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Notice

Civil Service Retirement System; Normal Cost Percentages

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AGENCY:

Office of Personnel Management.

ACTION:

Notice.

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.

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FOR FURTHER INFORMATION CONTACT:

Jessica Johnson, (202) 606-0299.

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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, Start Printed Page 31628including the employee contributions, are as follows:

Percent
Members29.4
Congressional employees34.9
Law enforcement officers, members of the Supreme Court Police, firefighters, nuclear materials couriers and employees under section 302 of the Central Intelligence Agency Retirement Act of 1964 for Certain Employees42.5
Air traffic controllers38.9
All other employees, without offset25.2

The Government wide normal cost percentages for CSRS offset, including the employee contributions, are as follows:

Percent
Members offset27.1
Congressional employees offset29.9
Law enforcement officers, members of the Supreme Court Police, firefighters, nuclear materials couriers and employees under section 302 of the Central Intelligence Agency Retirement Act of 1964 for Certain Employees offset38.0
Air traffic controllers offset34.6
All other employees, with offset19.5

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

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Office of Personnel Management.

Linda M. Springer,

Director.

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[FR Doc. E7-11082 Filed 6-6-07; 8:45 am]

BILLING CODE 6325-38-P