OFFICE OF PERSONNEL MANAGEMENT

Federal Funds

For necessary expenses to carry out functions of the Office of Personnel Management (OPM) pursuant to Reorganization Plan Numbered 2 of 1978 and the Civil Service Reform Act of 1978, including services as authorized by 5 U.S.C. 3109; medical examinations performed for veterans by private physicians on a fee basis; rental of conference rooms in the District of Columbia and elsewhere; hire of passenger motor vehicles; not to exceed $2,500 for official reception and representation expenses; advances for reimbursements to applicable funds of OPM and the Federal Bureau of Investigation for expenses incurred under Executive Order No. 10422 of January 9, 1953, as amended; and payment of per diem and/or subsistence allowances to employees where Voting Rights Act activities require an employee to remain overnight at his or her post of duty, [$97,774,000] $90,541,000, of which $6,004,000 shall remain available until expended for the Enterprise Human Resources Integration project, of which $642,000 may be for strengthening the capacity and capabilities of the acquisition workforce (as defined by the Office of Federal Procurement Policy Act, as amended (41 U.S.C. 4001 et seq.)), including the recruitment, hiring, training, and retention of such workforce and information technology in support of acquisition workforce effectiveness or for management solutions to improve acquisition management, and of which $1,416,000 shall remain available until expended for the Human Resources Line of Business project; and in addition [$112,516,000], $114,708,000 for administrative expenses, to be transferred from the appropriate trust funds of OPM without regard to other statutes, including direct procurement of printed materials, for the retirement and insurance programs: Provided, That the provisions of this appropriation shall not affect the authority to use applicable trust funds as provided by sections 8348(a)(1)(B), and 9004(f)(2)(A) of title 5, United States Code: Provided further, That no part of this appropriation shall be available for salaries and expenses of the Legal Examining Unit of OPM established pursuant to Executive Order No. 9358 of July 1, 1943, or any successor unit of like purpose: Provided further, That the President's Commission on White House Fellows, established by Executive Order No. 11183 of October 3, 1964, may, during fiscal year [2012] 2013, accept donations of money, property, and personal services: Provided further, That such donations, including those from prior years, may be used for the development of publicity materials to provide information about the White House Fellows, except that no such donations shall be accepted for travel or reimbursement of travel expenses, or for the salaries of employees of such Commission. (Financial Services and General Government Appropriations Act, 2012.)

Program and Financing (in millions of dollars)

The Office of Personnel Management's (OPM) mission is to help agencies build an effective Federal civilian workforce based on merit system principles. OPM leads Federal agencies in the strategic management of their human resources, proposes and implements human resources management policy, and provides agencies with ongoing advice and technical assistance to implement these policies and initiatives. OPM also supports veterans' preference in Federal hiring and manages the process for personnel security and background checks for suitability and national security clearances. OPM continues to honor the Government's commitment to employees by managing the trust funds that support the retirement and insurance benefits they earn, and delivering excellent benefit services and support to civil servants both during and after their Federal careers. The 2013 Budget will permit OPM to pursue long-term human resources strategies that deliver results and enhance the values of the civil service.

The functions and objectives of the OPM major organizations are:

Employee Services._Provides leadership and guidance to Federal agencies on Government-wide human resource policies. Specifically, ES provides direction and guidance on staffing, classification, pay, leave, performance management, training, executive resources, and employee and labor relations programs. Employee Services is responsible for issuing Government-wide policy on reciprocity of suitability investigations and suitability standards across government. ES also manages the operations of OPM's internal human resources program.

Merit System Audit and Compliance._Ensures that Federal agency human resources programs are effective and meet merit system principles and related civil service requirements. Merit System Audit and Compliance also manages the Combined Federal Campaign and provides Federal observers to monitor the election process in areas designated by the U.S. Attorney General.

Retirement Services._Administers the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS), serving Federal retirees and survivors who receive monthly annuity payments. Retirement program activities will continue to focus on making initial eligibility determinations, adjudications, post retirement changes, and survivor processing based on applicable laws and regulations. The 2013 Budget permits increased staffing levels to process funding to maintain timely processing of retirement claims and provide services to Federal annuitants.

Policy and Planning Analysis._ Provides guidance on proposing and developing new program-related legislation, writing program regulations, and developing policy guidance for Federal agencies, insurance carriers and program beneficiaries.

