we assumed the FERS MRA was age 55, regardless
of date of birth, to simplify the comparisons with CSRS and private
sector programs. 

\11 We did not choose age 55 with 20 years of service because neither
FERS nor CSRS provide unreduced retirement benefits at this age with
20 years of service.  However, FERS does provide reduced benefits for
employees who retire at their MRA (age 55 to 57) with 10 years of
service.  CSRS does not have a similar provision.  In the
contractor's database, about two-thirds of the private sector
retirement programs with DB plans provided reduced benefits for
employees who retired at age 55 or younger with 10 or less years of
service. 

\12 The contractor provided the results requested under our contract
in October 1995 and the results requested under the CBO contract in
January 1997.  The contractor used the same 435 employers in the
benefit calculations under both contracts.  However, some employer
values under the CBO contract changed because the contractor had
received updates on plan design since our contract.  The effect of
these changes on the benefit calculations was very small.  For
example, in programs with both DB and DC plans, the average of the
benefit amounts available from the DB plan portion changed from 23.4
percent of final salary in October 1995 to 23.0 percent in January
1997 for employees who retired at age 55 with 30 years of service
with a final salary of $60,000. 

\13 Benefit Levels of Nonfederal Retirement Programs (GAO/GGD-85-30,
Feb.  26, 1985). 

\14 Social Security, CSRS, and FERS benefits are to be adjusted
annually to reflect cost-of-living increases as measured by the
annual change in the Consumer Price Index (CPI).  In December 1996,
debate over the accuracy of the CPI expanded when the Senate Finance
Committee's advisory commission concluded that the CPI is biased and
overstates actual cost of living.  However, among economists there is
a lack of consensus regarding the size and direction of the bias in
the CPI. 

\15 Because the majority of employees covered by FERS were first
hired after 1983, the average years of service for those retiring
under FERS may not be an accurate indicator of the average length of
service for future FERS retirees. 

\16 Private Pensions:  Most Employers That Offer Pensions Use Defined
Contribution Plans (GAO/GGD-97-1, Oct.  3, 1996). 


COMPARATIVE BENEFIT LEVELS
AVAILABLE FROM FERS, CSRS, AND
PRIVATE SECTOR RETIREMENT PROGRAMS
============================================================ Chapter 2

The comparative benefit amounts available to employees in FERS and
CSRS and the average benefit amounts available from the retirement
programs in the contractor's private sector database can differ
considerably, depending on a number of factors and how these factors
interact with the retirement programs' designs.  These factors
include (1) the ages at which employees retire and at which programs
provide unreduced benefits, (2) the extent to which employees and
employers contribute to the DC plans that are integral components of
FERS and most private sector programs, and (3) the impact of
inflation and cost-of-living adjustments provided through the
retirement programs.  In general, when employees retire before age
62, the largest benefits are available from FERS and the smallest
benefits are available from the private sector programs.  The
benefits available from CSRS fall between those available from FERS
and the private sector programs. 

However, the comparative benefits are quite different for employees
who retire at age 62 or older.  For retirees at these older ages,
FERS continues to make the largest benefits available, but these
benefits are just slightly more than the average for private sector
programs that, like FERS, include both DB and DC plans.  The benefits
that are available at age 62 or older from the private sector
programs that include DB or DC plans only are quite similar, but
these benefits are smaller than the benefits available from FERS and
the average benefits available from the private sector programs that
include both DB and DC plans. 

CSRS benefits for employees retiring at age 62 or older with 20 years
of service are smaller than FERS benefits and the average benefits
available from private sector programs, regardless of program design
because (1) CSRS benefits are the same for specific years of service,
regardless of age, and (2) CSRS-covered employees receive no Social
Security benefits from their federal employment.  For employees who
retire at age 62 or older with 30 years of service, CSRS benefits are
still smaller than the benefits available from FERS and the private
sector programs that include both DB and DC plans, but the CSRS
benefits become similar to the benefits available from private sector
programs with DB or DC plans only. 

The level at which employees contribute to their DC plans is a
significant factor in determining the benefits that are available
from FERS and the private sector programs that incorporate DC plans. 
Considerably smaller benefits are available from such programs when
employees contribute lesser amounts than are necessary to receive
maximum employer contributions. 

In this chapter, we present the replacement rates available from
FERS, CSRS, and private sector programs for five illustrative
employees who are (1) age 55 with 30 years of service, (2) age 62
with 20 years of service, (3) age 65 with 20 years of service, (4)
age 62 with 30 years of service, and (5) age 65 with 30 years of
service and who retire with a final salary of $40,000.  Unless
otherwise indicated, the replacement rates are calculated using the
assumption that employees in FERS and the private sector programs
that include DC plans contributed amounts that are necessary to
receive maximum employer contributions to their DC plans.  However,
separate replacement-rate calculations are also presented for each
illustrative employee to show the effects of lower amounts of
employee contributions to DC plans.  The effects of cost-of-living
adjustment practices on retirement program replacement rates after 10
and 20 years of retirement are also analyzed in this chapter. 


   COMPARATIVE REPLACEMENT RATES
   AT RETIREMENT
---------------------------------------------------------- Chapter 2:1

With a replacement rate of 65 percent, FERS ranks first in a
comparison of available benefits for employees who retire at age 55
with 30 years of service.  CSRS is second with a replacement rate of
53 percent for employees who retire at age 55 with 30 years of
service, and the average of private sector programs with both DB and
DC plans in the contractor's database is third with a 45-percent
replacement rate.  The private sector programs that have DB or DC
plans only have available benefits averaging less than 30 percent of
final salary.  (See fig.  2.1.)

The availability of unreduced DB plan benefits in FERS and CSRS for
employees retiring at age 55 with 30 years of service is an advantage
over most DB plans in the private sector because private sector plans
usually impose reductions in accrued benefits for employees retiring
at age 55, regardless of their number of years of service.  Moreover,
Social Security retirement benefits are not available to private
sector retirees until they reach age 62, whereas the FERS' DB plan
provides an annuity supplement equal to the estimated Social Security
benefits that a retiree earned while employed by the federal
government and that the retiree could receive at age 62.\1

   Figure 2.1:  Average
   Replacement Rates Available for
   Employees Who Retire at Age 55
   With 30 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note 1:  Social Security retirement benefits are not available at age
55.  Retirees may elect to begin benefits at age 62. 

Note 2:  The FERS' DB plan provides an annuity supplement until the
retiree reaches age 62.  The supplement equals the estimated Social
Security benefits that are payable at age 62 and earned while the
retiree was employed by the federal government. 

Note 3:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.1). 

Because Social Security retirement benefits are available to retirees
in FERS and the private sector programs at age 62 or older, the
relative positions of the federal and private sector programs, in
terms of replacement rates, change at age 62.  Specifically, when the
employee retires at age 62 with 20 years of service, FERS is no
longer the dominant program, and CSRS drops from the second position
to the last position.  The FERS replacement rate of 66 percent is
higher than the 63-percent average replacement rate of the private
sector programs with both DB and DC plans.  Private sector programs
that include either a DB plan or a DC plan, but not both, have
available replacement rates of about 40 percent, which is higher than
the CSRS rate of 36 percent.  (See fig.  2.2.)

   Figure 2.2:  Average
   Replacement Rates Available for
   Employees Who Retire at Age 62
   With 20 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.2). 

When an employee retires at age 65 with 20 years of service, the
relative positions of the programs, in terms of replacement rates,
are the same as at age 62, but the available replacement rates for
all programs, except CSRS, are higher than at age 62.  At age 65,
replacement rates available to employees under FERS and the average
of the private sector programs with both DB and DC plans are almost
the same, 71.1 and 70.5 percent, respectively.  For private sector
programs with either a DB or DC plan, the average available
replacement rate increases to almost 50 percent.  The CSRS
replacement rate remains the same at 36 percent.  (See fig.  2.3.)

Several factors cause replacement rates for FERS and private sector
programs, on average, to increase between the ages of 62 and 65. 
Social Security benefits are reduced for employees who retire before
age 65.  Similarly, some private sector DB plans impose reductions in
accrued benefits when employees retire before age 65.  Finally, DC
plan benefit amounts are larger at age 65 because account balances
are paid out over shorter periods when employees retire at older
ages.  These factors do not apply to CSRS because (1) CSRS benefit
amounts are not determined by employees' ages upon retirement at age
55 or older, (2) CSRS employees are not covered by Social Security
through their federal employment, and (3) CSRS employees do not
receive any employer-paid DC plan benefits.  Therefore, after age 55,
CSRS replacement rates are the same for all employees with the same
years of service, regardless of the ages at which they retire. 

   Figure 2.3:  Average
   Replacement Rates Available for
   Employees Who Retire at Age 65
   With 20 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.3). 

When an employee retires at age 62 or older with 30 years of service,
the relative positions of the federal and private sector programs, in
terms of replacement rates, change again.  FERS and the private
sector programs that include both DB and DC plans remain in the top
two positions, but CSRS is no longer in the last position.  The CSRS
replacement rate moves just ahead of the averages of the replacement
rates available from programs with DB or DC plans only.  Some of the
change in the CSRS position is due to the graduated accrual rates
used for calculating benefit amounts under CSRS.\2 For a 30-year
career, 20 years are calculated at the highest rate; while for a
20-year career, only 10 years are calculated at the highest rate. 
Therefore, a 30-year career under CSRS yields a greater benefit than
does a 20-year career. 

When the employee retires at age 62 with 30 years of service, CSRS
has a replacement rate of 53 percent; while the averages of the
replacement rates for the DB and DC plans only programs are about 50
percent.  The FERS' replacement rate and the averages of rates from
the private sector programs that have both DB and DC plans are 81 and
75 percent, respectively, when the employee retires at age 62 with 30
years of service.  (See fig 2.4.)

   Figure 2.4:  Average
   Replacement Rates Available for
   Employees Who Retire at Age 62
   With 30 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.4). 

At age 65 with 30 years of service, the replacement rates available
to employees under CSRS and the averages of the replacement rates for
the private sector programs with DB or DC plans only are within 5
percentage points of each other, ranging from 53 to 58 percent.  The
replacement rate for employees retiring at age 65 with 30 years of
service under FERS is 87 percent, and the average of the rates for
private sector programs that include both DB and DC plans is 82
percent.  (See fig.  2.5.)

   Figure 2.5:  Average
   Replacement Rates Available for
   Employees Who Retire at Age 65
   With 30 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.5). 


--------------------
\1 The FERS annuity supplement ends when the retiree reaches age 62
and his or her actual Social Security payments can begin. 

\2 The accrual rates used to calculate the CSRS benefit amounts for
general employees are 1.5 percent for each of the first 5 years of
service, 1.75 percent for each of the next 5 years, and 2 percent for
each year of service over 10 years. 


   RELATIONSHIP OF EMPLOYEE
   CONTRIBUTIONS TO RETIREMENT
   PROGRAM BENEFITS
---------------------------------------------------------- Chapter 2:2

Just as differences exist in the levels of benefits provided by
various retirement programs, differences also exist among programs in
the amounts employees must contribute toward program costs.  In
general, to receive the replacement rates discussed above, CSRS and
the private sector programs that include Social Security and DB plans
only require the smallest employee contributions.  FERS and the
private sector programs that include DC plans, regardless of whether
a DB plan is also provided, require the greatest employee
contributions to receive maximum employer contributions to their
program benefits. 

The amounts that employees contribute to the FERS and private sector
DC plans are critical factors in determining the benefit amounts
employees can receive from the overall retirement programs. 
Employees who contribute the amounts that are necessary to receive
maximum employer contributions to DC plans will receive greater
benefits at retirement than those employees who elect not to
contribute to the DC plan or those employees who contribute smaller
amounts. 


      EFFECTS OF EQUALIZING
      EMPLOYEE CONTRIBUTIONS TO
      FERS, CSRS, AND PRIVATE
      SECTOR RETIREMENT PROGRAMS
      THAT INCLUDE BOTH DB AND DC
      PLANS
-------------------------------------------------------- Chapter 2:2.1

Most employees in CSRS are required to contribute 7 percent of their
salaries toward program costs.  Employees in FERS also generally
contribute a total of 7 percent of their salaries to Social Security
and the FERS' DB plan (i.e., 6.2 percent to Social Security and 0.8
percent to the DB plan).  Private sector employees contribute 6.2
percent of their salaries to Social Security, but virtually all of
the programs in the contractor's database with DB plans did not
require employee contributions toward DB plan costs. 

In the FERS' DC plan--the TSP--employees must contribute 5 percent of
their salaries to receive the maximum available employer
contributions to their accounts.  Accordingly, to obtain the greatest
available benefits from FERS, employees must contribute a total of 12
percent of their salaries.  Employees in private sector programs that
include DC plans must also generally contribute about 12 percent of
their salaries to receive the greatest benefits available from their
programs.  These employees must contribute 6.2 percent of their
salaries to Social Security, and, according to the contractor,
typically must contribute 6 percent of their salaries to receive
maximum employer contributions to their DC plans. 

Employees in CSRS can, by law, contribute up to 5 percent of their
salaries to the TSP with no employer-matching contributions. 
Therefore, CSRS employees who contribute 5 percent of their salaries
to the TSP would contribute a total of 12 percent of salary to their
retirement program, just as the employees in FERS and private sector
programs that include DC plans.  To show the effects of employee
contributions on replacement rates if employees in FERS, CSRS, and
private sector programs that include both DB and DC plans were all to
contribute approximately 12 percent of their salaries to their
retirement programs, figures 2.6 through 2.10 reflect the comparative
replacement rates that would be available to these employees.\3 As
the figures show, the replacement rate available to CSRS employees
who retire at age 55 with 30 years of service would be quite similar
to the FERS replacement rate, but considerably higher than the
average replacement rate available from private sector programs that
include both DC and DB plans.  However, even with employee
contributions of 12 percent of salary, the CSRS replacement rates for
employees who retire at ages 62 and 65 with 20 or 30 years of service
would be lower than FERS and the private sector programs that include
both DB and DC plans. 

   Figure 2.6:  Comparative
   Average Replacement Rates
   Available When Employees
   Contribute 12 Percent of Their
   Salaries and Retire at Age 55
   With 30 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note 1:  Social Security retirement benefits are not available at age
55.  Retirees may elect to begin benefits at age 62. 

