For other versions of this document, see http://wikileaks.org/wiki/CRS-98-972
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Prepared for Members and Committees of Congress
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This report describes recent trends in the number of civil service annuitants and the financial
status of the Civil Service Retirement and Disability Fund. Among the results presented:

    ·   In FY2004, 70% of civilian federal employees were enrolled in the Federal
        Employees Retirement System (FERS), which covers employees hired since 1984.
        Thirty percent were enrolled in the Civil Service Retirement System (CSRS),
        which covers only employees hired before 1984.
    ·   In FY2006, 2.4 million people received civil service annuity payments. Eighty-
        nine percent of these annuitants were covered by CSRS.
    ·   More than one-third of all federal employee annuitants and survivor annuitants
        reside in five states: California, Florida, Texas, Maryland, and Virginia.
    ·   The average civilian federal employee who retired in 2006 was 59 years old and
        had completed 27.8 years of federal service.
    ·   The average monthly annuity payment to workers who retired under CSRS in
        2006 was $2,452. Workers who retired under FERS received an average monthly
        annuity of $896. (The FERS retirees had shorter average length of service than
        CSRS retirees. They also earned Social Security benefits and received an
        employer match on their contributions to the Thrift Savings Plan.)
    ·   At the end of FY2006, the balance of the Civil Service Retirement and Disability
        Fund was $690 billion, an amount equal to 12 times the amount of outlays from
        the fund during 2006. The trust fund balance is expected to reach $702 billion by
        the end of FY2007.
    ·   From 1970 to 1985, the number of people receiving civil service annuities rose
        by one million, an increase of 105%. Between 1985 and 2006 the number of civil
        service annuitants rose by 482,000, an increase of 24%.
    ·   As of September 2006, civilian federal employment, including the Postal Service,
        totaled 2.7 million workers, the same as in 2000, and a decline of 429,000 (14%)
        since 1990.
    ·   Employees of the federal government are older on average than workers in the
        private sector. Sixty percent of all federal employees were age 45 or older in
        2004, and 42% were age 50 or older. In contrast, only 37% of wage and salary
        workers in the private sector were 45 or older in 2004, and just 25% were 50 or
        older.




   
                                                            ¢ ¢  ¢ 




    
Fundamentals of the Civil Service Retirement Programs ............................................................... 1
Retirement Coverage of Current Federal Employees...................................................................... 3
Coverage of Current Civil Service Annuitants ................................................................................ 3
State of Residence of Civil Service Annuitants............................................................................... 4
Average Age and Years of Service at Retirement ............................................................................ 6
   Average Annuity Amounts under CSRS and FERS .................................................................. 6
Average Age at Retirement of New Federal Retirees, 1990 to 2006............................................... 8
Total and Average Annuity Payments to Retirees and Survivors in 2006 ....................................... 8
Cost-of Living Adjustments under CSRS and FERS ...................................................................... 9
Income and Expenditures of the Civil Service Retirement and Disability Fund, 2006................. 10
Recent Trends in the Balance of the Civil Service Retirement and Disability Fund..................... 12
Number of Civil Service Annuitants and Total Annuity Payments, 1970 to 2006 ........................ 13
Civilian Federal Employment, 1940 to 2006................................................................................. 15
Age Distribution of Executive Branch Employees........................................................................ 17




Table 1. Retirement Systems Coverage of Federal Employees, by Fiscal Year .............................. 3
Table 2. Retirement Plan Coverage of Civil Service Annuitants, FY2006...................................... 4
Table 3. State of Residence of Civil Service Annuitants, 2006 ....................................................... 4
Table 4. Number, Average Age and Years of Service, and Average Annuity of Civil
  Service Annuitants Who Retired in 2006 ..................................................................................... 7
Table 5. Average Age at Retirement for New Federal Retirees, 1990 to 2006................................ 8
Table 6. Total and Average Annuity Payments to Retirees and Survivors in 2006.......................... 9
Table 7. Cost-of-Living Adjustments under CSRS and FERS ...................................................... 10
Table 8. Income and Expenditures of the Civil Service Retirement and Disability Fund,
  2006-2008....................................................................................................................................11
Table 9. Income and Expenditures of the Civil Service Retirement and Disability Fund,
  1990 to 2008............................................................................................................................... 13
Table 10. Annuitants and Annuity Payments, 1970 to 2006.......................................................... 14
Table 11. Civilian Federal Employment, 1940 to 2006................................................................. 16
Table 12. Age Distribution of Full-time, Permanent Employees................................................... 17



   
Author Contact Information .......................................................................................................... 18



    
                                                  ¢ ¢  ¢ 




     

The Civil Service Retirement System (CSRS) was established by P.L. 66-215 in 1920, 15 years
before Congress created the Social Security system for workers in the private sector. Because
CSRS was designed to provide both retirement and disability benefits, federal employees were
excluded from participating in Social Security. State and local governments were permitted to
bring their employees into the Social Security program in the early 1950s, and today about three-
fourths of state and local government employees are covered by Social Security.

In the Social Security Amendments of 1983 (P.L. 98-21), Congress mandated participation in
Social Security by all civilian federal employees initially hired on or after January 1, 1984.
Because Social Security provides both retirement and disability benefits, and because enrolling
federal workers in both CSRS and Social Security would have required each employee to
contribute more than 13% of pay, Congress directed the development of a new federal employee
retirement system with Social Security as the cornerstone. The result of these efforts was the
Federal Employees Retirement System (FERS), created by P.L. 99-335 and enacted on June 6,
1986. The new system, patterned after the retirement programs typical of large employers in the
private sector, is composed of three elements: (1) Social Security, (2) the FERS basic annuity (a
defined benefit plan), and (3) the Thrift Savings Plan (a defined contribution plan).1

All permanent federal employees whose initial federal employment began after December 31,
1983, are covered by FERS, as are employees who voluntarily switched from CSRS to FERS
during "open seasons" in 1987 and 1998.2 Former federal employees who have completed at least
five years of service under CSRS and are rehired after a break in service of less than one year can
either join FERS or participate in both CSRS and Social Security through the "CSRS offset plan."
Under this plan, 6.2% of the employee payroll contribution and an equal share of the employer
contribution are paid into Social Security. In retirement, these employees' CSRS annuities are
reduced ("offset") by the amount of the Social Security benefit.

