Order Code 98-972 EPW
CRS Report for Congress
Received through the CRS Web
Federal Employees’ Retirement System:
Summary of Recent Trends
Updated January 23, 2004
Patrick J. Purcell
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Federal Employee Retirement Programs:
Summary of Recent Trends
Summary
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 fiscal year 2002, 66% of civilian federal employees were enrolled
in the Federal Employees Retirement System (FERS), which covers
employees hired since 1984. Thirty-four percent were enrolled in
the Civil Service Retirement System (CSRS), which covers only
employees hired before 1984.
! 2.4 million people received civil service annuity payments in fiscal
year 2002. Ninety-three 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 2002 was 58
years old and had completed 26.7 years of federal service.
! The average monthly annuity payment to workers who retired under
CSRS in 2002 was $2,595. Workers who retired under FERS
received an average monthly annuity of $867. (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 FY2002, the balance of the Civil Service Retirement
and Disability Fund was $570 billion, an amount equal to 11 times
the amount of outlays from the fund during 2002. The trust fund
balance is expected to reach $633 billion by the end of fiscal year
2004.
! From 1970 to 1985, the number of people receiving civil service
annuities rose by one million, an increase of 105%. Between 1985
and 2002 the number of civil service annuitants rose by 412,000, an
increase of 20%.
! As of September 2002, civilian federal employment, including the
Postal Service, totaled 2.62 million workers, a decline of 500,000
(16%) since 1990.
! Employees of the federal government are older on average than
workers in the private sector. Fifty-nine percent of all federal
employees were age 45 or older in 2000, and 40% were age 50 or
older. In contrast, only 34% of wage and salary workers in the
private sector were 45 or older in 2000, and just 23% were 50 or
older.

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Contents
Fundamentals of the Civil Service Retirement Programs . . . . . . . . . . . 1
Retirement Coverage of Current Federal Employees . . . . . . . . . . . . . . 3
Coverage of Current Civil Service Annuitants . . . . . . . . . . . . . . . . . . . 4
State of Residence of Civil Service Annuitants . . . . . . . . . . . . . . . . . . . 5
Average Age and Years of Service at Retirement . . . . . . . . . . . . . . . . . 7
Average Age at Retirement of New Federal Retirees, 1989 to 2002 . . 10
Total and Average Annuity Payments to Retirees and Survivors
in 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Cost-of Living Adjustments under CSRS and FERS . . . . . . . . . . . . . 12
Income and Expenditures of the Civil Service Retirement and
Disability Fund, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Recent Trends in the Balance of the Civil Service Retirement
and Disability Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Number of Civil Service Annuitants and Total Annuity Payments,
1970 to 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Civilian Federal Employment, 1940 to 2002 . . . . . . . . . . . . . . . . . . . . 19
Age Distribution of Executive Branch Employees . . . . . . . . . . . . . . . 21
List of Tables
Table 1. Retirement Systems Coverage of Federal Employees, by Fiscal Year . . 4
Table 2. Retirement Plan Coverage of Civil Service
Annuitants, FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. State of Residence of Civil Service Annuitants, 2002 . . . . . . . . . . . . . . 6
Table 4. Number, Average Age and Years of Service, and Average Annuity of Civil
Service Annuitants Who Retired in 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 5. Average Age at Retirement for New Federal Retirees,1989 to 2002 . . 10
Table 6. Total and Average Annuity Payments to Retirees and
Survivors in 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 7. Cost-of-Living Adjustments under CSRS and FERS . . . . . . . . . . . . . . 12
Table 8. Income and Expenditures of the Civil Service Retirement and
Disability Fund, 2002-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 9. Income and Expenditures of the Civil Service Retirement and
Disability Fund, 1989 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 10. Annuitants and Annuity Payments, 1970 to 2006 . . . . . . . . . . . . . . . . 18
Table 11. Civilian Federal Employment, 1940 to 2002 . . . . . . . . . . . . . . . . . . . 20
Table 12. Age Distribution of Full-time, Permanent Employees . . . . . . . . . . . . 21

