Federal Pensions: Judicial Survivors' Annuities System Costs for 2008 to 2010
Published: 2013-02-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: JSAS was created in 1956 to provide financial security for the families of deceased federal judges. JSAS is administered by AOUSC. Active and senior judges currently contribute 2.2 percent and 2.75 percent of their salaries to JSAS, depending on when they elected coverage, and retired judges contribute 3.5 percent of their retirement salaries to JSAS.
Pursuant to the Federal Courts Administration Act of 1992 (Pub. L. No. 102-572), GAO was required to review JSAS costs every 3 years and determine whether the judges' contributions fund at least 50 percent of the plan's costs during the 3-year period. If the contributions funded less than 50 percent of these costs, GAO was to determine what adjustments to the contribution rates would be needed to achieve the 50 percent ratio. GAO used the normal cost rates determined by actuarial valuations of the system and compared the judges' normal cost rate against the plan's total normal cost rate. On December 28, 2012, the GAO audit requirement was repealed by the GAO Mandates Revision Act of 2012 (Pub. L. No. 112-234). Thus, this is the final GAO report.
section_title: What GAO Found
paragraphs: GAO found that for the 2008 to 2010 time frame covered by this review, the participating judges' share of normal cost was, on average, about 41 percent of the Judicial Survivors' Annuities System (JSAS) total normal costs, and the federal government's share of normal cost was about 59 percent of JSAS total normal costs. The federal government's share of JSAS normal costs increased over the years included in GAO's review, from approximately 53 percent in plan year 2008, to 61 percent in plan year 2009, and to approximately 64 percent in plan year 2010. The increase was a result of (1) less favorable actual economic and demographic outcomes over this period than predicted by the actuarial assumptions and (2) changes in actuarial assumptions regarding future economic and demographic outcomes.
GAO determined that to cover one-half of the projected JSAS costs, based on an average of the past three actuarial valuations, the participating judges' contribution rates would have to be increased 0.66 percentage points above the current rates. However, increasing the judges' contribution rates could adversely affect participation in the plan, which would be contrary to one of the major reasons for the structural changes made to JSAS over the years.
GAO also identified errors in the actuarial valuation report for plan year 2010 and the Administrative Office of the United States Courts (AOUSC) actuary subsequently issued a corrected report. To prevent these errors from occurring in the future, AOUSC revised its procedures for the preparation of the actuarial valuation reports in November 2012 that incorporated appropriate internal controls to help ensure that information provided to the actuary for future actuarial valuation reports is complete and accurate. GAO determined that the revised procedures developed by AOUSC, if properly implemented, are sufficient to address the errors identified.
section_title: What GAO Recommends
paragraphs: GAO is not making any recommendations in this report. In his comments on the draft report, the Director of AOUSC stated that the report accurately reflects the federal governments and participating judges contribution rates. He further commented that AOUSC has implemented several improvements to strengthen the administration of JSAS.

section_title: Letter
paragraphs: The Judicial Survivors’ Annuities System (JSAS) was established in 1956  as a voluntary survivor benefit plan available to Article III judges and  certain non-Article III judges. The Administrative Office of the United  States Courts (AOUSC) is responsible for administering JSAS. JSAS is to  provide annuities to surviving spouses and dependent children of   (1) deceased Supreme Court justices, (2) deceased judges of the United  States, and (3) other deceased judicial officials who participated in JSAS.
The Federal Courts Administration Act of 1992 enhanced the benefits  available from JSAS and reduced the amounts that participating judges  were required to contribute toward the plan’s costs. The act required us  to review JSAS costs every 3 years and to determine whether the judges’  contributions fund at least 50 percent of the plan’s costs. If the  contributions fund less than 50 percent of these costs, we are required to  determine what adjustments to the contribution rates would be needed to  achieve the 50 percent ratio. This audit provision in the 1992 act was  repealed on December 28, 2012. Therefore, this is our sixth and final  report since the passage of the 1992 act.