Under FERS, workers who have completed at least 30 years of service can retire at the minimum
retirement age. The minimum retirement was 55 for workers born before 1948, and it is
scheduled to rise to 57 for those born in 1970 or later. Employees with 20 or more years of
service can retire at age 60, and those with at least 5 years of service can retire at age 62. Federal
employees and former employees who have completed at least ten (but fewer than 30) years of
service can receive a reduced FERS pension benefit at the minimum retirement age. For those
who choose this option, the FERS pension benefit is permanently reduced by 5% multiplied by
the number of years between the worker's age at retirement and age 62. For example, the pension
of a federal employee who retires at age 56 with fewer than 30 years of service would be
permanently reduced by 5% multiplied by six, or 30%.

1
  In a defined benefit plan, the amount of the retirement benefit is based on an employee's salary and number of years
of service. With each year of service, a worker accrues a benefit equal to a fixed dollar amount or a percentage of pay.
A defined contribution plan is like a savings account maintained on behalf of each participating employee. The amount
of retirement benefits that a worker receives will depend on the balance in the account, which is the sum of
contributions, plus interest, dividends, and capital gains (or losses).
2
  P.L. 105-61 (Oct. 10, 1997) authorized an open season to be held from July through Dec. 1998, during which
employees still enrolled in CSRS could transfer to FERS.




      
                                                  ¢ ¢  ¢ 



Under CSRS, the minimum retirement age is 55 for employees with 30 years of federal service,
age 60 for those with 20 years of service, and 62 for employees with at least 5 years of service.
CSRS has no provision for early retirement with a reduced benefit, except for special
circumstances such as a reduction in force. Agencies undergoing a reduction in force can, with
the approval of the Office of Personnel Management, offer retirement to employees age 50 or
older with 20 or more years of service or at any age with 25 or more years of service. An
employee under CSRS who is offered and accepts an offer of voluntary early retirement has his or
her retirement annuity permanently reduced by 2% multiplied by the number of years between the
worker's age at retirement and age 55.

Under both CSRS and FERS, the amount of an employee's retirement annuity is based on the
average of the individual's highest three consecutive years of basic pay multiplied by their years
of service and the rate at which benefits accrue for each year of service.3 Under FERS, this
accrual rate is one percent of base pay per year. Workers with 20 years or more of service under
FERS who work until at least age 62 are credited with an accrual rate of 1.1% for each year of
service.4 For example, a worker covered by FERS who retires at 61 with 29 years of service will
receive a FERS annuity equal to 29% of his high-3 average pay. Delaying retirement by one year
would increase the annuity to 33% of high-3 average pay (30 X 1.1 = 33.0).

Accrual rates are lower under FERS than under CSRS because employees covered by FERS also
pay Social Security payroll taxes and earn Social Security retirement benefits. Under CSRS the
benefit accrual rate increases with length of service. Workers accrue benefits equal to 1.5% of
high-3 average pay for each of their first 5 years of service; 1.75% of high-3 pay for years 6
through 10; and 2.0% of high-3 pay for each year of service after the 10th year. This yields a
pension equal to 56.25% of high-3 average pay after 30 years of federal service under CSRS.

For all federal workers covered by FERS, the agency where they are employed contributes an
amount equal to 1% of the employee's base pay to the Thrift Savings Plan (TSP), even if the
employee makes no voluntary contributions to the TSP. In 2007, workers covered by FERS or
CSRS can contribute up to $15,500 to the TSP.5

Workers age 50 and older can contribute an additional $5,000 to the TSP. All contributions to the
Thrift Savings Plan are made on a pre-tax basis, and neither the employee's contribution nor any
investment earnings are taxed until the money is withdrawn from the account. In addition, the
first 5% of employee pay contributed to the TSP generates agency matching contributions for
workers covered by FERS.6 Workers covered by CSRS may contribute to the TSP, but t they
receive no matching contributions from their employing agency.




3
  The calculation of "high-three" average pay is based on nominal or "current dollars" rather than indexed or "constant
dollars."
4
  Because FERS coverage began in 1984, no federal workers will have 30 years of service exclusively under FERS
until 2014.
5
  Employee contributions to the TSP are subject to the annual limit on salary deferrals established under Internal
Revenue Code § 402(g).
6
  All employees covered by FERS receive "agency automatic contributions" of 1% of pay. Employee contributions are
matched dollar-for-dollar on the first 3% of pay and at $.50 on the dollar on the next 2% of pay. Thus, the maximum
agency contribution is 5% of pay.




      
                                                                              
 were accrued under CSRS, while just 11% had retired under FERS. (See Table 2.) Under both
 covered by CSRS. In FY2006, 89% of current annuitants were receiving pension benefits that
 workers and their surviving spouses and dependents receive benefits from employment that was
 Although the majority of current federal employees are covered by FERS, most retired federal
                                       
