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Federal Employees’ Retirement System:
Benefits and Financing
Katelin P. Isaacs
Analyst in Income Security
March 7, 2012
Congressional Research Service
7-5700
www.crs.gov
98-810
CRS Report for Congress
Pr
epared for Members and Committees of Congress
c11173008

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Federal Employees’ Retirement System: Benefits and Financing

Summary
Most civilian federal employees who were hired before 1984 are covered by the Civil Service
Retirement System (CSRS). Federal employees hired in 1984 or later are covered by the Federal
Employees’ Retirement System (FERS). Both CSRS and FERS require participants to contribute
toward the cost of their pensions through a payroll tax. Employees who are covered by CSRS
contribute 7.0% of pay to the Civil Service Retirement and Disability Fund (CSRDF). They do
not pay Social Security taxes or earn Social Security benefits. Employees enrolled in FERS
contribute 0.8% of their pay to the CSRDF. They pay 6.2% of wages up to the Social Security
taxable wage base to the Social Security trust fund under permanent law. Under temporary law,
they pay 4.2% of wages up to the Social Security taxable wage base. The taxable wage base is
$110,100 in 2012.
The minimum retirement age (MRA) under CSRS is 55 for workers who have at least 30 years of
service. The FERS MRA was 55 for employees born before 1948. The MRA for employees born
between 1953 and 1964 is 56, increasing to the age of 57 for those born in 1970 or later. Both
FERS and CSRS allow retirement with an unreduced pension at the age of 60 for employees with
20 or more years of service and at the age of 62 for employees with at least 5 years of service.
The Thrift Savings Plan (TSP) is a retirement savings plan similar to the 401(k) plans provided by
many employers in the private sector. In 2012, employees covered under either CSRS or FERS
can contribute up to $17,000 to the TSP. Employees aged 50 and older can contribute an
additional $5,500 to the TSP. Employees under FERS receive employer matching contributions of
up to 5% of pay from the federal agency by which they are employed. Federal workers covered
by CSRS also can contribute to the TSP, but they receive no matching contributions from their
employing agencies.
The Office of Personnel Management (OPM) estimates the cost of CSRS to be an amount equal
to 26.0% of employee pay. The federal government pays 19.0% of this amount and the other
7.0% is paid by employees. OPM estimates the cost of the FERS basic annuity at an amount
equal to 12.7% of pay. The federal government contributes 11.9% of this amount and the other
0.8% is paid by employees. There are three other employer costs for employees under FERS.
Both the employer and employee pay Social Security taxes equal to 6.2% of pay up to the
maximum taxable amount; agencies automatically contribute an amount equal to 1% of employee
pay to the TSP; and agencies make matching contributions to the TSP equal to up to 4% of pay.
At the start of FY2010, the CSRDF had an unfunded liability of $673.1 billion, consisting of a
$663.4 billion deficit for CSRS and a $9.7 billion deficit for FERS. Although the civil service
trust fund has an unfunded liability, it is not in danger of becoming insolvent. OPM projects that
the balance of the CSRDF will continue to grow through at least 2080, at which point it will hold
assets equal to more than 4.5 times total payroll and about 20 times total annual benefit payments.
Several bills in the 112th Congress propose significant changes to federal retirement benefits and
financing, including the House-passed version of H.R. 3630, H.R. 3813, and the House Rules
Committee print of H.R. 7. The President’s Budget Proposal for FY2013 also contains
recommendations for changes to federal pensions. In addition, this report describes the changes
enacted under P.L. 112-96 to federal retirement benefits and financing.

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Contents
Background on Retirement Plan Design.......................................................................................... 1
Two Types of Retirement Plans................................................................................................. 1
CSRS and FERS........................................................................................................................ 2
Origins of the Federal Civilian Retirement System................................................................... 2
Eligibility and Benefit Amounts Under FERS and CSRS ............................................................... 3
Retirement Age and Years of Service ........................................................................................ 3
Retirement Income Adequacy.......................................................................................................... 4
Replacement Rates .................................................................................................................... 4
Determinants of the Replacement Rate............................................................................... 4
Salary Base.......................................................................................................................... 4
Accrual Rates ...................................................................................................................... 5
Replacement Rates for Federal Retirees ............................................................................. 5
Social Security and the “FERS Supplement”...................................................................... 5
Cost-of-living Adjustments ....................................................................................................... 6
The Thrift Savings Plan ................................................................................................................... 6
TSP Investment Options............................................................................................................ 7
TSP Withdrawal Options ........................................................................................................... 9
Employer and Employee Contributions to CSRS and FERS.......................................................... 9
Employee Contributions.......................................................................................................... 10
Employee Contributions from a Budgetary Perspective ................................................... 10
Employee Contributions in Actuarial Terms ..................................................................... 11
Financing Pension Benefits for Federal Employees ...................................................................... 12
Federal Trust Funds and Pre-Funding of Benefits................................................................... 13
Investment Practices of Federal Trust Funds........................................................................... 14
Legislative Proposals in the 112th Congress .................................................................................. 15
P.L. 112-96, Title V of the Middle Class Tax Relief and Job Creation Act of 2012................ 15
H.R. 3630 (as passed in the House), Title V, Subtitle E of the Middle Class Tax Relief
and Job Creation Act of 2011 ............................................................................................... 16
H.R. 3813, the Security Annuities for Federal Employees Act of 2012.................................. 17
H.R. 7, Title XVI, the Securing Annuities of Federal Employees Act of 2012....................... 17
President’s Budget Proposal FY2013...................................................................................... 18

Figures
Tables
Table 1. Minimum Retirement Age Under FERS............................................................................ 3
Table 2. Government Matching Rate on TSP Contributions by FERS Participants ........................ 7
Table 3. Annual Rates of Return for Thrift Savings Plan Funds...................................................... 8

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Federal Employees’ Retirement System: Benefits and Financing

