NOTES TO THE FINANCIAL STATEMENTS 110

Note 14. Federal Employee and Veteran Benefits Payable

Federal Employee and Veteran Benefits Payable as of September 30, 2021, and 2020

Adjusted

Civilian Military Total Total

(In billions of dollars) 2021 2020 2021 2020 2021 2020

Pension benefits................................................................ 2,361.8 2,214.1 ................................ 1,933.6 1,799.3 ................................ 4,295.4 4,013.4 ...............................

Veterans compensation and burial 

benefits............................................................................................................................................................................

N/A N/A 4,302.3 3,863.1 4,302.3 3,863.1

Post-retirement health benefits................................ 427.3 ................................ 418.7 868.7................................ 848.6 1,296.0................................ 1,267.3 ..........

Veterans education and training benefits................................ - ................................ - 151.2 133.1 ................................ 151.2 133.1 ............................

Life insurance benefits................................................................ 60.1 57.6 ................................ 4.5 5.1 ................................ 64.6 62.7......................

FECA benefits................................................................ 29.2 ................................ 30.6 7.7 ................................ 7.8 36.9 ................................ 38.4 ..

Unfunded leave................................................................ 10.3 10.0 ................................ 16.8 ................................ 15.7 27.1 ................................ 25.7 

Liability for other benefits ................................................................ 1.7 1.6 ................................ 7.8 10.2 ................................ 9.5 11.8 ..................

Total federal employee and veteran 

benefits payable ................................................................ 2,890.4 2,732.6................................ 7,292.6 6,682.9 ................................ 10,183.0 9,415.5 ............................

Note: "N/A" indicates not applicable.

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. The actuarial accrued liability represents an estimate of

the PV of the cost of benefits that have accrued, determined based on future economic and demographic assumptions.

Actuarial accrued liabilities can vary widely from year to year, due to actuarial gains and losses that result from changes to

the assumptions and from experience that has differed from prior assumptions.

OPM administers the largest civilian pension and post-retirement health benefits plans. DOD and VA administer the

military pension and post-retirement health benefit plans. Other significant pension plans with more than $10.0 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 additional

information regarding their pension plans and other benefits.

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 PV 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. This SFFAS No. 33 does not apply to the FECA program.

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

methodology for developing these interest rates in FY 2014.

2 The model is based on the methodology used to produce the

HQM Yield Curve pursuant to the Pension Protection Act of 2006. As of July 2014, Treasury began releasing interest rate

yield curve data using this new Treasury’s TNC yield curve, which is derived from Treasury notes 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.

In addition to the benefits presented in this note, federal, civilian, and military employees and federal entities contribute

to the TSP. The TSP is administered by an independent government entity, the FRTIB, which is charged with operating the

2 Treasury’s HQM resource is available at: https://www.treasury.gov/resource-center/economic-policy/corp-bond-yield/Pages/TNC-YC.aspx
111 NOTES TO THE FINANCIAL STATEMENTS

TSP prudently and solely in the interest of the participants and their beneficiaries. Please refer to Note 24—Fiduciary

Activities for additional information on the TSP.

For FY 2020, VA reported a retrospective change in accounting regarding obligations for hospital care or medical

services. This change in accounting principle increased the prior year liability for other benefits line by $6.2 billion. In FY

2020, the $6.2 billion was previously reported in Note 12—Accounts Payable.

Pension Benefits

Change in Pension Benefits

Civilian Military Total

(In billions of dollars) 2021 2020 2021 2020 2021 2020

Actuarial accrued pension liability, 

beginning of fiscal year ................................2,214.1 ................................ 2,094.1 ................................ 1,799.3 1,759.2 ................................ 4,013.4 3,853.3.....................

Pension expense:

Prior (and past) service costs from plan 

amendments or new plans..............................................................................................................................................

- - - - - -

Normal costs ................................................................ 51.7 ................................ 44.4 38.4 ................................ 37.2 90.1 ................................ 81.6 .

Interest on liability ................................................................ 65.6 65.7................................ 57.0 59.2................................ 122.6 124.9 ..........................

