99 NOTES TO THE FINANCIAL STATEMENTS

Note 12. Federal Employee and Veteran Benefits Payable

Federal Employee and Veteran Benefits Payable as of September 30, 2018, and 2017

Civilian Military Total

Reclass Reclass

(In billions of dollars) 2018 2017 2018 2017 2018 2017

Pension and accrued benefits ................... 2,048.9 2,013.8 1,621.3 1,568.0 3,670.2 3,581.8

Veterans compensation and burial 

benefits ................................................... N/A N/A 2,956.3 2,810.0 2,956.3 2,810.0

Post-retirement health and accrued 

benefits ................................................... 403.3 375.7 787.0 781.6 1,190.3 1,157.3

Veterans education benefits...................... N/A N/A 65.7 50.7 65.7 50.7

Life insurance and accrued benefits........... 54.9 53.1 6.3 6.9 61.2 60.0

FECA benefits.......................................... 27.3 28.8 8.3 8.3 35.6 37.1

Liability for other benefits .......................... 1.2 1.2 1.8 2.0 3.0 3.2

Total federal employee and veteran 

benefits payable .................................... 2,535.6 2,472.6 5,446.7 5,227.5 7,982.3 7,700.1

Change in Pension and Accrued Benefits

Civilian Military Total

(In billions of dollars) 2018 2017 2018 2017 2018 2017

Actuarial accrued pension liability, 

beginning of fiscal year............................. 2,013.8 1,910.7 1,568.0 1,490.6 3,581.8 3,401.3

Pension expense:

Prior (and past) service costs from plan 

amendments or new plans...................... - - 8.9 (0.9) 8.9 (0.9)

Normal costs ......................................... 42.3 38.8 34.2 27.4 76.5 66.2

Interest on liability .................................. 68.7 69.5 57.5 57.6 126.2 127.1

Actuarial (gains)/losses (from 

experience) ........................................... (2.0) (12.0) 9.6 (1.6) 7.6 (13.6)

Actuarial (gains)/losses (from 

assumption changes)............................. 15.8 94.3 2.1 52.9 17.9 147.2

Other .................................................... 0.1 - - - 0.1 -

Total pension expense ........................... 124.9 190.6 112.3 135.4 237.2 326.0

Less benefits paid .................................... (89.8) (87.5) (59.0) (58.0) (148.8) (145.5)

Actuarial accrued pension liability, end of 

fiscal year ................................................ 2,048.9 2,013.8 1,621.3 1,568.0 3,670.2 3,581.8
NOTES TO THE FINANCIAL STATEMENTS 100

Change in Post-Retirement Health and Accrued Benefits

Civilian Military Total

(In billions of dollars) 2018 2017 2018 2017 2018 2017

Actuarial accrued post-retirement health 

benefits liability, beginning of fiscal year..... 375.7 352.3 781.6 799.7 1,157.3 1,152.0

Post-Retirement health benefits 

expense: 

Prior (and past) service costs from plan 

amendments or new plans...................... - - (20.9) - (20.9) -

Normal costs ......................................... 15.8 13.4 20.5 20.5 36.3 33.9

Interest on liability .................................. 14.1 13.9 30.0 32.3 44.1 46.2

Actuarial (gains)/losses (from 

experience) ........................................... 0.7 4.5 (17.2) (20.6) (16.5) (16.1)

Actuarial (gains)/losses (from 

assumption changes)............................. 12.9 7.5 14.7 (28.8) 27.6 (21.3)

Total post-retirement health benefits 

expense ................................................ 43.5 39.3 27.1 3.4 70.6 42.7

Less claims paid....................................... (15.9) (15.9) (21.7) (21.5) (37.6) (37.4)

Actuarial accrued post-retirement health 

benefits liability, end of fiscal year.............. 403.3 375.7 787.0 781.6 1,190.3 1,157.3

The government offers its employees retirement and other benefits, as well as health and life insurance. The liabilities

for these benefits, which include both actuarial amounts and amounts due and payable to beneficiaries and health care

carriers, apply to current and former civilian and military employees. Large fluctuations in actuarial amounts can result from

changes in estimates to future outflows for benefits based on complex assumptions and cost models.