Contacts
Author Contact Information........................................................................................................... 18
Acknowledgments ......................................................................................................................... 18
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Background on Retirement Plan Design
Employers establish retirement plans both to help them attract workers with valuable skills and to
enable older workers to retire without facing the prospect of inadequate income. Employers must
balance the goals of providing adequate retirement income with controlling the cost of the
retirement plan. For employers in the private sector, another important consideration is the
regulatory environment in which their retirement plans must operate. Private-sector retirement
plans must comply with the relevant provisions of federal law, including the Employee
Retirement Income Security Act (ERISA), the Age Discrimination in Employment Act (ADEA),
and the Internal Revenue Code.
Two Types of Retirement Plans
Retirement programs generally can be classified as either defined benefit (DB) plans or defined
contribution (DC) plans. In a defined benefit plan, a worker’s retirement benefit is typically paid
as a life annuity based on years of service and average salary. A defined contribution plan is much
like a savings account maintained by the employer on behalf of each participating employee. The
employer and/or employee contribute a specific dollar amount or percentage of pay into an
account, which is usually invested in stocks and bonds. When the worker retires, he or she
receives the balance in the account, which is the sum of all the contributions that have been made
plus interest, dividends, and capital gains (or losses), net of fees and expenses. The retiring
worker usually has the choice of receiving these funds as a series of payments over a period of
years or as a lump sum.
An important difference between the two types of retirement plans is that in a defined benefit plan
it is the employer who bears the financial risk, whereas in a defined contribution plan it is the
employee who bears the financial risk. In a defined benefit plan, the employer promises to
provide retirement benefits in the form of a life annuity or its actuarial equivalent.1 To pay the
promised benefit, the employer must make contributions to a pension fund, which is invested in
stocks, bonds, and other assets. The employer’s contributions plus the expected investment
earnings on the contributions must be sufficient to pay the pension benefits that workers have
earned under the plan. The employer is at risk for the full amount of retirement benefits that have
been earned by employees. If the pension plan is underfunded, the employer must make
additional contributions so that the promised benefits can be paid.
In a defined contribution plan, the employee bears the investment risk. If the contributions to the
plan have been insufficient or if the securities in which the contributions have been invested lose
value or appreciate too slowly, the employee might reach retirement age without the financial
resources needed to maintain his or her desired standard of living in retirement. If this occurs, the
worker might have little choice but to delay retirement.

1 The actuarial equivalent of a life annuity is a lump-sum payment that could purchase an annuity of equal value,
assuming a certain interest rate and life expectancy.
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CSRS and FERS
Most civilian federal employees who were hired before 1984 are covered by the Civil Service
Retirement System (CSRS). Under CSRS, employees do not pay Social Security taxes or earn
Social Security benefits. Federal employees first hired in 1984 or later are covered by the Federal
Employees’ Retirement System (FERS). All federal employees who are enrolled in FERS pay
Social Security taxes and earn Social Security benefits. Federal employees enrolled in either
CSRS or FERS also may contribute to the Thrift Savings Plan (TSP); however, only employees
enrolled in FERS are eligible for employer matching contributions to the TSP.
Origins of the Federal Civilian Retirement System
Congress passed the Civil Service Retirement Act of 1920 (P.L. 66-215) to provide pension
benefits for civilian federal employees. In 1935, Congress created the Social Security system for
workers in the private sector. During the 1950s, Congress allowed state and local governments to
bring their employees into Social Security, and today about three-fourths of state and local
employees are covered by Social Security. Federal employees remained outside of Social Security
until Congress passed the Social Security Amendments of 1983 (P.L. 98-21). This law required all
civilian federal employees hired into permanent employment on or after January 1, 1984, to
participate in Social Security.
Enrolling federal workers in both CSRS and Social Security would have resulted in substantial
duplication of benefits and would have required employees to contribute more than 13% of pay to
the two programs. Consequently, Congress directed the development of a new retirement system
for federal workers with Social Security as its cornerstone. The new plan was designed to include
many features of the retirement plans of large employers in the private sector. The result of this
effort was the Federal Employee Retirement System Act of 1986 (P.L. 99-335), enacted on June
6, 1986. The FERS has three elements:
• Social Security,
• the FERS basic retirement annuity and the FERS supplement, and
• the Thrift Savings Plan.
The FERS covers federal employees initially hired into federal employment on or after January 1,
1984, and employees who voluntarily switched from CSRS during “open seasons” in 1987 and
1998.2 Former federal employees who had completed at least five years of service under CSRS
and were later rehired by the government after a break in service could either join FERS or
participate in the “CSRS offset plan.” Under the CSRS offset plan, 6.2 percentage points of the
employee’s payroll contribution and an equal share of the employer contribution are diverted
from CSRS to the Social Security trust fund. Later, the retiree’s CSRS annuity is reduced (offset)
by the amount of his or her Social Security benefit. Both CSRS and the CSRS offset program will
terminate with the death of the last worker or survivor still covered under that program, which the
Office of Personnel Management (OPM) estimates will occur around the year 2070.

2 The open season held from July through December 1998 was authorized by P.L. 105-61, enacted on October 10,
1997.
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Eligibility and Benefit Amounts Under FERS and
CSRS
Under both CSRS and FERS, the date of an employees’ eligibility to retire with an annuity
depends on his or her age and years of service. The amount of the retirement annuity is
determined by three factors: the number of years of service, the accrual rate at which benefits are
earned for each year of service, and the salary base to which the accrual rate is applied.3
Retirement Age and Years of Service
Under CSRS, a worker with at least 30 years of service can retire at the age of 55; a worker with
at least 20 years of service can retire at the age of 60; and a worker with 5 or more years of
service can retire at the age of 62.
Federal employees are fully vested in the FERS basic retirement annuity after five years of
service. The FERS minimum retirement age (MRA) for an employee with 30 or more years of
service was 55 for workers born before 1948. The MRA under FERS began to increase in 2003
for workers born after 1947. The MRA for employees born between 1953 and 1964 is 56. It will
increase to 57 for those born in 1970 or later. (See Table 1.) A worker who has reached the
minimum retirement age and has completed at least 30 years of service can retire with an
immediate, unreduced annuity. A worker with 20 or more years of service can retire with an
unreduced annuity at age 60, and a worker with at least 5 years of service can retire at age 62.
Table 1. Minimum Retirement Age Under FERS
Year of Birth
Minimum Retirement Age
1947 or earlier
55 years
1948
55 years, 2 months
1949
55 years, 4 months
1950
55 years, 6 months
1951
55 years, 8 months
1952
55 years, 10 months
1953 to 1964
56 years
1965
56 years, 2 months
1966
56 years, 4 months
1967
56 years, 6 months
1968
56 years, 8 months
1969
56 years, 10 months
1970 or later
57 years
Source: U.S. Office of Personnel Management.