Actuarial (gains)/losses (from 

experience) ...................................................................................................................................................................

46.2 16.3 47.4 19.4 93.6 35.7

Actuarial (gains)/losses (from 

assumption changes).....................................................................................................................................................

80.8 88.7 53.9 (15.0) 134.7 73.7

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

 Total pension expense ................................244.3 ................................ 215.2 ................................ 196.7 100.8 ................................ 441.0 316.0 .................

Less benefits paid ................................................................ (96.6) (95.2) ................................ (62.4) (60.7) ................................ (159.0) (155.9) ............................

Actuarial accrued pension liability, end of 

fiscal year ................................................................ 2,361.8 ................................ 2,214.1 1,933.6................................ 1,799.3 4,295.4................................ 4,013.4 ........

Significant Long-Term Economic Assumptions Used in Determining Pension 

Liability and the Related Expense

Civilian Military

2021 2020 2021 2020

FERS CSRS FERS CSRS

Rate of interest................................................................ 3.10% 2.40% ................................ 3.30% 2.70%................................ 2.90% 3.20%.................................

Rate of inflation ................................................................ 1.70% 1.70% ................................ 1.70% 1.70%................................ 1.60% 1.60%................................

Projected salary increases ................................ 1.30% ................................ 1.30% 1.20% ................................ 1.20% 2.00%................................ 1.80% ................

Cost of living adjustment ................................ 1.50% ................................ 1.70% 1.50%................................ 1.70% 1.60%................................ 1.60% ..................
NOTES TO THE FINANCIAL STATEMENTS 112

Civilian Employees’ Pension

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 CSRS and the FERS. The basic benefit components

of the CSRS and the FERS are financed and operated through the 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, 2021, USPS has accrued, but not paid OPM, $14.6 billion in CSRS

and FERS retirement benefit expenses since 2014. In order for USPS to preserve liquidity and to ensure the ability to fulfill

its primary universal service mission was not placed at undue risk, USPS has not made any of the required payments for

FERS or CSRS amortization. The cost of each year’s payment, including defaulted payments, along with 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 government-wide Balance Sheet due to the USPS liability being eliminated with OPM’s corresponding

receivable due from USPS recording a loss allowance for doubtful accounts for the unpaid balances.

The civilian pension liability increased by $147.7 billion, primarily due to less favorable than assumed plan experience

and the declining interest rate assumption.

Military Employees’ Pensions

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

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

BRS, generally for military personnel with an entry date on or after January 1, 2018. The defined benefit plan includes nondisability 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 three 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 NDAA for FY

2016, effective January 1, 2018. The BRS is a 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 have opted into BRS during calendar year 2018.

Under the BRS, retiring members are given the option to receive a portion of their retired pay annuity in the form of a lump

sum distribution. For additional information on these benefits, see DOD’s Office of Military Compensation website

https://militarypay.defense.gov.

The DOD MRF was established by P.L. 98-94 (currently 10 U.S.C. §1461-1467) 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 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 VA) per P.L. 108-

136; and investment income.

DOD’s Office of the Actuary calculates the actuarial liability annually using economic and demographic assumptions

about the future (e.g., mortality and retirement rates). The $134.3 billion increase in the Military Retirement Pension liability

is primarily attributable to changes in assumptions and less favorable than assumed plan experience.

The NDAA for FY 2021, §§ 8224-8225 requires the USCG be covered by the MRF no later than the beginning of FY

2023. The USCG actuarial liability will be included on DOD’s September 30, 2022 financial statements.

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,

Accounting for Liabilities of the Federal Government 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, 2021, and 2020, was $130.1 billion and $110.6 billion, respectively.
113 NOTES TO THE FINANCIAL STATEMENTS

Veterans Compensation and Burial Benefits

Change in Veterans Compensation and Burial Benefits

Compensation Burial Total

(In billions of dollars) 2021 2020 2021 2020 2021 2020

Actuarial accrued liability, 

beginning of fiscal year ................................3,854.3 ................................ 3,122.7 ................................ 8.8 7.1 ................................ 3,863.1 3,129.8 .....................

