United States

Office of

Personnel Management

The Federal Government’s Human Resources Agency

Retirement and Insurance Service

 Financial Management Letter

Number: 99-09 Date: October 15, 1999

Subject: 1999 Cost Factors for Pension and Other Retirement Benefits

As required by Statement of Federal Financial Standards No. 5 (SFFAS-5) -- Liabilities of the Federal

Government – we are providing you with the “costs factors” for the Federal civilian benefit

programs. These factors will enable you to determine your 1999 cost for Pensions and Other

Retirement Benefits, as they relate to the Civil Service Retirement System (CSRS), Federal

Employees Retirement System (FERS), Federal Employees Health Benefits Program (FEHB) and the

Federal Employees’ Group Life Insurance Program (FEGLI).

BACKGROUND

The amounts remitted to OPM by and for covered employees do not generally cover the actual cost

of the benefits those employees will receive after their careers are over. As a consequence,

agencies must recognize an “imputed” cost equal to the difference between the true cost of

providing future benefits to their employees and the employee and employer contributions they

remit to OPM. The imputed cost will be recorded as a charge to standard general ledger (SGL)

account 6730G. An “imputed financing source” must also be recognized in an amount equal to the

imputed cost – this will be recorded as a credit to SGL account 5780G.

PENSIONS: CSRS AND FERS

CIVIL SERVICE RETIREMENT SYSTEM

For most “regular” CSRS covered employees, the 1999 cost factor is 24.2 per cent of basic pay*,

which is the same as the 1997 and 1998 factors. Accordingly, employing agencies must recognize,

as an imputed cost, the difference between this cost factor and the total contributions (employee

and employer) remitted to OPM for covered employees (15.76 per cent of basic pay).

The 1999 cost factors for CSRS are presented as Attachment A.

FEDERAL EMPLOYEES RETIREMENT SYSTEM

Unlike the CSRS, FERS is fully funded. That is, the future cost of providing a FERS benefit is

covered entirely by the contributions made by and for covered employees. Please note that the

1999 cost factor for “regular” coverage, under which the vast majority of employees are covered –

11.5 per cent of basic pay -- is the same as the 1997 and 1998 factors. The 1999 cost factors for

FERS are presented as Attachment B.

 

* See CSRS/FERS Handbook, Section 30A1.1-2 for definition of basic pay.
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GUIDELINES: CALCULATION OF IMPUTED COST OF CSRS AND FERS

To determine your imputed cost for CSRS and FERS, follow these steps:

 1. Sort all employees covered by CSRS and FERS by their category of coverage.

 2. Aggregate the annual basic pay of all employees in each category of CSRS and FERS

coverage.

 3. Multiply the aggregate basic pay for each category of CSRS and FERS coverage computed in

step 2 by the associated cost factor [for example, for “regular” CSRS and FERS employees the

factors would be 24.2 and 11.5 per cent, respectively].

 4. Compute the grand total of each of the individual calculations in step 3 for both CSRS and

FERS -- this is the service cost of providing CSRS and FERS benefits. 

 5. Subtract, from the amount derived in step 4, the total employer and employee contributions for

all employees covered by CSRS and FERS. The result is your imputed cost for FERS and

CSRS.

 6. Record the imputed cost computed in step 5 as a charge to Standard General Ledger

(SGL) account 6730G – Imputed Cost with a corresponding credit to SGL account 5780G

- Imputed Financing Sources. 

ILLUSTRATION: CALCULATION OF IMPUTED COST OF CSRS AND FERS

Agency XYZ has “regular” CSRS employees, who earn total annual basic pay of $500,000, and

“regular“ FERS employees, who earn total annual basic pay of $250,000. After it receives the cost

factors, Agency XYZ computes its imputed cost, as follows:

A B C D E

Annual Basic

Pay

Cost

Factor

(%)

Service Cost

[A * B]

Total

Contributions

(See below)

Imputed

Cost

[C - D]

CSRS $500,000 24.2 $121,000 $78,800 $42,200

FERS $250,000 11.5 $28,750 $29,375 $(625)**

TOTAL $149,750 $108,175 $41,575

 

** FASAB Interpretation Number 4 requires that any excess of total FERS-related contributions over the FERS-related service

cost be offset against the excess of the CSRS service cost over total CSRS-related contributions.
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Agency XYZ computed employer and employee contributions during 1999, as follows:

A B C D E F

Annual

Gross

Basic Pay

Employee

Withholding

Rate***

(%)

Agency

Contribution

Rate

(%)

Employee

Deductions

[A * B]

Employer

Contributions

[A * C]

Total

Contributions

[D + E]

CSRS $500,000 7.25 8.51 $36,250 $42,550 $78,800

FERS $250,000 1.05 10.7 $2,625 $26,750 $29,375

TOTAL $38,875 $69,300 $108,175

Agency XYZ posts the following transaction:

6730G (00) Imputed Cost 41,575

5780G (00) Imputed Financing Sources 41,575

OTHER RETIREMENT BENEFITS: 

FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM

BACKGROUND

The FEHB Program provides benefits to eligible Federal retirees, their dependents and survivors.

Neither the employing agency nor the active employee, however, makes contributions for

postretirement health benefits. As a consequence, employing agencies must recognize the entire

cost of providing postretirement health benefits to their employees as an imputed cost. We have

computed the cost factor you will need to calculate your imputed cost for postretirement health

benefits; for 1999, it is $2,731 per employee enrolled in the FEHB.