3 This report describes basic retirement benefits for federal employees under CSRS and FERS. Both programs also
provide for disability retirement, benefits for surviving dependents, and benefits for former spouses. These benefits are
described in three other CRS reports: CRS Report RS22838, Disability Retirement for Federal Employees; CRS Report
RS21029, Survivor Benefits for Families of Civilian Federal Employees and Retirees; and CRS Report RS22856,
Retirement and Survivor Annuities for Former Spouses of Federal Employees.
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Under FERS, an employee can retire with a reduced benefit at the minimum retirement age if he
or she has completed at least 10 years of service. The retirement benefit is permanently reduced
by 5% multiplied by the difference between 62 and the retiree’s age at the time the annuity
begins. For example, an employee with at least 10 years of service who retires at 56 would
receive a pension benefit that is reduced by 30% below the amount that would be paid to an
individual with the same salary and years of service who retired at the age of 62.
Retirement Income Adequacy
Replacement Rates
A commonly used measure of retirement income adequacy is the percentage of pre-retirement
income replaced by pension income. This measure—the replacement rate—is expressed by the
following ratio:
annual retirement

benefits

annual pre - retirement earnings


Replacement rates usually are based on the sum of the employee’s pension benefit and Social
Security benefit. Because retirees do not have the expenses that are associated with having a job,
most people are able to maintain their previous standard of living with less income than they had
while working. Although there is no fixed rule about what comprises an adequate replacement
rate, most pension analysts believe retirement income should replace at least 70% to 80% of pre-
retirement income.4 Workers who had low-wage jobs generally need a replacement rate near the
high end of this range because a higher proportion of their income is expended on non-
discretionary items, such as food, clothing, shelter, health care, and taxes.
Determinants of the Replacement Rate
The basic retirement annuity under both CSRS and FERS is determined by multiplying three
factors: the salary base, the accrual rate, and the number of years of service. This relationship is
shown in the following formula:
Pension Amount = salary base x accrual rate x years of service
Salary Base
In both CSRS and FERS, the salary base is the average of the highest three consecutive years of
basic pay.5 This is often called “high-three” pay.

4 U.S. Government Accountability Office, Federal Pensions: Thrift Savings Plan Has Key Role in Retirement Benefits,
HEHS-96-1, October 1995.
5 This calculation is based on nominal or “current dollars” rather than indexed or “constant dollars.”
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Accrual Rates
The accrual rate is the pension benefit earned for each year of service, expressed as a percentage
of the salary base. Under FERS, workers accrue retirement benefits at the rate of 1% per year. A
worker with 30 years of service will have accrued a pension benefit equal to 30% of high-three
pay. For employees in FERS who have at least 20 years of service and who work until age 62, the
accrual rate is 1.1% for each year of service. For example, a worker under FERS who retires at 61
with 29 years of service would receive an annuity equal to 29% of his or her high-three average
pay. Delaying retirement by one year would increase the annuity to 33% of high-three average
pay (30 x 1.1 = 33).
CSRS pension accrual rates increase with length of service. CSRS pensions equal 1.5% of high-
three average pay for each of the first 5 years of service, 1.75% for the 6th through 10th years; and
2.0% of high-three average pay for each year of service after the 10th year. This formula yields a
replacement rate of 56.25% for a worker who retires with 30 years of service. FERS accrual rates
are lower than the accrual rates under CSRS because employees under FERS pay Social Security
payroll taxes and earn Social Security retirement benefits.
Members of Congress, congressional staff, federal law enforcement officers, firefighters, and air
traffic controllers accrue benefits at higher rates under both CSRS and FERS than do other
federal employees. Under CSRS, Members of Congress and congressional staff accrue benefits at
the rate of 2.5% for each year of service. This results in a replacement rate of 75% after 30 years
of service. Law enforcement officers and firefighters accrue benefits at the rate of 2.5% for each
of their first 20 years of service and 2.0% for each year thereafter. Under FERS, Members of
Congress, congressional staff, law enforcement officers, and firefighters accrue pension benefits
at the rate of 1.7% per year for their first 20 years of service and 1.0% for each year of service
after the 20th year. These accrual rates yield a pension equal to 34% of the FERS salary base after
20 years of service and 44% after 30 years of service.
Replacement Rates for Federal Retirees
For a regular federal employee with 30 years of service, CSRS provides a replacement rate equal
to 56.25% of high-three average pay. Estimating replacement rates under FERS is complicated by
the fact that income from two of its components—Social Security and the TSP—will vary
depending on the individual’s work history, contributions to the TSP, and the investment
performance of his or her TSP account.6
Social Security and the “FERS Supplement”
Because Social Security retirement benefits cannot begin before the age of 62, Congress included
in FERS a temporary supplemental benefit for workers who retire before age 62. This “FERS
supplement” is paid to workers who retire at the age of 55 or older with at least 30 years of
service or at the age of 60 with at least 20 years of service. It is also paid to law enforcement
officers, firefighters, and air traffic controllers who retire at the age of 50 or later with 20 or more
years of service. The supplement is equal to the estimated Social Security benefit that the

6 For estimates of the replacement rates under FERS, see CRS Report RL30387, Federal Employees’ Retirement
System: The Role of the Thrift Savings Plan, by Katelin P. Isaacs.
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individual earned while employed by the federal government. It is paid only until the age of 62,
regardless of whether the retiree chooses to apply for Social Security retired worker benefits at 62
years old.
Cost-of-living Adjustments
Cost-of-living adjustments (COLAs) protect the purchasing power of retirement benefits from
being eroded by inflation in the prices of goods and services. COLAs do not raise the real value
of income. They merely prevent the real value of income from falling. In 1972, Congress passed
legislation providing for automatic COLAs for Social Security. COLAs have been in effect since
1962 for CSRS. Social Security COLAs and CSRS COLAs are equal to the annual change in the
Consumer Price Index for Urban Wage and Clerical Workers (CPI-W).7
As a cost-control measure, Congress limited the annual COLA applied to the FERS retirement
annuity. Under FERS, the basic retirement annuity is fully indexed if inflation is under 2% per
year and partially indexed if inflation exceeds 2%. If the CPI-W increases by up to 2%, then the
FERS annuity increases by the same percentage. If the CPI-W increases by 2% to 3%, the FERS
annuity increases by 2%. If the CPI-W increases by more than 3%, the FERS annuity increases by
the rise in the CPI-W minus one percentage point. Under FERS, COLAs are applied only to
annuities of retirees aged 62 or older, individuals who retired by reason of disability, and to
survivor annuitants. Other FERS retirees receive no COLAs while they are under the age of 62.
The Thrift Savings Plan
The Thrift Savings Plan (TSP) is a defined contribution (DC) retirement plan similar to the
401(k) plans provided by many employers in the private sector. The TSP is a key component of
FERS, especially for workers in the middle and upper ranges of the federal pay scale, who are
unlikely to achieve adequate retirement income—as measured by the replacement rate—from
Social Security and the FERS basic annuity.
In 2012, federal employees can contribute up to $17,000 to the TSP.8 Employees aged 50 and
older can contribute an additional $5,500. Contributions to the TSP are made on a pre-tax basis,
and the contributions and investment earnings are free from taxes until the money is withdrawn
from the account. For all federal workers under FERS, the agencies where they are employed
contribute an amount equal to 1% of each employee’s base pay to the TSP, whether or not the
employee chooses to contribute anything to the plan. In addition, employees enrolled in FERS
can receive employer matching contributions equal to 4% of pay, according to the schedule