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Federal Employee Retirement Programs:
Summary of Recent Trends
Fundamentals of the Civil Service Retirement Programs. 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 adequate retirement and disability benefits
on its own, 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 most state and local governments have
chosen to do so.
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 medium
and large employers in the private sector, is comprised of three elements: (1) Social
Security, (2) a defined benefit plan (the FERS basic annuity), and (3) a defined
contribution plan (the Thrift Savings 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” held in 1987 and 1998.2
Former federal employees who have completed at least 5 years of service under
CSRS and are rehired after a break in service of less than 1 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.
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 (October 10, 1997) authorized an open season to be held from July through
December 1998, during which employees still enrolled in CSRS could transfer to FERS.

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CRS-2
Under FERS, workers who have completed at least 30 years of service can retire
at age 55. The minimum retirement age will increase beginning with workers born
in 1948, eventually reaching age 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 10 (but fewer than 30) years of service can receive a reduced
FERS pension benefit at age 55. 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 55 with fewer than 30 years of service would be
permanently reduced by 5% multiplied by 7, or 35%.
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 3 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 25 years of service will receive a
FERS annuity equal to 25% of high-3 average pay. Delaying retirement by one year
would increase the annuity to 28.6% of high-3 average pay (26 X 1.1 = 28.6).
Accrual rates are higher under CSRS than under FERS because employees
covered by CSRS do not pay Social Security payroll taxes or 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 tenth 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
3 The calculation of “high-3 average pay” is based on nominal or “current dollars” rather
than indexed or “constant dollars.”
4 Note that because FERS coverage began in 1984, no federal workers will have 30 years
of service exclusively under FERS until 2014.

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CRS-3
2004, workers covered by FERS will be permitted to contribute as much as 14% of
their pay to the TSP, up to the annual limit defined in the Internal Revenue Code
($13,000 in 2004).5 These contributions 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.6 Workers covered by CSRS
also may participate in the TSP, but their total contribution is limited to 9% of pay,
and they receive no matching contributions from their employing agency.
Retirement Coverage of Current Federal Employees. Because
enrollment in CSRS has been closed to new entrants since 1984, the proportion of
federal workers covered by FERS has been rising and coverage under CSRS has been
declining. (See Table 1.) Fiscal year 1995 was the first year in which a majority of
civilian federal employees (51%) were covered by FERS. During FY2002, 65.5%
of federal employees were covered by FERS.
5 P.L. 106-554, the FY2001 Appropriations Act for the Departments of Labor, Health and
Human Services, and Education (H.R. 4577 of the 106th Congress), will increase the
maximum allowable employee contribution to the TSP by 1 percentage point each year for
5 years. The percentage-of-pay limits on contributions to the TSP then will be eliminated,
and employee contributions will be subject only to the limits applicable under Internal
Revenue Code § 402(g). Beginning in July 2001, employees covered by FERS are allowed
to contribute up to 11% of pay to the TSP, and employees covered by CSRS are allowed to
contribute up to 6% of pay to the TSP. The maximum permissible contribution will rise by
1 percentage point each fiscal year until reaching 15% for FERS and 10% for CSRS in
FY2005. In fiscal year 2006, the percentage-of-pay limits will be eliminated, but, the
contribution limits under IRC § 402(g) will continue to apply.
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.