subsections: section_title: Objectives, Scope, and Methodology
paragraphs: Our objectives were to determine whether participating judges’  contribution rates for the 2008, 2009, and 2010 plan years funded 50  percent of the JSAS costs and, if not, what adjustments in the contribution  rates would be needed to achieve the 50 percent ratio. To satisfy our  objectives, we used the normal cost rates determined by actuarial  valuations of the system for each of the 3 plan years and determined the  judges’ normal cost share of the plan’s total normal cost rate. The normal  cost rate is the level percentage of future salaries projected to be  sufficient, along with investment earnings and the plan’s assets, to pay  the plan’s benefits. The normal cost for a plan year is the normal cost rate  multiplied by the participants’ salaries for that year. The plan’s actuary,  using the plan’s funding method—in this case, the aggregate cost  method—determines the plan’s normal cost rate for each plan year. We  also examined participants’ contributions, the federal government’s  contribution, and other relevant information in each plan year’s JSAS  actuarial valuation report.
An independent accounting firm hired by AOUSC audited the JSAS  financial information, and the plan’s actuary certified the actuarial  information included in the JSAS actuarial valuation reports. We discussed  the contents of the JSAS actuarial valuation reports with officials from  AOUSC and the plan’s actuary for the 3 plan years (2008 to 2010).
During the course of our review, we identified errors in the actuarial  valuation report for plan year 2010, which resulted in the reissuance of  the report. We used this reissued actuarial valuation report to conduct our  analysis and reviewed AOUSC’s revised procedures for the preparation  of the actuarial valuation reports to determine if planned actions were  sufficient to address the errors we found.
In addition, we discussed with the plan’s actuary the actuarial  assumptions, methodology, and plan provisions used to project future  benefits of the plan. We did not independently audit the JSAS actuarial  valuation reports or the actuarially calculated cost figures. However,  because we had to rely on the work performed by the plan’s actuary, we  reviewed the qualifications of the plan’s actuary who prepared the JSAS  actuarial valuation reports for plan years 2008 to 2010 and found that the  actuary met relevant qualification standards.
We conducted this performance audit from January 2012 through  February 2013 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives. We provided a  draft of this report to the Director of AOUSC for review and comment.
section_title: Background
paragraphs: Depending on the circumstances, judicial participants may be eligible for  some combination of five retirement systems, including the Civil Service  Retirement System (CSRS) or the Federal Employees Retirement  System. Three other separate retirement systems, described in appendix  I, apply to various groups of judges in the federal judiciary, with JSAS  being available to participants in all three of these other retirement  systems to provide annuities to their surviving spouses and children.
subsections: section_title: History of JSAS
paragraphs: JSAS was created in 1956 to help provide financial security for the  families of deceased federal judges. Generally, it was established to  provide benefits to surviving eligible spouses and unmarried dependent  children of judges who participate in the plan. Judges may elect coverage  within 6 months of taking office; 6 months after getting married, if they  were not married when they took office; 6 months after being elevated to  a higher court; or during an open season authorized by statute. Upon a  judge’s death, the surviving spouse is to receive an annual annuity that  equals 1.5 percent of the judge’s average annual salary, including  retirement salary, during the 3 highest consecutive paid years (commonly  known as the high-3) times the judge’s years of creditable service. The  annuity may not exceed 50 percent of the high-3 and is guaranteed to be  no less than 25 percent. JSAS also provides survivor annuity benefits to  unmarried dependent children under age 18 or age 22 if they are full-time  students. JSAS annuitants receive an annual adjustment in their annuities  at the same time, and by the same percentage, as any cost-of-living  adjustment (COLA) received by CSRS annuitants. Spouses and children  are also eligible for Social Security survivor benefits, provided the judge  was an insured worker under the Social Security system.
Since its inception, JSAS has been amended several times. Because of  concern that too few judges were participating in the plan, Congress  made broad reforms effective in 1986 with the Judicial Improvements Act  of 1985. The 1985 act (1) increased the annuity formula for surviving  spouses from 1.25 percent to the current 1.5 percent of the high-3 for  each year of creditable service and (2) changed the provisions for  surviving child benefits to relate benefit amounts to judges’ high-3 rather  than the specific dollar amounts provided in 1976 by the Judicial  Survivors’ Annuities Reform Act. In recognition of the significant benefit  improvements that were made, the 1985 act increased the amounts that  judges were required to contribute from 4.5 percent to 5 percent of their  salaries, including retirement salaries. The 1985 act also changed the  requirements for government contributions to the plan. Under the 1976  Judicial Survivors’ Annuities Reform Act, the government matched the  judges’ contributions of 4.5 percent of salaries and retirement salaries.  The 1985 act modified this by specifying that the government would  contribute the amounts necessary to fund any remaining cost over the  future lifetime of current participants. That amount is limited to 9 percent  of total covered salary each year.