OPM administers the largest civilian plan. DOD and VA administer the largest military plans. Other significant pension

plans with more than $10 billion in actuarial accrued liability include those of the Coast Guard (DHS), Foreign Service

(State), TVA, and HHS’s Public Health Service Commissioned Corps Retirement System. Please refer to the financial

statements of the entities listed for further details regarding their pension plans and other benefits.

Change in Civilian Life Insurance and Accrued Benefits

(In billions of dollars) 2018 2017

Actuarial accrued life insurance benefits liability, beginning of fiscal year .... 53.1 50.9

Life insurance benefits expense:

New entrant expense ............................................................................ 0.6 0.4

Interest on liability ................................................................................. 1.9 1.9

Actuarial (gains)/losses (from experience) .............................................. (0.6) (0.4)

Actuarial (gains)/losses (from assumption changes)................................ 0.5 0.9

Total life insurance benefits expense ................................................... 2.4 2.8

Less costs paid ....................................................................................... (0.6) (0.6)

Actuarial accrued life insurance benefits liability, end of fiscal year ............. 54.9 53.1
101 NOTES TO THE FINANCIAL STATEMENTS

Significant Long-Term Economic Assumptions Used in Determining Pension 

Liability and the Related Expense

Civilian Military

2018 2017 2018 2017

FERS CSRS FERS CSRS

Rate of interest .............................. 3.60% 3.00% 3.80% 3.20% 3.50% 3.70%

Rate of inflation.............................. 1.60% 1.60% 1.80% 1.80% 1.50% 1.70%

Projected salary increases.............. 1.30% 1.30% 1.50% 1.50% 2.00% 2.10%

Cost of living adjustment ............... 1.40% 1.60% 1.40% 1.80% N/A N/A

Significant Long-Term Economic Assumptions Used in Determining 

Post-Retirement Health Benefits and the Related Expense

Civilian Military

2018 2017 2018 2017

Rate of interest ............................................. 3.60% 3.80% 3.60% 3.80%

Single equivalent medical trend rate............... 4.50% 4.80% 4.16% 4.12%

Ultimate medical trend rate............................ 3.20% 3.40% 4.00% 4.20%

Significant Long-Term Economic Assumptions Used in Determining Life Insurance 

Benefits and the Related Expense

Civilian

2018 2017

Rate of interest ............................................. 3.40% 3.60%

Rate of increase in salary .............................. 1.30% 1.50%

In accordance with SFFAS No. 33, Pension, Other Retirement Benefits, and Other Postemployment Benefits: Reporting 

the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates, entities are required 

to separately present gains and losses from changes in long-term assumptions used to estimate liabilities associated with 

pensions, ORB, and OPEB on the Statement of Net Cost. SFFAS No. 33 also provides a standard for selecting the discount 

rate assumption for present value estimates of federal employee pension, ORB, and OPEB liabilities. The SFFAS No. 33

standard for selecting the discount rate assumption requires it be based on a historical average of interest rates on marketable

Treasury securities consistent with the cash flows being discounted. Additionally, SFFAS No. 33 provides a standard for 

selecting the valuation date for estimates of federal employee pension, ORB, and OPEB liabilities that establishes a 

consistent method for such measurements. 

To provide a sustainable, justifiable data resource for the affected entities, Treasury developed a new model and 

methodology for developing these interest rates in fiscal year 2014. The new method that was developed is based on 

methodology used to produce the High Quality Market (HQM) Yield Curve pursuant to the Pension Protection Act of 

2006.

2 As of July 2014, Treasury began releasing interest rate yield curve data using this new U.S. Department of the 

Treasury’s Yield Curve for Treasury Nominal Coupon Issues (TNC yield curve), which is derived from Treasury notes

 

2 Treasury’s HQM resource is available at: https://www.treasury.gov/resource-center/economic-policy/corp-bond-yield/Pages/Corp-Yield-Bond-CurvePapers.aspx.
NOTES TO THE FINANCIAL STATEMENTS 102

and bonds. The TNC yield curve provides information on Treasury nominal coupon issues and the methodology extrapolates 

yields beyond 30 years through 100 years maturity. The TNC yield curve is used to produce a Treasury spot yield curve (a 

zero coupon curve), which provides the basis for discounting future cash flows.