                       .yap tuohtiw evael no seeyolpme edulcni ton seoD .ecivreS latsoP .S.U sedulcnI .a
                                                               .tnemeganaM lennosreP fo eciffO :ecruoS
     001              0.84                0.25                                          noitubirtsid egatnecreP
  000,896,2         000,692,1          000,204,1                                                      4991YF
     001              1.15                9.84                                          noitubirtsid egatnecreP
  000,286,2         000,173,1          000,113,1                                                      5991YF
     001              9.25                1.74                                          noitubirtsid egatnecreP
  000,026,2         000,583,1          000,532,1                                                      6991YF
     001              5.55                5.44                                          noitubirtsid egatnecreP
  000,186,2         000,784,1          000,491,1                                                      7991YF
     001              3.85                7.14                                          noitubirtsid egatnecreP
  000,856,2         000,055,1          000,801,1                                                      8991YF
     001              4.06                6.93                                          noitubirtsid egatnecreP
  000,545,2         000,635,1          000,900,1                                                      9991YF
     001              9.26                1.73                                          noitubirtsid egatnecreP
  000,095,2         000,926,1           000,169                                                       0002YF
     001              1.36                9.63                                          noitubirtsid egatnecreP
  000,676,2         000,986,1           000,789                                                       1002YF
     001              0.66                0.43                                          noitubirtsid egatnecreP
  000,416,2         000,717,1           000,798                                                       2002YF
     001              7.76                3.23                                          noitubirtsid egatnecreP
  000,076,2         000,808,1           000,268                                                       3002YF
     001              2.07               %8.92                                          noitubirtsid egatnecreP
  000,076,2         000,578,1           000,597                                                       4002YF
    latoT            SREF               SRSC                      a   seeyolpmE evitcA derevoC
    raeY lacsiF yb ,seeyolpmE laredeF fo egarevoC smetsyS tnemeriteR .1 elbaT
were covered by FERS. During FY2004, 70% of federal employees were covered by FERS.
(See Table 1.) FY1995 was the first year in which a majority of civilian federal employees (51%)
federal workers covered by FERS has been rising and coverage under CSRS has been declining.
Because enrollment in CSRS has been closed to new entrants since 1984, the proportion of
      ¢
   ¢ ¢  ¢ 
                                              ¢ ¢  ¢ 



CSRS and FERS, employee and agency contributions are paid into--and pension annuities are
paid from--the Civil Service Retirement and Disability Fund. The number of FERS annuitants is
comparatively small because the FERS is still a relatively new program when compared to the
average length of a worker's career. The program was established in 1987 and was made
retroactive for all employees initially hired on or after January 1, 1984.

          6002YF ,stnatiunnA ecivreS liviC fo egarevoC nalP tnemeriteR .2 elbaT
                                                    SRSC               SREF                  latoT


stnatiunna eeyolpmE                             317,875,1             308,942              615,828,1
egatnecreP                                           3.68               7.31                     001


stnatiunna rovivruS                                 788,695            768,32               457,026


egatnecreP                                           2.69               8.3                      001


stnatiunna latoT                                006,571,2             076,372              072,944,2


egatnecreP                                           8.88              2.11                      001


     .tnemeganaM lennosreP fo eciffO .S.U :ecruoS


                                                                          
More than 2.4 million people received civil service annuities in 2006, either as retired federal
employees, surviving spouses, or surviving dependents. California had the largest number of
annuitants with 216,965 and Vermont had the fewest with 4,126. Five states--California, Florida,
Texas, Maryland, and Virginia--accounted for more than one-third of all civil service annuitants
in 2006.

                   6002 ,stnatiunnA ecivreS liviC fo ecnediseR fo etatS .3 elbaT
                    etatS                       stnatiunnA fo rebmuN            latoT lanoitaN fo tnecreP
            amabalA                                          477,75                        4.2
               aksalA                                        270,7                         3.0
             anozirA                                         516,05                        1.2
           sasnakrA                                          684,42                        0.1
          ainrofilaC                                        569,612                        8.8
          odaroloC                                           251,54                        8.1
       tucitcennoC                                           625,41                        6.0
          erawaleD                                            200,8                        3.0
aibmuloC fo tcirtsiD                                         494,34                        8.1
              adirolF                                       449,561                        8.6
            aigroeG                                          597,77                        2.3
              iiawaH                                         045,42                        0.1
                ohadI                                        200,31                        5.0
               sionillI                                      702,56                        7.2


   
                                                     
           2.0                      364,5                           gnimoyW
           0.1                     970,52                          nisnocsiW
           7.0                     660,61                      ainigriV tseW
           6.2                     718,26                        notgnihsaW
           6.5                    987,731                               ainigriV
           2.0                      621,4                            tnomreV
           4.1                     709,33                                  hatU
           4.6                    707,751                                 saxeT
           7.1                     746,24                         eessenneT
           4.0                      592,9                      atokaD htuoS
           7.1                     339,04                    aniloraC htuoS
           4.0                      889,8                       dnalsI edohR
           3.4                    590,601                       ainavlysnneP
           3.1                     535,13                              nogerO
           0.2                     502,84                          amohalkO
           0.3                     714,37                                  oihO
           2.0                      410,6                     atokaD htroN
           7.2                     992,56                   aniloraC htroN
           9.3                     796,69                         kroY weN
           1.1                     406,62                       ocixeM weN
           3.2                     072,55                        yesreJ weN
           5.0                     387,11                  erihspmaH weN
           8.0                     176,02                              adaveN
           5.0                     801,31                           aksarbeN
           5.0                     305,11                            anatnoM
           1.2                     978,15                             iruossiM
           0.1                     545,42                          ippississiM
           1.1                     993,62                          atosenniM
           6.1                     834,04                            nagihciM
           8.1                     171,44                     sttesuhcassaM
           1.6                    090,941                            dnalyraM
           5.0                     764,31                                 eniaM
           0.1                     444,52                            anaisiuoL
           3.1                     270,23                           ykcutneK
           0.1                     196,32                                sasnaK
           8.0                     087,91                                  awoI
           4.1                     048,43                               anaidnI
latoT lanoitaN fo tnecreP   stnatiunnA fo rebmuN   etatS
   ¢ ¢  ¢ 
                                                 ¢ ¢  ¢ 



                    etatS                          stnatiunnA fo rebmuN                latoT lanoitaN fo tnecreP
 seirotirreT .S.U                                            986,41                                 6.0
seirtnuoc rehtO                                              004,92                                 2.1
latoT                                                      794,554,2                                001


     .tnemeganaM lennosreP fo eciffO :ecruoS


                              
More than 103,000 civilian federal employees (including U.S. Postal Service employees) retired
during FY2006. (See Table 4.) Of this number, 75,551 (73%) were normal retirements7 and
another 9,538 (9%) were voluntary early retirements. Under CSRS, normal retirement can occur
as early as age 55 with 30 years of service. Under FERS, the minimum retirement age is
increasing from 55 for workers born before 1948 to 57 for those born in 1970 or later. Under both
programs, normal retirement can be taken at age 60 with 20 years of service or age 62 with 5
years of service. The average age of workers taking voluntary, normal retirement in 2006 was 60
for employees covered by CSRS and 63 for those covered by FERS. Workers taking normal
retirement under CSRS in 2006 had completed an average of 34 years of service, while those
retiring under FERS had an average of 19 years of service.