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CRS-4
Table 1. Retirement Systems Coverage of Federal Employees,
by Fiscal Year
Covered active employees *
CSRS
FERS
Total
Fiscal Year 2002
906,000
1,717,000
2,623,000
Percentage distribution
34.5%
65.5%
100%
Fiscal Year 2001
987,000
1,689,000
2,676,000
Percentage distribution
36.9%
63.1%
100%
Fiscal Year 2000
961,000
1,629,000
2,590,000
Percentage distribution
37.6%
62.4%
100%
Fiscal Year 1999
1,009,000
1,536,000
2,545,000
Percentage distribution
39.6%
60.4%
100%
Fiscal Year 1998
1,108,000
1,550,000
2,658,000
Percentage distribution
41.7%
58.3%
100%
Fiscal Year 1997
1,194,000
1,487,000
2,681,000
Percentage distribution
44.5%
55.5%
100%
Fiscal Year 1996
1,235,000
1,385,000
2,620,000
Percentage distribution
47.1%
52.9%
100%
Fiscal Year 1995
1,311,000
1,371,000
2,682,000
Percentage distribution
48.9%
51.1%
100%
Fiscal Year 1994
1,402,000
1,296,000
2,698,000
Percentage distribution
52.0%
48.0%
100%
Source: Federal Civilian Workforce Statistics: 2002 Fact Book, Office of Personnel Management and
Report of the Civil Service Retirement and Disability Fund for the Fiscal Year ended
September 30, 2002. *Number of employees on a full-time equivalent basis. Includes U.S.
Postal Service. Does not include employees on leave without pay.
Coverage of Current Civil Service Annuitants. Although the majority
of current federal employees are covered by FERS, most retired federal workers and
their surviving spouses and dependents receive benefits from employment that was
covered by CSRS. At the beginning of FY2002, 93% of current annuitants were
receiving pension benefits that were accrued under CSRS, while just 7% had retired
under FERS. (See Table 2.) Under both CSRS and FERS, employee and agency
contributions are paid into – and pension annuities are paid from – the Civil Service

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CRS-5
Retirement and Disability Fund.7 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.
Table 2. Retirement Plan Coverage of Civil Service
Annuitants, FY2002
CSRS
FERS
Total
Employee annuitants
1,593,123
155,797
1,748,920
Percentage
91.1%
8.9%
100%
Survivor annuitants
620,041
14,089
634,130
Percentage
97.8%
2.2%
100%
Total annuitants
2,213,164
169,886
2,383,050
Percentage 92.9%
7.1%
100%
Source: Statistical Abstracts, Fiscal Year 2002, Federal Employee Benefits Program,
U.S. Office of Personnel Management.
State of Residence of Civil Service Annuitants. Nearly 2.4 million
people received civil service annuities in 2002, either as retired federal employees,
surviving spouses, or surviving dependents. California had the largest number of
annuitants with 223,806 and Vermont had the fewest with 3,928. Five states —
California, Florida, Texas, Maryland, and Virginia — accounted for 35% of all civil
service annuitants in 2002.
7 Under CSRS, both the employee and the employing agency contribute an amount equal to
7.0% of base pay to the retirement and disability fund. This does not provide sufficient
resources to pay the retirement benefits that are accrued annually by federal employees
covered under CSRS. The shortfall (equal to about 10% of pay) is made up through
transfers from the general fund of the U.S. Treasury. Retirement benefits accrued under
FERS are fully funded through contributions from employees (0.8% of base pay) and their
employing agencies (10.7% of payroll in 2004).

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CRS-6
Table 3. State of Residence of Civil Service Annuitants, 2002
State
Number of annuitants Percent of national total
Alabama
55,899
2.4%
Alaska
6,636
0.3%
Arizona
47,605
2.0%
Arkansas
23,700
1.0%
California
223,806
9.5%
Colorado
43,384
1.8%
Connecticut
14,503
0.6%
Delaware
6,752
0.3%
District of Columbia
43,700
1.9%
Florida
163,019
6.9%
Georgia
73,425
3.1%
Hawaii
23,889
1.0%
Idaho
11,619
0.5%
Illinois
64,015
2.7%
Indiana
33,888
1.4%
Iowa
19,518
0.8%
Kansas
23,184
1.0%
Kentucky
30,836
1.3%
Louisiana
25,321
1.1%
Maine
13,074
0.6%
Maryland
141,092
6.0%
Massachusetts
46,049
2.0%
Michigan
38,495
1.6%
Minnesota
25,393
1.1%
Mississippi
23,758
1.0%