Note 2:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Sources:  Watson Wyatt Worldwide database (see table III.1) and GAO
analysis. 

   Figure 2.7:  Comparative
   Average Replacement Rates
   Available When Employees
   Contribute 12 Percent of Their
   Salaries and Retire at Age 62
   With 20 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Sources:  Watson Wyatt Worldwide database (see table III.2) and GAO
analysis. 

   Figure 2.8:  Comparative
   Average Replacement Rates
   Available When Employees
   Contribute 12 Percent of Their
   Salaries and Retire at Age 65
   With 20 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Sources:  Watson Wyatt Worldwide database (see table III.3) and GAO
analysis. 

   Figure 2.9:  Comparative
   Average Replacement Rates
   Available When Employees
   Contribute 12 Percent of Their
   Salaries and Retire at Age 62
   With 30 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Sources:  Watson Wyatt Worldwide database (see table III.4) and GAO
analysis. 

   Figure 2.10:  Comparative
   Average Replacement Rates
   Available When Employees
   Contribute 12 Percent of Their
   Salaries and Retire at Age 65
   With 30 Years of Service and a
   Final Salary of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Sources:  Watson Wyatt Worldwide database (see table III.5) and GAO
analysis. 


--------------------
\3 The percentage of salary contributed is exactly 12 percent for
FERS and CSRS employees and averages 12.2 percent for private sector
employees in programs with both DB and DC plans. 


      EFFECTS OF EMPLOYEE
      CONTRIBUTION RATES ON DC
      PLAN BENEFITS
-------------------------------------------------------- Chapter 2:2.2

Whether comparisons are made of the replacement rates available
solely from DC plans or the replacement rates available from all
plans that are part of the retirement programs (i.e., Social
Security, DB plans, and/or DC plans), the amounts that employees
contribute to DC plans significantly affect replacement rates and can
affect which retirement program provides the highest replacement
rate. 

Table 2.1 illustrates the effects of employee contribution amounts on
DC plan benefits.  The table shows the comparative average
replacement rates that are available from FERS' TSP and the private
sector DC plans in the contractor's database when employees (1)
contribute amounts that are sufficient to receive maximum employer
contributions, (2) contribute amounts that are sufficient to receive
one-half of the maximum employer contributions available, and (3)
make no contributions to their DC plans.  The amounts that employees
contribute to their DC plans have a major influence on the benefits
they could receive from their DC plans.  For example, employees
retiring at age 62 with 30 years of service under FERS could expect
to receive annual benefits of about 30 percent of their final salary
from their TSP accounts if they had received the maximum employer
contributions by contributing 5 percent of their salary to the TSP
throughout their 30-year career.  This amount would be 10 times
greater than the 3 percent of final salary they could expect to
receive from TSP if they had made no contributions to their TSP
accounts. 



                                    Table 2.1
                     
                     Average Replacement Rates Available From
                     the FERS' TSP and the Private Sector DC
                       Plans at Varying Amounts of Employee
                                  Contributions

                               (Numbers in percent)

                                       Average DC plan replacement rates
                                ------------------------------------------------
                                                       Employees
                                      Employees       contribute
                                     contribute       amounts to
                                     amounts to     receive one-  Employees make
                                receive maximum     half maximum              no
Program design                   employer match   employer match   contributions
------------------------------  ---------------  ---------------  --------------
Age 55 with 30 years of service and $40,000 fina
--------------------------------------------------------------------------------
Private sector, DC plans only              26.0             16.3             6.3
Private sector, both DB and DC             24.1             13.3             2.1
 plans
FERS' TSP                                  27.2             16.3             2.8

Age 62 with 20 years of service and $40,000 fina
--------------------------------------------------------------------------------
Private sector, DC plans only              23.7             14.9             5.7
Private sector, both DB and DC             22.0             12.2             1.9
 plans
FERS' TSP                                  24.8             14.9             2.5

Age 65 with 20 years of service and $40,000 fina
--------------------------------------------------------------------------------
Private sector, DC plans only              25.2             15.8             6.1
Private sector, both DB and DC             23.5             12.9             2.0
 plans
FERS' TSP                                  26.4             15.9             2.7

Age 62 with 30 years of service and $40,000 fina
--------------------------------------------------------------------------------
Private sector, DC plans only              29.8             18.6             7.3
Private sector, both DB and DC             26.2             14.3             1.8
 plans
FERS' TSP                                  30.4             18.2             3.1

Age 65 with 30 years of service and $40,000 fina
--------------------------------------------------------------------------------
Private sector, DC plans only              31.7             19.8             7.8
Private sector, both DB and DC             27.9             15.2             1.9
 plans
FERS' TSP                                  32.4             19.4             3.3
--------------------------------------------------------------------------------
Source:  Watson Wyatt Worldwide database (see tables III.1 through
III.15). 

To show the effects of employee contributions to DC plans on the
total replacement rates available from all parts (i.e., Social
Security, DB plans, and/or DC plans) of the federal and private
sector retirement programs, figures 2.11 through 2.15 show the total
retirement program average replacement rates available at each of the
three levels of contributions to DC plans.\3

The replacement rates decline with reduced levels of employee
contributions in all programs that include DC plans. 

When employees retire at age 55 with 30 years of service, CSRS'
replacement rate is higher than the replacement rates for all other
programs in the comparison, regardless of the amounts employees
contribute to the DC plans, except for FERS employees who contribute
at least one-half of the amount required to receive maximum employer
contributions to the TSP.  (See fig.  2.11.)

   Figure 2.11:  Effect of
   Employee Contributions on
   Average Replacement Rates
   Available When Employees Retire
   at Age 55 With 30 Years of
   Service and a Final Salary of
   $40,000

   (See figure in printed
   edition.)

Note 1:  Social Security retirement benefits are not available at age
55.  Retirees may elect to begin benefits at age 62. 

Note 2:  These bars include the benefits gained from any DB or DC
plans to which the employer contributes. 

Source:  Watson Wyatt Worldwide database (see tables III.1, III.6,
and III.11). 

When employees retire at ages 62 and 65 with 20 years of service, the
other programs, even if covered employees made no contributions to
their DC plans, generally provide higher replacement rates than CSRS. 
The only average replacement rates when employees retire at ages 62
and 65 with 20 years of service that are lower than the CSRS
replacement rate are those rates that occur in private sector
programs with DC plans only when employees did not make maximum
contributions to their DC plans.  FERS' replacement rates when
employees retire at ages 62 and 65 with 20 years of service are
comparable to the replacement rates available from private sector
programs with both DB and DC plans at all three levels of employee
contributions.  However, employees in private sector programs with DC
plans only must make maximum contributions to their plans to receive
replacement rates at ages 62 and 65 that are comparable to the FERS'
replacement rate with no employee contributions to the TSP.  (See
figs.  2.12 and 2.13.)

   Figure 2.12:  Effect of
   Employee Contributions on
   Average Replacement Rates
   Available When Employees Retire
   at Age 62 With 20 Years of
   Service and a Final Salary of
   $40,000

   (See figure in printed
   edition.)

Note:  These bars include the benefits gained from Social Security
and any DB or DC plans to which the employer contributes. 

Source:  Watson Wyatt Worldwide database (see tables III.2, III.7,
and III.12). 

   Figure 2.13:  Effect of
   Employee Contributions on
   Average Replacement Rates
   Available When Employees Retire
   at Age 65 With 20 Years of
   Service and a Final Salary of
   $40,000

   (See figure in printed
   edition.)

Note:  These bars include the benefits gained from Social Security
and any DB or DC plans to which the employer contributes. 

Source:  Watson Wyatt Worldwide database (see tables III.3, III.8,
and III.13). 

When employees retire at ages 62 and 65 with 30 years of service, the
replacement rates available under FERS and the average of the private
sector programs that have both DB and DC plans are similar at all
three levels of employee contributions as they were with 20 years of
service.  The relative position of the CSRS replacement rate at 30
years of service has improved.  CSRS now provides a replacement rate
that is similar to (1) the averages of the replacement rates
available from the private sector programs with DB plans only, (2)
programs with DC plans only when employees make the contributions
that are needed to receive the maximum employer match, and (3) FERS
and private sector programs that have both DB and DC plans when the
employees make no contributions to their plans.  CSRS has a higher
replacement rate than private sector DC plans only programs when
employees contribute less than the amounts needed to get the maximum
employer match.  However, CSRS' replacement rate remains behind the
rates available from FERS and private sector programs that have DB
and DC plans as long as the FERS and private sector employees make
some contributions to their DC plans.  (See figs.  2.14 and 2.15.)

   Figure 2.14:  Effect of
   Employee Contributions on
   Average Replacement Rates
   Available When Employees Retire
   at Age 62 With 30 Years of
   Service and a Final Salary of
   $40,000

   (See figure in printed
   edition.)

Note:  These bars include the benefits gained from Social Security
and any DB or DC plans to which the employer contributes. 

Source:  Watson Wyatt Worldwide database (see tables III.4, III.9,
and III.14). 

   Figure 2.15:  Effect of
   Employee Contributions on
   Average Replacement Rates
   Available When Employees Retire
   at Age 65 With 30 Years of
   Service and a Final Salary of
   $40,000

   (See figure in printed
   edition.)

Note:  These bars include the benefits gained from Social Security
and any DB or DC plans to which the employer contributes. 

Source:  Watson Wyatt Worldwide database (see tables III.5, III.10,
and III.15). 


--------------------
\3 The comparisons shown in figures 2.11 through 2.15 do not include
any employee contributions to the FERS' TSP for CSRS employees
because the government does not match their TSP contributions.  The
comparisons also do not include any additional contributions that
FERS or private sector employees could make to their DC plans and
that would not be matched by their employers. 


   IMPACT OF COST-OF-LIVING
   ADJUSTMENT PRACTICES ON
   LONG-TERM REPLACEMENT RATES
---------------------------------------------------------- Chapter 2:3

After retirement benefits begin, inflation will erode the purchasing
power of these benefits unless they are maintained by COLAs.\5 By
law, the Social Security portion of FERS and private sector
retirement programs is adjusted each year.  Social Security
retirement benefits are increased each year by the percentage
increase in the CPI, which is used for inflation adjustment purposes. 
However, in the DB plan portion of private sector employers'
programs, wide variation exists in how COLAs are provided.  The
adjustments tend to be ad hoc, and their size and frequency tend to
vary by employer size.  The contractor we used routinely tracks the
COLAs given by 50 large companies, but neither we nor the contractor
are aware of any data sources that accurately track COLAs given by
private sector DB plans, overall.  Using COLA data from the 50
companies, the contractor determined that employees who retired from
the companies in 1985, had received, on average, a 4-percent benefit
increase by 1994.  These cumulative COLAs offset about 10 percent of
the CPI increase during the 10-year period.  For employees who
retired in 1975, cumulative COLAs averaging 30 percent were given,
which was about 15 percent of the CPI increase during the 20-year
period from 1975 to 1994.  In the absence of more complete data on DB
plan COLAs, we used the 50 companies' COLA experiences to represent
all private sector DB plans in calculating replacement rates
available from private sector programs 10 and 20 years after
retirement. 

FERS does not always provide full COLAs in its DB plan.  COLAs for
nondisabled FERS retirees are not paid until retirees reach age 62. 
When paid, the COLAs are equal to the annual increase in the CPI if
the price increase is 2 percent or less.  The adjustment is 2 percent
if the CPI increase is between 2 and 3 percent.  If the CPI increase
is 3 percent or greater, the adjustment is equal to the CPI increase
minus 1 percent. 

Like Social Security, the law calls for CSRS benefits to be adjusted
annually by the percentage increase in the CPI.  However, since 1980,
several legislative provisions have often reduced, delayed, or
skipped the scheduled CSRS COLAs.  For example, in 1983, the CSRS
COLA was delayed 1 month and was less than the increase in the CPI
for nondisabled retirees under age 62; the 1984 COLA was delayed for
9 months; in 1986, the President and Congress decided not to grant
any COLAs to federal retirees that year; and in fiscal years 1994,
1995, and 1996, the COLA payments were delayed until April of each of
those years instead of the scheduled January payment dates.\6 In
1995, we reported that the CSRS COLA delays and reductions during the
10-year period from 1985 to 1994 had caused the COLAs to cover about
80 percent of the CPI increase for the period.\7 In figures 2.16
through 2.20, the bars labeled CSRS I represent the statutory policy
of full adjustments for CSRS, and the bars labeled CSRS II represent
the actual COLA practices during 1985 through 1994 when 80 percent of
the CPI increase was covered. 

Because of the full COLAs provided for CSRS I, its replacement rates
remain the same in constant dollars, regardless of the length of
retirement.  In contrast, the replacement rates available from FERS
and private sector programs decline in constant dollars during
retirement because only the Social Security portion of these programs
is fully adjusted.  Similarly, the limitations on COLAs under CSRS II
cause retirees to lose purchasing power, or receive declining
replacement rates, during their retirement years. 

While FERS makes greater immediate benefits available than CSRS when
employees retire at age 55 with 30 years of service, FERS' smaller
COLAs\8 cause its replacement rate to fall behind the CSRS I
replacement rate after 20 years of retirement (i.e., the effective
FERS replacement rate is 65 percent at retirement, declines to 57
percent after 10 years, and further declines to 49 percent after 20
years in comparison to the constant CSRS I replacement rate of 53
percent at retirement and thereafter).  However, the FERS replacement
rates for age 55 retirees with 30 years of service continue to exceed
the average replacement rates for private sector programs in the
contractor's database, with both DB and DC plans that start at 45
percent, increase to 49 percent after 10 years (because of the
addition of Social Security retirement benefits at age 62), and
decrease to 39 percent after 20 years of retirement.\9 The FERS
replacement rate does not show an increase at 10 years after
retirement because the FERS annuity supplement ceases at age 62 when
Social Security retirement benefits are available.  The FERS
replacement rate for employees who retire at age 55 with 30 years of
service also exceeds the CSRS II replacement rate after 20 years of
retirement because, together, the FERS' higher replacement rate at
retirement and the increases provided by COLAs in the FERS' DB plan
and Social Security keep its replacement rate just above CSRS II with
its COLA that covers 80 percent of the increase in the CPI. 

   Figure 2.16:  Average
   Replacement Rates Available at
   Retirement and 10 and 20 Years
   After Retirement When Employees
   Retire at Age 55 With 30 Years
   of Service and a Final Salary
   of $40,000

   (See figure in printed
   edition.)

