Federal Workforce:

Added Cost of Early Retirement Is Included in Retirement Cost Factor

GGD-86-67BR: Published: Apr 25, 1986. Publicly Released: Apr 25, 1986.

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In response to a congressional request, GAO discussed issues concerning the cost-effectiveness of the government's policy of contracting under the Office of Management and Budget Circular A-76.

GAO found that the circular: (1) requires government agencies to compare the cost of performing commercial functions in-house to the cost of contracting to determine the most economical means of obtaining the work; and (2) prescribes that, when making cost comparison studies, agencies should use a civil service retirement cost factor of 27.9 percent of pay representing the government's share of accruing retirement system costs. The total accruing cost is the amount that the government would be required to set aside each year, with interest earnings, during the working careers of federal employees in order to pay their retirement benefits. No retirement costs accrue for an employee after that employee retires. The Employee Retirement Income Security Act generally requires private sector employers to fully fund accruing pension costs.

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