Current year expense:

Interest on the liability balance................................ 124.5 ................................ 106.8 0.3 ................................ 0.2 124.8................................ 107.0 ........

Prior (and past) service costs from 

program amendments or new programs 

during the period................................................................ 26.3 43.3................................ 1.1 ................................ - 27.4 43.3 ............................

Actuarial (gains)/losses (from 

experience) ................................................................ 47.7 107.7 ................................ (0.2) ................................ 1.3 47.5 ................................ 109.0 ..

Actuarial (gains)/losses (from 

assumption changes)................................................................ 349.5 574.9 ................................ 0.9 0.5 ................................ 350.4 575.4 .....................

Total current year expense................................ 548.0................................ 832.7 2.1................................ 2.0 550.1 ................................ 834.7 ...........

Less benefits paid ................................................................ (110.6) (101.1)................................ (0.3) (0.3) ................................ (110.9) (101.4) ...........................

Actuarial accrued liability, end of fiscal 

year................................................................ 4,291.7 ................................ 3,854.3 ................................ 10.6 8.8 4,302.3 ................................ 3,863.1 .................

Significant Economic Assumptions Used in Determining Veterans Compensation and 

Burial Benefits as of September 30, 2021, and 2020

2021 2020

Rate of interest................................................................................................ 2.95% ................................ 3.23%.................................

Rate of inflation ................................................................................................ 2.32% ................................ 2.16%................................

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 incurred in or aggravated

during active military service, death while on duty, or death resulting from service-connected disabilities after 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, §2301-2308, 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. The liability increased by $439.2 billion in FY 2021 primarily due to assumption changes

and interest on the liability balance. The total loss from assumption changes was mainly impacted by a decrease in the

discount rate assumptions, increase in the COLA rate assumptions, and by changes in other assumptions such as life

expectancy, new case rates, and mortality improvement rate. The interest on liability cost of $124.8 billion is based on the

prior year liability balance multiplied by the single weighted average discount rate used to compute the liability for veterans’

compensation and burial benefits payable in the prior year.

Several significant actuarial assumptions were used in the valuation of compensation and burial benefits to calculate the

PV of the liability. A liability was recognized for the projected benefit payments to: 1) those beneficiaries, including veterans
NOTES TO THE FINANCIAL STATEMENTS 114

and survivors, currently receiving benefit payments; 2) current veterans who are expected in the future to 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 and to become beneficiaries of the compensation program. Future benefit

payments to survivors of those veterans in classes 1, 2, and 3 above are also incorporated into the projection.

In FY 2021, there were several regulatory changes impacting the prior year service cost component of the veterans’

compensation and burial benefits payable liability. During FY 2021, the Johnny Isakson and David P. Roe, M.D. Veterans

Health Care and Benefits Improvement Act of 2020 (P.L. 116-315) contained various provisions for VA to care for homeless

veterans during a covered public health emergency, to carry out a retraining assistance program for unemployed veterans, and

other purposes. Several sections of this law affected the compensation and burial liability model. There were also two

procedural advisory changes that impacted the liability:

• The section that addresses the musculoskeletal system within the VA’s schedule for rating disabilities was revised to

ensure the rating schedule uses current medical terminology, thus providing updated criteria for the evaluation of

musculoskeletal disabilities; and

• VA amended its adjudication regulations to establish presumptive service connection for three chronic respiratory

health conditions, i.e., asthma, rhinitis, and sinusitis, including rhinosinusitis, based on exposure to fine, particulate

matter.

These regulatory changes resulted in a combined increase of $26.3 billion in the compensation liability and an increase

of $1.1 billion in the burial liability as of September 30, 2021.

The changes in experience related to compensation benefits resulted from an increase in the number of beneficiaries

receiving compensation benefits.

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.

Post-Retirement Health Benefits

Change in Post-Retirement Health Benefits

Civilian Military Total

(In billions of dollars) 2021 2020 2021 2020 2021 2020

Actuarial accrued post-retirement health 

benefits liability, beginning of fiscal year................................ 418.7 415.1................................ 848.6 830.2 ................................ 1,267.3 1,245.3 .............................