More than 8,000 federal employees took voluntary early retirement in 2006. These workers were
younger on average (54.3 years old) than those who took normal retirement, and their average
length of service (27.7years) was slightly less than that of those who took normal retirement.
Approximately 9% of all retirements among federal employees in 2006 were taken for reasons of
disability. Disability retirees were, on average, 51 years old with 17 years of service. Involuntary
retirements (such as those resulting from agency down-sizing) and retirements taken under other
special circumstances accounted for 3% of all retirements by federal employees in 2006.


                    ¢                                                             
The average monthly annuity paid to all civilian federal employees who retired under CSRS in
2006 was $3,373, while new FERS annuitants received an average annuity of $1,137 per month.
Employees retiring under CSRS received larger annuities than those covered by FERS both
because of their longer average length of service and because CSRS was designed to provide an
adequate retirement income from a single source. FERS was designed to provide a smaller
annuity than CSRS for any given length of service and level of compensation because federal
employees covered by FERS participate in Social Security and they also can elect to save for
retirement on a pre-tax basis with agency matching contributions through the Thrift Savings
Plan.8 Employees in FERS who retire at the minimum retirement age or older with 30 years of
federal service are eligible to receive a supplement to their FERS annuity between their

7
  Normal retirements include all retirements except disability retirements, voluntary early retirements, involuntary
retirements, and special provision retirements.
8
  In 2007, federal employees can contribute up to $15,500 of pay (pre-tax) to the TSP. Employees enrolled in FERS
receive matching contributions up to a maximum of 5% of pay. Employees enrolled in CSRS do not receive matching
contributions. For more information on the TSP, see CRS Report RL30387, Federal Employees' Retirement System:
The Role of the Thrift Savings Plan, by Patrick Purcell.




      
                                                                          
                                .tnemeganaM lennosreP fo eciffO eht morf atad fo sisylana SRC :ecruoS
      726,2$               731,1$           373,3$                           ytiunna ylhtnom egarevA
        8.72                3.81             6.23                             ecivres fo sraey egarevA
        1.95                4.95             0.95                           tnemeriter ta ega egarevA
      292,301              844,43           448,86                                             rebmuN
                                                                            b   6002 ni stnemeriter latoT
      365,4$               925,3$           319,4$                           ytiunna ylhtnom egarevA
        1.92                 4.52            4.03                             ecivres fo sraey egarevA
        6.45                 0.45            8.45                           tnemeriter ta ega egarevA
       965,4                451,1            514,3                                             rebmuN
                                                                         stnemeriter noisivorp laicepS
      124,2$               592,1$           637,2$                           ytiunna ylhtnom egarevA
        7.72                 6.32            8.82                             ecivres fo sraey egarevA
        3.45                 3.55            0.45                           tnemeriter ta ega egarevA
       070,8                367,1            703,6                                             rebmuN
                                                                           stnemeriter ylrae yratnuloV
      355,2$               463,1$           579,2$                           ytiunna ylhtnom egarevA
        5.82                3.42             0.03                             ecivres fo sraey egarevA
        9.55                0.65             9.55                           tnemeriter ta ega egarevA
       007,2                807              299,1                                             rebmuN
                                                                                 stnemeriter yratnulovnI
      445,1$               673,1$           060,2$                           ytiunna ylhtnom egarevA
        2.71                 2.41            2.62                             ecivres fo sraey egarevA
        0.15                 3.05            0.35                           tnemeriter ta ega egarevA
       835,9                981,7            943,2                                             rebmuN
                                                                                   stnemeriteR ytilibasiD
      837,2$                739$            194,3$                           ytiunna ylhtnom egarevA
       5.92                 9.81             0.43                             ecivres fo sraey egarevA
       0.16                 1.36             1.06                           tnemeriter ta ega egarevA
      155,57               472,22           772,35                                             rebmuN
                                                                                stnemeriteR lamroN
 latoT ro egarevA          a   SREF         SRSC                 stnemeriteR laredeF nailiviC
                    6002 ni deriteR ohW stnatiunnA ecivreS
liviC fo ytiunnA egarevA dna ,ecivreS fo sraeY dna egA egarevA ,rebmuN .                     4 elbaT
receive this supplement if they are at least age 60 at retirement.)
they will receive for their years of federal employment. (Employees with 20 years of service
retirement and age 62. The supplement is approximately equal to the Social Security payments
   ¢ ¢  ¢ 
                                                 ¢ ¢  ¢ 



    laicoS ylhtnom egareva eht ,6002 yraunaJ nI .ytiruceS laicoS ni etapicitrap osla SREF yb derevoc seeyolpmE
    .a

                                                     .530,1$ saw 26 ega ta gniriter srekrow rof tifeneb ytiruceS
                                                                        .stnemeriter deifissalcnu ,rehto sedulcnI .b


                             
  
In 2006, the average age of federal employees taking normal retirement was 61, almost the same
as in 1990. (See Table 5.) Over the period from 1990 to 2006, the average age of normal
retirements was 61.2 The average age for all retirements in 2006 was 59, and the average for the
period from 1990 to 2006 was 58.5. Federal agencies undergoing a major reorganization can
request permission from the Office of Personnel Management to offer their employees voluntary
early retirement or voluntary separation incentive pay ("buyouts"). Under voluntary early
retirement, an employee can retire as early as age 50 with 20 years of service. Voluntary
separation incentives are cash payments of up to $25,000 (before taxes) offered to employees
who retire or otherwise separate from federal employment voluntarily. Because these incentives
are generally offered to retirees who have not yet reached the combined age and years of service
that are required for normal retirement, they tend to reduce the average age of those who retire in
any given year.