7 Under both CSRS and FERS, automatic COLAs are paid out beginning in January each year, based on the percentage
increase in the CPI-W for the most recent third quarter (July-September) compared to the third quarter in the last year a
COLA was determined. In 1994, 1995, and 1996 COLAs for civil service annuitants were delayed from January until
April as a means of achieving budgetary savings. In 2010 and 2011, there were no automatic COLAs for civil service
annuitants. For 2012, the automatic CSRS COLA is 3.6% and the FERS COLA is 2.6%. See CRS Report 94-834, Cost-
of-Living Adjustments for Federal Civil Service Annuities, by Katelin P. Isaacs for a complete history of COLAs under
CSRS and FERS.
8 See 26 U.S.C. §402(g). Prior to 2006, employee contributions were limited to the lesser of a specific percentage of
pay or the amount permissible under I.R.C. §402(g). The Consolidated Appropriations Act of 2000 (P.L. 106-554)
eliminated the percentage-of-pay limitations on contributions to the TSP, effective in 2006.
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shown in Table 2. Federal workers covered by CSRS also may contribute to the TSP, but they
receive no matching contributions from their employing agencies.
P.L. 111-31 (June 22, 2009) directed the Federal Retirement Thrift Investment Board to add a
qualified Roth contribution to the TSP. Under a Roth contribution option, salary deferrals into a
retirement plan are made with after-tax income. Qualified distributions from the plan—generally,
distributions taken five or more years after the participant’s first Roth contribution and after he or
she has reached the age of 59½—are tax-free.
TSP participants are immediately vested in their contributions to the plan, all federal matching
contributions, and any interest, dividends, or capital gains attributable to those contributions.
Participants are fully vested in the 1% agency automatic contribution to the TSP after three years
(two years for congressional employees and executive branch political appointees).
Table 2. Government Matching Rate on TSP Contributions by FERS Participants
Employee Government
Total
0.0%
1.0%
1.0%
1.0%
2.0%
3.0%
2.0%
3.0%
5.0%
3.0%
4.0%
7.0%
4.0%
4.5%
8.5%
5.0% or more
5.0%
10.0%
Source: Federal Retirement Thrift Investment Board.
TSP Investment Options
The value of an individual’s TSP account at retirement will depend on how much he or she
contributed to the TSP each year, the number of years over which contributions were made, and
the investment earnings of the TSP funds. Participants in the TSP may choose among five funds
in which they can invest their TSP contributions:
• The “C” fund invests in the common stocks of corporations represented in the
Standard and Poor’s 500 index of companies incorporated in the United States.
• The “F” fund invests in bonds in the same proportion as they are represented by
the Shearson Lehman Brothers Aggregate (SLBA) bond index.
• The “G” fund invests in U.S. government securities and pays interest equal to the
average rate of return on government securities with maturities of four years or
more.
• The “S” fund invests in the common stocks of companies represented in the
Wilshire 4500 index. These are smaller companies than those in the S&P 500.
• The “I” fund invests in the common stocks of foreign corporations represented in
the Morgan-Stanley EAFE (Europe, Australia-Asia, Far East) index.9

9 The “S” and “I” funds were added in 2001 in accordance with the Thrift Savings Plan Act of 1996 (P.L. 104-208).
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In 2005, the TSP added a “Lifecycle Funds” option. Lifecycle Funds are invested in various
combinations of the five existing TSP funds. According to the Federal Retirement Thrift
Investment Board, participants who invest in these funds “benefit from having professionally
designed asset allocation models available to optimize their investment performance by providing
portfolios that are appropriate for their particular time horizon.”10 The participant’s time horizon
is based on the future date he or she expects to begin withdrawing money from the TSP. There are
currently four TSP Lifecycle Funds: Lifecycle 2050 (with a target date for leaving federal service
of 2045 or later); Lifecycle 2040 (with a target date of 2035 through 2044); Lifecycle 2030 (with
a target date of 2025 through 2034); and Lifecycle 2020 (with a target date of now through 2024).
When a particular “Lifecycle Fund” reaches its target date, it is automatically rolled into the “L
Income Fund,” to produce income for TSP participants who anticipate withdrawing from their
TSP accounts in the near term or who are already receiving TSP monthly payments.
Historical rates of return for the TSP are shown in Table 3. For the years before 2001, the rates of
return for the S and I funds are the rates of return for the indices on which those funds are based.
Table 3. Annual Rates of Return for Thrift Savings Plan Funds
Year
G Fund
C Fund
F Fund
S Fund
I Fund
1988 8.8%
11.8%
3.6%
20.5%
26.1%
1989
8.8% 31.0% 13.9% 23.9% 10.0%
1990
8.9% -3.2% 8.0% -13.6% -23.6%
1991
8.1% 30.8% 15.7% 43.5% 12.2%
1992 7.2%
7.7%
7.2%
11.9%
-12.2%
1993 6.1%
10.1%
9.5%
14.6%
32.7%
1994
7.2% 1.3% -3.0% -2.7% 7.8%
1995
7.0% 37.4% 18.3% 33.5% 11.3%
1996
6.8% 22.8% 3.7% 17.2% 6.1%
1997
6.8% 33.2% 9.6% 25.7% 1.5%
1998
5.7% 28.4% 8.7% 8.6% 20.1%
1999 6.0%
21.0%
-0.8%
35.5%
26.7%
2000
6.4% -9.1% 11.7% -15.8% -14.2%
2001 5.4%
-11.9%
8.6%
-2.2%
-15.4%
2002
5.0% -22.1% 10.3% -18.1% -16.0%
2003 4.1%
28.5%
4.1%
42.9%
37.9%
2004 4.3%
10.8%
4.3%
18.0%
20.0%
2005 4.5%
5.0%
2.4%
10.5%
13.6%
2006 4.9%
15.8%
4.4%
15.3%
26.3%
2007
4.9% 5.5% 7.1% 5.5% 11.4%
2008
3.8% -37.0% 5.5% -38.3% -42.4%

10 Statement of Gary A. Amelio, former executive director of the Federal Retirement Thrift Investment Board before
the Senate Subcommittee on Securities and Investment, June 14, 2005.
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Year
G Fund
C Fund
F Fund
S Fund
I Fund
2009 3.0%
26.7%
6.0%
34.9%
30.0%
2010
2.8% 15.1% 6.7% 29.1% 7.9%
1988-2010 5.9% 11.3% 7.2% 13.1% 7.7%
Sources: http://www.tsp.gov, http://www.wilshire.com, and http://www.msci.com.
Note: Rates of return for the TSP funds are shown net of expenses.
TSP Withdrawal Options
There are three ways an employee can withdraw funds from the TSP. Funds can be withdrawn
• as a life annuity,11
• in a single lump-sum payment, or
• in a series of monthly payments, either for a fixed number of months or in a fixed
dollar amount until the account is depleted.
A retiree can choose to have payments begin immediately or at a later date. There is a 10% tax
penalty for those who withdraw funds before the age of 59½. The penalty does not apply if the
individual has retired and is aged 55 or older, or if the withdrawals are taken as a series of
substantially equal periodic payments based on the person’s remaining life expectancy.
Employer and Employee Contributions to CSRS
and FERS
Both CSRS and FERS require participants to contribute toward the cost of their future pensions
through a payroll tax. Under CSRS, employees contribute 7.0% of base pay to the Civil Service
Retirement and Disability Fund (CSRDF). Under FERS, employees contribute 0.8% of pay to the
CSRDF and they also pay Social Security taxes (6.2% under permanent law; 4.2% under
temporary law through the end of February 2012 [P.L. 111-312 as amended by P.L. 112-78]) on
salary up to the maximum taxable wage base ($110,100 in 2012). Participants in CSRS are not
covered by Social Security.12 Members of Congress contribute 8.0% of salary to the CSRDF if
covered by CSRS and 1.3% of salary if under FERS. All Members of Congress pay Social
Security taxes, regardless of whether they are under CSRS or FERS.13
In the private sector, employers are required by the Employee Retirement Income Security Act of
1974 (ERISA, P.L. 93-406) to pre-fund the benefits that workers earn under defined benefit plans.
Pre-funding of future pension obligations is required because there is always the possibility that a