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CRS-7
State
Number of annuitants Percent of national total
Missouri
50,408
2.1%
Montana
10,812
0.5%
Nebraska
13,046
0.6%
Nevada
19,269
0.8%
New Hampshire
11,431
0.5%
New Jersey
56,057
2.4%
New Mexico
24,879
1.1%
New York
99,029
4.2%
North Carolina
58,271
2.5%
North Dakota
5,788
0.2%
Ohio
73,045
3.1%
Oklahoma
47,802
2.0%
Oregon
29,678
1.3%
Pennsylvania
105,743
4.5%
Rhode Island
9,410
0.4%
South Carolina
38,637
1.6%
South Dakota
8,748
0.4%
Tennessee
39,272
1.7%
Texas
150,374
6.4%
Utah
32,395
1.4%
Vermont
3,928
0.2%
Virginia
133,800
5.7%
Washington
59,939
2.6%
West Virginia
14,798
0.6%
Wisconsin
23,873
1.0%
Wyoming
5,257
0.2%
Total
2,348,249
100%
Source: Statistical Abstracts, Fiscal Year 2002, Federal Employee Benefits Program,
U.S. Office of Personnel Management.
Average Age and Years of Service at Retirement. More than 74,000
civilian federal employees (including U.S. Postal Service employees) retired during
fiscal year 2002. (See Table 4.) Of this number, 50,149 (68%) were normal
retirements8 and another 6,250 (8%) were voluntary early retirements. Under both
8 Normal retirements include all retirements except disability retirements, voluntary early
(continued...)

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CRS-8
CSRS and FERS, normal retirement can occur as early as age 55 with 30 years of
service, age 60 with 20 years of service, or age 62 with 5 years of service. The
minimum retirement age under FERS is scheduled to increase beginning with
workers born in 1948, eventually reaching age 57 for employees born in 1970 or
later. The average age of workers taking voluntary, normal retirement in 2002 was
60 for employees covered by CSRS and 62.6 for those covered by FERS. Workers
taking normal retirement under CSRS in 2002 had completed an average of 32.5
years of service, while those retiring under FERS had an average of 16.4 years of
service.
More than 6,000 federal employees took voluntary early retirement in 1999.
These workers were younger on average (53.4 years old) than those who took normal
retirement, and their average length of service (27.5 years) was slightly less than that
of those who took normal retirement. Approximately 14% of all retirements among
federal employees in 2002 were taken for reasons of disability. Disability retirees
were, on average, 49.8 years old with 16.6 years of service. Involuntary retirements
(such as those resulting from agency down-sizing) and retirements taken under other
special circumstances accounted for 10% of all retirements by federal employees in
2002.
Average Annuity Amounts under CSRS and FERS. The average
monthly annuity paid to civilian federal employees who retired under CSRS in 2002
was $2,595, while new FERS annuitants received an average annuity of $867 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.9 Employees in
FERS who retire at 55 or older with 30 years of federal service are eligible to receive
a supplement to their FERS annuity between their retirement and age 62. The
supplement is approximately equal to the Social Security payments they will receive
for their years of federal employment. (Employees with 20 years of service receive
this supplement if they are at least age 60 at retirement.)
8 (...continued)
retirements, involuntary retirements, and special provision retirements.
9 In 2002, federal employees covered by CSRS may contribute up to 7% of pay (pre-tax)
to the TSP, but they receive no agency matching contributions. For more information on the
TSP, see CRS Report RL30387, Federal Employees’ Retirement System: Role of the Thrift
Savings Plan, by Patrick Purcell.