         6002 ot 0991 ,seeriteR laredeF weN rof tnemeriteR ta egA egarevA .5 elbaT
                                   tnemeriteR ta egA egarevA                                 stnemeriteR lamroN
 raeY lacsiF                                                                                llA fo egatnecreP a sa
                         stnemeriter lamroN            stnemeriter llA                           stnemeriteR
    0991                        4.95                               3.16                               0.97


    4991                        1.85                               8.16                               8.65


    8991                        6.75                               5.16                               1.75


    2002                        1.85                               6.06                               6.76


    6002                        1.95                               0.16                               1.37


                                                                        .tnemeganaM lennosreP fo eciffO :ecruoS
    ,stnemeriter ylrae yratnulov ,stnemeriter ytilibasid tpecxe stnemeriter lla edulcni stnemeriter lamroN :etoN
                                                        .stnemeriter noisivorp laiceps dna ,stnemeriter yratnulovni


                                             ¢ ¢  
  
The Civil Service Retirement and Disability Fund paid annuities to 1.83 million retired federal
employees and 621,000 survivor annuitants in FY2006. Of these beneficiaries, 2.175 million
(89%) received benefits earned under CSRS and 274,000 (11%) received benefits under FERS.
Employee annuitants under CSRS received an average monthly annuity of $2,452. Survivors of
CSRS annuitants received an average monthly CSRS annuity of $1,189. Employee annuitants
under FERS received payments, averaging $896 per month and the average survivor benefit
under FERS was $375. As was noted earlier, FERS benefits are smaller than those under CSRS


   
                                                ¢ ¢  ¢ 



both because employees covered by FERS have fewer years of service than workers who retired
under CSRS, and because FERS benefits are intended to be supplemented by Social Security and
the Thrift Savings Plan.9

    6002 ni srovivruS dna seeriteR ot stnemyaP ytiunnA egarevA dna latoT.6 elbaT
                                            )sra llod fo sdnasuoht ni(



                                           SRSC                       SREF                    seeriteR llA
                                                                                             srovivruS dna
stnatiunna eeyolpmE                      317,875,1                   308,942                    615,828,1
latoT fo tnecreP                           %3.68                      %7.31                       %001


        tifeneb ylhtnom naeM               254,2$                        698$                    932,2$
     tifeneb ylhtnom naideM                251,2$                        716$                    779,1$
stnatiunna rovivruS                       788,695                    768,32                      457,026


latoT fo tnecreP                           %2.69                         %8.3                     %001


        tifeneb ylhtnom naeM               981,1$                        573$                    851,1$
     tifeneb ylhtnom naideM                350,1$                        482$                    220,1$
stnatiunna latoT                         006,571,2                   076,372                    072,944,2


latoT fo tnecreP                           %8.88                      %2.11                       %001


     .tnemeganaM lennosreP fo eciffO :ecruoS


                                                                                                           
Cost-of-living adjustments (COLAs) for both CSRS and FERS are based on the rate of inflation
as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-
W). COLAs are determined by the percentage change in the average monthly CPI-W during the
third quarter (July to September) of the current calendar year compared to the third quarter of the
previous year. The "effective date" for COLAs is December, but they first appear in benefit
checks issued in January.

All CSRS retirees and survivors receive yearly COLAs equal to the annual percentage change in
the CPI-W. Under FERS, COLAs are paid only to retired workers who are age 62 and older and
to disabled and survivor beneficiaries of any age. COLAs paid under FERS are less than the rate
of inflation whenever the increase in the CPI-W is greater than 2.0%. If the rate of inflation
during the measurement period is between 2.0% and 3.0%, the FERS COLA is 2.0%. If inflation
is greater than 3.0%, then the COLA for FERS benefits is equal to the CPI-W minus one
percentage point.10 In January 2007, CSRS beneficiaries received a COLA of 3.3%, and FERS
beneficiaries received a COLA of 2.3%. (See Table 7.)



9
  In June 2006, the average monthly Social Security benefit among all retired workers was $1,007. The average
monthly benefit for a surviving spouse was $954.
10
   Workers who switched from CSRS to FERS receive a COLA that is weighted by the proportion of their federal
service that was spent under each retirement system.




      
                                                ¢ ¢  ¢ 



                 -fo-tsoC .7 elbaT     SREF dna SRSC rednu stnemtsujdA gniviL
                                                  )tnecrep ni(



       diaP etaD                 ALOC SRSC                    ALOC SREF                 morf IPC ni egnahC
                                                                                         rtQ dr3 ot rtQ dr3
0991 yraunaJ                          %7.4                         7.3                            7.4
1991 yraunaJ                          4.5                          4.4                            4.5
2991 yraunaJ                          7.3                          7.2                            7.3
3991 yraunaJ                          0.3                          0.2                            0.3
  4991 lirpA                          6.2                          0.2                            6.2
  5991 lirpA                          8.2                          0.2                            8.2
  6991 lirpA                          6.2                          0.2                            6.2
7991 yraunaJ                          9.2                          0.2                            9.2
8991 yraunaJ                          1.2                          0.2                            1.2
9991 yraunaJ                          3.1                          3.1                            3.1
0002 yraunaJ                          4.2                          0.2                            4.2
1002 yraunaJ                          5.3                          5.2                            5.3
2002 yraunaJ                          6.2                          0.2                            6.2
3002 yraunaJ                          4.1                          4.1                            4.1
4002 yraunaJ                          1.2                          0.2                            1.2
5002 yraunaJ                          7.2                          0.2                            7.2
6002 yraunaJ                          1.4                          1.3                            1.4
7002 yraunaJ                          3.3                          3.2                            3.3
     .tnemeganaM lennosreP fo eciffO :ecruoS


  ¡    
  ¢ 
The Civil Service Retirement and Disability Fund (CSRDF) ended FY2006 with a balance of
$690 billion. By law, these assets are invested in special-issue U.S. Treasury bonds. The balance
of the trust fund represents the amount of budget authority available to pay benefits under both
CSRS and FERS. The fund's balance at the end of 2006 was more than 12 times the value of the
CSRS and FERS annuities paid from the fund that year.