Healthcare and Insurance._ Administers Federal Employees Health Benefit Program (FEHBP) health benefits contracts for the Federal government, and administer the Federal Employee Group Life Insurance (FEGLI) program covering employees, retirees and their families. Healthcare and Insurance is also responsible for implementing and overseeing Patient Protection and Affordable Care Act's Multi-State Plan Options.

Federal Investigative Services._Provides investigative products and services for over one hundred Federal agencies to use as the basis for security clearance or suitability decisions as required by Executive Orders and other rules and regulations. Over ninety percent of the Government's background investigations are provided by OPM. This function is completely financed by payment for these services from other Federal agencies through OPM's Revolving Fund.

Human Resources Solutions._Assists Federal agencies in achieving their missions by providing solutions that develop leaders, attract and build a high quality public sector workforce, and transform agencies into high performing organizations. This function is completely financed by payment for these services from other Federal agencies through OPM's revolving fund.

Object Classification (in millions of dollars)

Employment Summary

For necessary expenses of the Office of Inspector General in carrying out the provisions of the Inspector General Act of 1978, including services as authorized by 5 U.S.C. 3109, hire of passenger motor vehicles, [$3,142,000] $4,232,000, and in addition, not to exceed [$21,174,000] $21,172,000 for administrative expenses to audit, investigate, and provide other oversight of the Office of Personnel Management's retirement and insurance programs, to be transferred from the appropriate trust funds of the Office of Personnel Management, as determined by the Inspector General: Provided, That the Inspector General is authorized to rent conference rooms in the District of Columbia and elsewhere. (Financial Services and General Government Appropriations Act, 2012.)

Program and Financing (in millions of dollars)

This appropriation provides agency-wide audit, investigation, administrative sanction, and debarment functions to identify program management, contractual, and administrative deficiencies that may create conditions for fraud, waste, abuse, and mismanagement. During 2011, the Office of Inspector General (OIG) activities resulted in positive financial impacts of over $155 million and led to 46 arrests, 64 indictments, 63 criminal convictions, and 770 suspensions or debarments within the Federal Employees Health Benefits Program (FEHBP).

The audits function provides audit services covering agency functions, the FEHBP, the Federal Employees Group Life Insurance (FEGLI) program, the Federal retirement programs, revolving fund programs and operations, and information systems and security audits. Internal agency audits review all facets of agency operations, and include the oversight of the agency financial statement audit. Insurance audits review the operations of health and life insurance carriers, health care providers, pharmacy benefit managers, and insurance subscribers. Information systems audits review general controls, application controls and security within the agency's information systems and programs as well as for the information systems of insurance carriers within the FEHBP.

The investigations function detects and investigates improper and illegal activities involving agency programs, personnel, and operations. A large component of the investigative program involves criminal activities within the FEHBP, retirement and life insurance trust fund programs, as well as the OPM revolving fund programs. Our administrative sanctions program debars and suspends health care providers whose conduct may pose a financial threat to the FEHBP or health and safety risk to FEHBP enrollees and their families.

In 2013, the OIG will continue its audits and investigations of OPM programs, including the FEHBP and retirement trust fund programs, OPM revolving fund programs, and OPM financial statement oversight and other program areas. The OIG will continue to advance its prescription drug audit program, which includes audits of pharmacy benefit managers. OPM estimates that approximately 28 percent of FEHBP expenses, or over $13 billion in 2013 will be for prescription drugs. Through these audits, the OIG helps the FEHBP recover inappropriate charges, negotiate more favorable contracts, control future cost growth, and improve benefits provided to program enrollees. The OIG will also continue its FEHBP claims data warehouse initiative in 2013. This project streamlines and enhances the various administrative and analytical procedures involved in the oversight of the FEHBP. The purpose of the project is to capture data from experience-rated insurance carriers in a data warehouse of health care information. The system's software tools support a variety of analytical procedures, including data mining, using the data in the warehouse. The project has facilitated more efficient and effective oversight of the FEHBP by enhancing the ability of auditors and investigators to identify improper payments. The OIG is also assisting OPM with plans for an FEHBP data warehouse.