11 An annuity is a contract between the individual and an insurance company that pays a monthly income in exchange
for an initial premium. The monthly income that a given premium will purchase depends on both on the estimated rate
of return from the investment and actuarial estimates of the annuitant’s remaining life expectancy.
12 Former federal employees are eligible for Medicare at the age of 65, regardless of whether they were covered by
CSRS or FERS. Workers in both programs pay the Hospital Insurance (HI) payroll tax of 1.45% on all salary and
wages.
13 See also CRS Report RL30631, Retirement Benefits for Members of Congress, by Katelin P. Isaacs.
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firm could go out of business. A firm that closes down will no longer have revenues to pay its
pension obligations, and if these obligations were not fully funded, retirees and employees of the
firm would lose some or all of their pension benefits. Private-sector employers with defined
benefit pensions are required to pay premiums to the Pension Benefit Guaranty Corporation
(PBGC), which insures the pensions of workers whose employer terminates a pension plan that
has unfunded liabilities. For plans that terminate in 2012, the PBGC guarantees a maximum
annual benefit of approximately $55,841 for a worker retiring at the age of 65. The maximum
benefit is lower for workers who retire before the age of 65. The PBGC does not insure federal,
state, or local government pensions. The ultimate guarantors of government pensions are the
taxpayers.
The federal government requires firms in the private sector to pre-fund employees’ pension
benefits to ensure that if a firm goes out of business, there will be funds available to pay its
pension obligations. Although the federal government is unlikely to “go out of business,” there
are other reasons that Congress has required federal agencies and their employees to contribute
money to the CSRDF.14 First, by providing a continuous source of budget authority, the CSRDF
allows benefits to be paid on time, regardless of any delays that Congress may experience in
passing its annual appropriations bills. Secondly, the balance in the trust fund acts as a barometer
of the government’s future pension obligations. Given a fixed contribution rate and benefit
structure, a rising trust fund balance indicates that the government is incurring obligations to
make higher pension payments in the future.15 Finally, prefunding pension obligations forces
federal agencies to recognize their full personnel costs when requesting annual appropriations
from Congress. Otherwise, these costs would be recognized only in the central administrative
accounts of the Office of Personnel Management, and not by the agencies where the costs are
incurred.
Employee Contributions
Contributions to CSRS and FERS are not deposited into individual employee accounts. Nor is the
amount of a federal worker’s pension based on the amount of his or her contributions. All
contributions are paid into—and all benefits are paid out of—the Civil Service Retirement and
Disability Fund. Employee contributions pay for a comparatively small part of the retirement
annuities paid by CSRS and FERS. There are, however, both budgetary and actuarial reasons that
federal employees are required to contribute to CSRS and FERS.
Employee Contributions from a Budgetary Perspective
Employee contributions are revenues of the federal government. These revenues reduce the
proportion of pension costs that must be borne by the public. In FY2010, employee contributions
to CSRS and FERS totaled $3.4 billion, equal to 3.5% of the cash income of the Civil Service
Retirement and Disability Fund. The other major sources of revenue to the CSRDF are agency
contributions, contributions of the U.S. Postal Service on behalf of its employees, interest on the
federal bonds held by the fund, and transfers from the general revenues of the U.S. Treasury.

14 In general, state and local governments do not face this risk either; however, they are more like private businesses in
that they have in some cases defaulted on their public debts.
15 As is explained later in this report, a large balance in the civil service retirement trust fund does not by itself make it
easier to pay these benefits when they come due because the trust fund invests exclusively in U.S. Treasury securities.
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These transfers are necessary because the costs of the older of the two federal retirement
programs, the CSRS, are not fully covered by employee and agency contributions. FERS benefits
are required by law to be fully funded by the sum of contributions from employees and their
employing agencies and the interest earnings of the CSRDF.
Employee Contributions in Actuarial Terms
Actuaries calculate the cost of defined benefits pension plans in terms of “normal cost.” The
normal cost of a pension plan is the level percentage of payroll that must to be set aside each year
to fund the pension benefits that participants have earned. Normal cost is based on estimates of
attrition and mortality among the workforce, future interest rates, salary increases, and inflation.
OPM has estimated the current normal cost of CSRS to be 26.0% of payroll. The federal
government’s share of the normal cost of CSRS is 19.0% of payroll. The Civil Service Retirement
Amendments of 1969 (P.L. 91-93) require participating employees and their employing agencies
each to contribute an amount equal to 7.0% of basic pay to the CSRDF to finance retirement
benefits under CSRS. The combined contribution of 14% of employee pay does not fully finance
the retirement benefits provided by the CSRS. The costs of the CSRS that are not financed by the
7.0% employee and 7.0% agency contributions are attributable mainly to increases in future
CSRS benefits that result from (1) employees’ annual pay raises, and (2) annual COLAs to CSRS
annuities. In actuarial terms, the employee and agency contributions totaling 14% of pay are
equal to the static normal cost of CSRS benefits.16 This is the benefit that would be paid if
employees received no future pay raises and annuitants received no future COLAs. The dynamic
normal cost of CSRS pensions includes the cost of financing future benefit increases that result
from pay raises and COLAs provided to annuitants.17
Contributions from employees and their employing agencies meet about 54% of the normal cost
of CSRS (14.0/26.0 = .538). The remaining 46% of the cost of CSRS is paid from the interest
earned by bonds held by the retirement and disability trust fund, special contributions by the U.S.
Postal Service for retired postal workers, and transfers from the general revenues of the U.S.
Treasury. If each federal agency were to pay the full cost of CSRS benefits on an accrual basis, as
is done under FERS, they would contribute an amount equal to 19.0% of payroll. This represents
the dynamic normal cost of CSRS minus the required employee contribution of 7.0% of pay.
OPM has estimated the normal cost of the FERS basic annuity to be 12.7% of payroll for
FY2012. Federal law requires agencies to contribute an amount equal to the normal cost of FERS
minus employee contributions to the program. Employees contribute 0.8% of pay toward their
FERS annuities. Consequently, the normal cost of the FERS basic annuity to the federal
government is equal to 11.9% of payroll (12.7-0.8=11.9). The federal government has three other
mandatory costs for employees enrolled in FERS: Social Security, the 1% agency automatic
contribution to the TSP, and agency matching contributions to the TSP. Social Security taxes are
6.2% of payroll on both the employer and the employee up to the maximum taxable amount of
earnings ($110,100 in 2012).18 All agencies must contribute an amount equal to 1% of employee

