The Federal Employees' Retirement System:

Potential Changes in Agency Retirement Costs Following an Open Season

T-GGD-98-27: Published: Nov 5, 1997. Publicly Released: Nov 5, 1997.

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GAO discussed the potential impact on agency retirement costs of a retirement system open season in which anyone who is a general civilian employee of the federal government and is participating in the Civil Service Retirement System (CSRS) or the CSRS Offset Plan would be allowed to transfer to the Federal Employees Retirement System (FERS), focusing on the potential changes in retirement costs charged to federal civilian agencies that might follow such a transfer program.

GAO noted that: (1) it is difficult to predict who among eligible employees would switch; (2) review of the first FERS transfer program in 1987 showed that although eligible employees were provided the information and counseling that they would need to make a decision, about 4 percent of the eligible employees transferred to FERS; (3) the review suggests that employee decisions can be based on situational factors that are economic as well as noneconomic; (4) assuming some employees opt to switch, agency retirement costs would increase following an open season because of differences in the way CSRS and FERS are funded; (5) the amount of any increase would critically depend on the number of employees who switch and their salary levels; (6) given the uncertainty regarding how many employees might transfer, it is correspondingly difficult to estimate whether agencies would have a difficult time absorbing the cost increases; (7) although the largest increase in retirement costs GAO calculated--$332 million--would appear small in proportion to the costs of personnel benefits governmentwide, some agencies might find the costs difficult to absorb, depending on their different circumstances; and (8) regardless of the size of the increases in costs, under the budget process discretionary spending is capped, and Congress may choose not to provide agencies extra funding to cover their increased retirement costs.

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