Another challenge facing the OIG is the oversight of the vast OPM revolving fund programs, most notably the Federal Investigative Services, responsible for the Federal background investigations which have significant national security implications. The revolving fund programs are projected to spend over $1.9 billion in 2013.

The FY 2013 Budget includes funds associated with OPM's implementation of the Patient Protection and Affordable Care Act (ACA), including the Indian Health Care Improvement Reauthorization and Extension Act of 2009 (IHCIA), which was enacted as part of the ACA. The OIG is currently working with OPM on its implementation of the ACA. The OIG will also be partnering with the Department of Health and Human Services to implement the Level Playing Field provisions of the ACA. OPM recognized the OIGs role in this area and has asked OIG to work closely with them. These provisions will impact the drafting of the Multi-State Plan Program (MSPP) contracts in the area of fraud and abuse control requirements and will impact the ability of the OIG to provide oversight to the MSPP.

Object Classification (in millions of dollars)

Employment Summary

For payment of Government contributions with respect to retired employees, as authorized by chapter 89 of title 5, United States Code, and the Retired Federal Employees Health Benefits Act (74 Stat. 849), such sums as may be necessary. (Financial Services and General Government Appropriations Act, 2012.)

Program and Financing (in millions of dollars)

This appropriation covers: 1) the Government's share of the cost of health insurance for annuitants as defined in sections 8901 and 8906 of title 5, United States Code; 2) the Government's share of the cost of health insurance for annuitants (who were retired when the Federal employees health benefits law became effective), as defined in the Retired Federal Employees Health Benefits Act of 1960; and 3) the Government's contribution for payment of administrative expenses incurred by OPM in administration of the Act.

The budget authority for this account recognizes the amounts being remitted by the U.S. Postal Service to finance a portion of its post-1971 annuitants' health benefit costs.

The Budget proposes that the Office of Personnel Management (OPM) be given authority to streamline pharmacy benefit contracting within the FEHB program and leverage enrollees' purchasing power to reduce costs and obtain greater value for enrollees.

For payment of Government contributions with respect to employees retiring after December 31, 1989, as required by chapter 87 of title 5, United States Code, such sums as may be necessary. (Financial Services and General Government Appropriations Act, 2012.)

Program and Financing (in millions of dollars)

Per P.L. 96–427, Federal Employees Group Life Insurance Act of 1980, enacted October 10, 1980, this appropriation finances the Government's share of premiums, which is one-third the cost, for Basic life insurance for annuitants retiring after December 31, 1989, and who are less than 65 years old.

For financing the unfunded liability of new and increased annuity benefits becoming effective on or after October 20, 1969, as authorized by 5 U.S.C. 8348, and annuities under special Acts to be credited to the Civil Service Retirement and Disability Fund, such sums as may be necessary: Provided, That annuities authorized by the Act of May 29, 1944, and the Act of August 19, 1950 (33 U.S.C. 771–775), may hereafter be paid out of the Civil Service Retirement and Disability Fund. (Financial Services and General Government Appropriations Act, 2012.)

Program and Financing (in millions of dollars)

Summary of Budget Authority and Outlays (in millions of dollars)

The Payment to the Civil Service Retirement and Disability Fund consists of an appropriation and a permanent indefinite authorization to pay the Government's share of retirement costs as defined in the Civil Service Retirement Amendments of 1969 (P.L. 91–93), the Federal Employees Retirement Act of 1986 (P.L. 99–335), and the Civil Service Retirement Spouse Equity Act of 1985 (P.L. 98–615). The payment is made directly from the General Fund of the U.S. Treasury into the Civil Service Retirement and Disability Fund and is in addition to appropriated funds that will be contributed from agency budgets.

Current Appropriation Payment of Government share of retirement costs._P.L. 91–93 provides for an annual appropriation to amortize, over a 30-year period, all increases in Civil Service Retirement System costs resulting from acts of Congress granting new or liberalized benefits, extensions of coverage, or pay raises, exclusive of the effects of cost-of-living adjustments (COLAs). OPM has notified the Secretary of the Treasury each year of such sums as may be necessary to carry out these provisions.

Permanent Indefinite Authorization._Transfers for interest on static unfunded liability and payment of military service annuities. - P.L. 91–93 also provides permanent, indefinite authorization for the Secretary of the Treasury to transfer, on an annual basis, an amount equal to 5 percent interest on the Civil Service Retirement and Disability Funds current statutory unfunded liability, calculated based on static economic assumptions, and annuity disbursements attributable to credit for military service.

