Net Periodic Costs
Information about the net periodic costs for the CSRS and FERS pension plans, which are prepared by OPM, is as follows:
Components of Net Periodic Costs |
||||
(Dollars in billions) |
CSRS |
FERS |
||
|---|---|---|---|---|
|
Projected 2008 |
2007 |
Projected 2008 |
2007 |
Actuarial Liability as of October 1 |
$ 196.9 |
$ 193.7 |
$ 55.1 |
$ 49.3 |
+ Expected Contributions* |
0.5 |
0.5 |
3.2 |
3.0 |
– Expected Benefit Disbursements |
(9.4) |
(8.9) |
(0.8) |
(0.7) |
+ Interest Expense |
12.0 |
11.8 |
3.6 |
3.2 |
– Actuarial Gain due to Actual Experience during FY |
— |
(4.4) |
— |
(0.6) |
+ Actuarial Loss Due to Change in Assumptions |
— |
4.2 |
— |
0.9 |
Actuarial Liability |
$ 200.0 |
$ 196.9 |
$ 61.1 |
$ 55.1 |
* Expected contribution for CSRS consists of employee contributions only. |
||||
Cost Methods and Assumptions
OPM made the following assumptions in completing its analysis:
- The actuarial cost method is Entry Age Normal
- Long-term economic assumptions are as follows:
- Rate of inflation — 3.5%
- FERS COLA — 2.8%
- Annual general salary increases — 4.25%
- Interest rate — 6.25%
- The Postal Service is not required to make any agency contributions to CSRS
- Postal Service contributions to FERS will not change; contributions will continue at the current rate of 11.2% of pay (the employee contribution is 0.8% of pay)
The OPM Board of Actuaries decided to incorporate an assumption of future mortality improvement into the actuarial valuation as of September 30, 2007. This caused the dynamic normal cost of CSRS to increase from 25.2% of pay to 25.8% and the FERS normal cost to increase from 12.0% to 12.3%.
Components of Net Change in Plan Assets
The following table prepared by OPM shows the components of the net change in plan assets for the CSRS and FERS programs.
Analysis of Change in Pension Net Assets during FY 2007 as calculated by OPM (9/30/07 latest actual data available) |
||
|---|---|---|
(Dollars in billions) |
CSRS Actual |
FERS Actual |
Net Assets as of 9/30/2006* |
$ 207.9 |
$ 58.0 |
+ Contributions |
0.6 |
3.0 |
– Benefit Disbursements |
(8.9) |
(0.7) |
– Transfer to Health Benefits Fund |
(17.1) |
0.0 |
+ Investment Income |
11.3 |
3.2 |
Net Assets as of 9/30/2007 |
$ 193.8 |
$ 63.5 |
*OPM restated September 30, 2006 CSRS net assets from $207.6 to $207.9. |
||
As stated previously, CSRDF is a single fund and does not maintain separate accounts for individual agencies. The actual securities of the CSRDF are not allocated separately to CSRS or FERS, or to Postal Service and non-Postal Service beneficiaries. The assets of the CSRDF are composed entirely of special issue Treasury securities with maturities ranging up to 15 years. The long-term securities bear interest rates ranging from 4% to 5%, while the short-term securities have an interest rate of 3.75%.
The assumed rate of return on the CSRS fund balance for both 2006 and 2007 was 6.25% while the actual rates of return were 5.42% and 5.51%, respectively. For the FERS fund, the assumed rate of return for both 2007 and 2006 was 6.25%, while the actual rates of return were 5.63% and 5.73% respectively. The projected rate of return on both the CSRS and FERS fund balance for 2008 is 6.25%.