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CRS-9
Table 4. Number, Average Age and Years of Service, and
Average Annuity of Civil Service Annuitants Who Retired in 2002
Average or
2002 civilian federal retirements
CSRS
FERS*
Total
Normal Retirements
Number
38,999
11,150
50,149
Average age at retirement
60.0
62.6
60.6
Average years of service
32.5
16.4
28.9
Average monthly annuity
$2,733
$651
$2,271
Disability Retirements
Number
4,031
6,509
10,540
Average age at retirement
51.5
48.7
49.8
Average years of service
23.8
12.2
16.6
Average monthly annuity
$1,608
$1,017
$1,243
Involuntary retirements
Number
2,009
218
2,227
Average age at retirement
55.0
55.6
55.0
Average years of service
28.0
23.4
27.5
Average monthly annuity
$2,372
$1,292
$2,266
Voluntary early retirements
Number
5,721
531
6,252
Average age at retirement
53.3
53.7
53.3
Average years of service
27.9
23.9
27.6
Average monthly annuity
$2,156
$1,170
$2,072
Special provision retirements
Number
2,480
348
2,828
Average age at retirement
54.4
53.1
54.2
Average years of service
29.7
29.3
29.7
Average monthly annuity
$4,292
$4,792
$4,354
Total retirements in 2002 **
Number
54,627
19,526
74,153
Average age at retirement
58.3
57.3
58.0
Average years of service
30.7
15.4
26.7
Average monthly annuity
$2,595
$867
$2,141
Source: CRS analysis of data from the Office of Personnel Management.
* Employees covered by FERS also participate in Social Security. In January 2002, the average
monthly Social Security benefit for workers retiring at age 62 was $936.
** Includes other, unclassified retirements.

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CRS-10
Average Age at Retirement of New Federal Retirees, 1989 to 2002.
In 2002, the average age of federal employees taking normal retirement was 60.6.
(See Table 5.) Over the period from 1989 to 2002, the average age of normal
retirements was 61.4 The average age for all retirements in 2002 was 58.1, which
was the same as the average for the period from 1989 to 2002. Under the terms of
the Homeland Security Act 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.
Table 5. Average Age at Retirement for New Federal Retirees,
1989 to 2002
Average age at retirement
Normal retirements as
Fiscal
All
Normal
a percentage of all
year
retirements
retirements
retirements
1989
59.4
61.3
77.4%
1990
59.4
61.3
79.0
1991
55.4
61.2
78.1
1992
59.1
61.5
70.6
1993
57.9
61.5
52.4
1994
58.1
61.8
56.8
1995
58.0
62.0
53.2
1996
57.6
62.0
52.8
1997
57.5
61.8
55.4
1998
57.6
61.5
57.1
1999
58.1
61.3
63.2
2001
58.0
61.0
64.5
2002
58.1
60.6
67.6
Source: Office of Personnel Management.
Note: Normal retirements include all retirements except disability retirements, voluntary early
retirements, involuntary retirements, and special provision retirements.

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CRS-11
Total and Average Annuity Payments to Retirees and Survivors in
2002. The Civil Service Retirement and Disability Fund paid annuities to 1.75
million retired federal employees and 634,000 survivor annuitants in fiscal year 2002.
Of these beneficiaries, 2.2 million (93%) received benefits earned under CSRS and
170,000 (7%) received benefits under FERS. Employee annuitants under CSRS
received an average monthly annuity of $2,048. Survivors of CSRS annuitants
received an average monthly CSRS annuity of $1,040. Employee annuitants under
FERS received payments, averaging $735 per month for retirees and $317 for
survivors. 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.10
Table 6. Total and Average Annuity Payments to Retirees and
Survivors in 2002
(in thousands of dollars)
All retirees
CSRS
FERS
and survivors
Employee annuitants
1,593,123
155,797
1,748,920
Percent of Total
91.1%
8.9%
100%
Mean monthly benefit
$2,048
$735
$1,931
Median monthly benefit
$1,812
$481
$1,716
Survivor annuitants
620,041
14,089
634,130
Percent of Total
97.8%
2.2%
100%
Mean monthly benefit
$1,040
$317
$1,024
Median monthly benefit
$916
$235
$895
Total annuitants
2,213,164
169,886
2,383,050
Percent of Total
92.9%
7.1%
100%
Source: Statistical Abstracts, Fiscal Year 2002, Federal Employee Benefits Program, Office of
Personnel Management.
10 In December 2002, the average monthly Social Security benefit among all retired workers
was $895. The average monthly benefit for a surviving spouse was $861.

