Office of Personnel Management

Retirement and Insurance Service

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Federal Employee Benefit Programs

FINANCIAL MANAGEMENT LETTER

Number: F-98-02 Date: January 30, 1998

SUBJECT: Material Relating to Accounting for Pension Costs

This Financial Management Letter transmits illustrative guidance prepared by the U.S.

Department of the Treasury, Financial Management Service, for recording pension

expense using the cost factors we provided in Financial Management Letter F-97-08, Cost

Factors for Pensions and Other Retirement Benefits, dated October 23, 1997.

In addition, subject to the signature of the Federal Accounting Standards Advisory Board

(FASAB), Interpretation of Federal Financial Accounting Standards Number 4, Accounting

for Pension Payments in Excess of Pension Expense, has been issued. 

We asked FASAB to provide guidance regarding the entries to be made by employer

agencies should payments to the Civil Service Retirement and Disability Fund exceed their

pension expense. A copy of Interpretation Number 4 can be found in the "financenet"

website: 

http://www.financenet.gov/financenet/fed/fasab/intprt4.ht.

If you have any questions, please call Judy Yuran, Manager, U.S. Government Standard

General Ledger Staff, Financial Management Service, (202) 874-6308 or Internet email,

Judy.Yuran@FASD.FININFO-FMS.fms.sprint.com.

Robert A. Yuran, Chief

Financial Policy Staff

Retirement and Insurance Service

Enclosure
ENCLOSURE

Entries to Record Pension Cost, Including Pension Cost Covered by Imputed

Financing

Your agency received a Financial Management Letter, dated October 23, 1997, from

OPM that provides factors from which agencies’ total pension cost for the year is

derived. The factor for your Civil Service Retirement System (CSRS) cost for the year

is 24.2%. How do you do the proper accounting entries?

NOTE: The entry illustrated in paragraph 78 of Statement of Federal Financial

Accounting Standards Number 5 needs clarification.

Assumptions: The agency has one employee, who makes $26,000 per year or $1,000

per pay period. Since he is a regular CSRS employee, he contributes 7% of his salary

to the pension fund and the agency contributes a matching 7%. For the sake of

simplicity, the only deduction made from the employee’s salary is contributions to the

CSRS. Entries to record payroll expense and the employer’s portion of pension

expense for contributions are made biweekly. Note: For simplicity, budgetary entries

are excluded.

Biweekly entries to record payroll and agency contributions to the pension fund are as

follows. 

Note: Entries are coded as N or G for elimination purposes on the Consolidated

Financial Statements.

6100N Operating/Program Expense (payroll) 1,000.

6400G Benefit Program Expense (6100G may also be used) 70.

2210N Accrued Funded Payroll & Benefits (Employees pay, net) 930.

2210N Accrued Funded Payroll & Benefits (Employee contribution to

CSRS) 70.

2210G Accrued Funded Payroll & Benefits (Employer contribution to

CSRS) 70.

When the employee is paid, the entries are as follows.

2210N Accrued Funded Payroll & Benefits (Employees pay, net) 930.

2210N Accrued Funded Payroll & Benefits (Employee contribution to

CSRS) 70.

2210G Accrued Funded Payroll & Benefits (Employer contribution to

CSRS) 70.

 1010 Fund Balance with Treasury 1,070.

and

If paid from an appropriation.

 3100 Unexpended Appropriations 1,070.

 5700 Appropriations Used 1,070.
Note: If the fiscal year-end falls in the middle of a pay period, the cost for the portion

of the pay period that represents an expense of the closing fiscal year must be

accrued. This accrual must be reversed at the beginning of the new year.

At fiscal year-end, the entry to record cost that will be covered by imputed financing is

calculated as follows. 

Assume the cost factor is 25% for simplicity. 25% of $26,000. or $6,500. is the cost of

CSRS for your agency for this year. Employees have contributed 7% or $1,820. for the

year and the agency has contributed another 7% or $1,820. $2,860.($6,500 - $1,820 -

$1,820) of additional cost will be “financed” by an imputed financing source.

For FY 1997 the entry would be:

6400G Benefit Program Expense (6100G may also be used) 2,860.

 5790 Other Financing Sources (Imputed) 2,860.

For FY 1998 reporting, the SGL Board implemented an Imputed Financing account. 

The entry will be:

6400G Benefit Program Expense (Cost paid by another agency which is

covered by Imputed Financing) 2,860.

(6100G may also be used)

 5780 Imputed Financing Sources (Account is G by definition) 2,860.

For FY 1999 reporting, the SGL Board has voted to implement an “Imputed Cost”

account. This represents the cost not paid by the agency but needed to recognize full

cost of programs. Also, account 6400 was approved for deletion. The entry will be:

 6730 Imputed Cost (This account is G by definition) 2,860.

 5780 Imputed Financing Sources (G by definition) 2,860.