Note 1:  Social Security retirement benefits are not available at age
55.  Retirees may elect to begin benefits at age 62. 

Note 2:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.1). 

When retirement occurs at age 62 or older, Social Security retirement
benefits are available immediately upon retirement for FERS and
private sector retirees.  Therefore, the changes in the relative
replacement rates that occur within a particular program design after
retirement at age 55 do not occur at the older retirement ages.  For
employees who retire at ages 62 and 65 with 20 or 30 years of
service, FERS starts with the highest replacement rates of all
programs, and this advantage continues throughout the next 20 years. 
(See figs.  2.17 through 2.20.)

When retirement occurs at age 62 or older with 20 years of service,
the private sector programs in the contractor's database that have
both DB and DC plans rank in the second position for the full 20
years.  CSRS I stays in the third position, but moves closer to the
private sector program average by the 20-year point.  CSRS II remains
at the bottom for the full 20 years.  (See figs.  2.17 and 2.18.)

   Figure 2.17:  Average
   Replacement Rates Available at
   Retirement and 10 and 20 Years
   After Retirement When Employees
   Retire at Age 62 With 20 Years
   of Service and a Final Salary
   of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.2). 

   Figure 2.18:  Average
   Replacement Rates Available at
   Retirement and 10 and 20 Years
   After Retirement When Employees
   Retire at Age 65 With 20 Years
   of Service and a Final Salary
   of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.3). 

When retirement occurs at age 62 or older with 30 years of service,
the averages of the replacement rates for the private sector programs
that have both DB and DC plans are higher than those for CSRS I at
retirement and 10 years after retirement.  However, by 20 years after
retirement, the CSRS I replacement rate becomes higher than the
private sector rate.  The replacement rate for CSRS II remains lower
than the rates for all other programs at the 10-year and 20-year
points.  (See figs.  2.19 and 2.20.) However, at the 20-year point,
the replacement rates available are similar for employees who retire
at age 62 with 30 years of service under CSRS II and the private
sector programs that include both DB and DC plans.  CSRS II's
replacement rate is 44 percent, and the private sector rate is 45
percent. 

   Figure 2.19:  Average
   Replacement Rates Available at
   Retirement and 10 and 20 Years
   After Retirement When Employees
   Retire at Age 62 With 30 Years
   of Service and a Final Salary
   of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.4). 

   Figure 2.20:  Average
   Replacement Rates Available at
   Retirement and 10 and 20 Years
   After Retirement When Employees
   Retire at Age 65 With 30 Years
   of Service and a Final Salary
   of $40,000

   (See figure in printed
   edition.)

Note:  The percentages shown were calculated using the assumption
that the employee contributed the percentage of salary that is
necessary to obtain the maximum employer-matching contributions. 

Source:  Watson Wyatt Worldwide database (see table III.5). 


--------------------
\5 By their nature, the TSP and private sector DC plan benefits are
not subject to cost-of-living adjustments. 

\6 The COLA delays in 1994, 1995, and 1996 also applied to FERS
retirees. 

\7 Overview of Federal Retirement Programs (GAO/T-GGD-95-172, May 22,
1995). 

\8 In our analysis, we assumed the rate of inflation and increase in
the CPI to be 4.5 percent each year, so the FERS COLA is 3.5 percent,
which is smaller than the CSRS COLA of 4.5 percent.  If the rate of
inflation is 2 percent or less, then the FERS and CSRS COLAs would be
the same. 

\9 Because the private sector programs with DB plans only were so few
in number, the contractor did not calculate their effective
replacement rates 10 and 20 years after retirement.  Also, the COLA
information available to the contractor pertained largely to programs
that included both DB and DC plans. 


COMPARATIVE FEATURES OF FERS,
CSRS, AND PRIVATE SECTOR
RETIREMENT PROGRAMS
============================================================ Chapter 3

The designs of the private sector retirement programs in the
contractor's database fall into the following three distinct groups: 
(1) programs with Social Security, a DB plan, and a DC plan; (2)
programs with Social Security and DC plans only; and (3) programs
with Social Security and DB plans only.  The FERS program design is
the same as the first group, while CSRS is different from all three
groups.  CSRS is solely a DB plan with no Social Security coverage. 
Employees in CSRS may contribute to the TSP, but the government makes
no contribution to their accounts. 

Along with the differing program designs, specific features of
federal and private sector DB and DC plans often vary considerably
from plan to plan, including the ages at which benefits are
available, the formulas used to calculate benefit amounts, the
amounts of contributions employees are required to pay toward plan
costs, and the arrangements for determining employer contributions to
DC plans. 

This chapter compares and contrasts the features of FERS, CSRS, and
private sector retirement programs in the contractor's database. 


   PROGRAM DESIGNS
---------------------------------------------------------- Chapter 3:1

DB plans are offered by 75 percent of the 661 private sector
employers in the contractor's database, and DC plans are offered by
93 percent of the employers.  FERS includes both a DB plan and a DC
plan--the TSP--to which the government and most FERS employees
contribute.  CSRS includes a DB plan only, but CSRS employees are
allowed to contribute to the TSP.  The federal government does not
contribute to CSRS employees' TSP accounts.  All of the private
sector programs and FERS provide Social Security coverage.  Employees
in CSRS are not covered by Social Security through their federal
employment. 

In the contractor's database, 69 percent of the 661 private sector
programs consisted of three parts--Social Security, DB plans, and DC
plans.  Another 25 percent of the programs had Social Security and DC
plans only.  The remaining 7 percent of the programs had Social
Security and DB plans only.\1 Figure 3.1 shows the various designs of
the federal and private sector programs. 

   Figure 3.1:  Federal and
   Private Sector Retirement
   Program Designs

   (See figure in printed
   edition.)

   Source:  GAO and the Watson
   Wyatt Worldwide database.

   (See figure in printed
   edition.)


--------------------
\1 These percentages do not add to 100 percent or to the percentages
cited in the previous paragraph because of rounding. 


   PROGRAM FEATURES
---------------------------------------------------------- Chapter 3:2

Table 3.1 shows that the major features of FERS and CSRS, as well as
private sector DB and DC plans, vary greatly.  However, one specific
feature alone does not reflect a retirement program's overall
generosity.  Rather, it is the combination of all the features
working together that determines benefit amounts.  For example, one
DB plan may use employees' 5-year salary averages in benefit
calculations, and a second DB plan may use employees' 3-year salary
averages.  In this case, the salary average feature in the second
plan appears better because it usually would produce higher salary
averages.  However, the first plan could produce greater benefit
amounts if its benefit formula provided a higher percentage of the
salary average for each year of service than the second plan.  But,
the second plan could still provide greater benefit amounts for
employees who retire at age 55 if the first plan had a feature
calling for reductions in accrued benefits for employees who retire
at that age and if the second plan had no such feature. 

Through a replacement rate analysis, as used in the retirement
program comparisons presented in chapter 2, all of a program's
features are considered in calculating the benefit amounts the
program provides at varying ages and years of service so that
meaningful comparisons with other programs can be made. 

Additional details on the features of the FERS, CSRS, and private
sector DB plans are presented in appendix IV.  Appendix V presents
details on the FERS and private sector DC plans. 



                                    Table 3.1
                     
                        Major Features of FERS, CSRS, and
                      Private Sector Retirement Programs in
                            the Contractor's Database

Program features    Private sector\a    FERS                CSRS
------------------  ------------------  ------------------  --------------------
Social Security     Yes                 Yes                 No

Require employee    Yes, 7% of plans    Yes, 0.8% of pay\b  Yes, 7% of pay
contributions to    No, 92% of plans
DB plan

Definition of pay   Base pay, 97%       Base pay only       Base pay only
for DB plan         Overtime, 61%
benefit             Bonuses, 53%
calculation         Commissions, 41%
                    Other pay, 14%

Average pay for DB  Final 3-year        Average of highest  Average of highest 3
plan benefit        average, 14%        3 consecutive       consecutive years of
calculations        Final 5-year        years of base pay   base pay
                    average, 64%        ("high 3")
                    Career average,
                    11%
                    Other, 8%

Formula for         Formulas varied so  1.1% of "high 3"    1.5% of "high 3" for
calculating DB      widely that they    for each year of    each of the first 5
plan benefit        could not be        service, if age 62  years of service,
amounts             meaningfully        and 20 years of     1.75% for each of
                    summarized or a     service;            the next 5 years,
                    "typical" formula   otherwise, 1% for   and 2% for each year
                    described           each year           over 10 years

DB plan formula is  Yes, 75% of plans   No                  No Social Security
integrated with     No, 25% of plans                        coverage
Social Security

Unreduced DB plan   Usually with        MRA\d and 30 years  Age 55 and 30 years
benefits are        service             of service          of service
available           requirement,\c      Age 60 and 20       Age 60 and 20 years
                    Age 55, 10%         years               Age 62 and 5 years
                    Age 60, 14%         Age 62 and 5 years
                    Age 62, 27%
                    Age 65, 43%
                    Other, 4%

Reduced DB plan     Less than age 55,   MRA and 10 years    None
benefits are        8%                  of service
available at        Age 55 and 10
employee's option   years or less,
                    69%
                    Age 55 and more
                    than 10 years,
                    13%
                    Other, 7%

Postretirement      At least once       Annual adjustments  Annual adjustments
increases in DB     during 1983-92,     payable only to     fully indexed to the
plan amounts        Yes, 43%            retirees age 62 or  CPI for all
                    No, 44%             older, unless they  annuitants, unless
                                        are disability or   limited by law
                                        survivor
                                        annuitants.
                                        Adjustments,
                                        unless limited by
                                        law, are equal to
                                        (1) the increase
                                        in the CPI, if the
                                        CPI increases 2
                                        percent or less;
                                        (2) 2 percent, if
                                        the CPI increases
                                        between 2 and 3
                                        percent; and (3)
                                        the CPI increase
                                        minus 1 percent,
                                        if the CPI
                                        increases 3
                                        percent or more.

Tax advantages to   Yes, 93% had        Yes, up to 10% of   Yes, up to 5% of pay
employee in the DC  employee            pay on a pretax     on a pretax basis
plan                contributions       basis
                    under a Section
                    401(k) or 403(b)
                    feature
                    No, 5%

Employer            Matching only,\e    For all FERS        No employer
contributions to    65%                 employees, 1% of    contributions
DC                  Nonmatching only,   pay. Plus, 100%
plan                11%                 matching on the
                    Both matching and   first 3% of pay
                    nonmatching,\e      that employee
                    17%                 contributes and
                    Other, 2%           50% matching on
                                        the next 2% of
                                        pay.
--------------------------------------------------------------------------------
\a The percentages for some features may total less than 100 percent
because of rounding or because some employers did not provide
information on a particular feature.  Percentages for other features
may total more than 100 percent because multiple responses could be
given. 

\b The required contribution is 7 percent of pay minus the
contribution of 6.2 percent of pay to Social Security. 

\c Eighty-two percent of the programs had service requirements. 
These requirements ranged from 5 to 35 years of service when the
employee retires at age 55, from 1 to 40 years at ages 60 and 62, and
from 1 to 10 years at age 65. 

\d MRA is the minimum optional retirement age, which ranges from age
55 to age 57 and is based on the employee's date of birth. 

\e For programs with employer-matching contributions, the median
match was 50 percent of employee contributions up to 6 percent of
pay. 

Source:  Watson Wyatt Worldwide database (see apps.  IV and V). 


CONCLUSIONS AND AGENCY AND
CONTRACTOR COMMENTS
============================================================ Chapter 4


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:1

There is no definitive answer to the question of whether federal
retirement programs offer greater or smaller benefits than private
sector programs.  Depending on individual retirees' circumstances and
how they interact with the retirement programs' designs, the benefits
available from FERS and CSRS can be smaller, similar, or greater than
benefits available from the private sector programs in the
contractor's database. 

For example, CSRS benefits are greater than the benefits available
from the private sector programs in the contractor's database when
employees retire before age 62.  However, for employees who retire at
age 62 or older with 20 years of service, CSRS benefits at retirement
are smaller than the benefits available from private sector programs
in the database of all designs.  After 20 years of retirement, CSRS
benefits for age 62 or older retirees who retired with 20 years of
service are still behind the private sector programs that have both
DB and DC plans, even though the COLA provision in CSRS provides
greater increases in benefits over time than private sector programs. 

CSRS replacement rates are greater than those available in the
private sector when employees retire at age 55 principally because
private sector DB plans generally impose reductions in accrued
benefits for employees who retire at that age.  CSRS imposes no such
reductions; but it does permit employees to retire at age 55 under
regular retirement provisions only if they have 30 or more years of
service.  Therefore, CSRS limits age 55 retirement eligibility to
long-term, career employees.  The average private sector program has
no similar design feature, although the average program allows
employees to retire on reduced benefits at age 55 with fewer than 30
years of service--a feature that does not exist in CSRS.  Most
federal employees do not have 30 years of service by the time they
are age 55, and, of those who do, many elect to retire later.  As a
result, the average CSRS retirement age is about 62. 

The lack of Social Security coverage for employees in CSRS is a major
reason why the private sector programs in the contractor's database
can provide higher replacement rates to employees who retire at age
62 or older.  Moreover, CSRS employees do not participate in a DC
plan to which their employer contributes.  As this report shows, most
private sector programs in the contractor's database included DC
plans to which their employers contribute and from which employees
can earn significant benefit amounts. 

CSRS was closed to new entrants at the end of 1983 and was replaced
by FERS--a completely restructured federal retirement program.  FERS
follows the model used by most of the private sector employers in the
contractor's database:  a three-part retirement package that includes
Social Security, a DB plan, and a DC plan.  As our findings
illustrate, the FERS benefits from Social Security, the DB plan, and
the government's automatic 1-percent contribution to the TSP alone
are smaller than CSRS benefits for employees who retire at age 55. 
However, these FERS benefits can be greater than CSRS benefits for
employees who retire at age 62 or older, even though FERS employees
generally contribute the same total percentage of their salaries
toward the cost of these benefits as CSRS employees contribute.  By
contributing to their DC plan, FERS employees can obtain greater
benefits than are available from CSRS at all ages, but they will pay
more to receive the greater benefit amounts. 