In response to concerns that required contributions of 5 percent may have  created a disincentive to participate, Congress enacted the Federal  Courts Administration Act of 1992. Under this act, participants’  contribution requirements were reduced from 5 percent to 2.2 percent of  salaries for active and senior judges and 3.5 percent of retirement  salaries for retired judges. The 1992 act also significantly increased  benefits for survivors of retired judges. This increase was accomplished  by including years spent in retirement in the calculation of creditable  service and the high-3 salary averages. Additionally, the 1992 act  allowed judges to stop contributing to the plan if they ceased to be  married and granted benefits to survivors of any judge who died in the  interim between leaving office and the commencement of a deferred  retirement salary. Prior to 2008, surviving spouses forfeited their JSAS  annuity rights if they remarried before reaching age 55. In 2008, JSAS  was amended to restore the judicial survivor’s spousal annuity upon the  termination or dissolution of a subsequent remarriage by annulment,  death, or divorce.
Furthermore, after AOUSC conducted a study of JSAS to determine  whether it was equitable in its coverage and cost when compared to other  survivor benefit programs, Congress passed the Judicial Survivors  Protection Act of 2009. The 2009 act authorized an open season, which  covered the period from September 11, 2009, through March 10, 2010,  for judges who previously opted not to enroll in JSAS. However, these  judges were required to pay 2.75 percent of future pay instead of the 2.2  percent referred to in the 1992 act. The 2009 act also allowed judges to  purchase, in 3-month increments, up to an additional year of service  credit for each year of federal judicial service completed. According to  AOUSC, during this open season, 279 judges enrolled in JSAS,  increasing the participation rate from 60 percent to 71 percent.
According to the JSAS actuarial valuation report for plan year 2010  issued on November 16, 2012, as of October 1, 2010, there were 1,542  active and senior judges, 268 retired judges, and 356 survivor annuitants  covered under JSAS.
section_title: Calculation of Federal Share
paragraphs: JSAS is financed by judges’ contributions and direct appropriations of  federal funds. Funds appropriated are in amounts estimated to be  sufficient, together with judges’ contributions, investment earnings, and  the plan’s assets, to fund the future benefits paid to survivors of current  and deceased participants. The plan’s actuary, using the plan’s funding  method—in this case, the aggregate cost method—determines the plan’s  normal cost rate for each plan year. Normal cost calculations are  estimates and require that many actuarial assumptions be made about  the future, including, but not limited to, mortality rates, turnover rates,  returns on investment, salary increases, and COLA increases over the life  spans of current participants and beneficiaries. There are many  acceptable actuarial methods for calculating normal cost. Regardless of  which cost method is chosen, the expected total long-term cost of the  plan should be the same; however, the allocation of these total long-term  costs to particular years’ costs may differ, depending on the cost method  used. The federal government’s actuarially recommended contribution is  the product of the federal government’s normal cost rate and the  participating judges’ salaries. The actual federal government contribution  is through annual appropriations.
To determine the actuarially recommended annual contribution of the  federal government, AOUSC, which is responsible for the administration of  JSAS, engages an enrolled actuary to perform the calculation of funding  needed based on the difference between the present value of the expected  future benefit payments to participants and the value of net assets in the  plan. For the 3-year period under review, AOUSC’s Accounting and  Financial Systems Division (AFSD) was responsible for gathering and  transmitting relevant information, such as participants’ demographic data  and economic assumptions, to the plan’s actuary to perform these  calculations. Appendix II provides more details on the methodology used to  determine the federal government’s contribution rate.
