United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency

Benefits Administration Letter 

Number: 03-309 Date: September 15, 2003

Subject: Fiscal Year 2003 Factors for Calculating Imputed Costs 

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

Government – this letter provides the fiscal year (FY) 2003 cost factors for the Federal 

civilian benefit programs. Agencies will use these factors to calculate their imputed costs 

relating to the “pensions” (the Civil Service Retirement and Federal Employees’ 

Retirement Systems), the Federal Employees Health Benefits Program and the Federal 

Employees Group Life Insurance Program. 

PENSIONS 

Recently, the Board of Actuaries of the Civil Service Retirement and Disability Fund 

adopted a new set of economic assumptions for the Civil Service Retirement System 

(CSRS) and the Federal Employees’ Retirement System (FERS). OPM’s pension actuary 

has applied these new assumptions to derive the FY 2003 cost factors for the CSRS and 

FERS. New contribution rates, corresponding with the recommended assumptions, will 

become effective with the first pay period beginning on or after October 1, 2004. 

The cost factors for the CSRS and FERS are expressed as percentages of “basic pay.” 

Basic pay is the portion of gross pay from which agencies withhold CSRS and FERS 

deductions; it generally excludes bonuses, allowances, overtime, and holiday pay. The 

normal cost factor represents the percentage of basic pay that would have to be remitted 

by and for covered employees to pay fully the Government’s cost to provide a CSRS or 

FERS benefit. 

 

Civil Service 

Retirement 

System 

Federal Employees’ 

Group Life 

Insurance Program 

Federal Employees 

Health Benefits 

Program 

Federal Employees 

Retirement 

System 

Federal Long 

Term Care 

 Insurance 

Program 
 2 

CSRS. For most or “regular” CSRS-covered employees, the FY 2003 cost factor will be 

25.0 percent of basic pay, compared with 24.4 percent for FY 2002. Since the percentage 

of basic pay actually remitted to OPM by and for most CSRS-covered employees in 

FY 2003 was less than 25.0 percent, agencies must recognize an imputed cost for the 

shortfall. The FY 2003 cost factors for all categories of CSRS coverage are attached. 

FERS. For regular FERS-covered employees, the FY 2003 cost factor is 12.0 percent of 

basic pay, compared with 11.5 percent for FY 2002. Since the percentage of basic pay 

actually remitted to OPM by and for most FERS-covered employees in FY 2003 was less 

than 12.0 percent, agencies will, likely for the first time, recognize a FERS-related imputed 

cost. The cost factors for all categories of FERS coverage are on the attachment. 

Illustration: Calculation of Imputed Cost for Pensions 

Agency XYZ has the following employees: 

Category Number Aggregate Basic Pay 

Paid in FY 2003 

Regular CSRS 10 $500,000 

Regular FERS 10 $250,000 

Agency XYZ computes its total FY 2003 “service cost” by multiplying the basic pay paid 

in fiscal year 2003 for each CSRS and FERS category by the applicable cost factor: 

A B 

Basic Pay 

Paid in FY 2003 Cost Factor 

Service Cost 

[A * B] 

CSRS Regular $500,000 25.0% $125,000

FERS Regular $250,000 12.0% 30,000

Total Service Cost $155,000

Agency XYZ determines the amount of employee withholdings and agency contributions 

actually remitted to OPM in FY 2003 for each CSRS and FERS category: 

Employee Withholdings and Agency Contributions 

Employee 

Withholdings 

Agency 

Contributions 

Total 

CSRS Regular $35,000 35,625 $70,625

FERS Regular $2,000 26,750 28,750

Total Employee Withholdings and Agency Contributions $99,375
 3 

Agency XYZ computes its imputed cost by subtracting the total amount of employee 

withholdings and agency contributions remitted to OPM in FY 2003 from its FY 2003 

service cost: 

Total Service Cost $155,000

Less: Total Employee Withholdings and Agency Contributions 99,375

Imputed Cost for CSRS and FERS $55,625

Agency XYZ posts its imputed cost for CSRS and FERS: 

6730F.24 Imputed Cost 55,625 

5780F.24 Imputed Financing Sources 55,625

FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM 

Although the Government provides health benefits to Federal employees after they retire, 

no contributions are made by or for employees during their active working careers. Thus, 

agencies must recognize the Government’s entire cost to provide post-retirement health 

benefits to their employees as an imputed cost. The cost factor is expressed as an amount 

per employee currently enrolled in the FEHB Program; for FY 2003, the factor is $3,766 

per enrolled employee. 