FERS continued CSRS' objective of encouraging employees to spend
their working careers in federal service by making unreduced benefits
available at age 55 only to employees who serve 30 or more years with
the government.  Consistent with this objective, FERS also provides
an annuity supplement to career employees who retire before Social
Security benefits are otherwise available.  This feature is not
commonly found in private sector programs and, along with the lack of
reductions in accrued DB plan benefits for age 55 retirees in federal
programs, the feature causes FERS replacement rates available at age
55 to exceed the replacement rates available from the private sector
programs of all designs in the contractor's database.  However, as
with CSRS, FERS employees generally have been older than age 55 when
they retired.  FERS was designed to encourage, but not to require,
longer careers by raising the age of earliest retirement eligibility
to age 57 for employees born after 1969 and by increasing the DB plan
benefit formula for employees who continue working to at least age
62. 

For employees who retire at age 62 or older, the total benefits
available at retirement from all three parts of FERS are quite
comparable to the average benefits available from private sector
programs in the contractor's database that also have DB and DC plans
in addition to Social Security.  Because the COLA provision in the
FERS' DB plan provides greater increases in benefits over time than
do private sector DB plans on average, FERS retirees will fare better
in times of high inflation when increases in the CPI will be greater. 
However, the FERS COLA does not fully maintain retirees' purchasing
power and, thereby, represents a reduction from the inflation
protection intended for CSRS retirees. 


   AGENCY AND CONTRACTOR COMMENTS
   AND OUR EVALUATION
---------------------------------------------------------- Chapter 4:2

Watson Wyatt Worldwide and the Federal Retirement Thrift Investment
Board provided oral comments on the draft of this report, and OPM
provided written comments.  All of the officials agreed with our
conclusion that there is no definitive answer to the question of
whether federal retirement programs offer greater or smaller benefits
than private sector programs.  The Thrift Board and OPM officials
noted that it is very difficult to compare varied federal and private
sector retirement programs.  They said, and we agree, that our
analyses and conclusions are dependent on (1) the database used; (2)
the age and service characteristics of the illustrative employees;
and (3) the assumptions made about salary histories, return on
investments, the conversion of defined contribution plan amounts at
retirement to annuities, and the rate of inflation. 

We believe that the database and illustrative employees used and the
assumptions made are reasonable because they either were those used
by OPM in its latest actuarial valuations, were based on standards
used in the benefits field, or were necessary to provide a common
basis of comparison.  We modified the executive summary and chapter 1
of this report to clarify that the use of different databases,
illustrative employees, and assumptions would have changed the
relative magnitude of benefits available among retirement programs as
well as the levels of benefits provided by all programs.  Using such
data could possibly, in some circumstances, change the relative
rankings between programs.  However, while we believe that no one
database or set of assumptions could fully capture the range of
private sector programs and employees' experiences, we also believe
that using different databases and assumptions would not have changed
our conclusion that no definitive answer exists to the question of
whether federal programs offer greater or smaller benefits than
private sector programs. 

OPM also commented that our analyses and conclusions might be better
understood if additional information on the database, illustrative
employees, and the assumptions were provided in the report (i.e., the
executive summary and chapter 1 of the report).  OPM expressed
concern that we had implied in the executive summary that variations
in retirement benefits result from employee decisions and situations,
while the body of the report made it clear that the variations result
from the structural differences between retirement programs.  We
agree that the variations in benefits available did not result solely
from employee choices and have modified the executive summary to
reflect that it is the interactions between factors, such as
employees' ages, years of service, and DC plan contribution behavior,
and the varying designs and provisions of the retirement programs
that affect the comparisons among programs. 

OPM also said that while it is difficult to include every material
item in the executive summary, some significant information contained
in the body of the report was not included in the executive summary. 
OPM mentioned the following:  (1) that private sector salaries used
in calculating retirement benefits often include overtime and
bonuses, (2) that a meaningful "typical" retirement benefit formula
does not exist for the private sector, and (3) that retirement
program designs vary considerably between large and small private
sector companies.  We agree that it was difficult to include all
information in the executive summary and, as noted previously, have
modified the executive summary to clarify that the use of different
databases, illustrative employees, and assumptions would have changed
the relative magnitude of benefits available among retirement
programs, the levels of benefits provided by all programs, and could,
in some circumstances, change the relative rankings between programs. 
We have modified the executive summary to specifically mention that
many private sector programs use overtime, bonuses, or commissions in
their benefit calculations.  We have modified the objective, scope,
and methodology section of chapter 1 to include that (1) the salary
histories include base pay only, (2) benefit calculations in many of
the private sector programs in the contractor's database would
include other types of compensation in addition to base pay, and (3)
had we assumed other types of compensation in addition to the base
pay represented in the salary histories, the averages of the
replacement rates from the private sector programs would have
increased.  We also deleted the footnote in chapter 2 to which OPM
referred. 

We agree that not being able to identify a typical benefit formula is
significant.  It is one of the major reasons why we selected the
replacement rate analysis as our method of comparison and had the
contractor separately calculate and then average the benefits
available from each of the 435 retirement programs in the private
sector database. 

We agree with OPM that retirement program designs vary considerably
and say this in the executive summary.  We also agree that program
designs vary by employer size and have discussed this in an earlier
GAO report.\1 Our methodology did not include analyses by employer
size because the contractor's database included primarily large
employers. 

The contractor and the Thrift Board also provided editorial and
technical comments that we incorporated in the report as appropriate. 


--------------------
\1 GAO/GGD-97-1. 


FERS, CSRS, AND WATSON WYATT
WORLDWIDE DATABASE STATISTICS
=========================================================== Appendix I



                               Table I.1
                
                Number of Participants in FERS and CSRS
                  at the Beginning of Fiscal Year 1995

Participants                                      FERS    CSRS   Total
----------------------------------------------  ------  ------  ------
Employees:
Active\a                                        1,375,  1,443,  2,818,
                                                   000     000     000
Former\b                                        89,000  26,000  115,00
                                                                     0
Total employees                                 1,464,  1,469,  2,933,
                                                   000     000     000
Annuitants:
Retirees                                        44,900  1,652,  1,696,
                                                           000     900
Survivors                                        3,100  610,00  613,10
                                                             0       0
Total annuitants                                48,000  2,262,  2,310,
                                                           000     000
======================================================================
Total participants                              1,512,  3,731,  5,243,
                                                   000     000     000
----------------------------------------------------------------------
\a Number of employees determined on a full-time equivalent basis. 
These numbers include employees on leave without pay who retain
coverage. 

\b Former employees are employees who separated before eligibility
for immediate retirement benefits, but who are entitled to deferred
benefits. 

Source:  United States Office of Personnel Management, Annual Report
of the Civil Service Retirement and Disability Fund for Fiscal Year
1995 (May 1996). 



                               Table I.2
                
                Sizes of the Private Sector Employers in
                the Contractor's Database as of October
                                  1995

                                                    Percentage of
                                                   employers whose
                                                program benefits could
                                                      be valued
                                                ----------------------
                                        Percen
                                          tage
                                        of all
                                        employ
                                        ers in      DB      DC  DB and
                                        databa   plans   plans      DC
Number of employees                         se    only    only   plans
--------------------------------------  ------  ------  ------  ------
499 or fewer                                 9      28       9       6
500 to 999                                  10       4      12       6
1,000 to 2,499                              22      24      26      20
2,500 to 4,999                              16      24      19      13
5,000 to 9,999                              11       8      15      13
10,000 or more                              30      12      17      40
No response                                  2       0       2       2
======================================================================
Number of employers                        661      25     106     304
----------------------------------------------------------------------
Note:  The Watson Wyatt Worldwide 1993 COMPARISON database had 661
employers.  Of those 661, 435 employers contributed to their plans
and provided sufficient information so that the benefits could be
valued. 

Source:  Watson Wyatt Worldwide database. 



                               Table I.3
                
                 Sizes in Percentiles, Median, and Mean
                  for Private Sector Employers in the
                Contractor's Database as of October 1995

                                                   Employers whose
                                                program benefits could
                                                 be valued (number of
                                                      employees)
                                                ----------------------
                                           All
                                        employ
                                        ers in
                                        databa
                                            se
                                        (numbe
                                          r of      DB      DC  DB and
                                        employ   plans   plans      DC
Percentiles, median, and mean             ees)    only    only   plans
--------------------------------------  ------  ------  ------  ------
25th percentile                          1,232     415   1,050   1,672
50th percentile (median)                 3,500   2,020   2,700   6,000
75th percentile                         13,000   3,925   6,000  18,724
Mean                                    15,148   3,691   7,410  20,003
----------------------------------------------------------------------
Source:  Watson Wyatt Worldwide database. 



                               Table I.4
                
                  Industry Classifications of Private
                  Sector Employers in the Contractor's
                      Database as of October 1995

                                                    Percentage of
                                                   employers whose
                                                program benefits could
                                                      be valued
                                                ----------------------
                                        Percen
                                          tage
                                        of all
                                        employ
                                        ers in      DB      DC  DB and
                                        databa   plans   plans      DC
Industry                                    se    only    only   plans
--------------------------------------  ------  ------  ------  ------
Manufacturing -durable goods                27       4      32      28
Manufacturing -nondurable goods             18      16      19      21
Financial services                          15       4      12      20
Insurance and real estate                   11       8       2      18
Services                                    11       8      22       9
Health care                                  8      52       8       4
Nonprofit and public organizations           8      24       8       2
Retail and wholesale                         7      12      11       5
Utilities                                    7       0       0       8
Energy and natural resources                 5       4       2       7
Transportation                               2       0       1       2
Construction                                \a       0       1      \a
No response                                  1       0       2      \a
======================================================================
Number of employers                        661      25     106     304
----------------------------------------------------------------------
Note:  Multiple responses were permitted.  Therefore, percentages
total more than 100 percent. 

\a Less than 0.5 percent. 

Source:  Watson Wyatt Worldwide database. 



                               >Table I.5
                
                 Geographic Locations of Private Sector
                 Employers in the Contractor's Database
                           as of October 1995

                                                    Percentage of
                                                   employers whose
                                                program benefits could
                                                      be valued
                                                ----------------------
                                        Percen
                                          tage
                                        of all
                                        employ
                                        ers in      DB      DC  DB and
                                        databa   plans   plans      DC
Region                                      se    only    only   plans
--------------------------------------  ------  ------  ------  ------
Midwest                                     44      36      36      49
Northeast                                   37      28      32      40
Southeast                                   33      24      30      35
Pacific                                     30       8      44      27
West south central                          20      20      21      21
Mountain                                    12       4      16      11
No response                                  2       0       1       2
======================================================================
Number of employers                        661      25     106     304
----------------------------------------------------------------------
Note 1:  Geographic locations refer to a region(s) in which the
employer has at least 1,000 employees or 10 percent of its workforce. 

Note 2:  Multiple responses were permitted.  Therefore, percentages
total more than 100 percent. 

Source:  Watson Wyatt Worldwide database. 



                               >Table I.6
                
                 Retirement Program Designs of Private
                  Sector Employers in the Contractor's
                      Database as of October 1995

                                                          Employers
                                                        whose program
                                        All employers   benefits could
                                         in database      be valued
                                        --------------  --------------
                                                Percen          Percen
Retirement plans offered                Number     t\a  Number       t
--------------------------------------  ------  ------  ------  ------
DB plans only                               44       7      25       6
DC plans only                              164      25     106      24
Both DB and DC plans                       453      69     304      70
======================================================================
Number of employers                        661     100     435     100
----------------------------------------------------------------------
Note:  The total number of employers whose program benefits could be
valued remained the same between October 1995 and January 1997 when
the additional replacement rate analyses were provided under the CBO
contract.  However, the numbers in each category changed.  As of
January 1997, 23 of the 435 employers had DB plans only, 109 of the
employers had DC plans only, and 303 of the employers had both DB and
DC plans. 

\a These percentages do not add to 100 percent because of rounding. 

Source:  Watson Wyatt Worldwide database. 


SALARY HISTORIES USED IN PENSION
PLAN AND SOCIAL SECURITY BENEFIT
CALCULATIONS
========================================================== Appendix II

To calculate retirement benefit amounts available from Social
Security and individual employers' DB and DC plans, a number of
factors must be taken into account.  A primary factor is an
employee's salary history.  Most DB plans base benefits on employees'
average annual salaries received in the final years of employment,
such as the last 3 or 5 years.  Some use the average of the annual
salaries that employees received during their entire careers with an
employer.  Salary histories are also necessary to determine the total
amounts that employees and employers could contribute to DC plans
over employees' working years, as well as to calculate the Social
Security benefits earned while working for a particular employer. 

For all of the illustrative employees used in this report to show the
relative benefit amounts available from FERS, CSRS, and private
sector retirement programs, we assumed the employees began working in
1995 and worked throughout the specified periods (20 or 30 years)
under each program used in the comparisons.  We developed employee
salary histories that resulted in final salaries equivalent in 1995
dollars to $25,000, $40,000, and $60,000.  The $25,000 salary history
has the slowest rate of growth and was selected to represent the
experiences of employees at lower salary levels.  The $40,000 salary
history was selected to represent the experiences of the "typical"
federal employee because employees retiring under the optional
retirement provisions of CSRS and FERS in 1995 had final salaries
averaging about $40,000.  The $60,000 salary history has the fastest
rate of growth and was selected to represent the experiences of
higher-paid employees.  The three salary histories are presented in
tables II.1, II.2, and II.3. 



                               Table II.1
                
                Salary History With a Final Salary That
                  Is Equivalent to a $25,000 Salary in
                                  1995

                                                 30-year       20-year
Year                                              career        career
------------------------------------------  ------------  ------------
1                                                $12,234       $21,572
2                                                 15,322        23,179
3                                                 16,562        25,703
4                                                 18,327        27,198
5                                                 20,834        30,132
6                                                 22,879        33,148
7                                                 25,099        35,843
8                                                 26,997        37,337
9                                                 29,216        38,403
10                                                30,917        40,003
11                                                33,500        41,454
12                                                35,996        42,606
13                                                39,915        43,923
14                                                42,238        44,820
15                                                46,793        47,999
16                                                51,478        49,791
17                                                55,663        51,920
18                                                57,982        55,620
19                                                59,639        57,697
20                                                62,124        57,697
21                                                64,377           n/a
22                                                66,165           n/a
23                                                68,211           n/a
24                                                69,603           n/a
25                                                74,540           n/a
26                                                77,324           n/a
27                                                80,630           n/a
28                                                86,375           n/a
29                                                89,601           n/a
30                                                89,601           n/a
----------------------------------------------------------------------
Legend:  n/a = not applicable

Source:  GAO generated. 