section_title: Judges’ Share of JSAS Normal Cost Was Less Than Half of Plan’s Costs
paragraphs: For JSAS plan years 2008 to 2010, the participating judges’ share of  normal cost was, on average, about 41 percent of the plan’s costs. Based  on information contained in the JSAS actuarial valuation reports for plan  years 2008, 2009, and 2010, to cover one-half of the plan’s future costs,  the judges’ contribution rates would need to increase by 0.66 percentage  points. However, increasing the judges’ contribution rates could adversely  affect participation in the plan, which would be contrary to one of the  major reasons for the structural changes made to JSAS over the years.  This is the third time since 1992 we have reported that the judges’  contribution rates did not account for one-half of JSAS normal costs.
subsections: section_title: JSAS Costs for Plan Years 2008 to 2010
paragraphs: In plan year 2008, participating judges’ normal costs represented about  47 percent of JSAS total normal costs, which was slightly less than the 50  percent goal. The difference between the 50 percent ratio and the  participating judges’ share became larger in plan years 2009 and 2010,  when judges’ normal costs represented 39 percent and approximately 36  percent of JSAS total normal costs, respectively. The judges’ average  share of total normal costs for the 3-year period under review was about  41 percent. The federal government’s share of JSAS normal costs  increased over the years included in our review, from approximately 53  percent in plan year 2008, to 61 percent in plan year 2009, and to  approximately 64 percent in plan year 2010. The government’s average  share of total normal costs for the 3-year period under review was about  59 percent. Table 1 shows, for the period covered in our review, the  judges’ and the federal government’s normal cost rates and shares of  JSAS normal costs using the aggregate cost method. See appendix II for  a discussion of the aggregate cost method.
The total normal costs expressed as a percentage of the present value of  participants’ future salaries shown in table 1 increased from 5.41 percent  in plan year 2008 to 7.59 percent in plan year 2010. The judges’ actual  rate of normal cost increased marginally from 2.55 percent of salaries in  plan year 2008, to 2.62 in plan year 2009, and to 2.70 percent of salaries  in plan year 2010. During those same years, the recommended  government’s contribution rate increased from 2.86 percent of salaries in  plan year 2008 to 4.09 percent of salaries in plan year 2009, and to 4.89  percent in plan year 2010.
Most of the increase in the recommended federal government’s  contribution rate over the 3 years under review was due to (1) less  favorable actual economic and demographic outcomes over this period  than predicted by the actuarial assumptions (known as losses from  economic and demographic “experience”) and (2) changes in actuarial  assumptions regarding future economic and demographic outcomes.  Specifically, in plan years 2008 and 2009, both economic and  demographic experience were less favorable than predicted by the  actuarial assumptions; this included losses because of rates of return on  plan assets being significantly less than assumed as well as other  factors. In addition, economic and demographic assumptions were  revised to reflect (1) expected increases in life expectancy and   (2) decreases in assumed future rates of investment return, inflation, and  salary increases. Beginning in plan year 2009, to reflect lower mortality  rates, the plan’s actuary used a mortality table that projected mortality  rates forward to build in 5 years of mortality improvement and applied a 4- year age setback. In addition, in plan year 2010, the assumed rates of  investment return and inflation were changed to be consistent with  changes in the assumptions used by the Office of Personnel  Management (OPM) for CSRS. These changes included a decrease in  the assumed rate of investment return from 6.25 percent to 5.75 percent.
One factor that may further increase the federal government’s  contribution rate over the next 3-year cycle is continued low interest rates.  Specifically, if rates remain at today’s low levels, a further reduction in the  assumed rate of investment return is possible. Potential changes to other  assumptions, such as salary increases, inflation, and mortality  improvement, as well as actual demographic and economic experience  over the next 3-year cycle, would also influence future contribution rates.
section_title: Adjustment That Would Be Needed in Judges’ Contribution Rates
paragraphs: Based on our review of the judges’ contribution rates for JSAS, we  determined that to cover 50 percent of the projected JSAS costs, based  on an average of the past three actuarial valuations, the participating  judges’ contribution rates would have to be increased 0.66 percentage  points above the current rates. There are many ways a rate increase  could be distributed among plan participants. For example, the increase  could be equally distributed among those currently contributing 2.2  percent, 2.75 percent, and 3.5 percent. If the increase were distributed  equally among the judges, those contributing 2.2 percent would be  increased to 2.86 percent, those contributing 2.75 percent would be  increased to 3.41 percent, and those contributing 3.5 percent would be  increased to 4.16 percent.