16 A pension plan’s normal cost is the level percentage of pay that, invested today at a particular real rate of interest will
be sufficient to fully finance the retirement benefits under the plan.
17 Two other elements of a pension plan’s dynamic normal cost are increases in benefits that result from (1) new or
expanded benefits and (2) newly covered groups of workers.
18 Under current, temporary law, the employee Social Security tax is 4.2% through the end of February 2012.
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pay to the TSP. The normal cost of FERS to the federal government is therefore at least 18.9% of
pay. Federal matching contributions to the TSP can add up to 4 percentage points to that amount.
For an employee enrolled in FERS who contributes 5.0% or more of pay to the TSP, his or her
employing agency must finance retirement costs equal to 22.9% of employee pay.
CSRS and FERS differ in the way that each federal agency must budget its contributions toward
employee pension benefits. Under FERS, each agency must include the full normal cost of the
FERS basic benefit (11.9% of pay for FY2012) in its annual budget request. In addition, each
agency must include in its budget request the cost of the employer share of Social Security
payroll taxes, the 1.0% automatic contribution to the TSP, and employer matching contributions
to the TSP. Under CSRS, each agency must budget only a 7.0% contribution to the CSRDF, even
though this is less than the full cost of the program. The costs associated with CSRS that are not
paid by the employee contribution of 7.0% and the agency contribution of 7.0% are treated as a
general obligation of the U.S. Treasury.
In both CSRS and FERS, government contributions to the Civil Service Retirement and
Disability Fund result in the Treasury issuing securities that are credited to the fund. The
contributions for both programs are commingled, and benefits for retirees and survivors in both
programs are paid from the CSRDF. In contrast, government contributions to the TSP are
deposited into individual accounts for each TSP participant. The accounts are managed by the
Federal Retirement Thrift Investment Board. The TSP is not a trust fund of the U.S. government.
TSP accounts are individually owned by the participants in the TSP in the same way that 401(k)
accounts are owned by workers in the private sector.
Financing Pension Benefits for Federal Employees
As of September 30, 2009, the CSRDF had net assets of $758.7 billion available for benefit
payments under both CSRS and FERS. At the same time, the accrued actuarial liability under the
CSRS and FERS plans was $1,431.8 billion.19 In other words, on October 1, 2010, the civil
service trust fund had an unfunded actuarial liability of $673 billion. All but $9.7 billion of this
unfunded liability is attributable to CSRS. Federal law has never required that employee and
agency contributions must equal the present value of benefits that employees accrue under the
CSRS. In contrast, the FERS Act requires that the benefits accrued each year by employees must
be fully funded by contributions from employees and their employing agencies.
Although the CSRDF has an unfunded liability, it is not in danger of becoming insolvent.
According to the projections of the actuaries at OPM, the assets of the CSRDF will continue to
grow over the next 70 years. The fund’s assets are projected to reach $1.1 trillion in 2020, $2.3
trillion in 2040, $5.4 trillion in 2060, and $11.7 trillion in 2080. Actuarial projections indicate that
the CSRDF will be able to meet its financial obligations in perpetuity. According to OPM, “the
total assets of the CSRDF, including both CSRS and FERS, continue to grow throughout the term
of the projection, and ultimately reach a level of about 4.5 times payroll, or about 20 times the
level of annual benefit outlays.”20 One reason that the CSRDF will not exhaust its resources is
that all federal employees hired since 1984 are enrolled in FERS. By law, the benefits that

19 The actuarial present value of benefits is based on their dynamic normal cost, including future COLAs.
20 Civil Service Retirement and Disability Fund, Annual Report of the Board of Actuaries, Civil Service Retirement and
Disability Fund, Fiscal Year Ended September 30, 2010, p. 18.
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employees earn under FERS must be fully funded by the sum of employer and employee
contributions and interest earnings.
Federal Trust Funds and Pre-Funding of Benefits
The CSRDF is similar to the Social Security Trust Fund in that 100% of the monies deposited
must be used to purchase special-issue U.S. Treasury bonds. This exchange between the trust
fund and the Treasury does not result in revenues or outlays for the federal government. It is an
intra-governmental transfer, which has no effect on the size of the government’s budget surplus or
deficit.21
Federal trust funds are not a “store of wealth” like private pension funds. The assets of the civil
service retirement trust fund are U.S. Treasury bonds that function solely as a record of available
budget authority. The bonds cannot be sold by the trust fund to the general public in exchange for
cash. They can only be returned to the Treasury, which recognizes each bond as representing an
equivalent dollar-value of budget authority to be used for the payment of benefits to federal
retirees and their survivors. The Office of Management and Budget has stated that
These [trust fund] balances are available for future benefit payments and other trust fund
expenditures, but only in a bookkeeping sense. The holdings of the trust funds are not assets
of the Government as a whole that can be drawn down in the future to fund benefits. Instead,
they are claims on the Treasury. From a cash perspective, when trust fund holdings are
redeemed to authorize the payment of benefits, the Department of the Treasury finances the
expenditure in the same way as any other Federal expenditure—by using current receipts or
by borrowing from the public. The existence of large trust fund balances, therefore, does not,
by itself, increase the Government’s ability to pay benefits. Put differently, these trust fund
balances are assets of the program agencies and corresponding liabilities of the Treasury,
netting to zero for the Government as a whole.22
Government trust funds, however, can ease the burden of future benefit payments if an increase in
the trust fund balance represents a net increase in national saving. Again, quoting OMB:
From an economic standpoint, the Government is able to prefund benefits only by increasing
saving and investment in the economy as a whole. This can be fully accomplished only by
simultaneously running trust fund surpluses equal to the actuarial present value of the
accumulating benefits while maintaining an unchanged Federal fund deficit, so that the trust
fund surplus reduces the unified budget deficit or increases the unified budget surplus. This
would reduce Federal borrowing by the amount of the trust funds surplus and increase the
amount of national saving available to finance investment. As long as the increase in
Government saving is not offset by a reduction in private saving, greater investment would
increase future national income, which would yield greater tax revenue to support the
benefits.23