CSRDF receives income from several sources. Some of the fund's income results from cash
transactions. Other income comes from intra-governmental transfers. The largest cash
transaction ($3.7 billion in 2006) consists of employee contributions to CSRS and FERS. These
contributions are equal to 7.0% of base pay under CSRS and 0.8% of pay under FERS.11 Smaller

11
  Under the Balanced Budget Act of 1997 (P.L. 105-33), employee contribution rates under CSRS and FERS rose by
0.25% in January 1999 and by a further 0.15% in January 2000. They were to increase by another 0.1% in January
2001 before reverting to their previous levels--7.0% under CSRS and 0.8% under FERS--after Dec. 31, 2002, but the
(continued...)



       
                                              ¢                       ¢ ¢ 


cash payments are received from the District of Columbia to finance retirement benefits for its
employees, and from additional cash contributions made by federal workers. These usually are
former federal employees who are returning to government service and who had previously
withdrawn their retirement contributions.

The fund's largest sources of income are (1) interest payments on the U.S. Treasury bonds it
holds, (2) a payment from the general fund of the Treasury to make up for the insufficient funding
of benefits accrued under CSRS, and (3) payments from federal agencies and the Postal Service
on behalf of their employees.12 Agency contributions under CSRS are equal to 7.0% of payroll,
and are supplemented by transfers from the general fund of the Treasury equal to approximately
10% of payroll. Agency contributions to FERS are required by law to be equal to the full actuarial
cost of the program minus employee contributions. Agency contributions to FERS equal 11.2% of
pay in 2006. These three sources of income are not cash transactions, but intra-governmental
transfers which result in an increase in the fund's budget authority as recorded in the accounts of
the U.S. Treasury. The fund receives Treasury bonds as a record of this budget authority, which it
redeems periodically as annuity payments come due.13

Expenditures from the retirement and disability fund consist mainly of payments to retired federal
employees and their surviving spouses and dependents. Annuity payments totaled $57.5 billion in
2006, while payments to the estates of decedents and payments to separating employees
accounted for another $318 million. Administrative expenses for the fund were $134 million, just
0.23% of expenditures.

   8 elbaT     ytilibasiD dna tnemeriteR ecivreS liviC eht fo serutidnepxE dna emocnI .
                                              8002-6002 ,dnuF
                                               )snoillim ni stnuoma(
                                                         6002YF           ).tse( 7002YF           ).tse( 8002YF
ecnalab gninnigeB                                       377,066$             459,986$                757,107$
            dnuf eht ot emocnI
            :snoitcasnart hsaC
   snoitubirtnoc eeyolpmE                                 517,3$              010,4$                   809,3$
       aibmuloC fo tcirtsiD                                 05$                83$                      33$
 stisoped eeyolpme rehtO                                   535$                636$                     566$
:srefsnart latnemnrevogartnI
      snoitubirtnoc ycnegA                               918,31$              270,41$                 417,51$
       )latot( ecivreS latsoP                            924,4$               283,3$                  695,3$


(...continued)
increased contributions were repealed by P.L. 106-346.
12
   At the time CSRS was created in 1920, it was common for private employers to pay some retirement benefits directly
from their sales revenues rather than from reserves held in a pension fund. Because CSRS was not designed to be
funded entirely from employee and agency contributions, some of the benefits accrued by workers covered by CSRS
are financed through transfers from the general revenues of the U.S. Treasury.
13
   See CRS Report RL30023, Federal Employee Retirement Programs: Budget and Trust Fund Issues, by Patrick
Purcell.




   
                                                   ¢ ¢  ¢ 



                                                            6002YF            ).tse( 7002YF             ).tse( 8002YF


  seitiruces no tseretnI                                    234,63$               950,24$                  527,34$
 stpiecer dnuf lareneG                                      151,82$               501,23$                  445,33$
tesffo tnemyolpme-eR                                          33$                   93$                      04$
  dnuf eht ot emocni latoT                                  461,78$               143,69$                 522,101$
dnuf eht morf serutidnepxE
 seitiunna rovivrus dna eeyolpmE                            135,75$-             541,16$-                  128,36$-
setatse ot stnemyap dna sdnufeR                              813$-                203$-                     703$-
                   noitartsinimdA                            431$-                 19$-                     401$-
             aFBHRSP ot refsnarT                           --------              000,32$-                 --------


                                                              dnuf eht morf serutidnepxe latoT
                                                           389,75$-              835,48$-                 232,46$-
                                                           459,986$               ecnalab gnidnE
                                                                                 757,107$                 057,837$
.8002YF ,tnemnrevoG setatS detinU eht fo tegduB ,tegduB dna tnemeganaM fo eciffO .S.U :ecruoS
     .a   eht yb dezirohtua saw dnuF stifeneB htlaeH eeriteR ecivreS latsoP eht ot tnemyap emit-eno sihT       latsoP

                                                        .)534-901 .L.P( tcA tnemecnahnE dna ytilibatnuoccA




        
  ¢ 
Between 1990 and 2006, the balance of the Civil Service Retirement and Disability Fund rose
from $236 billion to $690 billion, an increase of 192%. (See Table 9.) The balance of the fund
has been rising partly because the civil service retirement programs are in a long-term transition
from pay-as-you-go financing under CSRS to advance-funding under FERS.

For most of its history, CSRS benefits were funded on a pay-as-you-go basis with a small reserve
equal to about one year of benefit payments to meet unexpected contingencies. Employee
contributions and agency contributions were less than the actuarial value of the benefits that were
accrued each year by federal employees. In 1969, P.L. 91-93 mandated annual payments to the
fund from the general revenues of the U.S. Treasury to make up most of this shortfall.14 When
Congress passed the legislation that created FERS in 1986, it required that the full actuarial value
of benefits accrued each year by federal employees covered by the program (including the value
of future COLAs) must be funded by the sum of employee and agency contributions. The Office
of Personnel Management estimates that at some time in the 21st century, the trust fund will reach
a steady state in which it holds sufficient budget authority to finance about 20 years of retirement
and disability benefits.




14
   The Office of Management and Budget has estimated that employee and agency contributions and the transfers from
the general fund are sufficient to meet all of the actuarial costs of CSRS except for the increase in benefits represented
by COLAs.