                               Table II.2
                
                Salary History With a Final Salary That
                  Is Equivalent to a $40,000 Salary in
                                  1995

                                                 30-year       20-year
Year                                              career        career
------------------------------------------  ------------  ------------
1                                                $16,809       $34,447
2                                                 18,826        37,202
3                                                 21,067        39,992
4                                                 23,405        42,872
5                                                 25,839        45,873
6                                                 28,371        48,992
7                                                 30,925        52,226
8                                                 33,646        55,568
9                                                 36,506        59,013
10                                                39,536        62,554
11                                                42,660        66,120
12                                                45,944        69,756
13                                                49,436        73,384
14                                                53,094        76,906
15                                                56,917        80,136
16                                                61,015        83,021
17                                                65,408        86,010
18                                                70,118        89,106
19                                                75,166        92,314
20                                                80,052        92,314
21                                                84,855           n/a
22                                                89,946           n/a
23                                                95,343           n/a
24                                               101,064           n/a
25                                               107,128           n/a
26                                               113,555           n/a
27                                               120,369           n/a
28                                               127,591           n/a
29                                               135,246           n/a
30                                               143,361           n/a
----------------------------------------------------------------------
Legend:  n/a = not applicable

Source:  GAO generated. 



                               Table II.3
                
                Salary History With a Final Salary That
                  Is Equivalent to a $60,000 Salary in
                                  1995

                                                 30-year       20-year
Year                                              career        career
------------------------------------------  ------------  ------------
1                                                $17,505       $48,407
2                                                 22,330        52,389
3                                                 28,602        56,332
4                                                 31,079        61,364
5                                                 40,034        65,982
6                                                 44,010        73,988
7                                                 54,303        80,309
8                                                 60,355        86,352
9                                                 65,443        89,051
10                                                71,416        92,761
11                                                75,174        99,037
12                                                81,358        99,037
13                                                87,481       105,103
14                                                95,295       107,248
15                                               102,468       115,027
16                                               114,900       119,323
17                                               124,717       124,424
18                                               134,102       133,487
19                                               138,293       138,472
20                                               144,055       138,472
21                                               153,801           n/a
22                                               153,801           n/a
23                                               163,222           n/a
24                                               166,553           n/a
25                                               178,633           n/a
26                                               185,304           n/a
27                                               193,226           n/a
28                                               207,301           n/a
29                                               215,042           n/a
30                                               215,042           n/a
----------------------------------------------------------------------
Legend:  n/a = not applicable

Source:  GAO generated. 


   SOCIAL SECURITY BENEFITS
   PRODUCED BY SALARY HISTORIES
-------------------------------------------------------- Appendix II:1

Table II.4 shows the Social Security benefit amounts earned by FERS
and private sector employees with the above salary histories and
years of service, assuming the employees had no Social
Security-covered employment with any other employer before or after
retirement. 



                                    Table II.4
                     
                      Percentage of Final Salary Replaced by
                     Social Security Benefits in FERS and the
                             Private Sector Programs

                                           Social Security replacement rates
                                                      (percentage)
                                        ----------------------------------------
                                             $25,000       $40,000       $60,000
                                               final         final         final
                                             average       average       average
                                              salary        salary        salary
                                             in 1995       in 1995       in 1995
Age and years of service at retirement       dollars       dollars       dollars
--------------------------------------  ------------  ------------  ------------
Age 55 with 30 years of service\a               25.3          19.2          16.9
Age 62 with 20 years of service                 22.5          19.0          16.3
Age 65 with 20 years of service                 27.1          23.0          19.6
Age 62 with 30 years of service                 25.3          19.2          16.9
Age 65 with 30 years of service                 30.3          23.1          20.6
--------------------------------------------------------------------------------
Note:  The replacement rates were determined using an assumption that
the Social Security salary ceiling (the amount of earnings to which
Social Security contributions and benefit calculations apply) will
increase by 4.5 percent each year--the same projected rate of salary
growth that OPM used in its actuarial valuations of CSRS and FERS. 

\a Social Security benefits were assumed to be payable at age 62 for
retirements before age 62 and were adjusted for the 7 years of
4.5-percent inflation between the ages of 55 and 62. 

Source:  Watson Wyatt Worldwide database. 


RESULTS OF THE REPLACEMENT RATE
ANALYSIS
========================================================= Appendix III



                                                                     Table III.1
                                                       
                                                       Average Replacement Rates Available With
                                                         Maximum Employer Contributions to DC
                                                        Plans -Age 55 and 30 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.0            22.2    41.6    55.6          15.0      21.2      55.6        51.0         10.5      19.3      55.6        46.8
DC plan                       32.0    29.6    33.4                  19.1      21.5                               12.3      13.8
Social Security                                                     25.3      25.3                               25.3      25.3
=====================================================================================================================================================
Total                 20.0    32.0    51.8    75.0    55.6          59.4      68.0      55.6        51.0         48.1      58.4      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               19.0            21.1    37.4    53.1          14.2      20.2      53.1        48.7         10.0      18.4      53.1        44.7
DC plan                       26.0    24.1    27.2                  15.5      17.5                               10.0      11.3
Social Security                                                     19.2      19.2                               19.2      19.2
=====================================================================================================================================================
Total                 19.0    26.0    45.2    64.6    53.1          48.9      56.9      53.1        48.7         39.2      48.9      53.1        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.8            23.4    37.8    55.6          15.8      21.2      55.6        51.0         11.1      19.3      55.6        46.8
DC plan                       29.0    27.0    30.4                  17.4      19.6                               11.2      12.6
Social Security                                                     16.9      16.9                               16.9      16.9
=====================================================================================================================================================
Total                 20.8    29.0    50.4    68.2    55.6          50.1      57.7      55.6        51.0         39.2      48.8      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some column cells show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.2
                                                       
                                                       Average Replacement Rates Available With
                                                         Maximum Employer Contributions to DC
                                                        Plans -Age 62 and 20 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.2            21.0    21.7    35.8          14.1      19.7      35.8        32.8         10.0      17.9      35.8        30.1
DC plan                       24.1    22.3    25.2                  14.4      16.2                                9.2      10.4
Social Security       22.5    22.5    22.5    22.5                  22.5      22.5                               22.5      22.5
=====================================================================================================================================================
Total                 42.7    46.6    65.8    69.4    35.8          51.0      58.4      35.8        32.8         41.7      50.8      35.8        30.1

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               21.0            21.7    21.7    35.8          14.6      19.7      35.8        32.8         10.3      17.9      35.8        30.1
DC plan                       23.7    22.0    24.8                  14.2      16.0                                9.1      10.3
Social Security       19.0    19.0    19.0    19.0                  19.0      19.0                               19.0      19.0
=====================================================================================================================================================
Total                 40.0    42.7    62.7    65.5    35.8          47.8      54.7      35.8        32.8         38.4      47.2      35.8        30.1

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               21.6            23.1    21.8    35.8          15.6      19.8      35.8        32.8         11.0      18.0      35.8        30.1
DC plan                       23.0    21.4    24.2                  13.8      15.6                                8.9      10.0
Social Security       16.3    16.3    16.3    16.3                  16.3      16.3                               16.3      16.3
=====================================================================================================================================================
Total                 37.9    39.3    60.8    62.3    35.8          45.7      51.7      35.8        32.8         36.2      44.3      35.8        30.1
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.3
                                                       
                                                       Average Replacement Rates Available With
                                                         Maximum Employer Contributions to DC
                                                        Plans -Age 65 and 20 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               23.0            22.8    21.8    35.8          15.4      19.8      35.8        32.8         10.8      18.0      35.8        30.1
DC plan                       25.6    23.7    26.8                  15.3      17.3                                9.8      11.1
Social Security       27.1    27.1    27.1    27.1                  27.1      27.1                               27.1      27.1
=====================================================================================================================================================
Total                 50.1    52.7    73.6    75.7    35.8          57.8      64.2      35.8        32.8         47.7      56.2      35.8        30.1

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               24.1            24.0    21.7    35.8          16.2      19.7      35.8        32.8         11.4      17.9      35.8        30.1
DC plan                       25.2    23.5    26.4                  15.1      17.0                                9.7      10.9
Social Security       23.0    23.0    23.0    23.0                  23.0      23.0                               23.0      23.0
=====================================================================================================================================================
Total                 47.1    48.2    70.5    71.1    35.8          54.3      59.7      35.8        32.8         44.1      51.8      35.8        30.1

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               25.0            25.4    21.7    35.9          17.1      19.7      35.9        32.9         12.0      17.9      35.9        30.2
DC plan                       24.5    22.8    25.8                  14.7      16.6                                9.5      10.7
Social Security       19.6    19.6    19.6    19.6                  19.6      19.6                               19.6      19.6
=====================================================================================================================================================
Total                 44.6    44.1    67.8    67.1    35.9          51.4      55.9      35.9        32.9         41.1      48.2      35.9        30.2
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.4
                                                       
                                                       Average Replacement Rates Available With
                                                         Maximum Employer Contributions to DC
                                                        Plans -Age 62 and 30 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               32.3            30.8    32.6    55.6          20.7      29.6      55.6        51.0         14.6      26.9      55.6        46.8
DC plan                       36.6    32.1    37.2                  20.7      24.0                               13.3      15.4
Social Security       25.3    25.3    25.3    25.3                  25.3      25.3                               25.3      25.3
=====================================================================================================================================================
Total                 57.6    61.9    88.2    95.1    55.6          66.7      78.9      55.6        51.0         53.2      67.6      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               30.8            29.3    31.2    53.2          19.7      28.3      53.2        48.8         13.9      25.7      53.2        44.7
DC plan                       29.8    26.2    30.4                  16.9      19.6                               10.9      12.6
Social Security       19.2    19.2    19.2    19.2                  19.2      19.2                               19.2      19.2
=====================================================================================================================================================
Total                 50.0    49.0    74.7    80.8    53.2          55.8      67.1      53.2        48.8         44.0      57.5      53.2        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               34.2            33.5    32.6    55.6          22.6      29.6      55.6        51.0         15.9      26.9      55.6        46.8
DC plan                       33.1    29.3    34.0                  18.9      21.9                               12.1      14.1
Social Security       16.9    16.9    16.9    16.9                  16.9      16.9                               16.9      16.9
=====================================================================================================================================================
Total                 51.1    50.0    79.7    83.5    55.6          58.4      68.4      55.6        51.0         44.9      57.9      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.5
                                                       
                                                       Average Replacement Rates Available With
                                                         Maximum Employer Contributions to DC
                                                        Plans -Age 65 and 30 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               36.2            32.7    32.6    55.6          22.0      29.6      55.6        51.0         15.5      26.9      55.6        46.8
DC plan                       38.9    34.2    39.6                  22.0      25.5                               14.2      16.4
Social Security       30.3    30.3    30.3    30.3                  30.3      30.3                               30.3      30.3
=====================================================================================================================================================
Total                 66.5    69.2    97.2   102.5    55.6          74.3      85.4      55.6        51.0         60.0      73.6      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               34.7            31.3    31.2    53.1          21.1      28.3      53.1        48.7         14.8      25.7      53.1        44.7
DC plan                       31.7    27.9    32.4                  18.0      20.9                               11.6      13.4
Social Security       23.1    23.1    23.1    23.1                  23.1      23.1                               23.1      23.1
=====================================================================================================================================================
Total                 57.8    54.8    82.3    86.7    53.1          62.2      72.3      53.1        48.7         49.5      62.2      53.1        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               38.7            36.1    32.6    55.6          24.3      29.6      55.6        51.0         17.1      26.9      55.6        46.8
DC plan                       35.3    31.2    36.2                  20.1      23.3                               12.9      15.0
Social Security       20.6    20.6    20.6    20.6                  20.6      20.6                               20.6      20.6
=====================================================================================================================================================
Total                 59.3    55.9    87.9    89.4    55.6          65.0      73.5      55.6        51.0         50.6      62.5      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.6
                                                       
                                                       Average Replacement Rates Available With
                                                           One-half of the Maximum Employer
                                                       Contributions to DC Plans -Age 55 and 30
                                                                   Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.0            22.2    41.6    55.6          15.0      21.2      55.6        51.0         10.5      19.3      55.6        46.8
DC plan                       20.0    16.3    20.0                  10.5      12.9                                6.8       8.3
Social Security                                                     25.3      25.3                               25.3      25.3
=====================================================================================================================================================
Total                 20.0    20.0    38.5    61.6    55.6          50.8      59.4      55.6        51.0         42.6      52.9      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               19.0            21.1    37.4    53.1          14.2      20.2      53.1        48.7         10.0      18.4      53.1        44.7
DC plan                       16.3    13.3    16.3                   8.6      10.5                                5.5       6.8
Social Security                                                     19.2      19.2                               19.2      19.2
=====================================================================================================================================================
Total                 19.0    16.3    34.4    53.7    53.1          42.0      49.9      53.1        48.7         34.7      44.4      53.1        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.8            23.4    37.8    55.6          15.8      21.2      55.6        51.0         11.1      19.3      55.6        46.8
DC plan                       18.2    14.8    18.3                   9.5      11.8                                6.1       7.6
Social Security                                                     16.9      16.9                               16.9      16.9
=====================================================================================================================================================
Total                 20.8    18.2    38.2    56.1    55.6          42.2      49.9      55.6        51.0         34.1      43.8      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.7
                                                       
                                                       Average Replacement Rates Available With
                                                           One-half of the Maximum Employer
                                                       Contributions to DC Plans -Age 62 and 20
                                                                   Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.2            21.0    21.7    35.8          14.1      19.7      35.8        32.8         10.0      17.9      35.8        30.1
DC plan                       15.1    12.3    15.1                   7.9       9.7                                5.1       6.3
Social Security       22.5    22.5    22.5    22.5                  22.5      22.5                               22.5      22.5
=====================================================================================================================================================
Total                 42.7    37.6    55.8    59.3    35.8          44.5      51.9      35.8        32.8         37.6      46.7      35.8        30.1