Post-Retirement health benefits 

expense: 

Prior (and past) service costs from plan 

amendments or new plans................................................................ - - ................................ - - ................................ - - ..............

Normal costs ................................................................ 19.8 ................................ 17.7 25.5 ................................ 23.0 45.3 ................................ 40.7 .

Interest on liability ................................................................ 14.0 14.4................................ 28.4 29.4................................ 42.4 43.8 ..........................

Actuarial (gains)/losses (from 

experience) ................................................................ (16.1) ................................ (16.6) (40.4) ................................ (9.8) (56.5) ................................ (26.4) ...

Actuarial (gains)/losses (from 

assumption changes)................................................................ 7.3 4.5 ................................ 28.9 (2.4) ................................ 36.2 2.1 .....................

Total post-retirement health benefits 

expense................................................................ 25.0 ................................ 20.0 42.4 ................................ 40.2 67.4 ................................ 60.2 ......

Less claims paid................................................................ (16.4) (16.4) ................................ (22.3) (21.8) ................................ (38.7) ...............................(38.2) 

Actuarial accrued post-retirement health 

benefits liability, end of fiscal year................................ 427.3 ................................ 418.7 868.7 ................................ 848.6 1,296.0 ................................ 1,267.3 ......
115 NOTES TO THE FINANCIAL STATEMENTS

Significant Long-Term Economic Assumptions Used in Determining 

Post-Retirement Health Benefits and the Related Expense

Civilian Military

2021 2020 2021 2020

Rate of interest ................................................................ 3.20% ................................ 3.40% 3.00%................................ 3.30% ..............................

Single equivalent medical trend rate................................ 4.40% ................................ 4.40% 4.11% ................................ 4.06% ................................

Ultimate medical trend rate................................3.20% ................................ 3.20% ................................ 3.60% ................................ 3.60% .............

Civilian Employees’ 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 Employee 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.

As of September 30, 2021, the USPS has accrued but not paid to the Postal Service Retiree Health Benefits Fund $57.0

billion in payments required under the Postal Accountability and Enhancement Act of 2006 (P.L. 109-435, Title VIII). In

order for USPS to preserve liquidity and to ensure the ability to fulfill its primary universal service mission was not placed at

undue risk, USPS has not made these required payments. The cost for each year’s payment, including defaulted payments,

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 government-wide Balance Sheet due to the USPS liability being eliminated with the

OPM’s corresponding receivable due from USPS recording a loss allowance for doubtful accounts for the unpaid balances.

The post-retirement civilian health benefit liability increased $8.6 billion. This increase is due to the accruing cost of

benefits and interest on the existing liability, largely offset by actuarial gains attributable to favorable plan experience.

Military Employees’ Post-Retirement Health Benefits

Military retirees who are not yet eligible for Medicare (and their 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 MTF on a space-available basis or from civilian providers through TRICARE. 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 post-retirement medical benefits are

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

Since FY 2002, DOD has provided medical coverage to Medicare-eligible retirees (and their eligible Medicare-eligible

dependents). This coverage, called 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 MTF on a space-available basis or from civilian providers.

10 U.S.C., Chapter 56 created the DOD 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 (Treasury contribution). The Secretary of Defense

directs the Secretary of the Treasury to make DOD’s normal cost payments. The MERHCF pays for medical costs incurred

by Medicare-eligible beneficiaries at MTF and civilian providers (including payments to U.S. Family Health Plans for

grandfathered beneficiaries), plus the costs associated with claims administration.

DOD’s Office of the Actuary calculates 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 and the benefits for pre-
NOTES TO THE FINANCIAL STATEMENTS 116

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

increased $20.1 billion. The increase is primarily attributable to the normal operation of the plan – the cost of benefit accruals

and interest on the liability less benefits paid. The actuarial gain from experience of $40.4 billion is primarily due to increases

in Military Retirement Health Benefits and MERHCF.