Calculation of Imputed Cost for Employees Enrolled in the FEHB Program: 

Step 1: Ascertain actual enrollment in the FEHB Program at three points in time: 

October 1, 2002; March 31, 2003; and September 30, 2003; include ALL 

enrolled employees, both full-time and less than full-time. 

Step 2: Multiply the October 1 enrollment by one; the March 31 enrollment by two; 

and the September 30 enrollment by one. 

Step 3: Calculate the grand total of each of the individual calculations in Step 2. 

Step 4: Divide the grand total in Step 3 by four to derive the “constructed FEHB 

enrollment." 

Step 5: Multiply the constructed FEHB Program enrollment, computed in Step 4, by 

the fiscal year 2003 cost factor of $3,766 – this is the imputed FEHB cost. 

Step 6: Record the imputed cost as a charge to SGL account 6730F.24, with a 

corresponding credit to SGL account 5780F.24. 
 4 

Illustration: Calculating Imputed Cost for Employees Enrolled in the FEHB Program: 

10/1/02 3/31/03 9/30/03 

Step 1: Actual enrollment 72 66 60

Step 2: Multiplier 72 x 1 = 72 66 x 2 = 132 60 x 1 = 60 

Step 3: Grand Total 264

Step 4: Constructed Enrollment [Grand Total Divided by Four] 66

Step 5: Imputed Cost [Constructed Enrollment Times Cost Factor] $248,556

Agency XYZ posts the following entry: 

6730F.24 Imputed Cost 248,556 

5780F.24 Imputed Financing Sources 248,556

FEDERAL EMPLOYEES LIFE INSURANCE PROGRAM 

The FEGLI Program provides life insurance benefits to eligible Federal retirees. The 

contributions remitted by and for covered employees do not fully cover the cost to provide 

post-retirement FEGLI Program benefits. Thus, agencies must recognize the unfunded 

portion of this cost as an imputed cost. The fiscal year 2003 cost factor for the FEGLI 

Program is 0.02 percent of basic pay, the same as in previous years. 

Calculation of the Imputed Cost for Employees Enrolled in the FEGLI Program: 

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] to determine imputed cost. 

3. Record imputed cost computed in Step 2 as a charge to SGL account 6730F.24, with a 

corresponding credit to SGL account 5780F.24. 

Illustration: Calculation of the Imputed Cost for Employees Enrolled in the FEGLI Program: 

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

Basic life insurance to be $1,125,000. It determines its fiscal year 2003 imputed cost for the 

FEGLI Program, as follows: 
 5 

A B C

Annual Basic Pay Cost Factor (%) Imputed Cost 

[A x B] 

$1,125,000 .02 $225

Agency XYZ posts the following entry: 

6730F.24 Imputed Cost 225

5780F.24 Imputed Financing Sources 225

ASSURANCE FOR AUDITORS 

The cost factors provided in this letter are being issued before they can be opined upon by 

OPM’s independent public accounting firm. Nonetheless, the FY 2002 cost factors for 

“regular” CSRS and FERS coverage, as well as those for the FEHB and FEGLI Programs 

were disclosed in the footnotes accompanying OPM’s consolidated FY 2002 financial 

statements; these statements received an unqualified audit opinion. The policies, 

procedures and controls pertaining to the calculation of the cost factors did not change 

from FY 2002. The change to the CSRS and FERS cost factors for FY 2003, as a 

consequence of the new economic assumptions discussed above is, in the view of OPM’s 

pension actuary, not material. Thus, auditors of agency financial statements can rely upon 

the disclosures in OPM’s FY 2002 financial statements and the audit opinion thereon. 

INQUIRIES 

If you have any questions about this letter, we would prefer that you email us at 

finance@opm.gov, so we have a record of them. You may of course call us on 202-606-0606. 

Robert A. Yuran, Chief 

 Financial Policy Group 

Center for Financial Services 

Attachment
Attachment 

2003 COST FACTORS FOR THE CSRS AND FERS 

CSRS 

CATEGORY COST FACTOR (%) 

Regular 25.0

Regular offset 19.5 

Law enforcement officers 40.3 

Law enforcement officers - offset 35.7 

Air traffic controllers 33.5 

Air traffic controllers – offset 28.7 

Members of Congress 28.4 

Members of Congress – offset 26.1 

Congressional employees 33.9 

Congressional employees – offset 28.7

FERS 

CATEGORY COST FACTOR (%) 

Regular 12.0

Law enforcement officers 25.1 

Air traffic controllers 24.4 

Members of Congress 17.7 

Congressional employees 17.9 

Military reserve technicians 14.7 

.