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               21.0            21.7    21.7    35.8          14.6      19.7      35.8        32.8         10.3      17.9      35.8        30.1
DC plan                       14.9    12.2    14.9                   7.9       9.6                                5.1       6.2
Social Security       19.0    19.0    19.0    19.0                  19.0      19.0                               19.0      19.0
=====================================================================================================================================================
Total                 40.0    33.9    52.9    55.6    35.8          41.5      48.3      35.8        32.8         34.4      43.1      35.8        30.1

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               21.6            23.1    21.8    35.8          15.6      19.8      35.8        32.8         11.0      18.0      35.8        30.1
DC plan                       14.4    11.8    14.6                   7.6       9.4                                4.9       6.1
Social Security       16.3    16.3    16.3    16.3                  16.3      16.3                               16.3      16.3
=====================================================================================================================================================
Total                 37.9    30.7    51.2    52.7    35.8          39.5      45.5      35.8        32.8         32.2      40.4      35.8        30.1
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.8
                                                       
                                                       Average Replacement Rates Available With
                                                           One-half of the Maximum Employer
                                                       Contributions to DC Plans -Age 65 and 20
                                                                   Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               23.0            22.8    21.8    35.8          15.4      19.8      35.8        32.8         10.8      18.0      35.8        30.1
DC plan                       16.0    13.1    16.1                   8.4      10.4                                5.4       6.7
Social Security       27.1    27.1    27.1    27.1                  27.1      27.1                               27.1      27.1
=====================================================================================================================================================
Total                 50.1    43.1    63.0    65.0    35.8          50.9      57.3      35.8        32.8         43.3      51.8      35.8        30.1

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               24.1            24.0    21.7    35.8          16.2      19.7      35.8        32.8         11.4      17.9      35.8        30.1
DC plan                       15.8    12.9    15.9                   8.3      10.2                                5.3       6.6
Social Security       23.0    23.0    23.0    23.0                  23.0      23.0                               23.0      23.0
=====================================================================================================================================================
Total                 47.1    38.8    59.9    60.6    35.8          47.5      52.9      35.8        32.8         39.7      47.5      35.8        30.1

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               25.0            25.4    21.7    35.9          17.1      19.7      35.9        32.9         12.0      17.9      35.9        30.2
DC plan                       15.4    12.6    15.5                   8.1      10.0                                5.2       6.4
Social Security       19.6    19.6    19.6    19.6                  19.6      19.6                               19.6      19.6
=====================================================================================================================================================
Total                 44.6    35.0    57.6    56.8    35.9          44.8      49.3      35.9        32.9         36.8      43.9      35.9        30.2
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.9
                                                       
                                                       Average Replacement Rates Available With
                                                           One-half of the Maximum Employer
                                                       Contributions to DC Plans -Age 62 and 30
                                                                   Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               32.3            30.8    32.6    55.6          20.7      29.6      55.6        51.0         14.6      26.9      55.6        46.8
DC plan                       22.8    17.5    22.3                  11.3      14.4                                7.3       9.2
Social Security       25.3    25.3    25.3    25.3                  25.3      25.3                               25.3      25.3
=====================================================================================================================================================
Total                 57.6    48.1    73.6    80.2    55.6          57.3      69.3      55.6        51.0         47.2      61.4      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               30.8            29.3    31.2    53.2          19.7      28.3      53.2        48.8         13.9      25.7      53.2        44.7
DC plan                       18.6    14.3    18.2                   9.2      11.7                                5.9       7.5
Social Security       19.2    19.2    19.2    19.2                  19.2      19.2                               19.2      19.2
=====================================================================================================================================================
Total                 50.0    37.8    62.8    68.6    53.2          48.1      59.2      53.2        48.8         39.0      52.4      53.2        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               34.2            33.5    32.6    55.6          22.6      29.6      55.6        51.0         15.9      26.9      55.6        46.8
DC plan                       20.7    15.9    20.4                  10.2      13.1                                6.6       8.5
Social Security       16.9    16.9    16.9    16.9                  16.9      16.9                               16.9      16.9
=====================================================================================================================================================
Total                 51.1    37.6    66.3    69.9    55.6          49.7      59.6      55.6        51.0         39.4      52.3      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.10
                                                       
                                                       Average Replacement Rates Available With
                                                           One-half of the Maximum Employer
                                                       Contributions to DC Plans -Age 65 and 30
                                                                   Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               36.2            32.7    32.6    55.6          22.0      29.6      55.6        51.0         15.5      26.9      55.6        46.8
DC plan                       24.3    18.6    23.8                  12.0      15.3                                7.7       9.9
Social Security       30.3    30.3    30.3    30.3                  30.3      30.3                               30.3      30.3
=====================================================================================================================================================
Total                 66.5    54.6    81.6    86.7    55.6          64.3      75.2      55.6        51.0         53.5      67.1      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               34.7            31.3    31.2    53.1          21.1      28.3      53.1        48.7         14.8      25.7      53.1        44.7
DC plan                       19.8    15.2    19.4                   9.8      12.5                                6.3       8.0
Social Security       23.1    23.1    23.1    23.1                  23.1      23.1                               23.1      23.1
=====================================================================================================================================================
Total                 57.8    42.9    69.6    73.7    53.1          54.0      63.9      53.1        48.7         44.2      56.8      53.1        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               38.7            36.1    32.6    55.6          24.3      29.6      55.6        51.0         17.1      26.9      55.6        46.8
DC plan                       22.1    17.0    21.7                  10.9      14.0                                7.0       9.0
Social Security       20.6    20.6    20.6    20.6                  20.6      20.6                               20.6      20.6
=====================================================================================================================================================
Total                 59.3    42.7    73.7    74.9    55.6          55.8      64.2      55.6        51.0         44.7      56.5      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.11
                                                       
                                                       Average Replacement Rates Available With
                                                       No Employee Contributions to DC Plans -
                                                            Age 55 and 30 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.0            22.2    41.6    55.6          15.0      21.2      55.6        51.0         10.5      19.3      55.6        46.8
DC plan                        7.7     2.5     3.4                   1.6       2.2                                1.0       1.4
Social Security                                                     25.3      25.3                               25.3      25.3
=====================================================================================================================================================
Total                 20.0     7.7    24.7    45.0    55.6          41.9      48.7      55.6        51.0         36.8      46.0      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               19.0            21.1    37.4    53.1          14.2      20.2      53.1        48.7         10.0      18.4      53.1        44.7
DC plan                        6.3     2.1     2.8                   1.4       1.8                                0.9       1.2
Social Security                                                     19.2      19.2                               19.2      19.2
=====================================================================================================================================================
Total                 19.0     6.3    23.2    40.2    53.1          34.8      41.2      53.1        48.7         30.1      38.8      53.1        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.8            23.4    37.8    55.6          15.8      21.2      55.6        51.0         11.1      19.3      55.6        46.8
DC plan                        7.0     2.3     3.1                   1.5       2.0                                1.0       1.3
Social Security                                                     16.9      16.9                               16.9      16.9
=====================================================================================================================================================
Total                 20.8     7.0    25.7    40.9    55.6          34.2      40.1      55.6        51.0         29.0      37.5      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.12
                                                       
                                                       Average Replacement Rates Available With
                                                       No Employee Contributions to DC Plans -
                                                            Age 62 and 20 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               20.2            21.0    21.7    35.8          14.1      19.7      35.8        32.8         10.0      17.9      35.8        30.1
DC plan                        5.8     1.9     2.5                   1.2       1.6                                0.8       1.0
Social Security       22.5    22.5    22.5    22.5                  22.5      22.5                               22.5      22.5
=====================================================================================================================================================
Total                 42.7    28.3    45.4    46.7    35.8          37.8      43.8      35.8        32.8         33.3      41.4      35.8        30.1

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               21.0            21.7    21.7    35.8          14.6      19.7      35.8        32.8         10.3      17.9      35.8        30.1
DC plan                        5.7     1.9     2.5                   1.2       1.6                                0.8       1.0
Social Security       19.0    19.0    19.0    19.0                  19.0      19.0                               19.0      19.0
=====================================================================================================================================================
Total                 40.0    24.7    42.6    43.2    35.8          34.8      40.3      35.8        32.8         30.1      37.9      35.8        30.1

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               21.6            23.1    21.8    35.8          15.6      19.8      35.8        32.8         11.0      18.0      35.8        30.1
DC plan                        5.6     1.8     2.4                   1.2       1.5                                0.7       1.0
Social Security       16.3    16.3    16.3    16.3                  16.3      16.3                               16.3      16.3
=====================================================================================================================================================
Total                 37.9    21.9    41.2    40.5    35.8          33.1      37.6      35.8        32.8         28.0      35.3      35.8        30.1
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.13
                                                       
                                                       Average Replacement Rates Available With
                                                       No Employee Contributions to DC Plans -
                                                            Age 65 and 20 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               23.0            22.8    21.8    35.8          15.4      19.8      35.8        32.8         10.8      18.0      35.8        30.1
DC plan                        6.2     2.0     2.7                   1.3       1.7                                0.8       1.1
Social Security       27.1    27.1    27.1    27.1                  27.1      27.1                               27.1      27.1
=====================================================================================================================================================
Total                 50.1    33.3    51.9    51.6    35.8          43.8      48.6      35.8        32.8         38.7      46.2      35.8        30.1

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               24.1            24.0    21.7    35.8          16.2      19.7      35.8        32.8         11.4      17.9      35.8        30.1
DC plan                        6.1     2.0     2.7                   1.3       1.7                                0.8       1.1
Social Security       23.0    23.0    23.0    23.0                  23.0      23.0                               23.0      23.0
=====================================================================================================================================================
Total                 47.1    29.1    49.0    47.4    35.8          40.5      44.4      35.8        32.8         35.2      42.0      35.8        30.1

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               25.0            25.4    21.7    35.9          17.1      19.7      35.9        32.9         12.0      17.9      35.9        30.2
DC plan                        6.0     2.0     2.6                   1.3       1.7                                0.8       1.1
Social Security       19.6    19.6    19.6    19.6                  19.6      19.6                               19.6      19.6
=====================================================================================================================================================
Total                 44.6    25.6    47.0    43.9    35.9          38.0      41.0      35.9        32.9         32.4      38.6      35.9        30.2
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.14
                                                       
                                                       Average Replacement Rates Available With
                                                       No Employee Contributions to DC Plans -
                                                            Age 62 and 30 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               32.3            30.8    32.6    55.6          20.7      29.6      55.6        51.0         14.6      26.9      55.6        46.8
DC plan                        8.9     2.2     3.8                   1.4       2.4                                0.9       1.6
Social Security       25.3    25.3    25.3    25.3                  25.3      25.3                               25.3      25.3
=====================================================================================================================================================
Total                 57.6    34.2    58.3    61.7    55.6          47.4      57.3      55.6        51.0         40.8      53.8      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               30.8            29.3    31.2    53.2          19.7      28.3      53.2        48.8         13.9      25.7      53.2        44.7
DC plan                        7.3     1.8     3.1                   1.2       2.0                                0.7       1.3
Social Security       19.2    19.2    19.2    19.2                  19.2      19.2                               19.2      19.2
=====================================================================================================================================================
Total                 50.0    26.5    50.3    53.5    53.2          40.1      49.5      53.2        48.8         33.8      46.2      53.2        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               34.2            33.5    32.6    55.6          22.6      29.6      55.6        51.0         15.9      26.9      55.6        46.8
DC plan                        8.1     2.0     3.4                   1.3       2.2                                0.8       1.4
Social Security       16.9    16.9    16.9    16.9                  16.9      16.9                               16.9      16.9
=====================================================================================================================================================
Total                 51.1    25.0    52.4    52.9    55.6          40.8      48.7      55.6        51.0         33.6      45.2      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 



                                                                     Table III.15
                                                       
                                                       Average Replacement Rates Available With
                                                       No Employee Contributions to DC Plans -
                                                            Age 65 and 30 Years of Service

                                At retirement                        10 years after retirement                     20 years after retirement
                    --------------------------------------  --------------------------------------------  -------------------------------------------
                                                              Private                                       Private
                        Private sector         Federal         sector                Federal                sector                Federal
                    ----------------------  --------------  ------------  ------------------------------  -----------  ------------------------------
                        DB      DC  DB and
                     plans   plans      DC                     DB and DC                                    DB and DC
Program component     only    only   plans    FERS    CSRS         plans      FERS    CSRS I     CSRS II        plans      FERS    CSRS I     CSRS II
------------------  ------  ------  ------  ------  ------  ------------  --------  --------  ----------  -----------  --------  --------  ----------
Average replacement rates at final salary of $25,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               36.2            32.7    32.6    55.6          22.0      29.6      55.6        51.0         15.5      26.9      55.6        46.8
DC plan                        9.5     2.3     4.0                   1.5       2.6                                1.0       1.7
Social Security       30.3    30.3    30.3    30.3                  30.3      30.3                               30.3      30.3
=====================================================================================================================================================
Total                 66.5    39.8    65.3    66.9    55.6          53.8      62.5      55.6        51.0         46.8      58.9      55.6        46.8

Average replacement rates at final salary of $40,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               34.7            31.3    31.2    53.1          21.1      28.3      53.1        48.7         14.8      25.7      53.1        44.7
DC plan                        7.8     1.9     3.3                   1.2       2.1                                0.8       1.4
Social Security       23.1    23.1    23.1    23.1                  23.1      23.1                               23.1      23.1
=====================================================================================================================================================
Total                 57.8    30.9    56.3    57.6    53.1          45.4      53.5      53.1        48.7         38.7      50.2      53.1        44.7

Average replacement rates at final salary of $60,000:
-----------------------------------------------------------------------------------------------------------------------------------------------------
DB plan               38.7            36.1    32.6    55.6          24.3      29.6      55.6        51.0         17.1      26.9      55.6        46.8
DC plan                        8.7     2.1     3.7                   1.4       2.4                                0.9       1.5
Social Security       20.6    20.6    20.6    20.6                  20.6      20.6                               20.6      20.6
=====================================================================================================================================================
Total                 59.3    29.3    58.8    56.9    55.6          46.3      52.6      55.6        51.0         38.6      49.0      55.6        46.8
-----------------------------------------------------------------------------------------------------------------------------------------------------
Note 1:  Because of differences in the annual rates of growth in the
three salary histories, the replacement rates may differ somewhat for
each salary history. 