21 Federal trust funds represent budget authority. Only revenues and outlays affect the size of the annual budget surplus
or deficit. The excess revenues that result in a trust fund surplus therefore reduce the government’s deficit (or increase
its surplus) and the outlays for retiree and survivor benefits either reduce the government’s budget surplus or increase
the budget deficit. However, the exchange of cash for bonds (or vice versa) between the trust fund and the Treasury
does not affect the deficit because it is an exchange that occurs entirely within the government.
22 U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2010: Analytical
Perspectives, 2009, p. 345.
23 Ibid.
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Investment Practices of Federal Trust Funds
Federal trust funds do not represent a store of wealth for the government because they consist
entirely of U.S. government bonds. A bond represents wealth only when it is held by someone
other than the individual, company, or government that issued it. A bond is an I.O.U.—that is, a
promise to pay. An I.O.U. received from someone else might be considered an asset, provided
that the issuer is willing and able to pay the debt when it is due, but writing an I.O.U. to oneself
does not create an asset. This analogy applies to the U.S. Treasury bonds held by the federal
government’s trust funds: they are I.O.U.s issued by one agency of the U.S. government and held
by another agency of the same government. Both the issuer and holder are part of the same entity:
the U.S. government. When federal trust funds redeem their bonds, the Treasury has only one
source from which to obtain the required cash: the public. It can do this either by collecting taxes
or by borrowing.
Many state and local government pension funds invest in stocks, bonds, mortgages, real estate,
and other private assets. If Congress were to permit the CSRDF to acquire assets other than U.S.
Treasury bonds—such as the stocks and bonds issued by private corporations—these assets could
be sold to the public for cash as pension liabilities come due. This would represent a major
change in public policy that would have important effects on the federal budget and on private
businesses that would, in effect, be partly owned by an agency of the federal government.24
Among the possible drawbacks of allowing the CSRDF to invest in private assets are that the
stocks and bonds purchased by the trust fund would displace purchases of these assets by private
citizens, so that while civil service retirement benefits would be prefunded, it would be at the cost
of reducing the amount of private-sector assets held by private citizens. In a scenario of “full
displacement,” there would be no net increase in the amount of saving and investment in the
economy, just a reallocation of assets in which the government would own more private sector
stocks and bonds and private investors would hold more Treasury bonds.
A second issue that would have to be considered if the trust fund were to purchase private
investment securities would be the fund’s management and investment practices. Who would
make the investment decisions, and what would be the acceptable level of investment risk for the
funds? The most fundamental risk is that poor investment choices would result in the trust fund
losing value over time. Another question would be how the fund would decide what assets to
purchase. Deciding what would constitute an appropriate investment for a fund that consists
mainly of monies provided by taxpayers could be controversial. Not all companies, industries, or
countries would be seen by the public as appropriate places to invest these funds. In short, the
question of investing trust fund assets in securities other than U.S. Treasury bonds is one that
would deserve close and careful consideration of all the possible ramifications.
Allowing the civil service retirement trust fund to invest in private-sector securities also would
have implications for the federal budget. Currently, the trust fund is credited by the Treasury with
agency contributions on behalf of covered employees, and it receives revenue in the form of
employee contributions. Agency contributions are intra-governmental transfers, and have no

24 The Railroad Retirement and Survivors’ Improvement Act of 2001 (P.L. 107-90) authorizes the Railroad Retirement
Trust Fund to acquire corporate stocks, bonds, and other assets to fund railroad retirement benefits. According to the
Congressional Budget Office, “such an action has no clear precedent and raises questions about how the federal
government might behave as an investor in private enterprises.” (Congressional Budget Office, The Budget and
Economic Outlook: Fiscal Years 2003-2012, January 2002, p. 88.)
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effect on the size of the government’s annual budget deficit or surplus. Employee contributions,
however, are revenues of the U.S. government. As it now operates, the only outlays of the trust
fund are payments to annuitants and relatively minor outlays for administrative expenses. If the
trust fund were to purchase private assets such as corporate stocks and bonds rather than U.S.
Treasury bonds, there would be an immediate outlay of funds. This outlay by the trust fund would
be paid for in part by employee contributions that would be diverted from the general fund of the
Treasury. The remainder of the purchase, financed by agency contributions, would replace an
intra-governmental transfer with a direct outlay of federal funds.
Because the Treasury would no longer receive employee contributions toward CSRS and FERS
as revenue, it would have to borrow an equal amount from the public. Consequently, without an
offsetting reduction in outlays elsewhere in the budget or an increase in revenues other sources,
the net effect of these transactions would be an increase in the government’s budget deficit (or a
decrease in the budget surplus). If the budget accounting period extended over a long enough
time, these transactions would cancel one another out because the long-term effect would merely
move some outlays from the future, where they would have occurred as payments to annuitants,
to the present, where they would occur partly as outlays to purchase assets and partly as a
reduction in revenues that currently go to the general fund of the Treasury.
Legislative Proposals in the 112th Congress
Several pieces of legislation in the 112th Congress propose changes to the benefits and financing
of the federal employee retirement system. For instance, P.L. 112-96 (i.e., the H.R. 3630
conference report), enacted on February 22, 2012, makes a number of changes to FERS. In
addition, the House-passed version of H.R. 3630, H.R. 3813, and the House Rules Committee
print of H.R. 7 include proposals to increase employee contributions and make other
comprehensives changes to retirement benefits for certain federal employees. This legislation is
summarized below. Additionally, federal retirement recommendations from the President’s
Budget Proposal for FY2013 are also described.
P.L. 112-96, Title V of the Middle Class Tax Relief and Job Creation
Act of 2012
Title V, Sections 5001-5003 of P.L. 112-96, the Middle Class Tax Relief and Job Creation Act of
2012, contains provisions related to federal employee retirement contributions and benefits. P.L.
112-96 (i.e., the H.R. 3630 conference report) was passed in the House and the Senate on
February 17, 2012, and signed into law on February 22, 2012. P.L. 112-96 increases the FERS
employee contributions by 2.3% for FERS employees hired (or rehired with less than five years
of FERS service) after December 31, 2012.25 Under P.L. 112-96, the FERS employee contribution
rate for most newly hired/rehired FERS employees is 3.1% (current law is 0.8%). The new
employee contribution rate for Members of Congress and congressional staff is also 3.1% (current
law is 1.3%). For newly hired (rehired with less than five years of service) FERS employees after
December 12, 2012, who are law enforcement officers, firefighters, air traffic controllers, or