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CRS-12
Cost-of Living Adjustments under CSRS and FERS. 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.11 In January 2004, CSRS beneficiaries received a
COLA of 2.1%, and FERS beneficiaries received a COLA of 2.0%. (See Table 7.)
Table 7. Cost-of-Living Adjustments under CSRS and FERS
Change in
CSRS
FERS
CPI from
Date paid
COLA
COLA
3rd Qtr to 3rd Qtr
January 1989
4.0%
3.0%
4.0%
January 1990
4.7%
3.7%
4.7%
January 1991
5.4%
4.4%
5.4%
January 1992
3.7%
2.7%
3.7%
January 1993
3.0%
2.0%
3.0%
April 1994
2.6%
2.0%
2.6%
April 1995
2.8%
2.0%
2.8%
April 1996
2.6%
2.0%
2.6%
January 1997
2.9%
2.0%
2.9%
January 1998
2.1%
2.0%
2.1%
January 1999
1.3%
1.3%
1.3%
January 2000
2.4%
2.0%
2.4%
January 2001
3.5%
2.5%
3.5%
January 2002
2.6%
2.0%
2.6%
January 2003
1.4%
1.4%
1.4%
January 2004
2.1%
2.0%
2.1%
Source: Office of Personnel Management.
* COLAs are first included in benefits paid during the month after the effective date.
11 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.

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CRS-13
Income and Expenditures of the Civil Service Retirement and
Disability Fund, 2002. The Civil Service Retirement and Disability Fund
(CSRDF) ended FY2002 with a balance of $569.5 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 2002 was more than 11 times the value
of the CSRS and FERS annuities paid from the fund that year.
The Civil Service Retirement and Disability Fund 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 ($4.0 billion
in 2002) 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.12 Smaller
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.13 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 10.7% of pay in 2004.
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.14
12 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 December 31, 2002, but the
increased contributions were repealed by P.L. 106-346.
13 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.
P.L. 108-18 (April 23, 2003) will reduce future Postal Service Payments to the Civil
Service Retirement and Disability Fund. For more information, see CRS Report Rl31684,
Funding Postal Service Obligations to the Civil Service Retirement System.
14 Also see CRS Report RL30023, Civil Service Retirement Programs: Budget and Trust
(continued...)

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CRS-14
Expenditures from the retirement and disability fund consist almost entirely of
payments to retired federal employees and their surviving spouses and dependents.
Annuity payments totaled $48.5 billion in 2002, while payments to the estates of
decedents and payments to separating employees accounted for another $285 million.
Administrative expenses for the fund were $131 million, just 0.27% of expenditures.
Table 8. Income and Expenditures of the Civil Service
Retirement and Disability Fund, 2002-2004
(amounts in millions)
FY2002
FY2003(est.)
FY2004(est.)
Beginning balance
$542,639
$573,738
$602,596
Income to the fund
Cash transactions:
Employee contributions
$3,998
$3,930
$3,858
District of Columbia
$61
$52
$46
Other employee deposits
$477
$494
$520
Intragovernmental transfers:
Agency contributions
$10,731
$9,975
$10,739
Postal Service (total)
$6,763
$7,026
$7,221
Interest on securities
$35,902
$37,266
$38,768
General fund receipts
$22,108
$22,484
$22,787
Re-employment offset
$29
$29
$30
Total income to the fund
$80,069
$81,256
$83,969
Expenditures from the fund
Employee annuities
-$40,764
-$42,479
-$43,671
Survivor annuities
-$7,790
-$8,086
-$8,497
Payments to estates
-$150
-$163
-$169
Separated employees
-$135
-$127
-$114
Administration
-$131
-$136
-$148
Total expenditures from the fund
-$48,970
-$50,991
-$52,599
Legislation (Postal Service Payments)
–-
-$1,407
-$626
Ending balance
$573,738
$602,596
$633,340
Source: U.S. Office of Management and Budget, Budget of the United States Government, FY2004.
14 (...continued)
Fund Issues.