Payments for Spouse Equity._The permanent, indefinite authorization also includes a payment in accordance with P.L. 98–615 which provides for the Secretary of the Treasury to transfer an amount equal to the annuities granted to eligible former spouses of annuitants who died between September 1978 and May 1985 who did not elect survivor coverage.

Financing._The unfunded liability of new and increased annuity benefits becoming effective on or after October 20, 1969, as authorized by 5 U.S.C.8348, and annuities under special Acts to be credited to the Civil Service Retirement and Disability Fund, such sums as may be necessary: Provided , That annuities authorized by the Act of May 29, 1944, and the Act of August 19, 1950 (33 U.S.C. 771–775), may hereafter be paid out of the Civil Service Retirement and Disability Fund. (Financial Services and General Government Appropriations Act, 2010.)

Object Classification (in millions of dollars)

Program and Financing (in millions of dollars)

The unfunded liabilities of the Civil Service Retirement and Disability Fund (CSRDF) will be reduced by two policies included in the Budget.

First, the President's Retirement Reform proposal, included in the President's Plan for Economic Growth and Deficit Reduction (September 2011), would increase agency contributions to the retirement fund above and beyond those necessary to support the accumulating benefits of their employees, and these excess funds would be applied to the unfunded liabilities of the CSRDF. (The President's proposal to eliminate the FERS supplemental benefit for new employees will not have a measurable impact on the balance of the CSRDF within the next 10 fiscal years.)

Second, the Administration's Phased Retirement proposal, included in the Administration's Federal Hiring Modernization Act of 2010 (September, 2010), is designed to incent retirement-age employees to phase into their retirement status and increase the sharing of institutional knowledge, and will also have a small but measurable impact on the CSRDF.

These impacts are not subject to PAYGO because the Treasury's General Fund would otherwise be required by law to fund these liabilities.

Program and Financing (in millions of dollars)

This account contains reserve resources required under the Office of Personnel Management's contract with the administrator of the Flexible Benefits program. This account is funded by payments from Federal agencies based on the participation of their employees in the program and from net forfeitures, as authorized by the National Defense Authorization Act for Fiscal Year 2004 (P.L. 108–136). Account assets are available to indemnify the administrator when benefit payments exceed contributions, and for program enhancements.

Object Classification (in millions of dollars)

Special and Trust Fund Receipts (in millions of dollars)

Program and Financing (in millions of dollars)

The Postal Accountability and Enhancement Act (P.L.109–435) created the Postal Service Retiree Health Benefits Fund to help fully fund the Postal Service's retiree (annuitant) health benefits liabilities.

This account receives from the Postal Service: 1) the pension savings provided to the Postal Service by the Postal Civil Service Retirement System Funding Reform Act of 2003 (P.L.108–18) that were held in escrow during 2006; 2) payments defined within P.L. 109–435, and modified by P.L. 111–68, to begin the liquidation of the Postal Service's unfunded liability for post-retirement health benefits; and 3) beginning in 2017, payments for the actuarial cost of Postal Service contributions for the post-retirement health benefits for its current employees. This account also receives any surplus resources of the Civil Service Retirement and Disability Fund that are not needed to finance future retirement benefits under the Civil Service Retirement System to current or former employees of the Postal Service that are attributable to civilian employment with the Postal Service.

As a result of this health benefits financing system, beginning in 2017, the Postal Service will cease to pay annual premium costs for its post-1971 current annuitants directly to the Employees and Retired Employees Health Benefits Fund. Instead, these premium payments will be paid from amounts that the Postal Service remits to this fund. Payments for a proportion of the premium costs of Postal Service annuitants' pre-1971 service would continue to be paid by the General Fund of the Treasury through the Government Payment for Annuitants, Employees Health Benefits account.

Program and Financing (in millions of dollars)

Under current law, from 2012 to 2016, USPS must make a stream of payments set in statute in 2006 toward paying down retiree health benefit unfunded liabilities, as well as pay annual Federal Employees Health Benefits Program premiums for current retirees. Also under current law, starting in 2017, USPS must pay the per capita accruing costs (or normal cost) to fund future retiree health benefits of current employees and a 40-year amortization of the remaining UFL for current retirees.