section_title: Increase in Judges’ Contribution Rates Could Adversely Affect the Number of Plan Participants
paragraphs: A potential impact of increasing the contribution rates could be a decline in  the participation rate for JSAS. Increasing the participation rate in JSAS  was a major reason for the plan changes made over the years. In the past,  we reported a participation rate in JSAS of 38 percent before passage of  the 1992 act. According to AOUSC, the participation rate in JSAS was 71  percent as of September 30, 2010. Increasing the contribution rates now,  along with the potential for changing the rates every 3 years, could have an  impact on judges’ decisions to participate in JSAS.
Table 2 illustrates how the normal cost share for judges and the federal  government has fluctuated over the past 9 years.
As shown in table 2, the judges’ normal cost share, in any given year,  may vary from the 50 percent goal, either exceeding or not meeting this  goal. The judges’ annual share of normal costs for the 9-year period  covering plan years 2002 to 2010 ranged from approximately 36 to 78  percent over this period, averaging approximately 56 percent.
section_title: Plan Year 2010 Actuarial Valuation Report Was Reissued Because of Omissions and Errors
paragraphs: Our review of the JSAS actuarial valuation reports showed that AOUSC  had not established sufficient controls to help ensure that the information  provided to the actuary to calculate actuarial amounts used in determining  JSAS normal costs was complete and accurate. Specifically, during our  review, we found that the initial actuarial valuation report issued in May  2011 for plan year 2010 (1) omitted information on legislative changes  affecting the plan provisions, (2) contained inaccurate participant data,  and (3) used incorrect economic assumptions. After we brought these  issues to AOUSC’s attention, the agency provided updated information to  the actuary, and the actuary reissued its actuarial valuation report for plan  year 2010 in November 2012.
subsections: section_title: Omissions Related to Legislative Changes
paragraphs: We found that AOUSC did not provide key information to the actuary  about changes in plan provisions authorized by the Judicial Survivors  Protection Act of 2009, including the establishment of an open enrollment  season. Although AOUSC’s AFSD provided to the actuary the number of  participants who enrolled during the open season, AFSD did not notify the  actuary that these judges contributed 2.75 percent of pay as authorized  by the 2009 act, instead of the 2.2 percent required by the Federal Courts  Administration Act of 1992. Similarly, AFSD did not provide the actuary  with the number of judges who purchased additional years of service,  also allowed under the 2009 act. As a result, these plan changes were  not considered when the actuary initially calculated the normal cost rates  for plan year 2010. Further, the initial actuarial valuation report for plan  year 2010 did not document any changes in plan provisions when  describing the JSAS plan.
AOUSC officials explained that in October 2009, the person responsible  for preparing the information for the actuary separated from the agency,  and a new staff person was assigned to perform these responsibilities.  The new staff person was not as familiar with the required information to  be provided to the actuary. In addition, AFSD had not established  procedures that required coordination with the Office of Human  Resources’ Judges Compensation and Retirement Services Office  (JCRSO). JCRSO manages the processing of all personnel and payroll  documents for all judges and survivors through the Human Resources  Management Information System (HRMIS). As such, JCRSO staff  members are knowledgeable about changes in JSAS that affect  contribution rates and participation. However, JCRSO did not participate  in preparing the information that was provided to the actuary, nor did it  review the actuarial valuation reports before they were issued because  AOUSC’s procedures did not require such coordination. As a result, plan  participant information resulting from changes in plan provisions was  omitted from the plan year 2010 initial actuarial valuation report.