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CRS-15
Recent Trends in the Balance of the Civil Service Retirement and
Disability Fund. Between 1989 and 2002, the balance of the Civil Service
Retirement and Disability Fund rose from $215 billion to $574 billion, an increase
of 167%. (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.15 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.
Table 9. Income and Expenditures of the Civil Service
Retirement and Disability Fund, 1989 to 2004
(in billions of dollars)
Fiscal year
CSRDF income
CSRDF expenditures
Ending balance
1989
$48.8
-$29.2
$214.6
1990
$52.2
-$31.1
$235.6
1991
$56.2
-$33.3
$258.5
1992
$59.5
-$33.7
$284.4
1993
$62.2
-$34.9
$311.8
1994
$63.5
-$36.4
$338.9
1995
$65.7
-$38.4
$366.2
1996
$66.6
-$39.8
$393.0
1997
$70.2
-$41.7
$421.5
1998
$72.2
-$43.1
$450.7
1999
$74.5
-$43.9
$481.3
2000
$76.0
-$45.2
$512.1
2001
$77.9
-$47.4
$542.6
2002
$80.1
-$49.0
$573.7
2003(est.)
$79.8
-$51.0
$602.5
2004(est.)
$83.3
-$52.6
$633.2
Source: Office of Management and Budget, Budget of the United States Government, various years.
15 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.

---

CRS-16
Number of Civil Service Annuitants and Total Annuity Payments,
1970 to 2006. 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 has 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
2000, the number of civil service annuitants rose from around 2 million to about 2.4
million. The Office of Management and Budget estimates that by 2006 there will be
approximately 2.5 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.16
Under current law, the real value of a civil service annuity either remains
constant (CSRS) or declines (FERS) during retirement.17 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;18 special pay increases such as locality pay
16 On the revenue side of the equation, federal tax revenues increase each year partly as a
result of inflation, and income tax brackets are indexed in recognition of increases in
personal income that result solely from inflation.
17 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. FERS annuities are only
partially indexed for annual increases in the general price level that exceed 2.0%, as
measured by the Consumer Price Index (CPI-W.)
18 Adjustments in the pay for each grade and step affect the real value of pay only to the
extent that they exceed the rate of inflation, which has only rarely occurred. In the long run,
(continued...)

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CRS-17
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.
18 (...continued)
wages increase faster than prices in the economy at large because of increases in worker
productivity (measured as output per worker per hour work.) Increases in productivity are
the chief source of growth in economic output and worker incomes.

---

CRS-18
Table 10. Annuitants and Annuity Payments, 1970 to 2006
Payments
Payments
Total
in nominal
in constant
annuitants
dollars
2002 dollars
Year
(000s)
(millions)
(millions)
1970
962
$2,746
$12,732
1971
1,026
3,228
14,339
1972
1,166
3,772
16,234
1973
1,277
4,515
18,294
1974
1,335
5,661
20,657
1975
1,391
7,048
23,568
1976
1,452
8,267
26,138
1977
1,522
9,531
28,294
1978
1,589
10,867
29,984
1979
1,656
12,369
30,650
1980
1,675
14,662
32,011
1981
1,779
17,597
34,826
1982
1,829
19,405
36,176
1983
1,869
20,717
37,420
1984
1,910
21,813
37,769
1985
1,971
23,012
38,475
1986
2,008
23,942
39,299
1987
2,055
25,713
40,720
1988
2,095
28,047
42,651
1989
2,122
29,134
42,268
1990
2,143
31,036
42,719
1991
2,184
33,188
43,836
1992
2,185
33,545
43,013
1993
2,242
34,792
43,315
1994
2,263
36,254
44,009
1995
2,311
38,319
45,234
1996
2,333
39,670
45,485
1997
2,343
41,604
46,633
1998
2,361
42,943
47,395
1999
2,369
43,828
47,327
2000
2,372
45,072
47,087
2001
2,380
47,244
47,991
2002
2,383
48,838
48,838
*2003
2,400
50,854
49,711
*2004
2,446
52,450
50,167
*2005
2,486
54,844
51,227
*2006
2,526
57,197
52,122
*2007
2,559
59,582
52,971
*2008
2,595
61,982
53,761
Source: Office of Personnel Management and Office of Management and Budget.
Note: Depending on the day that the fiscal year begins, a year can have 11, 12, or 13 payments.
* Estimated number of annuitants and nominal outlays from the Budget of the United States.