Note 2:  Some columns show no data because all of the program
components are not applicable to all of the retirement plans. 


FEATURES OF FEDERAL AND PRIVATE
SECTOR DEFINED BENEFIT PLANS
========================================================== Appendix IV

The Watson Wyatt database included information on the retirement
programs of 661 employers of which 497 had DB plans.  Sufficient
information was available to enable Watson Wyatt to determine the
benefit amounts provided by 435 of the 661 employers.  Of the 435
employers whose program benefits could be valued, 329 had DB plans. 
Of these 329 employers, 25 had retirement programs that included DB
plans only and 304 had programs that included both DB and DC plans. 

This appendix describes in detail the features of all 497 DB plans
included in the 661 programs in Watson Wyatt's database.  It also
describes separately the features of the 329 DB plans in the 435
programs that could be valued.  The private sector DB plans are
divided into three categories.  The first category, "all employers in
database," contains data on all 497 DB plans.  The second category,
"DB plans only," contains data on the 25 programs with DB plans only
whose benefits could be valued.  The third category, "DB and DC
plans," contains data on the DB plans in the 304 programs with DB and
DC plans whose benefits could be valued.  Therefore, the number of
plans in the second and third categories will not total the number of
plans in the first category. 

The number of plans in each table varies because plans are sometimes
excluded when a particular feature is not applicable to them.  For
example, in table IV.1, the total number of plans in the "all
employers in database" category is 497, but in table IV.5, the total
number of plans in that category is 470.  Twenty-seven plans were
excluded because they were nontraditional plans that, by nature, do
not use salary averages in benefit calculations. 



                                    Table IV.1
                     
                     Eligibility Requirements to Participate
                           in the Defined Benefit Plans

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
                  employers      DB     and
Eligibility              in   plans      DC
requirements       database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Immediate (any           25      28      23  Immediate         Immediate
age/any service)

Any age/6 months          3       0       4
service

Any age/12               18       4      18
months service

Any age/Other             2       4       2
service
requirement

Age 18                    4      12       3

Age 21/12 months         36      44      39
service

Age 21/Service            7       4       7
other than 12
months

Other age/                2       4       2
Service
requirement

No response               3       0       2

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------


                                    Table IV.2
                     
                                 Vesting Schedule

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
                  employers      DB     and
Vesting                  in   plans      DC
schedule\a         database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Cliff vesting, 5         91      92      95  Cliff vesting, 5  Cliff vesting, 5
years service                                years service     years service

Graded vesting,           3       4       3
7 years service

Other vesting             5       4       2
schedule

No response               1       0       0

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------
\a If certain conditions are satisfied at the time an employee
separates from an employer, the employee will have a vested interest
in all or a portion of his or her accrued defined benefit plan
benefits.  Under cliff vesting, an employee must complete a set
number of years of service before any benefits are guaranteed.  Under
graded vesting, an employee is guaranteed an increasing portion of
plan benefits as his or her years of service increase. 



                                    Table IV.3
                     
                        Employee Contribution Requirements

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
                  employers      DB     and
Employee                 in   plans      DC
contributions      database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Required                  7       8       4  7% of base pay    7% of base pay
                                             for general       for general
                                             employees minus   employees
                                             contributions to
                                             Social
                                             Security\b

Not required             92      92      96

No response               1       0      \a

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------
\a Less than 0.5 percent. 

\b The Social Security contribution rate since 1990 has been 6.2
percent of pay up to the Social Security pay ceiling, meaning that
employees in FERS contribute 0.8 percent of their pay to the DB plan. 



                                    Table IV.4
                     
                        Compensation Elements Included in
                             Benefit Calculation Base

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
                  employers      DB     and
Compensation             in   plans      DC
elements           database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Base pay                 97     100      99  Base pay only     Base pay only

Overtime                 61      68      63

Commissions              41      20      47

Bonuses                  53      48      56

401(k) or salary         59      48      62
deferrals

Internal Revenue         44      40      48
Code section 125
conversions

Other pay                14      16      15

No response               2       0       1

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------
Note:  Some employers defined compensation to include more than one
element.  Therefore, percentages total to more than 100 percent. 



                                    Table IV.5
                     
                        Pay Base for Benefit Calculations

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
Pay base for      employers      DB     and
benefit                  in   plans      DC
calculations       database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Career average           11       0      11  Average of        Average of
only                                         highest 3         highest 3
                                             consecutive       consecutive years
                                             years of base     of base pay rate
                                             pay rate

Final average,           64      77      70
5-year averaging
period

Final average,           14       0      12
3-year averaging
period

Final average,            5       9       3
other averaging
period

More than one             1       0       1
formula, career
average and
final average
(5-year
averaging
period)

More than one            \a       0       1
formula, career
average and
final average
(3-year
averaging
period)

Other                     2       0       2

No response               3      14      \a

================================================================================
Number of plans         470      22     286
--------------------------------------------------------------------------------
\a Less than 0.5 percent



                                    Table IV.6
                     
                      Social Security Integration in Benefit
                                     Formulas

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
Social Security   employers      DB     and
integration in           in   plans      DC
benefit formulas   database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Offset                   21       9      24  No Social         No Social
integration                                  Security          Security coverage
formula(s) only                              integration

Excess                   47      45      53
integration
formula(s) only

No integration           25      41      17
in any plan
formula

More than one             1       0       1
formula, one
offset and one
excess

More than one             4       0       3
formula, one
offset and one
not integrated

More than one             2       5       2
formula, one
excess and one
not integrated

No response               0       0       0

================================================================================
Number of plans         470      22     286
--------------------------------------------------------------------------------


                                    Table IV.7
                     
                      Age and Years of Service Requirements
                        for Unreduced Retirement Benefits

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Age and years of
service                 All              DB
requirements for  employers      DB     and
unreduced                in   plans      DC
benefits           database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Less than age 55         \a       0       0  Minimum           Age 55 with 30
                                             retirement age    years of service,
                                             and 30 years of   age 60 and 20
                                             service, age 60   years of service,
                                             and 20 years of   or age 62 and 5
                                             service, or age   years of service
                                             62 and 5 years
                                             of service

Age 55                   10       8       8

Age 60, no years          1       0       0
of service
requirement

Age 60, with a           13       4      16
years of service
requirement

Age 62, no years          1       0       2
of service
requirement

Age 62, with a           26       4      28
years of service
requirement

Other age                 2       0       2
requirement,
less than age 65

Years of service          2       4       1
requirement, but
no age
requirement

Age 65                   43      80      41

No response               2       0       2

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------
\a Less than 0.5 percent. 



                                    Table IV.8
                     
                      Age and Years of Service Requirements
                         for Reduced Retirement Benefits

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Age and years           All              DB
service           employers      DB     and
requirements for         in   plans      DC
reduced benefits   database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Less than age 55          8      12       7  Minimum           No provision
                                             retirement age
                                             (varying from
                                             ages 55 to 57
                                             based on year of
                                             birth) and 10
                                             years of service

Age 55, 10 years         69      68      73
or less of
service

Age 55, more             13       8      13
than 10 years of
service

Age 60                    2       8       2

Age 62                   \a       0       0

Years of service          4       4       3
requirement only

Other age                 1       0       1
requirement

No response               3       0       1

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------
\a Less than 0.5 percent. 



                                    Table IV.9
                     
                       Supplemental Benefits Available for
                       Retirees Receiving Reduced Benefits

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Supplemental            All
benefits          employers      DB  DB and
available for            in   plans      DC
retirees           database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
No                       84      91      86  No supplemental   No supplemental
                                             benefits for      benefits
                                             retirees not
                                             eligible for
                                             unreduced
                                             benefits. If
                                             eligible for
                                             unreduced
                                             benefits, an
                                             annuity
                                             supplement is
                                             payable from the
                                             MRA\a to age 62.
                                             This supplement
                                             equals the
                                             portion of the
                                             Social Security
                                             benefit that was
                                             earned during
                                             federal service
                                             and would be
                                             payable at age
                                             62.

Yes                      12       4      13

No response               4       5       1

================================================================================
Number of plans         468      22     285
--------------------------------------------------------------------------------
\a MRA is the minimum optional retirement age.  The FERS MRA is age
55 for employees born before January 1, 1948.  The MRA increases
until it reaches age 57 for employees born after December 31, 1969. 



                                   Table IV.10
                     
                     Age at Which Retirement Supplement Ends

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
Age at which      employers      DB     and
retirement               in   plans      DC
supplement ends    database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Age 62                   87      \a      87  Age 62            No supplement
                                                               paid

Age 65                    7      \a       8

Other                     6      \a       5

No response               0       0       0

================================================================================
Number of plans          55       1      37
--------------------------------------------------------------------------------
\a Fewer than five employers/plans in column, and percentages were
not determined. 



                                   Table IV.11
                     
                          Program Provided at Least One
                      Postretirement Benefit Increase During
                                     1983-92

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Postretirement          All
benefit           employers      DB  DB and
increases during         in   plans      DC
1983-92            database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                      43      28      42  Yes\a             Yes

No                       44      68      43

No response              13       4      15

================================================================================
Number of plans         497      25     304
--------------------------------------------------------------------------------
Note:  Data on private sector increases during 1983-92 were the
latest available at the time the contract was awarded to Watson Wyatt
Worldwide.  The percentages include plans that provided at least one
increase. 

\a FERS became effective January 1, 1987.  Therefore, COLA payments
began in January 1988. 



                                   Table IV.12
                     
                           Years When Program Provided
                     Postretirement Increases During 1983-92

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Years when              All
postretirement    employers      DB  DB and
increases were           in   plans      DC
provided           database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
1983                     25      29      19  See table IV.13   See table IV.13
                                             for actual        for actual
                                             postretirement    postretirement
                                             increases paid.   increases paid.

1984                     35      29      29

1985                     38      29      32

1986                     32      57      30

1987                     34      43      32

1988                     37      43      31

1989                     33      43      27

1990                     31      14      28

1991                     27      29      22

1992                     22      29      19

No response               2       0       2

================================================================================
Number of plans         213       7     129
--------------------------------------------------------------------------------
Note:  Data on private sector increases during 1983-92 were the
latest available at the time the contract was awarded to Watson Wyatt
Worldwide. 

\a Employers in the Watson Wyatt database may have provided more than
one increase during 1983-92.  Therefore, the percentages total more
than 100 percent. 



                              Table IV.13
                
                  Postretirement Increases in FERS and
                         CSRS From 1983 to 1997

                          (Numbers in percent)

Month and year when postretirement increases were
provided                                                  FERS    CSRS
------------------------------------------------------  ------  ------
May 1983                                                    \a   3.9\b
January 1985                                                \a     3.5
January 1986                                                \a     0.0
January 1987                                                \a     1.3
January 1988                                               3.2     4.2
January 1989                                               3.0     4.0
January 1990                                               3.7     4.7
January 1991                                               4.4     5.4
January 1992                                               2.7     3.7
January 1993                                               2.0     3.0
April 1994                                                 2.0     2.6
April 1995                                                 2.0     2.8
April 1996                                                 2.0     2.6
January 1997                                               2.0     2.9
----------------------------------------------------------------------
\a FERS became effective January 1, 1987, and COLA payments began in
January 1988. 

\b The CSRS COLA payment for May 1983 was 3.3 percent for nondisabled
employee annuitants under age 62. 


FEATURES OF FEDERAL AND PRIVATE
SECTOR DEFINED CONTRIBUTION PLANS
=========================================================== Appendix V

The Watson Wyatt database included information on the retirement
programs of 661 employers of which 617 had DC plans.  Sufficient
information was available to enable Watson Wyatt to determine the
benefit amounts provided by 435 of the 661 employers.  Of the 435
employers whose program benefits could be valued, 410 had DC plans. 
Of these 410 employers, 106 had retirement programs that included a
DC plan only and 304 had programs that included both DB and DC plans. 

This appendix describes in detail the features of all 617 DC plans
included in the 661 programs in Watson Wyatt's database.  It also
describes separately the features of the 410 DC plans in the 435
programs that could be valued.  The private sector DC plans are
divided into three categories.  The first category, "all employers in
database," contains data on all 617 DC plans.  The second category,
"DC plans only," contains data on the 106 programs with DC plans only
whose benefits could be valued.  The third category, "DB and DC
plans," contains data on the DC plans in the 304 programs with DB and
DC plans whose benefits could be valued.  Thus, the number of plans
in the second and third categories will not total the number of plans
in the first category. 

The number of plans in each table varies because plans are sometimes
excluded when a particular feature is not applicable to them.  For
example, in table V.1, the total number of plans in the "all
employers in database" category is 617, but in table V.2, the total
number of plans in that category is 530 because only 530 plans of the
617 plans include employer contributions. 



                                    Table V.1
                     
                     Eligibility Requirements to Participate
                        in the Defined Contribution Plans

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
                  employers      DC     and
Eligibility              in   plans      DC
requirements       database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Immediate (any           20      17      19  Open season       Open season every
age/any service)                             every 6 months;   6 months; new
                                             new hires may     hires may join
                                             join during the   during the second
                                             second open       open season after
                                             season after      hire (6 to 12
                                             hire (6 to 12     months after
                                             months after      hire)
                                             hire)

Any age/6 months          7       8       7
service

Any age/12               28      25      32
months service

Any age/Other             7       6       7
service
requirement

Age 18                    5       8       5

Age 21/12 months         19      23      18
service

Age 21/Service            5       5       5
other than 12
months

Other age/                2       2       1
Service
requirement

No response               7       6       6

================================================================================
Number of plans         617     106     304
--------------------------------------------------------------------------------


                                    Table V.2
                     
                      Vesting Schedules (Plans With Employer
                                  Contributions)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Vesting                 All              DB
schedules (plans  employers      DC     and
with employer            in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Immediate                32      26      29  Full and          Full and
                                             immediate         immediate vesting
                                             vesting in all    in employee
                                             contributions     contributions and
                                             and earnings      earnings (no
                                             except employer   employer
                                             nonmatching       contributions are
                                             contributions     made)
                                             and earnings on
                                             the nonmatching
                                             contributions
                                             that vest at 3
                                             years of service

Cliff vesting in          6       4       8
less than 5
years

Cliff vesting            18      13      20
with 5 years of
service

Graded vesting,          28      33      31
100% vested in
less than 7
years

Graded vesting,           7      16       4
100% vested in 7
years

Other                     5       7       6

No response               4       1       2

================================================================================
Number of plans         530     100     300
--------------------------------------------------------------------------------


                                    Table V.3
                     
                      Types of Employer Contributions (Plans
                           With Employer Contributions)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Types of
employer
contributions           All              DB
(plans with       employers      DC     and
employer                 in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Matching only            65      54      78  Nonmatching       No employer
                                             contribution of   contributions
                                             1% of pay; 100%
                                             match on the
                                             first 3% of pay
                                             and 50% on the
                                             next 2% of pay
                                             that employee
                                             contributes

Nonmatching only         11      11       5

Both matching            17      34      15
and nonmatching

Other                     2       0       2

No response               5       1       0

================================================================================
Number of plans         530     100     300
--------------------------------------------------------------------------------


                                    Table V.4
                     
                      Amounts of Employer Contributions as a
                            Percentage of Pay in 1992

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Amounts of
employer                All              DB
contributions as  employers      DC     and
a percentage of          in   plans      DC
pay                database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Less than 2.00%          11       8      14  1994 employer     Employer does not
                                             contribution was  contribute to the
                                             3.9%\a            plan

2.00% to 3.99%           16      16      19

4.00% to 7.99%            9      20       6

8.00% to 9.99%            3       6       1

10.00% or more            4       8       3

No employer               1       0       1
contributions

Employer never           13       5       1
contributes to
plan

No response              43      37      55

================================================================================
Number of plans         617     106     304
--------------------------------------------------------------------------------
Note:  Information on contributions made in 1992 was the latest
available at the time the contract was awarded to Watson Wyatt. 