   
                                               ¢ ¢  ¢ 



  ytilibasiD dna tnemeriteR ecivreS liviC eht fo serutidnepxE dna emocnI .9 elbaT
                                8002 ot 0991 ,dnuF
                                             ) s r al l o d f o s n o i l l i b n i (


  raeY lacsiF            emocnI FDRSC                          serutidnepxE FDRSC                ecnalaB gnidnE
      0991                     2.25$                                           1.13$-                  6.532$


      5991                      7.56                                            4.83-                      2.663


      6991                      6.66                                            8.93-                      0.393


      7991                      2.07                                            7.14-                      5.124


      8991                      2.27                                            1.34-                      7.054


      9991                      5.47                                            9.34-                      3.184


      0002                      0.67                                            2.54-                      1.215


      1002                      9.77                                            4.74-                      6.245


      2002                      1.08                                            0.94-                      7.375


      3002                      4.87                                            4.05-                      7.106


      4002                      4.28                                            3.25-                      9.136


      5002                      7.38                                            8.45-                      8.066


      6002                      2.78                                            0.85-                      0.096

     a7002                      3.69                                            5.48-                      8.107


      8002                     2.101                                            2.46-                      8.837


                      tnemnrevoG setatS detinU eht fo tegduB ,tegduB dna tnemeganaM fo eciffO :ecruoS
                                                                                        .sraey suoirav ,


    .dnuF htlaeH eeriteR ecivreS latsoP eht ot tnemyap noillib 32$ a edulcni 7002 rof serutidnepxE .a


      
¢ ¢ 
The number of people receiving civil service annuity payments has more than doubled since
1970, but the rate of increase has slowed since 1985. (See Table 10.) The rapid rise in the number
of civil service annuitants from less than one million in 1970 to approximately two million in
1985 resulted from the increase in federal employment that occurred between 1940 and 1955.
(See Table 11.) Throughout the 1930s, civilian federal employment (including postal employees)
was less than one million. 1940 was the first year in which there were more than one million
people in the federal workforce. By 1955, civilian federal employment had reached 2.4 million.
There were brief upward spikes in federal employment during World War II and the Korean War,
but relatively few of these war-time workers remained in service long enough to become vested in
pension benefits.

After 1955, civilian federal employment increased much more slowly. It reached 2.9 million in
1970, due in part to the war in Vietnam and the creation of such large-scale social programs as
Medicare and Medicaid in the 1960s. The slower but still steady increase in the number of federal
employees in the years between 1955 and 1970 had as one of its consequences the slower but
steady increase in the number of civil service annuitants in the years since 1985. Between 1985
and 2005, the number of civil service annuitants rose from around 2 million to about 2.5 million.


   
                                                   ¢ ¢  ¢ 



The Office of Management and Budget estimates that by 2012 there will be approximately 2.9
million people receiving federal civil service annuities.

Expenditures for civil service annuities have grown by a greater percentage than the number of
annuitants because they are affected not only by the number of people employed by the federal
government, but also by increases in average life-span, growth in real wages, and inflation. Cost-
of-living adjustments--which have been applied to civil service annuities since 1962--do not
represent an increase in the real value of these annuities. They merely keep purchasing power
from eroding due to the effects of inflation.15

Under current law, the real value of a civil service annuity either remains constant (CSRS) or
declines (FERS) during retirement.16 Therefore, the increase in the real value of annuities has
been the result of increases in the average value of the "high-3" average pay on which these
annuities are based. Rates of increase in the high-3 average pay of retiring federal employees are
in turn affected by adjustments to pay for each grade-and-step level; special pay increases such as
locality pay adjustments; the distribution of federal employees among various grade-and-step
levels over time; and average length of service (since each additional year of service tends to
increase the high-3 average pay). The average real value of civil service annuities per annuitant
can be expected to decline in the future as a growing number of new retirees are covered by
FERS rather than CSRS. FERS annuities are supplemented by Social Security benefits and the
Thrift Savings Plan.

                   01 elbaT     6002 ot 0791 ,stnemyaP ytiunnA dna stnatiunnA .
     raeY           )sdnasuoht( stnatiunnA latoT             lanimoN ni stnemyaP              tnatsnoC ni stnemyaP
                                                               )snoillim( sralloD             )snoillim( sralloD 6002
     0791                           269                               647,2$                           862,41$


     5791                          193,1                               840,7                            014,62


     0891                          576,1                              266,41                            278,53


     1891                          977,1                              795,71                            720,93


     2891                          928,1                              504,91                            935,04


     3891                          968,1                              717,02                            339,14


     4891                          019,1                              318,12                            423,24


     5891                          179,1                              210,32                            511,34


     6891                          800,2                              249,32                            930,44


     7891                          550,2                              317,52                            236,54


     8891                          590,2                              740,82                            697,74


     9891                          221,2                              431,92                            663,74


     0991                          341,2                              630,13                            278,74




15
   Federal tax revenues increase each year partly as a result of inflation. Income tax brackets are indexed in recognition
of increases in personal income that result solely from inflation.
16
   Some CSRS COLAs in the 1970s exceeded the rate of inflation because P.L. 91-93, enacted in 1969, called for
COLAs of "CPI plus one percentage point." The additional one percentage point was repealed by P.L. 94-440, enacted
in 1976.




   
                                                ¢ ¢  ¢ 




    raeY          )sdnasuoht( stnatiunnA latoT            lanimoN ni stnemyaP            tnatsnoC ni stnemyaP
                                                            )snoillim( sralloD           )snoillim( sralloD 6002
    1991                        481,2                              881,33                          421,94


    2991                        581,2                              545,33                          202,84


    3991                        242,2                              297,43                          045,84


    4991                        362,2                              452,63                          713,94


    5991                        113,2                              913,83                          096,05


    6991                        333,2                              076,93                          279,05


    7991                        343,2                              406,14                          852,25


    8991                        163,2                              349,24                          211,35


    9991                        963,2                              828,34                          630,35


    0002                        273,2                              270,54                          767,25


    1002                        083,2                              442,74                          087,35


    2002                        383,2                              838,84                          927,45


    3002                        004,2                              842,05                          450,55


    4002                        644,2                              221,25                          626,55