The Budget proposes to shift how the Postal Service (USPS) pre-funds its retiree health benefits unfunded liability (UFL). Under the proposal, starting in 2012, USPS would pay the normal costs for the future retiree health benefits of current employees and also a stream of payments associated with paying down the remaining UFL for current retirees. Further, the Budget would provide USPS temporary financial relief as the 2012 ($5.5 billion deferred from 2011 and $5.6 billion in 2012) and 2013 ($5.6 billion) UFL payments would be adjusted so that USPS would pay through 2013 a total of $14.1 billion less than what it would have paid to this Fund under current law. USPS would make up this $14.1 billion payment to the Fund by paying larger amounts in future years through the 40-year amortization of the remaining UFL that starts in 2017.

This proposal provides the following benefits to USPS: 1) USPS would be provided temporary financial relief in the form of lower payments in 2012 and 2013; 2) The new calculations of normal cost and UFL are based on new actuarial assumptions that reflect that USPS has fewer employees than in 2006, when the pre-funding mechanism was originally adopted therefore the actual annual payments for the normal costs would be reset each year based on the number of USPS employees; 3) This Fund would pay the premiums for current USPS retirees now, rather than starting in 2017- this accelerates what would have occurred anyway in 2017 under current law. See also the Postal Service section of this Appendix for information on this proposal.

Program and Financing (in millions of dollars)

Budget Program._OPM's Revolving Fund provides financing for investigations, training, and other functions that OPM is authorized or required to perform on a reimbursable basis. OPM programs offer the following:
OPM's Human Resources Solutions organization delivers human resources products and services to Federal agencies on a reimbursable basis. These products and services are designed to help Federal agency customers develop leaders committed to public service values, attract and build a top quality public sector workforce and aid in their transformation into high-performing organizations. As a revolving fund program, HR Solutions recovers costs of operations by managing thousands of individual reimbursable agreements from more than 150 Federal Departments and agencies for HR products and services. HR Solutions' comprehensive plan for fiscal years 2012 and 2013 include continued delivery of the full array of HR services, including: staffing products and services (examining, testing, recruitment and branding, and automated talent acquisition technology), human resources consulting, and leadership training. Initiatives include implementing the recommendations of key business process reviews, implementing a balanced scorecard framework to assess performance, and investing in research and development for enhancing current products and services.
OPM's USAJOBS program, and more specifically the USAJOBS.gov website, has emerged over the last decade as the face of Federal hiring. USAJOBS 3.0 fosters a comprehensive realignment of Federal recruiting and hiring. A key element to this strategy is that the product is Government-hosted, with key enterprise components brought under full Government control, while the Federal Government leverages innovation from the private sector. USAJOBS 3.0 has an increased capacity to provide applicants, hiring managers, and human resource professionals with information to improve the recruitment and hiring process, as well as provide robust and secure data standardization and sharing.
OPM's Presidents Management Fellows Program (PMF) is a leadership development program at the entry level for advanced degree candidates. The PMF Program attracts and selects candidates with the goal of developing future government leaders. PMF provides agencies with graduates from a variety of academic disciplines and career paths, who have a clear interest in, and commitment to, excellence in the leadership and management of public policies and programs.
OPM's Federal Investigative Services organization provides personnel background investigative services to determine individuals suitability for Federal civilian, military, and contract employment and eligibility for access to classified national security information. Background investigations are performed for Federal agencies on a fee-for-service basis. Federal Investigative Services conducts more than 90 percent of the Federal Governments background investigations concerning Federal employees, contractors, and military members for various Federal agencies. Investigations are a critical step in the Federal hiring process, and can affect hiring or removal decisions based on the individuals fitness and suitability for employment. Based on information gathered in background investigations, Federal agencies also issue security clearances and place individuals in sensitive positions involving national security or the public trust.
OPM revolving fund also partially supports the Human Resources Line of Business and Enterprise Human Resources Integration (EHRI). The Human Resources Line of Business (HR LoB) leads the government-wide transformation of HR Information Technology by focusing on modernization, integration, and performance assessment of shared service centers for HR and payroll. The HR LoB is a model for cross-agency collaboration which achieves HR service delivery improvements and cost savings results. On a fee-for-service basis, the EHRI program provides Federal agencies with an electronic official personnel folder (eOPF) system, as well as workforce analysis and other analytical tools. The eOPF is a web-based application that is capable of storing, processing, and displaying the OPFs of all current, separated, and retired Federal Employees. The system will replace the existing manual HR process by automating the Federal Governments HR processes and thereby creating a streamlined Federal HR system for all Federal Employees. The analytical tools streamline and automate the electronic exchange of standardized HR data and provide comprehensive workforce analysis, forecasting, and reporting capabilities across the Executive Branch for the strategic management of human resources.