---

CRS-19
Civilian Federal Employment, 1940 to 2002. Since 1990, the number of
civilian federal employees (including the U.S. Postal Service, which participates in
both CSRS and FERS) has fallen by 505,000. (See Table 11.) Civilian federal
employment outside the Postal Service has fallen by 498,000, a decline of 21.5%
since 1990. These reductions 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.
Note that in 2002, employment in the
Judicial Branch exceeded employment in the Legislative Branch. Between 1983 and
2000, employment in the Legislative Branch declined from 40,000 employees to
31,000 employees. Over the same period, employment in the Judicial Branch rose
from 15,000 to 33,000.

---

CRS-20
Table 11. Civilian Federal Employment, 1940 to 2002
(In thousands, as of September 30 each year)
Legislative
Judicial
Executive
Postal
Year
Branch
Branch
Branch
Service
Total
1940
20
2
758
312
1,091
1945
25
3
3,181
379
3,588
1950
23
4
1,449
485
1,961
1955
22
4
1,860
512
2,397
1960
23
5
1,808
563
2,398
1965
26
6
1,900
596
2,528
1970
31
7
2,158
726
2,922
1975
39
10
2,149
699
2,897
1976
39
11
2,157
676
2,883
1977
39
13
2,131
658
2,841
1978
39
13
2,164
656
2,872
1979
40
13
2,161
662
2,876
1980
40
15
2,161
660
2,876
1981
39
16
2,143
663
2,861
1982
39
16
2,110
660
2,825
1983
39
17
2,157
663
2,876
1984
39
17
2,171
683
2,910
1985
39
18
2,214
750
3,021
1986
38
19
2,193
774
3,024
1987
38
20
2,235
798
3,091
1988
38
22
2,222
832
3,114
1989
38
22
2,238
826
3,124
1990
38
24
2,250
817
3,129
1991
39
26
2,244
804
3,113
1992
39
28
2,227
792
3,086
1993
38
28
2,157
790
3,013
1994
35
28
2,085
823
2,971
1995
33
29
2,012
845
2,919
1996
32
30
1,934
852
2,848
1997
31
30
1,867
854
2,782
1998
30
32
1,856
871
2,789
1999
30
32
1,821
866
2,749
2000
31
32
1,784
861
2,708
2001
33
32
1,738
831
2,634
2002
31
33
1,750
810
2,624
Source: Office of Personnel Management.
Note: Table shows total persons employed, including part-time.

---

CRS-21
Age Distribution of Executive Branch Employees. Employees of the
federal government are older on average than workers in the private sector. Forty-
one percent of employees in the Executive branch were under age 45 in 2001.
Nineteen percent were between the ages of 45 and 49, and 40% were age 50 or older.
(See Table 12.) In contrast, according to data collected by the U.S. Bureau of the
Census, an estimated 66% of all wage and salary workers in the private sector were
under age 45 in 2000. Eleven percent of private sector employees were ages 45 to
49, and 23% were age 50 or older.19
Under both CSRS and FERS, an employee can retire with an immediate,
unreduced annuity at age 55 with 30 years of service or at age 60 with 20 years of
service. Nearly 40% 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
2002 was 58. The average among those who took normal retirement – as opposed
to early retirement or disability retirement, for example – was 61.20
Table 12. Age Distribution of Full-time, Permanent Employees
(Employees in thousands, as of September 30, 2001)
Under
65 or
Age
Age 45
45 - 49
50 - 54
55 - 59
60 - 64
older
Total
Number
646
304
333
186
74
27
1,569
Percent
41.1%
19.4%
21.2%
11.8%
4.7%
1.7%
100%
Source: U.S. Office of Personnel Management
19 CRS analysis of data from the March 2002 Current Population Survey. Based on wage
and salary workers employed in the private sector.
20 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.

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