Civilian Employees

Pensions

OPM administers the largest civilian pension plan, which covers substantially all full-time, permanent civilian federal 

employees. This plan includes two components of defined benefits, the Civil Service Retirement System (CSRS) and the 

Federal Employees’ Retirement System (FERS). The basic benefit components of the CSRS and the FERS are financed and 

operated through the Civil Service Retirement and Disability Fund (CSRDF), a trust fund. CSRDF monies are generated 

primarily from employees’ contributions, federal entity contributions, payments from the General Fund, and interest on 

investments in Treasury securities. As of September 30, 2018, USPS has accrued, but not paid OPM, $5.6 billion in CSRS 

and FERS retirement benefit expenses since 2014.

The Federal Retirement Thrift Investment Board (FRTIB) administers the Thrift Savings Plan (TSP). The TSP 

investment options include two fixed income funds (the G and F Funds), three stock funds (the C, S, and I Funds) and five 

lifecycle funds (L 2050, L 2040, L 2030, L 2020, and L Income). The L Funds diversify participant accounts among the G, F, 

C, S, and I Funds, using professionally determined investment mixes (allocations) that are tailored to different time horizons. 

Treasury securities held in the G Fund are included in federal debt securities held by the public and accrued interest on the 

Balance Sheet. The G Fund held $245.5 billion and $217.9 billion in nonmarketable Treasury securities as of September 30, 

2018, and 2017, respectively. 

The liability for civilian pension and accrued benefits payable increased $35.1 billion. This increase is partly 

attributable to changes in actuarial assumptions. The assumption loss results primarily from decreases to the assumed rates of

interest, which was partly offset by a modest gain from changes in demographic assumptions. 

Post-Retirement Health Benefits

The post-retirement civilian health benefit liability is an estimate of the government’s future cost of providing postretirement health benefits to current employees and retirees. Although active and retired employees pay insurance premiums 

under the Federal Employees Health Benefits Program, these premiums cover only a portion of the costs. The OPM actuary 

applies economic and demographic assumptions to historical cost information to estimate the liability. 

The Postal Accountability and Enhancement Act of 2006 (Postal Act of 2006) (P.L. No 109-435, Title VIII), made 

significant changes in the funding of future retiree health benefits for employees of the USPS, including the requirement for 

the USPS to make scheduled payments to the Postal Service Retiree Health Benefits (PSRHB) Fund. Various legislation 

required the USPS to make scheduled payments to the PSRHB Fund ranging from $5.4 billion to $5.8 billion per year from 

fiscal year 2007 through fiscal year 2016. Thereafter, the law required USPS to make annual payments in the amount of the 

normal cost plus or minus an amount to amortize the unfunded liability or surplus. USPS currently owes the PSRHB Fund a 

total of $42.6 billion consisting of $38.2 billion for fiscal years 2011 through 2017 and $4.4 billion for fiscal year 2018. As of 

September 30, 2018, USPS has indicated payment of the total $42.6 billion due will remain open. At this time, Congress has 

not taken further action on these payments due to the PSRHB Fund from USPS. The cost for each year’s payment, including 

any defaulted payment, along with all other benefit program costs, are included in USPS’ net cost for that year in the 

consolidated Statements of Net Cost. The liability is not included on the governmentwide balance sheet due to the USPS 

liability being eliminated with the OPM receivable.

The post-retirement civilian health benefit liability increased $27.6 billion. This increase is due to the accruing cost of 

benefits, interest on the existing liability and an actuarial loss primarily attributable to updated demographic assumptions 

used in the fiscal year 2018 calculation. 

Life Insurance Benefits

One of the other significant employee benefits is the Federal Employees’ Group Life Insurance (FEGLI) Program. 

Employee and annuitant contributions and interest on investments fund a portion of this liability. The actuarial life insurance

liability is the expected present value of future benefits to pay to, or on behalf of, existing FEGLI participants, less the 

expected present value of future contributions to be collected from those participants. The OPM actuary uses salary increase 

and interest rate yield curve assumptions that are generally consistent with the pension liability.
103 NOTES TO THE FINANCIAL STATEMENTS

Workers’ Compensation Benefits

The DOL determines both civilian and military entities’ liabilities for future workers’ compensation benefits for civilian 

federal employees, as mandated by the FECA, for death, disability, medical, and miscellaneous costs for approved 

compensation cases, and a component for incurred, but not reported, claims. The FECA liability is determined annually using 

historical benefit payment patterns related to injury years to predict the future payments. 