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. For the FYs 2017 through 2021, the average medical care cost per year was $80.9 billion.

Veterans Education and Training Benefits

Change in Veterans Education and Training Benefits

(In billions of dollars) 2021 2020

Actuarial accrued liability, beginning of fiscal year................................................................ 133.1 ................................ 105.9 ...............

Current year expense:

Prior (and past) service costs from plan amendments or new plans................................ 14.3 ................................ - ...................

Interest on liability ................................................................................................3.6................................ 3.8 ..........................

Actuarial (gains)/losses (from experience) ................................................................ 17.4................................ 9.4 .......................

Actuarial (gains)/losses (from assumption changes)................................................................ (4.1) ................................ 27.3 .........

Total current year expense................................................................................................ 31.2 ................................ 40.5 ...........

Less benefits paid ................................................................................................(13.1) ................................ (13.3)............................

Actuarial accrued liability, end of fiscal year ................................................................ 151.2................................ 133.1 .......................

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

• Post 9/11 GI Bill;

• VR&E;

• Survivors’ and Dependents’ Educational Assistance; and

• Montgomery GI Bill-Active Duty.

Based on the actuarial estimates of future payments, the total liability for the four education and training programs

increased by $18.1 billion in FY 2021. The $18.1 billion increase is primarily attributable to experience gains and prior

service costs offset by benefits paid.

In FY 2021, VA conducted experience studies for the Post 9/11 GI Bill, Survivors’ and Dependents’ Educational

Assistance and VR&E programs, which made up the decrease of $4.1 billion from assumption changes. The more significant

changes included within this amount consisted of the change in the duration of the Post 9/11 GI Bill model was reduced to 30

years compared to 62 years used in the prior year, which decreased the liability by $13.8 billion, which is offset by an

increase of $8.1 billion due to changes in the initial enrollment assumption.

In addition, P.L. 116-315 § 1025 eliminated the period of eligibility for training and rehabilitation for certain veterans

with service-connected disabilities. Prior to this legislation, all veterans were required to use their benefits within 12 years of

discharge or release from military service. This resulted in an increase of $14.3 billion in the VR&E liability. The change in

legislation increased the current year expenses and is included in the prior (and past) service costs from plan amendments or

new plans.

For additional information regarding actuarial assumptions and the four education and training type programs, please

refer to VA’s financial statements.
117 NOTES TO THE FINANCIAL STATEMENTS

Life Insurance Benefits

Civilian Employees’ Life Insurance Benefits

Change in Civilian Life Insurance Benefits

(In billions of dollars) 2021 2020

Actuarial accrued life insurance benefits liability, beginning of fiscal year ................................ 57.6 ................................ 54.6 .............

Life insurance benefits expense:

New entrant expense ................................................................................................ 0.7 ................................ 0.5 .....................

Interest on liability ................................................................................................1.6................................ 1.9 ..........................

Actuarial (gains)/losses (from experience) ................................................................ (0.3)................................ 0.1 .......................

Actuarial (gains)/losses (from assumption changes)................................................................ 1.2 ................................ 1.0 .........

Total life insurance benefits expense ................................................................................................ 3.2 3.5............................

Less costs paid ................................................................................................................................ (0.7) (0.5) ................................

Actuarial accrued life insurance benefits liability, end of fiscal year ................................ 60.1................................ 57.6 ......................

Significant Long-Term Economic Assumptions Used in Determining Life Insurance 

Benefits and the Related Expense

Civilian

2021 2020

Rate of interest................................................................2.90% ................................................................ 3.10% .................................

Rate of increase in salary................................................................ 1.30% ................................................................ 1.20% ..................

One of the other significant employee benefits is the FEGLI Program. Employee and annuitant contributions and

interest on investments fund a portion of this liability. The actuarial life insurance liability is the expected PV of future

benefits to pay to, or on behalf of, existing FEGLI participants, less the expected PV 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.

As of September 30, 2021, the total amount of FEGLI insurance in-force is estimated at $770.3 billion ($664.4 billion

for employees and $105.9 billion for annuitants).

