Most federal employees and retirees probably don't think too much about how the government funds the Federal Employees Retirement System. But recent changes are exposing just how complicated the sausage-making is.
The law establishes employee contributions to subsidize the federal retirement system, but that constitutes only a small fraction of the cost of funding FERS. The Office of Personnel Management computes the amount of funding required, known as the "normal cost."
The Board of Actuaries of the Civil Service Retirement System recently adopted a number of minor changes in the assumptions used to compute the normal cost, including changes regarding mortality rate and demographics. The board also found that recent legislation, including the fiscal 2010 Defense authorization act, required increases in the normal costs.
A June 21 Federal Register notice and accompanying OPM announcement, Director John Berry said OPM had adjusted the normal cost percentage for each category of employees based on changes in the demographic and economic assumptions and the authorization act.
The governmentwide normal cost percentages, including employee contributions as of the first pay period after Oct. 1, are:
| Category | FERS Agency Contribution Rate (%) | ||
| CPDF Code | Current | 10/2010 | |
| Regular | K | 11.2 | 11.7 |
| Law Enforcement Officer | M | 24.9 | 25.7 |
| Air Traffic Controller | L | 24.5 | 25.5 |
| Military Reserve Technician | N | 14.0 | 14.5 |
| Employees under section 303 of the CIA Act of 1964 for certain employees (when serving abroad) | None | 15.7 | 16.8 |
| Member of Congress | None | 17.3 | 17.9 |
| Congressional Employee | None | 15.8 | 16.4 |
Payback
The U.S. Postal Service soon could receive an influx of more than $50 billion for its retiree health benefits fund if new legislation meets congressional approval.
Rep. Stephen Lynch, D-Mass., last week introduced a bill (H.R. 5746) that could reduce the Postal Service's burden to fund its Civil Service Retirement System and reverse years of overpayment to the account.
The subcommittee approved the bill on Wednesday. It now heads to the full committee.
The Postal Regulatory Commission in June found the agency overpaid between $50 billion and $55 billion to its CSRS fund. USPS Inspector General David Williams earlier this year put that number at $75 billion. The overpayment was the result of unclear guidance on how increases in postal salaries affected pension contributions after USPS absorbed the Post Office Department in 1971, officials said.
If the bill passes, the Office of Personnel Management would be required to review the overpayment claim and deposit any surplus into the Postal Service Retiree Health Benefits Fund. OPM is responsible for determining USPS' share of CSRS contributions and also helps fund that account.
The legislation already has garnered support outside of Congress. The American Postal Workers Union on Monday began urging its members to campaign in favor of the bill, and the Postal Service also has expressed its general support for the measure, according to a subcommittee staffer familiar with the issues.
CORRECTION: The original version of this story misstated the pension contributions of employees under Section 303 of the 1964 CIA Act for certain employees (when serving abroad). The erroneous figures were based on original government documents that were later corrected.