Financing._OPM's revolving fund account gains spending authority from agreements with other Federal agencies who are seeking the following services: Human Resources Solutions provides a multitude of HR services to other Federal agencies, which include consulting services, training, staffing programs, vendor management, and administrative law judge services. Individual pricing and fee structures for HR Solutions offerings differ because the business models for each of its products and services vary. USAJOBS is financed by an annual fee assessed to Federal agencies. The fee is based on the Federal agency's pro rata share of total Federal government FTE population supported, as provided in the Central Personnel Data File (CPDF). PMF Program assesses a fixed fee for each fellow hired by a Federal agency. The Federal Investigative Services provides personnel background investigative services on a fixed price basis to determine individual's fitness or suitability for Federal civilian, military, and contract employment and/or eligibility for a security clearance. EHRI provides two primary service offerings on a fee-for-service basis: the electronic Official Personnel Folder (eOPF), including deployment and hosting services, and a suite of analytical tools enabling agencies to perform workforce analysis and forecasting. EHRI provides customized eOPF systems to other agencies at additional cost, in which the customer pays for ongoing eOPF maintenance. The pricing structure for eOPF maintenance is a fixed price per license (i.e., electronic folder) and is based on the number of active users at the customer agency. The HR LOB has established public and private Shared Service Centers (SSCs) to provide technology solutions to support multiple agencies with HR information technology and HR services and is financed in part by agency contributions from partner agencies.

Operating Results._In fiscal year 2011, OPM's revolving fund businesses revenue total was $1.989B and the expenses total was $1.986B which provided a net gain on operations of $3 million. The cumulative retained income on was $357M. The following revolving fund programs will utilize the resources as follows: The Federal Investigative Services will continue to improve the automation of the background investigation process, USAJOBS will continue the development of the enterprise integration components which will allow agencies the flexibility to connect relevant public and private assessment, on-boarding, and recruitment tools to enhance the functionality of the USAJOBS system, and Human Resources Solutions will invest in research and development for enhance product and services to meet customer demand.

Object Classification (in millions of dollars)

Employment Summary

Trust Funds

Special and Trust Fund Receipts (in millions of dollars)

Program and Financing (in millions of dollars)

Summary of Budget Authority and Outlays (in millions of dollars)

The Civil Service Retirement and Disability Fund is the oldest and largest of the four trust funds administered by the Compensation Group. The Fund is financed and structured very differently from the other three trust funds. It is characterized by permanent indefinite budget authority. Budget Authority is the authority to incur obligations and pay expenses which become available to an agency during any fiscal year. Once approved, permanent budget authority is permanently available for all future years. Indefinite budget authority is used when the precise amount of budget authority required cannot be forecast in advance and must be thus be determined at some future point in time (e.g. when actual receipts and expenses become known).

The Civil Service Retirement and Disability Fund covers two Federal civilian retirement systems: the Civil Service Retirement System (CSRS) established on May 22, 1920, and the Federal Employees Retirement System (FERS) established on June 6, 1986. The Retirement Fund is a single plan even though there are two different benefit tiers and funding methods. CSRS is basically a defined benefit plan, covering Federal employees hired prior to 1984. CSRS participants do not participate in the Social Security system. FERS is a three-tiered pension program that uses Social Security as a base, provides an additional basic benefit, and includes a thrift savings plan. FERS covers employees hired after 1983 and formerly CSRS-covered employees who elected to join FERS.

The Budget proposes that the United States Patent and Trademark Office (PTO) continue to fund the full cost for retirement benefits for PTO's employees covered under the Civil Service Retirement System.