The actuarial methodology provides for the effects of inflation and adjusts historical payments to constant dollars by 

applying wage inflation factors (cost-of-living adjustments or COLA) and medical inflation factors (consumer price indexmedical or CPIM) to the calculation of projected benefits. 

DOL selects the COLA factors, CPIM factors, and discount rate by averaging the COLA rates, CPIM rates, and interest 

rates for the current and prior four years. Using averaging renders estimates that reflect historical trends over five years 

instead of conditions that exist in one year. 

The COLAs and CPIMs used in the projections for fiscal year 2018 are listed below in the table. 

DOL selected the interest rate assumptions whereby projected annual payments were discounted to present value based

on interest rate assumptions on the TNC Yield Curve to reflect the average duration of income payments and medical

payments. The average durations for income payments and medical payments were 14.7 years and 9.6 years, respectively.

Based on averaging the TNC Yield Curves for the current and prior four years, the interest rate assumptions for income

payments and medical payments were 2.72% and 2.38%, respectively.

For the COLAs, CPIMs, average durations, and interest rate assumptions used in the projections for fiscal year 2017,

refer to the fiscal year 2017 Financial Report.

Military Employees (Including Veterans)

Pensions

The Military Retirement System consists of a funded, noncontributory, defined benefit plan for military personnel

(Services of Army, Navy, Air Force, and the Marine Corps) with an entry date prior to January 1, 2018 and the Blended

Retirement System (BRS), generally for military personnel with an entry date on or after January 1, 2018. The defined

benefit plan includes non-disability retired pay, disability retired pay, survivor annuity programs, and Combat-Related

Special Compensation. The Service Secretaries may approve immediate non-disability retired pay at any age with credit of at

least 20 years of active duty service. Reserve retirees must be at least 60 years old and have at least 20 qualifying years of

service before retired pay commences; however, in some cases, the age can be less than 60 if the reservist performs certain

types of active service. P.L. 110-181 provides for a 90-day reduction in the reserve retirement age from age 60 for every 3

months of certain active duty service served within a fiscal year for service after January 28, 2008 (not below age 50). There

is no vesting of defined benefits before non-disabled retirement. There are distinct non-disability benefit formulas related to

four populations within the Military Retirement System: Final Pay, High-3, Career Status Bonus/Redux, and the BRS enacted

in the National Defense Authorization Act for Fiscal Year 2016, effective January 1, 2018. The BRS is a new retirement

benefit merging aspects of both a defined benefit annuity with a defined contribution account, through the TSP. The date an

individual enters the military generally determines which retirement system they would fall under and if they have the option

to select, via a one-time irrevocable election, their retirement system. Military personnel with a start date on or after January

1, 2018 are automatically enrolled in BRS. Although all members serving as of December 31, 2017 were grandfathered under

the prior retirement system, Active Duty, National Guard and Reserve personnel meeting established criteria may opt into

BRS during calendar year 2018. Under the BRS, retiring members are given the option to receive a portion of their retired
NOTES TO THE FINANCIAL STATEMENTS 104

pay annuity in the form of a lump sum distribution. For more information on these benefits, see DOD’s Office of Military

Compensation website https://militarypay.defense.gov.

The DOD Military Retirement Fund was established by P.L. 98-94 (currently Chapter 74 of Title 10, U.S.C.) and

accumulates funds to finance, on an accrual basis, the liabilities of DOD military retirement and survivor benefit programs.

This Fund receives income from three sources: monthly normal cost payments from the Services to pay for DOD’s portion of

the current year’s service cost; annual payments from the Treasury to amortize the unfunded liability and pay for the increase

in the normal cost attributable to Concurrent Receipt (certain beneficiaries with combat-related injuries who are receiving

payments from the VA) per P.L. 108-136; and investment income.

The $53.3 billion increase in the Military Retirement Pension liability is attributable to the increase from expected

normal and interest costs offset by benefit payments, with additional impacts due to assumption and benefit changes and

actuarial experience. Liabilities in the future will depend on interest costs and benefit accruals, future benefit changes,

assumption changes, and actuarial experience.

Post-Retirement Health Benefits

Military retirees who are not yet eligible for Medicare (and their eligible non-Medicare eligible dependents) are eligible

for post-retirement medical coverage provided by DOD. Depending on the benefit plan selected, retirees and their eligible

dependents may receive care from military treatment facilities (MTFs) on a space-available basis or from civilian providers.