Veterans’ Life Insurance Benefits

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

• National Service Life Insurance covers policyholders who served during World War II.

• Veterans’ Special Life Insurance 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.

• Service-Disabled Veterans Insurance program was established in 1951 to meet the insurance needs of veterans who

received a service-connected disability rating.

Death benefit liabilities consist of reserves for permanent plan and term policies as well as policy benefits for Veterans

Mortgage Life Insurance. Disability income and waiver liabilities consist of reserves to fund the monthly payments to

disabled insureds under the Total Disability Income Provision and the policy premiums waived for qualifying disabled

veterans. Insurance dividends payable consists of dividends left on deposit with VA and dividends payable to policyholders.

Unpaid policy claims consist 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 veteran’s life insurance liability for future
NOTES TO THE FINANCIAL STATEMENTS 118

policy benefits as of September 30, 2021, and 2020, was $4.5 billion and $5.1 billion, respectively. For additional

information on veteran’s life insurance liability, please refer to VA’s financial statements.

The VA supervises 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 Injury Protection program, which provides for

insurance payments to veterans who suffer a serious traumatic injury in service.

The amount of insurance in-force is the total face amount of life insurance coverage provided by each administered and

supervised program at the end of the fiscal year. It includes any paid-up additional coverage provided under these policies.

The supervised programs’ policies and face values are not reflected in VA’s liabilities because the risk of loss on these

programs is assumed by Prudential and its reinsurers through the terms and conditions of the group policy. As a result, the

information provided for the supervised programs is for informational purposes only and is unaudited. The face value for

supervised programs as of September 30, 2021, and 2020, was $1,219.0 billion and $1,183.7 billion, respectively. The face

value for administered programs as of September 30, 2021, and 2020, was $5.3 billion and $6.0 billion, respectively.

Federal Employees’ Compensation Act Benefits

Workers’ Compensation Benefits

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. Effective March 12, 2021, the ARP, Section

4016, “Eligibility for Workers’ Compensation Benefits for Federal Employees Diagnosed with COVID-19,” mandates that

accepted COVID-19 claims (or other accepted claims resulting from a coronavirus pandemic) be paid by the fund and are not

billable to other federal entities; related administrative costs, including the fair share costs of non-appropriated entities, are to

be paid by the fund and are not billable. Beginning in FY 2021, the actuarial liability includes claims covered by Section

4016 of the ARP.

The FECA liability is determined annually using historical claim data and benefit payment patterns related to injury

years to predict the future payments. The actuarial methodology provides for the effects of inflation and adjusts liability

estimates to constant dollars by applying wage inflation factors (COLA) and medical inflation factors (CPIM) to the

calculation of projected benefits. DOL selects the COLA factors and CPIM factors by averaging over five years the COLA

rates and CPIM rates, respectively. The FY 2021 methodology for averaging the COLA rates used OMB provided rates; the

FY 2021 methodology for averaging the CPIM rates used OMB‐provided rates and information obtained from the Bureau of

Labor Statistics public releases for CPI. Using averaging renders estimates that reflect trends over five years instead of

conditions that exist in one year.

The COLAs and CPIMs used in the projections for FY 2021 are listed below in the table.

DOL selects the discount rates by averaging 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. DOL selected the interest

rate assumptions whereby projected annual payments were discounted to PV 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 15 years and 11 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 2.2 percent and

2.1 percent, respectively.

For the COLAs, CPIMs, average durations, and interest rate assumptions used in the projections for FY 2020, refer to

the FY 2020 Financial Report.
119 NOTES TO THE FINANCIAL STATEMENTS

Unfunded Leave

Unfunded leave are the amounts recorded by an employer federal entity for unpaid leave earned that an employee is

entitled to upon separation and that will be funded by future years’ budgetary resources. The unfunded leave total as of

September 30, 2021 and 2020, was $27.1 billion and $25.7 billion, respectively.

Liability for Other Benefits

Liability for other benefits includes several programs. The largest program is VA’s Community Care Program, with an

estimated liability of $6.1 billion as of September 30, 2021.