Financing._The financing of the Retirement Fund is easily the most complex of the four trust funds. CSRS has been financed under a statutory funding method passed by Congress in 1969. This funding method is based on the static economic assumptions of no future inflation, no future general schedule salary increases, and a 5 percent interest rate. Under CSRS, regular employees contribute 7 percent of pay. Law Enforcement Officers, Firefighters, and Congressional employees contribute an extra 0.5 percent of pay, and Members of Congress an extra 1.0 percent of pay. Non-Postal Agencies match the employee contributions. Also under the static funding method for CSRS, the Treasury pays interest on any static unfunded liabilities that are not being financed by the Postal Service. The Treasury also makes payments to amortize, over a 30-year period, any increases in the static unfunded liability due to salary increases for Non-Postal employees that occurred during the year, and pays for the cost of any benefits attributable to military service for both Postal and Non-Postal employees that were paid out during the year.
FERS is funded under a dynamic entry age funding method as prescribed in Chapter 84 of Title 5, United States Code, and employees and agencies together contribute the full amount of the dynamic normal cost. During fiscal year 2010, the dynamic normal cost was 12.0 percent (employees share, 0.8% and employers share, 11.2%) of pay for regular employees. Effective fiscal year 2011, the normal cost will be 12.5 percent (employees share, 0.8% and employers share, 11.5%), and for fiscal year 2012, the normal cost is projected to be 12.7 percent (employees share, 0.8% and employers share, 11.9%). An extra 0.5 percent of pay is contributed by Law Enforcement Officers, Firefighters, Air Traffic Controllers, Congressional employees, and Members of Congress. This normal cost is for the defined benefit plan only, and does not include the cost of Social Security or the Thrift Plan. FERS regular employees contribute a percentage of salary that is equal to the difference between the contribution rate for CSRS employees, as set forth above, and the tax rate under the Old Age, Survivors and Disability Insurance (OASDI) portion of Social Security, which currently is 6.2 percent of pay. In December of 2010, President Obama signed The Middle Class Tax Relief Act of 2010 (Public Law 111–312), which reduced FERS employees' Social Security payroll tax rate from 6.2 to 4.2 percent for one year.
The Budget proposes amendments to employer and employee FERS and CSRS contributions, as well as the introduction of a FERS phased retirement program and elimination of the FERS annuity Supplement for new federal employees, described in legislative proposal sections, below.

Status of Funds (in millions of dollars)

Object Classification (in millions of dollars)

Program and Financing (in millions of dollars)

The following describes portions of three legislative proposals that are not subject to PAYGO that would impact the financing and benefits of the Civil Service Retirement and Disability Fund (CSRDF).

The first legislative proposal, the President's Retirement Reform proposal, was presented in the President's Plan for Economic Growth and Deficit Reduction (September 2011). It would increase employee contributions to the retirement fund by 1.2% of pay, phased in over 3 years beginning in 2013, and retain employer contributions at current rates. The portion of employer contributions that are not needed to fund accumulating benefits of current employees would reduce the CSRDF's unfunded liability, and would thus reduce interest payments to the CSRDF. This proposal also included the elimination of the FERS supplemental annuity for new FERS employees, which would reduce the normal cost of FERS benefits resulting in reduced agency contributions to the CSRDF.

The second legislative proposal, the Administration's Phased Retirement proposal, which was included in the Administration's Federal Hiring Modernization Act of 2010 (September, 2010), gives federal agencies an additional tool to help ensure continuity of operations and facilitate knowledge management by allowing valued employees to transition into retirement. This proposal would decrease agency contributions because agencies would not immediately replace individuals engaged in a phased retirement.

The third legislative proposal would provide financial relief to the United States Postal Service by refunding FERS contributions that exceeded the projected liability for future Postal Service retirees covered under FERS. This proposal is one part of a comprehensive Postal relief and reform proposal reflected in the Budget. This proposal decreases the amount of funds the CSRDF would have available to invest in securities and thereby would decrease projected interest earnings of CSRDF.

These impacts are not subject to PAYGO because they reflect intragovernmental accrual and interest payments.

Program and Financing (in millions of dollars)

The following describes portions of three legislative proposals that are subject to PAYGO that would impact the financing and benefits of the Civil Service Retirement and Disability Fund (CSRDF).