This TRICARE coverage is available as Select ( a preferred provider organization – a health plan that contracts with medical

providers to create a network of participating providers; member cost-shares are typically higher for services received out-ofnetwork) and PRIME (a health maintenance organization- a health plan that limits services to a specific network of medical

personnel and facilities and usually by requiring referral by a primary-care physician for specialty care; coverage is also

available for non-referred and out-of-network care, subject to higher cost-sharing). These postretirement medical benefits are

paid by the Defense Health Agency on a pay-as-you-go basis.

Since fiscal year 2002, DOD has provided medical coverage to Medicare-eligible retirees (and their eligible Medicareeligible dependents). This coverage, called TRICARE for Life (TFL), is a Medicare Supplement plan which includes

inpatient, outpatient and pharmacy coverage. Enrollment in Medicare Part B is required to maintain eligibility in TFL.

Retirees with TFL coverage can obtain care from MTFs on a space-available basis or from civilian providers.

10 U.S.C., Chapter 56 created the DOD Medicare-Eligible Retiree Health Care Fund (MERHCF), which became

operative on October 1, 2002. The purpose of this fund is to account for and accumulate funds for the health benefit costs of

Medicare-eligible military retirees, and their dependents and survivors who are Medicare eligible. The Fund receives

revenues from three sources: interest earnings on MERHCF assets, Uniformed Services normal cost contributions, and

Treasury contributions. The DOD Medicare-Eligible Retiree Health Care Board of Actuaries (the MERHCF Board) approves

the methods and assumptions used in actuarial valuations of the MERHCF for the purpose of calculating the per capita

normal cost rates (to fund the annual accrued benefits) and determining the unfunded liability amortization payment (the U.S.

Treasury contribution). The Secretary of Defense directs the Secretary of Treasury to make DOD’s normal cost payments.

The MERHCF pays for medical costs incurred by Medicare-eligible beneficiaries at MTFs and civilian providers (including

payments to U.S. Family Health Plans for grandfathered beneficiaries), plus the costs associated with claims administration.

DOD’s actuaries calculate the actuarial liabilities annually using assumptions and experience (e.g., mortality and

retirement rates, health care costs, medical trend rates, and the discount rate). Actuarial liabilities are calculated for all DOD

retiree medical benefits, including both the benefits funded through the MERHCF as well as the benefits for pre-Medicare

retirees who are paid on a pay-as-you-go basis. Military post-retirement health and accrued benefits payable increased $5.4

billion. This increase is due primarily to changes in actuarial assumptions and expected normal and interest costs, offset by

changes due to plan amendments and favorable recent claims experience. The $20.9 billion reduction in the liability due to

plan amendments reflects the estimated savings resulting from change to pharmacy copays enacted in the National Defense

Authorization Act for Fiscal Year 2018, effective February 1, 2018.

In addition to the health care benefits the federal government provides for civilian and military retirees and their

dependents, the VA also provides medical care to veterans on an “as available” basis, subject to the limits of the annual

appropriations. In accordance with 38 CFR 17.36 (c), VA’s Secretary makes an annual enrollment decision that defines the

veterans, by priority, who will be treated for that fiscal year subject to change based on funds appropriated, estimated

collections, usage, the severity index of enrolled veterans, and changes in cost. While VA expects to continue to provide

medical care to veterans in future years, an estimate of such future benefits cannot be reasonably made. Accordingly, medical

care expenses are recognized in the period the medical care services are provided and included on the Statement of Net Cost.

For the fiscal years 2014 through 2018, the average medical care cost per year was $63.2 billion.
105 NOTES TO THE FINANCIAL STATEMENTS

Veterans Compensation and Burial Benefits

The government compensates disabled veterans and their survivors. Veterans’ compensation is payable as a disability

benefit or a survivor’s benefit. Entitlement to compensation depends on the veteran’s disabilities having been incurred in, or

aggravated during, active military service; death while on duty; or death resulting from service-connected disabilities, if not

on active duty.

Eligible veterans who die or are disabled during active military service-related causes, as well as their dependents, and

dependents of service members who died during active military service, receive compensation benefits. In addition, service

members who die during active military service and veterans who separated under other than dishonorable conditions are

provided with a burial flag, headstone/marker, and grave liner for burial in a VA national cemetery or are provided a burial

flag, headstone/marker and a plot allowance for burial in a private cemetery. These benefits are provided under 38 U.S.C.,

Part 2, Chapter 23 in recognition of a veteran’s military service and are recorded as a liability in the period the requirements

are met.