25 These increased employee contributions for new civilian employees also apply in the same way for new employees
covered by the Foreign Service Retirement System and the Central Intelligence Agency Retirement and Disability
System.
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nuclear waste handlers, the FERS employee contribution rate is 3.5% under P.L. 112-96 (current
law 1.3%).26
P.L. 112-96 also makes changes in the FERS benefit accrual rates for Members of Congress and
congressional staff who are hired (or rehired with less than five years of service) after December
31, 2012. This law sets the benefit accrual rate (used in the FERS pension amount calculation) for
new Members of Congress and new congressional staff at the same level as for most FERS
employees. Under current law, Members of Congress and congressional staff have a FERS benefit
accrual rate of 1.7% per year for the first 20 years of service and 1.0% for any years of service
after 20 years. P.L. 112-96 treats new Members and congressional staff like regular FERS
employees for the purposes of the FERS benefit accrual rate: 1.0% per year of service, or, if an
employee has at least 20 years of service and works until at least the age of 62, the benefit accrual
rate is 1.1% per year of service.
H.R. 3630 (as passed in the House), Title V, Subtitle E of the Middle
Class Tax Relief and Job Creation Act of 2011
On December 9, 2011, Representative Camp introduced, H.R. 3630, the Middle Class Tax Relief
and Job Creation Act of 2011. The version of H.R. 3630 was passed by the House on December
13, 2011. Among other provisions, the House-passed version contains a number of proposals
related to federal employee retirement benefits. Some of these federal retirement provisions
would impact current federal employees covered by CSRS and FERS, whereas other provisions
would be effective for newly hired FERS (or rehired with less than five years of FERS service)
employees after December 31, 2012.
The House-passed version of H.R. 3630 would increase retirement contributions for current
Members of Congress and current federal employees covered by CSRS and FERS by an
additional 0.5% per year over calendar years 2013, 2014, and 2015. Beginning in calendar year
2015, the CSRS and FERS employee contribution would, therefore, be 1.5% higher than under
current law. (These increased contributions for current federal civilian employees would also
apply in the same way for current employees covered by the Foreign Service Retirement System,
the Central Intelligence Agency Retirement and Disability System, and the Tennessee Valley
Authority retirement pension plan.)
This version of H.R. 3630 would also eliminate the FERS supplement for employees separating
from service under FERS after December 31, 2012, with the following exception: the FERS
supplement would be preserved for any FERS employee subject to a mandatory retirement age
(law enforcement officers [LEOs], firefighters, air traffic controllers, etc.).
Finally, the House-passed version of H.R. 3630 would make a number of changes to the
retirement benefits of FERS employees hired (or rehired with less than five years of FERS
service) after December 31, 2012: (1) increase the FERS employee contribution rates for regular
FERS employees to 4.0% of pay (the FERS employee contribution rate for Members of Congress,
congressional staff, LEOs, air traffic controllers, nuclear materials couriers, customs and border
patrol agents, and other categories similar to LEOs [i.e., LEOs/etc.] would be 4.5%); (2) change
the measure of pay used to calculate the FERS annuity from the current law three highest,

26 Under P.L. 112-96, FERS agency contributions are reduced by the amount of the increased employee contributions.
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consecutive years of base salary to be the five highest, consecutive years of base salary (“high-
5”); and (3) reduce the benefit accrual rate by 0.3% for regular FERS employees with less than 20
years of service; Members of Congress, congressional staff, and LEOs/etc. with less than 20 years
of service; and LEOs/etc. with more than 20 years of service.
H.R. 3813, the Security Annuities for Federal Employees Act of 2012
Representative Ross introduced H.R. 3813 on January 24, 2012. H.R. 3813 proposes many of the
same changes to federal employee retirement benefits as in the House-passed version of H.R.
3630. For instance, H.R. 3813 would also eliminate the FERS supplement for individuals
separating from service after December 31, 2012, except if the individual is an LEO/etc. subject
to mandatory retirement age. Like the House-passed version of H.R. 3630, H.R. 3813 would
increase CSRS and FERS employee contributions for current employees by 1.5% over three
calendar years.27 In addition, for FERS employees hired (or rehired with less than five years of
FERS service) after December 31, 2012, H.R. 3813 would also increase the FERS employee
contribution to be 4.0% of pay for regular FERS employees and 4.5% of pay for certain special
categories of FERS employees: Members of Congress, congressional staff, and LEOs/etc. Finally,
like the House-passed version of H.R. 3630, H.R. 3813 would change the measure of pay used to
calculate the FERS annuity for FERS employees hired (or rehired with less than five years of
FERS service) after December 31, 2012, to be based on high-5 pay instead of high-3 pay.
H.R. 3813 proposes slightly different changes in the FERS benefit accrual rates for FERS
employees hired (or rehired with less than five years of FERS service) after December 31, 2012,
in comparison with the House-passed version of H.R. 3630. H.R. 3813 would also reduce the
benefit accrual rate by 0.3% for regular FERS employees with less than 20 years of service;
Members of Congress, congressional staff, and LEOs/etc. with less than 20 years of service; and
LEOs/etc. with more than 20 years of service. However, unlike the House-passed version of H.R.
3630, H.R. 3813 would also reduce by 0.3% the benefit accrual rate for Members of Congress
and congressional staff with more than 20 years of service.
Finally, H.R. 3813 contains a provision—not found in the House-passed version of H.R. 3630—
that would allow TSP participants to deposit any accumulated annual leave into their TSP
accounts, subject to current annual TSP contributions limits.28
H.R. 7, Title XVI, the Securing Annuities of Federal Employees Act
of 2012
Sections 16001 through 16006 of Title XVI (the Security Annuities of Federal Employees Act of
2012) of the House Rules Committee print of H.R. 7 contain the identical federal retirement
provisions as found in H.R. 3813.29

27 As in the House-passed version of H.R. 3630, these contributions for current federal civilian employees would also
apply in the same way for current employees covered by the Foreign Service Retirement System, the Central
Intelligence Agency Retirement and Disability System, and the Tennessee Valley Authority retirement pension plan.
28 This TSP provision was added to H.R. 3813 as part of an amendment in the nature of a substitute, which was offered
by Rep. Ross on February 6, 2012.
29 See House Rules Committee Print112-4, February 8, 2012, available online here: http://docs.house.gov/
billsthisweek/20120213/CPRT-112-HPRT-RU00-HR7RCP.pdf.
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President’s Budget Proposal FY2013
The President’s Budget Proposal for FY2013 contains some recommendations related to federal
retirement benefits and financing. This proposal would also increase CSRS and FERS employee
contributions for current federal workers, but by a lower amount than the House-passed version
of H.R. 3630, H.R. 3813, and the House Rules Committee print of H.R. 7. The President’s Budget
Proposal for FY2013 would increase current employee contributions by 0.4% in each of the next
three calendar years—2013, 2014, and 2015—for a cumulative increase of 1.2% of pay over
current contributions.
This proposal would also eliminate the FERS annuity supplement for new employees. The
President’s Budget Proposal for FY2013 would not make any further changes to FERS benefits.

Author Contact Information

Katelin P. Isaacs

Analyst in Income Security
kisaacs@crs.loc.gov, 7-7355


Acknowledgments
This report was originally prepared by former CRS Specialist Patrick Purcell. Please direct any inquiries to
the listed author.

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