The first legislative proposal, the President Retirement Reform proposal, was presented in the President's Plan for Economic Growth and Deficit Reduction (September 2011). It would increase FERS employee contributions to the retirement fund by 1.2% of pay, phased in over 3 years beginning in 2013, and retain employer contributions at current rates. The increase of receipts from employees would score.

The second legislative proposal, the Administrations Phased Retirement proposal, which was included in the Administrations Federal Hiring Modernization Act of 2010 (September, 2010), gives federal agencies an additional tool to help ensure continuity of operations and facilitate knowledge management by allowing valued employees to transition into retirement. This proposal would decrease outlays from the CSRDF by incenting some employees to delay the date of full retirement they would otherwise choose.

Third, the Budget proposes to return to the Postal Service (USPS) surplus amounts it has paid into its Office of Personnel Management (OPM) account for its share of Federal Employee Retirement System costs. OPM has determined this surplus, as of September 30, 2010, is approximately $10.9 billion. Under the proposal, half of the surplus would be paid back to USPS in 2012 and the other half paid back in 2013. See also the Postal Service section of this Appendix.

Program and Financing (in millions of dollars)

This fund finances payments to private insurance companies for Federal employees' group life insurance and expenses of the Office of Personnel Management in administering the program.

The Administration proposes that PTO will fund the accruing costs associated with post-retirement life insurance benefits for PTO's employees.

Budget program._The status of the basic (regular and optional) life insurance program on September 30 is as follows:

Financing._Non-Postal Service employees, employees of Tribal organizations, and all retirees under 65 pay two-thirds of the premium costs for Basic coverage; agencies and tribal organizations pay the remaining third. Optional and certain post-retirement Basic coverages are paid entirely by enrollees. The status of the reserves at the end of the year is as follows:

Object Classification (in millions of dollars)

Program and Financing (in millions of dollars)

This display combines FEHB fund and the Retired Employees Health Benefits (REHB) fund.

The FEHB fund provides for the cost of health benefits for: 1) active employees; 2) employees who retired after June 1960, or their survivors; 3) those annuitants transferred from the REHB program as authorized by Public Law 93–246; 4) tribal organizations; and 5) the related expenses of OPM in administering the program.

The REHB fund, created by the Retired Federal Employees Health Benefits Act of 1960, provides for: 1) the cost of health benefits for retired employees and survivors who enroll in a Government-sponsored uniform health benefits plan; 2) the contribution to retired employees and survivors who retain or purchase private health insurance; and 3) expenses of OPM in administering the program.

Budget program._The balance of the FEHB fund is available for payments without fiscal year limitation. Numbers of participants at the end of each fiscal year are as follows:

In determining a biweekly subscription rate to cover program costs, one percent is added for administrative expenses and three percent is added for a contingency reserve held by OPM for each carrier. OPM is authorized to transfer unused administrative reserve funds to the contingency reserve.

The REHB fund is available without fiscal year limitation. The amounts contributed by the Government are paid into the fund from annual appropriations. The number of participants at the end of each fiscal year are as follows:

Financing._The funds are financed by: 1) withholdings from active employees and annuitants; 2) agency contributions for active employees; 3) Government contributions for annuitants appropriated to OPM; and 4) contributions made by the United States Postal Service in accordance with the provisions of Public Law 101–508.
Funds made available to carriers but not used to pay claims in the current period are carried forward as special reserves for use in subsequent periods. OPM maintains a contingency reserve, funded by employee and Government contributions, which may be used to defray future cost increases or provide increased benefits. OPM makes payments to carriers from this reserve whenever carrier-held reserves fall below levels prescribed by OPM regulations or when carriers can demonstrate good cause such as unexpected claims experience or variations from expected community rates.
The Budget proposes that the Patent and Trademark Office continue to fund the accruing costs associated with post-retirement health benefits for its employees. The Budget also proposes that the Office of Personnel Management (OPM) be given authority to streamline pharmacy benefit contracting within the FEHB program and leverage enrollees' purchasing power to reduce costs and obtain greater value for enrollees.

Status of Funds (in millions of dollars)

Object Classification (in millions of dollars)

(in millions of dollars)

This account represents general miscellaneous receipts of the Office of Personnel Management and receipts that must be returned to the General Fund of the Treasury.