The liability for veterans’ compensation and burial benefits payable is based on an actuarial estimate of future

compensation and burial payments. It increased by $146.3 billion in fiscal year 2018. The $146.3 billion increase is primarily

attributable to assumption changes and experience. The major impact from experience changes was from veterans who first

became eligible for benefits during fiscal year 2018. The major impact from assumption changes was from a decrease in the

discount rate. Several significant actuarial assumptions were used in the valuation of compensation and burial benefits to

calculate the present value of the liability. A liability was recognized for the projected benefit payments to: 1) those

beneficiaries, including veterans and survivors, currently receiving benefit payments; 2) current veterans who will in the

future become beneficiaries of the compensation program; and 3) a proportional share of those in active military service as of

the valuation date who are expected to be future veterans. Future benefit payments to survivors of those veterans in classes 1,

2, and 3 above are also incorporated into the projection. The projected liability does not include any administrative costs.

The veterans’ compensation and burial benefits liability is developed on an actuarial basis. It is impacted by interest on

the liability balance, experience gains or losses, changes in actuarial assumptions, prior service costs, and amounts paid for

costs included in the liability balance.

Change in Veterans Compensation and Burial Benefits

Compensation Burial Total

(In billions of dollars) 2018 2017 2018 2017 2018 2017

Actuarial accrued liability, beginning of 

fiscal year ............................................... 2,805.1 2,491.4 4.9 4.9 2,810.0 2,496.3

Current year expense:

Interest on the liability balance................ 102.7 97.9 0.2 0.2 102.9 98.1

Prior (and past) service costs from 

program amendments or new programs 

during the period.................................... 14.3 - - - 14.3 -

Actuarial (gains)/losses (from 

experience) .......................................... 45.5 50.7 (0.1) (0.2) 45.4 50.5

Actuarial (gains)/losses (from 

assumption changes)............................. 66.8 244.3 2.4 0.2 69.2 244.5

Total current year expense................... 229.3 392.9 2.5 0.2 231.8 393.1

Less benefits paid ................................... (85.3) (79.2) (0.2) (0.2) (85.5) (79.4)

Actuarial accrued liability, end of fiscal 

year ....................................................... 2,949.1 2,805.1 7.2 4.9 2,956.3 2,810.0
NOTES TO THE FINANCIAL STATEMENTS 106

Significant Economic Assumptions Used in Determining Veterans Compensation and 

Burial Benefits as of September 30, 2018, and 2017

2018 2017

Rate of interest.................................................................... 3.52% 3.66%

Rate of inflation ................................................................... 2.28% 2.28%

Veterans Education Benefits

For eligible Veterans and their dependents, the VA provides four education/retraining type programs: 

x Post 9/11 GI Bill

x Montgomery GI Bill-Active Duty 

x Vocational Rehabilitation and Employment 

x Dependent Education Assistance 

The total liability for the four education/training programs is based on actuarial estimates of future payments and 

increased by $15.0 billion in fiscal year 2018. The $15.0 billion increase is primarily attributable to assumption changes and

experience. The major impact from experiences changes was from veterans who first became eligible for benefits during 

fiscal year 2018. The major impact from assumption changes was from a $12.0 billion adjustment made outside of the model 

to account for potential new enrollees in the next year. This adjustment was based on the number of new enrollees who began 

to use their Post-9/11 GI Bill benefits in 2018. The actuarial modeling estimates are based on beneficiaries who have already 

started to use those benefits. Currently, these models do not include assumptions for expected future new beneficiaries as an 

input to calculate the estimated liability. However, based on experience, it is probable that new beneficiaries will enroll in

these programs in the future. As of September 30, 2018, VA has not developed a practical way to estimate the future number 

of new beneficiaries in its models, in accordance to SFFAS No. 5. Since these models have only been placed in operation for 

the past two years, enhancements and studies such as assumption revisions and possibility of inclusion of multiple years of 

future enrollees in the models will be examined. Results of these enhancements and studies may lead to significant changes in

the future liabilities.