    5002                        684,2                              756,45                          024,65


    6002                        354,2                              618,75                          618,75

    a7002                       174,2                              804,16                          680,06

    a8002                       884,2                              090,46                          063,16

    a9002                       815,2                              294,66                          092,26

    a0102                       145,2                              527,86                          699,26

    a1102                       465,2                              518,07                          415,36

    a2102                       785,2                              779,27                          440,46


                    .tegduB dna tnemeganaM fo eciffO dna tnemeganaM lennosreP fo eciffO :ecruoS
    .stnemyap 31 ro ,21 ,11 evah nac raey a ,snigeb raey lacsif eht taht yad eht no gnidnepeD :etoN
       .setatS detinU eht fo tegduB eht morf syaltuo lanimon dna stnatiunna fo rebmun detamitsE   .a


     ¢                                                                         
Since 1990, the number of civilian federal employees (including the U.S. Postal Service, which
participates in both CSRS and FERS) has fallen from 3.1 million to 2.7 million. (See Table 11.)
Civilian federal employment outside the Postal Service fell from 2.25 million in 1990 to 1.88
million in 2006, a decline of 16.4%. Reductions in federal employment yield immediate savings
in payroll costs, and ultimately they will result in lower expenditures for retirement annuities for
federal employees. In the near-term, however, reductions in the federal work force may result in a
greater number of annuitants to the extent that the reductions are achieved by inducing employees
to retire early. Employment in the Judicial Branch (34,000) exceeded employment in the
Legislative Branch (29,000) in 2006. Since 1980, employment in the Legislative Branch has
declined from 40,000 employees to 29,000 employees. Over the same period, employment in the
Judicial Branch rose from 15,000 to 34,000.


   
                                                               
137,2    997              768,1                43                    13        3002
596,2    118              818,1                53                    13        2002
407,2    848              297,1                43                    03        1002
207,2    168              877,1                23                    13        0002
947,2    668              128,1                23                    03        9991
987,2    178              658,1                23                    03        8991
787,2    458              278,1                03                    13        7991
848,2    258              439,1                03                    23        6991
919,2    548              210,2                92                    33        5991
179,2    328              580,2                82                    53        4991
310,3    097              751,2                82                    83        3991
680,3    297              722,2                82                    93        2991
311,3    408              442,2                62                    93        1991
921,3    718              052,2                42                    83        0991
421,3    628              832,2                22                    83        9891
411,3    238              222,2                22                    83        8891
190,3    897              532,2                02                    83        7891
420,3    477              391,2                91                    83        6891
120,3    057              412,2                81                    93        5891
019,2    386              171,2                71                    93        4891
678,2    366              751,2                71                    93        3891
528,2    066              011,2                61                    93        2891
168,2    366              341,2                61                    93        1891
678,2    066              161,2                51                    04        0891
798,2    996              941,2                01                    93        5791
229,2    627              851,2                 7                    13        0791
825,2    695              009,1                 6                    62        5691
893,2    365              808,1                 5                    32        0691
793,2    215              068,1                 4                    22        5591
169,1    584              944,1                 4                    32        0591
885,3    973              181,3                 3                    52        5491
190,1    213               857                  2                    02        0491
        ecivreS          hcnarB             hcnarB                hcnarB
latoT                                                                          raeY
        latsoP          evitucexE           laiciduJ             evitalsigeL
                  )raey hcae 03 rebmetpeS fo sa ,sdnasuoht ni(
         6002 ot 0491 ,tnemyolpmE laredeF nailiviC .11 elbaT
   ¢ ¢  ¢ 
                                                  ¢ ¢  ¢ 



                    evitalsigeL               laiciduJ             evitucexE                latsoP
     raeY                                                                                                      latoT
                      hcnarB                  hcnarB                 hcnarB                 ecivreS


     4002                03                        43                 288,1                   867               417,2


     5002                13                        43                 278,1                   467               107,2


     6002                92                        43                 088,1                   757               007,2


                             .tnemeganaM lennosreP fo eciffO :ecruoS
      .emit-trap gnidulcni ,deyolpme snosrep latot swohs elbaT :etoN


                  ¡  ¢
Employees of the federal government are older on average than workers in the private sector.
Forty percent of employees in the Executive branch were under age 45 in 2004. Eighteen percent
were between the ages of 45 and 49, and 42% were age 50 or older. (See Table 12.) In contrast,
according to data collected by the U.S. Bureau of the Census, 63% of all wage and salary workers
in the private sector were under age 45 in 2004. Twelve percent of private sector employees were
ages 45 to 49, and 25% were age 50 or older.17

Under CSRS and FERS, an employee can retire with an immediate, unreduced annuity at age 55
(CSRS) or 56 (FERS) with 30 years of service or at age 60 with 20 years of service. About 37%
of federal employees will reach age 55 within 10 years, but not all of them will have 30 years of
service at that age. Of those who do, not all will retire immediately. The average age among all
federal employees who retired in 2006 was 59. The average among those who took normal
retirement--as opposed to early retirement or disability retirement, for example--was 61.18

                21 elbaT    seeyolpmE tnenamreP ,emit-lluF fo noitubirtsiD egA .
                               )4002 ,03 rebmetpeS fo sa ,sdnasuoht ni seeyolpme(
          egA            egA rednU         94- 54        45- 05      95- 55      46- 06        ro 56           latoT
                             54                                                                redlo
fo rebmuN                     756            192          513          242          49           33             236,1
 seeyolpme
tnecreP                       3.04           8.71         3.91         8.41        8.5           1.2            001


      .tnemeganaM lennosreP fo eciffO .S.U :ecruoS




17
   CRS analysis of data from the Current Population Survey. Based on wage and salary workers employed in the
private sector.
18
   Retirements other than normal retirements include disability retirements, voluntary early retirements, involuntary
retirements, special retirements for law enforcement officers and firefighters, and other unclassified retirements.




       
                                   ¢ ¢  ¢ 



    

Patrick Purcell
Specialist in Income Security
ppurcell@crs.loc.gov, 7-7571




   

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For other versions of this document, see http://wikileaks.org/wiki/CRS-98-972