section_title: Inaccurate Participant Data
paragraphs: We also found that AOUSC provided inaccurate participant data to the  actuary. AFSD provided the actuary participant data from its Census  database for the 2010 plan year, which were not reviewed and properly  reconciled to HRMIS by JCRSO’s staff. AFSD uses data from HRMIS to  annually update the Census database to provide the actuary information  on judiciary retirement and survivor plans. Because participant data were  not reviewed and properly reconciled by experienced and knowledgeable  JCRSO staff members, participant status was sometimes misclassified,  and the total number of participants was incomplete in the original data  provided to the actuary for plan year 2010. For example, in plan year  2010, there were 2,870 participants in the Census database and 2,840  participants in the HRMIS database—a difference of 30 participants.  Although this difference only represented about 1 percent of the  population of participants, which by itself is not material, the lack of  adequate reconciliation and review procedures could have led to a more  significant misstatement of the reported amounts that may not have been  prevented or detected and corrected in a timely manner. Having incorrect  data about plan participants can affect the actuarial amounts used in  calculating JSAS normal costs.
According to AOUSC, these differences occurred because, as discussed  previously, there was no required reconciliation of Census and HRMIS  data by JCRSO. Although AFSD had procedures that required its  management to review the Census database and the actuarial reports  before issuance, these procedures did not require that data provided to  the actuary be reviewed and approved by JCRSO.
section_title: Incorrect Economic Assumptions
paragraphs: We found that AOUSC inadvertently provided incorrect economic  assumptions to the actuary for plan year 2010. Actuaries use economic  and demographic assumptions to calculate various actuarial present  values, such as a plan’s present value of future benefits. For JSAS, the  actuary is responsible for the demographic assumptions, which include  rates for mortality, retirement, termination, and disability. AOUSC is  responsible for providing the actuary the economic assumptions to be  used in the actuarial valuation reports, which include rates for return on  investment, inflation, and salary increases. For the economic  assumptions, AOUSC has historically made a determination to use  assumptions that are consistent with those used by OPM in its  determination of funding requirements for the federal CSRS, specifically  those that relate to return on investment and inflation. Prior to fiscal year  2010, OPM used the same set of economic assumptions for funding and  financial reporting purposes. However, effective in fiscal year 2010,  Statement of Federal Financial Accounting Standards 33 (SFFAS No. 33)  required federal agencies (including OPM) to use a prescribed  methodology for determining economic assumptions for financial  reporting purposes. This prescribed methodology differed from the  methodology used by OPM for determining the economic assumptions for  funding purposes. As a result, OPM began using one set of economic  assumptions for funding and another set of economic assumptions for  financial reporting purposes beginning in fiscal year 2010. For JSAS,  AOUSC inadvertently provided the actuary the economic assumptions  used for financial reporting instead of the economic assumptions for  funding. According to AOUSC, its staff members were not aware of the  issuance of SFFAS No. 33—and the change to two sets of economic  assumptions—because the agency, for its own financial reporting, does  not follow the Federal Accounting Standards Advisory Board (FASAB)  standards but rather the Financial Accounting Standards Board (FASB)  standards. Subsequently, AOUSC instructed the actuary to change the  plan year 2010 economic assumptions. The actuary issued a revised  actuarial valuation report to include the newly required assumptions on  November 16, 2012. The assumed rate for return on investment was  revised from 4.80 percent to 5.75 percent, and the assumed rate of  inflation was revised from 2.50 percent to 3 percent, causing the actuarial  amounts in the actuarial valuation report for plan year 2010 to change.
section_title: Revisions to Plan Year 2010 JSAS Report and Actions Taken by AOUSC
paragraphs: In the reissued report, the normal cost rate, expressed as a percentage of  the present value of participants’ future salaries, decreased from 9.21  percent in the initial report to 7.59 percent because of the combined effect  of the errors noted above. In addition, the judges’ share of total normal  cost increased from 28.7 percent to 35.6 percent, a net increase of 6.9  percentage points. The government’s share of total normal cost  decreased by 6.9 percentage points as well, from 71.3 percent to 64.4  percent. We reviewed the changes made by the actuary in the November  2012 report and found that the reissued report addressed the errors we  found in our review.