GUIDELINES: CALCULATION OF IMPUTED COST OF POSTRETIREMENT HEALTH BENEFITS

To determine imputed cost, perform the following steps:

1. Ascertain actual enrollment in the FEHB at three points in time: October 1, 1998; March 31,

1999; and September 30, 1999.

2. Multiply the October 1, 1998 enrollment by one; the March 31, 1999 enrollment by two; and the

September 30, 1999 enrollment by one.

 

*** For the sake of simplicity, it is assumed for this illustration, that these withholding rates were in effect for the entire

fiscal year. In reality, they became effective in January 1999.
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3. Calculate the grand total of each of the individual calculations in step 2.

4. Divide the grand total in Step 3 by four – this is your constructed FEHB enrollment.

5. Multiply the constructed FEHB enrollment determined in step 4 by the cost factor – this is your

imputed cost.

6. Record the imputed cost computed in step 5 as a charge to SGL account 6730G, with a

corresponding credit to SGL account 5780G. 

ILLUSTRATION: CALCULATION OF IMPUTED COST OF POSTRETIREMENT HEALTH BENEFITS

10/1/98 3/31/99 9/30/99

Actual enrollment 72 66 60

Multiplier 1 2 1

Product 72 132 60

Grand Total 264

Constructed Enrollment [Grand Total divided by 4] 66

Cost Factor $2,731

IMPUTED COST [Constructed Enrollment times Cost Factor] $180,246

Agency XYZ posts the following transaction:

6730G (00) Imputed Cost 180,246

5780G (00) Imputed Financing Sources 180,246
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OTHER RETIREMENT BENEFITS: 

FEDERAL EMPLOYEES LIFE INSURANCE PROGRAM

BACKGROUND

The FEGLI Program provides life insurance benefits to eligible Federal retirees, their dependents

and survivors. Part of the premiums remitted by and for active covered employees funds their

postretirement life insurance benefits. As a consequence, employing agencies must recognize a

relatively small amount of the cost of providing postretirement life insurance as an imputed cost.

The 1999 cost factor for FEGLI is the same as in 1998 and 1997; that is, .02 per cent of basic pay.

GUIDELINES: CALCULATION OF IMPUTED COST OF POSTRETIREMENT LIFE INSURANCE

Agencies will determine their imputed cost for postretirement life insurance by the following steps:

1. Determine the aggregate annual basic pay of all employees covered by Basic life insurance.

2. Multiply the amount determined in Step 1 by the cost factor [.02 per cent of basic pay] -- –

this is your imputed cost.

3. Record the imputed cost computed in step 2 as a charge to SGL account 6730G, with

a corresponding credit to SGL account 5780G. 

ILLUSTRATION: IMPUTED COST OF POSTRETIREMENT LIFE INSURANCE

Agency XYZ has determined the aggregate annual basic pay of its employees covered by Basic life

insurance to be $500,000. It determines its imputed cost of postretirement life insurance, as

follows:

A B C

Aggregate

Annual Basic Pay Cost Factor

(%)

Imputed Cost

[A x B]

$500,000 .02 $100

Agency XYZ posts the following transaction:

6730G (00) Imputed Cost 100

5780G (00) Imputed Financing Sources 100
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1999 FACTS I REPORTING

As we advised in Financial Management Letter No. 99-08, the balance on the books of employing

agencies in accounts 6730G and 5780G must be equal. It is critical that you ensure that the

balances in these accounts are equal before submitting your 1999 FACTS I reporting.

Note the “00” in the above illustrative entries. As these SGL accounts are intragovernmental [“G”],

agencies must use the two-digit department code of their “trading partner” for FACTS I reporting. It

is essential, when reporting the balances in accounts 5780G and 6730G to FACTS I, that agencies

use partner code “00”.

ASSURANCE FOR AUDITORS

Due to the need to distribute these cost factors to employing agencies shortly after the end of the

fiscal year, insufficient time is available for our independent public accounting firm to opine on

them. Nonetheless, the 1998 cost factors for regular CSRS and FERS coverage, as well as those for

FEHB and FEGLI, were disclosed in the footnotes accompanying OPM’s 1998 financial statements. 

These financial statements were audited by the public accounting firm of KPMG, LLP (KPMG),

which issued an unqualified opinion on them. The cost factors for CSRS, FERS, and FEGLI did not

change for 1999, nor did the policies, procedures and controls pertaining to the calculation of any

of the cost factors, including the FEHB factor. Thus, your auditors can rely upon the disclosures in

the 1998 financial statements and KMPG’s opinions thereon.

INQUIRIES

If you have any questions about the cost factors, please contact the Financial Policy Staff on

202-606-0606 or email us at finance@opm.gov.

__________________________________

Robert A. Yuran, Chief

Financial Policy Staff

Retirement and Insurance Service

Attachments (2)
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Attachment A

COST FACTORS - CSRS

CATEGORY

1999

COST FACTOR

(%)

Regular 24.2

Regular offset 19.3

Law enforcement officers 40.0

Law enforcement officers - offset 36.2

Air traffic controllers 31.9

Air traffic controllers – offset 28.2

Members of Congress 29.3

Members of Congress – offset 27.0

Congressional employees 32.5

Congressional employees – offset 27.8
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Attachment B

COST FACTORS - FERS

CATEGORY FERS COST FACTOR (%)

Regular 11.5

Law enforcement officers 24.6

Air traffic controllers 23.1

Members of Congress 16.5

Congressional employees 16.7

Military reserve technicians 11.9