[Federal Register Volume 72, Number 109 (Thursday, June 7, 2007)]
[Notices]
[Pages 31627-31628]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-11082]


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OFFICE OF PERSONNEL MANAGEMENT


Civil Service Retirement System; Normal Cost Percentages

AGENCY: Office of Personnel Management.

ACTION: Notice.

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SUMMARY: The Office of Personnel Management (OPM) is providing notice 
of revised normal cost percentages for employees covered by the Civil 
Service Retirement System (CSRS).

DATES: The revised normal cost percentages are effective at the 
beginning of the first pay period commencing on or after October 1, 
2007.

ADDRESSES: Send or deliver requests for actuarial assumptions and data 
to the Board of Actuaries, care of Gregory Kissel, Manager, Office of 
Actuaries, Strategic Human Resources Policy Division, Office of 
Personnel Management, Room 4307, Washington, DC 20415.

FOR FURTHER INFORMATION CONTACT: Jessica Johnson, (202) 606-0299.

SUPPLEMENTARY INFORMATION: Most Federal employees hired before 1984 are 
under the Civil Service Retirement System (CSRS). Section 8334 of title 
5, United States Code, provides for the mandated percentage of basic 
pay as an employee deduction and agency contributions that are paid 
into the Civil Service Retirement and Disability Fund (Fund) for CSRS. 
The ``normal cost'' is the percentage of salary that must be 
contributed at the time service is performed in order to pay the full 
cost of retirement benefits, assuming that the contributions begin at 
first creditable employment, and that the system will continue. The 
normal cost percentages change from time to time based upon changes in 
the underlying economic assumptions. To fully fund the retirement 
system, the normal cost percentage of basic pay must be paid into the 
Retirement Fund at the time service is performed. Under CSRS, the 
employee deductions and agency contributions are statutorily mandated 
and unlike FERS, CSRS is not fully funded. The normal costs for CSRS 
reflect the percentage of basic pay that would have to be contributed 
to the Fund for CSRS to be fully funded. Additionally, there are a few 
entities that must pay the full normal cost for their CSRS employees.
    CSRS offset refers to those employees who are simultaneously 
covered by the Old Age, Survivors, and Disability Insurance (OASDI) tax 
and CSRS. Section 8334(k) of title 5, United States Code, and subpart J 
of part 831 of title 5, Code of Federal Regulations, describe the 
employee deductions and agency contributions for CSRS offset. Normal 
cost percentages are different for regular CSRS and CSRS offset because 
of differences in their benefit structures.
    Recently, the Board of Actuaries of the Civil Service Retirement 
System approved a revised set of economic assumptions for use in the 
dynamic actuarial valuations of CSRS. These assumptions were adopted 
after the Board reviewed statistical data prepared by the OPM actuaries 
and considered trends that may affect future experience under the 
System.
    Based on its analysis, the Board concluded that it would be 
appropriate to assume a rate of investment return of 6.25 percent, with 
no difference from the current rate of 6.25 percent. The Board 
increased the anticipated inflation rate from 3.25 percent to 3.50 
percent, and increased the projected rate of General Schedule salary 
increases from 4.00 percent to 4.25 percent. These salary increases are 
in addition to assumed within-grade increases that reflect past 
experience.
    The new assumptions anticipate that, over the long term, the annual 
rate of investment return will exceed inflation by 2.75 percent and 
General Schedule salary increases will exceed inflation by .75 percent 
a year, as compared to 3 percent and .75 percent, respectively, under 
the previous assumptions.
    The normal cost calculations depend on both the economic and 
demographic assumptions. The demographic assumptions are determined 
separately for each of a number of special groups, in cases where 
separate experience data is available. Based on the new economic 
assumptions and the change in the demographic assumption concerning the 
rate of early retirements, OPM has determined the normal cost 
percentage for each category of employees. The Government wide normal 
cost percentages for CSRS, without offset,

[[Page 31628]]

including the employee contributions, are as follows:

------------------------------------------------------------------------
                                                                Percent
------------------------------------------------------------------------
Members......................................................       29.4
Congressional employees......................................       34.9
Law enforcement officers, members of the Supreme Court              42.5
 Police, firefighters, nuclear materials couriers and
 employees under section 302 of the Central Intelligence
 Agency Retirement Act of 1964 for Certain Employees.........
Air traffic controllers......................................       38.9
All other employees, without offset..........................       25.2
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    The Government wide normal cost percentages for CSRS offset, 
including the employee contributions, are as follows:

------------------------------------------------------------------------
                                                                Percent
------------------------------------------------------------------------
Members offset...............................................       27.1
Congressional employees offset...............................       29.9
Law enforcement officers, members of the Supreme Court              38.0
 Police, firefighters, nuclear materials couriers and
 employees under section 302 of the Central Intelligence
 Agency Retirement Act of 1964 for Certain Employees offset..
Air traffic controllers offset...............................       34.6
All other employees, with offset.............................       19.5
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    These normal cost percentages are effective at the beginning of the 
first pay period commencing on or after October 1, 2007.

Office of Personnel Management.
Linda M. Springer,
Director.
[FR Doc. E7-11082 Filed 6-6-07; 8:45 am]
BILLING CODE 6325-38-P