\a Total of all government contributions made to the TSP in 1994 as a
percentage of all FERS employees' salaries. 



                                    Table V.5
                     
                      Employer-Matching Contributions (Plans
                           With Employer Contributions)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Employer-
matching
contributions           All              DB
(plans with       employers      DC     and
employer                 in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Only employee             1       1       1  Employee pretax   No employer
after-tax                                    contributions     contributions
contributions                                matched
matched

Only employee            43      59      39
pretax
contributions
matched

Both after-tax           15       8      18
and pretax
contributions
matched

No matching               9      10       5
employer
contributions

No response              32      22      37

================================================================================
Number of plans         530     100     300
--------------------------------------------------------------------------------


                                    Table V.6
                     
                      Maximum Employee Contributions Matched
                     by Employer in 1993 (Plans With Matching
                                  Contributions)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Maximum employee
contributions
matched by              All              DB
employer (plans   employers      DC     and
with matching            in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
2.00% or less             3       2       2  5% of pay         No employer
                                                               contributions

2.01% to 4.00%           21      27      22

4.01% to 6.00%           64      56      66

6.01% to 8.00%            7       6       6

8.01% to 10.00%           1       2       1

10.01% or more            4       7       3

No response              \a       0       0

================================================================================
Number of plans         436      88     283
--------------------------------------------------------------------------------
\a Less than 0.5 percent. 



                                    Table V.7
                     
                         Percentiles of Maximum Employee
                       Contributions Matched by Employer in
                     1993 (Plans With Matching Contributions)

                   Private sector (maximum
                    employee contribution
                    percentages matched)                   Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Percentiles of
maximum employee
contributions
matched by              All              DB
employer (plans   employers      DC     and
with matching            in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25th percentile          5%      4%      5%  5% of pay         No employer
                                                               contributions

50th percentile          6%      6%      6%
(median)

75th percentile          6%      6%      6%

================================================================================
Number of plans         436      88     283
--------------------------------------------------------------------------------


                                    Table V.8
                     
                      Maximum Pretax Employee Contributions
                       Allowed in 1993 (Plans With Employee
                                  Contributions)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Maximum pretax
employee
contributions           All              DB
allowed (plans    employers      DC     and
with employee            in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
No maximum                1       2       1  10% of pay        5% of pay

3.00% or less            \a       0       0

3.01% to 6.00%            6       9       6

6.01% to 9.00%            6       8       5

9.01% to 12.00%          24      32      27

12.01% to 15.00%         33      37      32

15.01% to 18.00%         16       7      20

18.01% or more            8       3       3

No response               6       2       6

================================================================================
Number of plans         549      96     284
--------------------------------------------------------------------------------
Note:  Employee pretax contribution amounts are limited by IRS.  The
limit in 1997 is $9,500. 

\a Less than 0.5 percent. 



                                    Table V.9
                     
                      Percentiles of Maximum Pretax Employee
                       Contributions Allowed in 1993 (Plans
                           With Employee Contributions)

                   Private sector (maximum
                       pretax employee
                   contributions allowed)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Percentiles of
maximum pretax
employee
contributions           All              DB
allowed (plans    employers      DC     and
with employee            in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25th percentile         10%     10%     10%  10% of pay        5% of pay

50th percentile         15%     12%     15%
(median)

75th percentile         16%     15%     15%

================================================================================
Number of plans         549      96     284
--------------------------------------------------------------------------------
Note:  Employee pretax contribution amounts are limited by IRS.  The
limit in 1997 is $9,500. 



                                    Table V.10
                     
                        Amounts of Employer Match on a 3-
                       Percent Employee Contribution (Plans
                      That Only Match Contributions up to 3
                                     Percent)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Amounts of
employer match
on a 3% employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 3%)             database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25% or less               6       0       6  100% employer     No employer
                                             match on          contributions
                                             employee
                                             contributions up
                                             to 3% of pay and
                                             50% employer
                                             match on
                                             employee
                                             contributions of
                                             next 2% of pay

26% to 50%               31      43      29

51% to 75%                3       0       4

76% to 100%              50      57      50

Over 100%                10       0      11

No response               0       0       0

================================================================================
Number of plans          36       7      28
--------------------------------------------------------------------------------


                                    Table V.11
                     
                     Percentiles of Amounts of Employer Match
                       on a 3-Percent Employee Contribution
                     (Plans That Only Match Contributions up
                                  to 3 Percent)

                  Private sector (employer
                   match on a 3% employee
                        contribution)                      Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Percentiles of
amounts of
employer match
on a 3% employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 3%)             database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25th percentile         50%    100%     50%  100% employer     No employer
                                             match on          contributions
                                             employee
                                             contributions up
                                             to 3% of pay and
                                             50% employer
                                             match on
                                             employee
                                             contributions of
                                             next 2% of pay

50th percentile        100%    100%    100%
(median)

75th percentile        100%    100%    100%

================================================================================
Number of plans          36       7      28
--------------------------------------------------------------------------------


                                    Table V.12
                     
                        Amounts of Employer Match on a 4-
                       Percent Employee Contribution (Plans
                      That Only Match Contributions up to 4
                                     Percent)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Amounts of
employer match
on a 4% employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 4%)             database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25% or less              11      13      11  100% employer     No employer
                                             match on          contributions
                                             employee
                                             contributions up
                                             to 3% of pay and
                                             50% match on
                                             employee
                                             contributions of
                                             next 2% of pay.
                                             At 4% employee
                                             contribution,
                                             employer match
                                             is 87.5%.

26% to 50%               58      63      57

51% to 75%                6       0       6

76% to 100%              23      19      26

Over 100%                 2       5       0

No response               0       0       0

================================================================================
Number of plans          57      16      35
--------------------------------------------------------------------------------


                                    Table V.13
                     
                     Percentiles of Amounts of Employer Match
                       on a 4-Percent Employee Contribution
                     (Plans That Only Match Contributions up
                                  to 4 Percent)

                  Private sector (employer
                   match on a 4% employee
                        contribution)                      Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Percentages of
amounts of
employer match
on a 4% employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 4%)             database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25th percentile         50%     50%     50%  100% employer     No employer
                                             match on          contributions
                                             employee
                                             contributions up
                                             to 3% of pay and
                                             50% match on
                                             employee
                                             contributions of
                                             next 2% of pay.
                                             At 4% employee
                                             contribution,
                                             employer match
                                             is 87.5%.

50th percentile         50%     50%     50%
(median)

75th percentile         75%     50%    100%

================================================================================
Number of plans          57      16      35
--------------------------------------------------------------------------------


                                    Table V.14
                     
                        Amounts of Employer Match on a 5-
                       Percent Employee Contribution (Plans
                      That Only Match Contributions up to 5
                                     Percent)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Amounts of
employer match
on a 5% employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 5%)             database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25% or less              19      33      17  100% employer     No employer
                                             match on          contributions
                                             employee
                                             contributions up
                                             to 3% and 50%
                                             match on
                                             employee
                                             contributions of
                                             next 2% of pay.
                                             At 5% employee
                                             contribution,
                                             employer match
                                             is 80%.

26% to 50%               48      25      55

51% to 75%                4       0       3

76% to 100%              25      25      25

Over 100%                 4      17       0

No response               0       0       0

================================================================================
Number of plans          53      12      36
--------------------------------------------------------------------------------


                                    Table V.15
                     
                     Percentiles of Amounts of Employer Match
                       on a 5-Percent Employee Contribution
                     (Plans That Only Match Contributions up
                                  to 5 Percent)

                  Private sector (employer
                   match on a 5% employee
                        contribution)                      Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Percentages of
amounts of
employer match
on a 5% employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 5%)             database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25th percentile         35%     25%     35%  100% employer     No employer
                                             match on          contributions
                                             employee
                                             contributions up
                                             to 3% and 50%
                                             match on
                                             employee
                                             contributions of
                                             next 2% of pay.
                                             At 5% employee
                                             contribution,
                                             employer match
                                             is 80%.

50th percentile         50%     50%     50%
(median)

75th percentile        100%    100%     66%

================================================================================
Number of plans          53      12      36
--------------------------------------------------------------------------------


                                    Table V.16
                     
                        Amounts of Employer Match on a 6-
                      Percent or More Employee Contribution
                     (Plans That Only Match Contributions up
                              to 6 Percent or More)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Amounts of
employer match
on a 6% or more
employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 6% or more)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25% or less              20      22      18  Employer does     No employer
                                             not match         contributions
                                             employee
                                             contributions
                                             above 5% of pay

26% to 50%               53      54      54

51% to 75%               14      10      14

76% to 100%              13      14      13

Over 100%                \a       0       0

No response              \a       0       1

================================================================================
Number of plans         245      50     176
--------------------------------------------------------------------------------
\a Less than 0.5 percent. 



                                    Table V.17
                     
                     Percentiles of Amounts of Employer Match
                         on a 6-Percent or More Employee
                       Contribution (Plans That Only Match
                      Contributions Up to 6 Percent or More)

                  Private sector (employer
                    match on a 6% or more
                   employee contribution)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Percentages of
amounts of
employer match
on a 6% or more
employee
contribution
(plans that only        All              DB
match             employers      DC     and
contributions up         in   plans      DC
to 6% or more)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
25th percentile         40%     30%     40%  Employer does     No employer
                                             not match         contributions
                                             employee
                                             contributions
                                             above 5% of pay

50th percentile         50%     50%     50%
(median)

75th percentile         60%     50%     60%

================================================================================
Number of plans         245      50     176
--------------------------------------------------------------------------------


                                    Table V.18
                     
                        Employer-Set Dollar Limitation on
                         Employer-Matching Contributions

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Dollar
limitation
(other than
legal maximum)          All              DB
on employer-      employers      DC     and
matching                 in   plans      DC
contributions      database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                       5      11       3  No employer-set   No employer
                                             limitation        contributions

No                       81      75      81

No response              14      14      16

================================================================================
Number of plans         436      88     283
--------------------------------------------------------------------------------
Note:  Employer-matching contribution amounts are subject to
statutory limitations. 



                                    Table V.19
                     
                      Employer Contributions Not Based on a
                      Match of Employee Contributions (Plans
                           With Employer Contributions)

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Employer
contributions
not based on a
match of
employee
contributions           All              DB
(plans with       employers      DC     and
employer                 in   plans      DC
contributions)     database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                      27      45      20  1% of pay         No employer
                                                               contributions

No                       71      55      78

No response               2       0       2

================================================================================
Number of plans         530     100     300
--------------------------------------------------------------------------------


                                    Table V.20
                     
                     Employer-Nonmatching Contributions Based
                                    on Profits

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
Employer-               All              DB
nonmatching       employers      DC     and
contributions            in   plans      DC
based on profits   database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                      50      58      49  No                No employer
                                                               contributions

Partially                10       9       8

No                       34      31      35

No response               6       2       8

================================================================================
Number of plans         145      45      61
--------------------------------------------------------------------------------


                                    Table V.21
                     
                               Plan Loan Provisions

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
                        All              DB
                  employers      DC     and
Plan has a loan          in   plans      DC
provision          database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                      70      66      77  Yes               Yes

No                       27      34      21

No response               3       0       2

================================================================================
Number of plans         617     106     304
--------------------------------------------------------------------------------


                                    Table V.22
                     
                          In-Service Hardship Withdrawal
                                    Provisions

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
In-service              All              DB
hardship          employers      DC     and
withdrawal               in   plans      DC
provisions         database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                      84      83      88  No\a              No\a

No                       12      17      10

No response               4       0       2

================================================================================
Number of plans         617     106     304
--------------------------------------------------------------------------------
\a In late 1997, changes in the provisions of the federal DC plan,
the TSP, will allow federal employees to make withdrawals if they are
age 59-1/2 or older or if they have a financial hardship. 



                                    Table V.23
                     
                         In-Service (Other Than Hardship)
                     Withdrawals Permitted Before Age 59-1/2

                       Private sector
                    (percentage of plans)                  Federal
                  -------------------------  -----------------------------------
                               Employers
                             whose program
                             benefits could
                               be valued
                             --------------
In-service
(other than
hardship)               All              DB
withdrawals       employers      DC     and
permitted before         in   plans      DC
age 59-1/2         database    only   plans  FERS              CSRS
----------------  ---------  ------  ------  ----------------  -----------------
Yes                      25      17      30  No                No

No                       33      51      21

No response              42      32      49

================================================================================
Number of plans         617     106     304
--------------------------------------------------------------------------------
Note:  Under IRS code, such withdrawals are only permissible from
after-tax accounts. 




(See figure in printed edition.)Appendix VI
COMMENTS FROM THE OFFICE OF
PERSONNEL MANAGEMENT
=========================================================== Appendix V



(See figure in printed edition.)



(See figure in printed edition.)


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