In fiscal year 2016, VA reported an estimated liability for the Post 9/11 GI Bill of $59.6 billion. This was the first time 

VA had reported this estimated liability and the models and assumptions used were conservative with limited experience 

studies or assumptions. At that time, VA had not developed models or estimates for the other three programs listed; however, 

it was management’s assertion that the amount recorded for the Post 9/11 GI Bill was large enough to include any liability for

the other three programs. In fiscal year 2017, VA broke out each program and developed individual estimates based on 

actuarial standards. While not reported in 2016, VA developed an estimate for fiscal year 2016 for each of the new programs 

to be used for comparisons only in 2017. This estimate reflected an increase in the liability of $8.7 billion. This amount is 

presented as "Other" for fiscal year 2017 in the schedule of "Changes in Veterans Education Benefits" provided below. 

The fiscal year 2017 Actuarial (gains)/losses from assumption changes included the impacts of refinements to the 

modeling of the Post 9/11 GI Bill program (liability decrease of $29.3 billion); prior service costs associated with the 

“Forever GI Bill of 2017,” which eliminated the 15-year limitation for using the benefit (liability increase of $8.2 billion);

and other assumption changes (liability increase of $6.3 billion).

For details regarding actuarial assumptions and the four education/retraining type programs, please refer to VA’s 

financial statements.
107 NOTES TO THE FINANCIAL STATEMENTS

Change in Veterans Education Benefits

(In billions of dollars) 2018 2017

Actuarial accrued liability, beginning of fiscal year...................................... 50.7 59.6

Current year expense:

Interest on liability ................................................................................. 1.3 0.7

Actuarial (gains)/losses (from experience) .............................................. 14.6 9.3

Actuarial (gains)/losses (from assumption changes)................................ 10.0 (14.8)

Other ................................................................................................... - 8.7

Total current year expense.................................................................. 25.9 3.9

Less benefits paid ................................................................................... (10.9) (12.8)

Actuarial accrued liability, end of fiscal year .............................................. 65.7 50.7

Life Insurance Benefits

The largest veterans’ life insurance programs consist of the following:

x National Service Life Insurance (NSLI) covers policyholders who served during World War II.

x Veterans’ Special Life Insurance (VSLI) was established in 1951 to meet the insurance needs of veterans who 

served during the Korean Conflict and through the period ending January 1, 1957.

x Service-Disabled Veterans Insurance (S-DVI) program was established in 1951 to meet the insurance needs of 

veterans who received a service-connected disability rating.

 The components of veteran life insurance liability for future policy benefits are presented below:

 

Veterans Life Insurance Liability as of September 30, 2018, and 2017

(In billions of dollars) 2018 2017

Insurance death benefits:

NSLI....................................................................................................... 2.3 2.8

VSLI....................................................................................................... 1.1 1.2

S-DVI ..................................................................................................... 0.7 0.7

Other...................................................................................................... 0.3 0.3

Total death benefits .............................................................................. 4.4 5.0

Death benefit annuities .............................................................................. - -

Disability income & waiver.......................................................................... 0.8 0.8

Insurance dividends payable ...................................................................... 0.9 1.1

Unpaid policy claims .................................................................................. 0.2 -

Total veterans life insurance liability ......................................................... 6.3 6.9

Insurance dividends payable consists of dividends left on deposit with VA, related interest payable, and dividends

payable to policyholders. Unpaid policy claims consists of insurance claims that are pending at the end of the reporting

period, an estimate of claims that have been incurred but not yet reported, and disbursements in transit.

The VA supervises Service members Group Life Insurance (SGLI) and Veterans Group Life Insurance programs that

provide life insurance coverage to members of the uniformed armed services, reservists, and post-Vietnam Veterans as well

as their families. VA has entered into a group policy with the Prudential Insurance Company of America to administer and

provide the insurance payments under these programs. All SGLI insureds are automatically covered under the Traumatic
NOTES TO THE FINANCIAL STATEMENTS 108

Injury Protection program, which provides for insurance payments to veterans who suffer a serious traumatic injury in

service.

Pension Benefits

The VA also provides certain veterans and/or their dependents with pension benefits, based on annual eligibility

reviews. The pension program for veterans is not accounted for as a “federal employee pension plan” under SFFAS No. 5 due

to differences between its eligibility conditions and those of federal employee pensions. Therefore, a future liability for

pension benefits is not recorded. VA pension liabilities are recognized when due and payable. The projected amounts of

future payments for pension benefits (presented for informational purposes only) as of September 30, 2018, and 2017, was

$104.8 billion and $87.6 billion, respectively.