Reporting complete and accurate information is critical to ensuring that  Congress has the accurate and complete information it needs to make  key decisions about JSAS. Standards for Internal Control in the Federal  Government provides that internal control should generally be designed  to assure that ongoing monitoring occurs in the course of normal  operations, including regular management and supervisory activities,  comparisons, reconciliations, and other actions people take in performing  their duties. The standards also state that effective communications  should occur in a broad sense with information flowing down, across, and  up the organization. Because AOUSC’s policies and procedures did not  incorporate key monitoring and communication controls for JSAS, the  calculations for determining the plan’s cost were inaccurate, and the plan  year 2010 actuarial valuation report had to be reissued.
To prevent these errors from occurring in the future, AOUSC issued  revised procedures in November 2012 that incorporated internal controls  to help ensure that information provided to the actuary for future actuarial  valuation reports is complete and accurate. Specifically, in its revised  procedures, AOUSC assigned JCRSO as the plan actuary’s main point of  contact. JCRSO is now responsible for producing the judges’ population  and demographic data needed for the plan’s actuary after properly  reconciling the data. As part of the revised procedures, AOUSC created  the Judges’ Retirement and Survivors’ Trust Fund Monitoring Group to  provide operational oversight and focus on issues related to JSAS, such  as legislative changes to the plan. The monitoring group includes staff  members from JCRSO, AFSD, and the Office of the General Counsel.  AOUSC’s revised procedures also require the actuary to prepare  valuation reports that include economic assumptions for both funding and  financial reporting purposes. The economic assumptions used by the  actuary are to be approved and documented by the monitoring group  after consulting with OPM. Further, AOUSC’s revised procedures require  that JCRSO review actuarial valuation reports before issuance to help  ensure the accuracy of participant data and completeness of all relevant  information affecting JSAS. We determined that the revised procedures  developed by AOUSC, if properly implemented, are sufficient to address  the issues we identified in this report. Consequently, we are not making  any recommendations in this report.
section_title: Agency Comments
paragraphs: We provided a draft of this report to AOUSC for review and comment.  Written comments from the Director of AOUSC are reprinted in appendix  III. AOUSC also provided technical comments, which we have  incorporated as appropriate.
In his comments, the Director of AOUSC stated that our report accurately  reflects the federal government’s and participating judges’ contribution  rates into JSAS and recognizes that judges have contributed almost 56  percent of the cost of the program from fiscal years 2002 through 2010.  AOUSC’s Director also stated that AOUSC has implemented several  improvements to strengthen the administration of JSAS, including the  incorporation of better internal controls, improved communication and  coordination between offices with JSAS responsibilities, and  documentation of the new process.
We are sending copies of this report to interested congressional  committees and the Director of the Administrative Office of the United  States Courts. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  Larry Malenich at malenichj@gao.gov or Frank Todisco at  todiscof@gao.gov or call (202) 512-3406. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix IV.
J. Lawrence Malenich  Director  Financial Management and Assurance  Frank Todisco  Chief Actuary  Applied Research and Methods  The undersigned meets the qualification standards of the American  Academy of Actuaries to render the actuarial opinions contained in this  report.
section_title: Appendix I: Retirement Systems Available to Federal Judges
paragraphs: The Administrative Office of the United States Courts (AOUSC)  administers three retirement systems for judges in the federal judiciary.    The Judicial Retirement System automatically covers United States  Supreme Court justices, federal circuit and district court judges, and  territorial district court judges, and is available, at their option, to the  Counselor to the Chief Justice, the Director of the Administrative  Office of the United States Courts, and the Director of the Federal  Judicial Center.    The Judicial Officers’ Retirement System is available to bankruptcy  and full-time magistrate judges.    The United States Court of Federal Claims Judges’ Retirement  System is available to the United States Court of Federal Claims  judges.
Bankruptcy, full-time magistrate, and United States Court of Federal  Claims judges are automatically covered under the Federal Employees  Retirement System (FERS) and may elect to participate in the Judicial  Officer’s Retirement System or the United States Court of Federal Claims  Judges’ Retirement System.
Judges who retire under the judicial retirement systems generally  continue to receive the full salary amounts that were paid immediately  before retirement, assuming the judges met the age and service  requirements.
Retired territorial district court judges generally receive the same cost-of- living adjustment that Civil Service Retirement System retirees receive,  except that their annuities cannot exceed 95 percent of an active district  court judge’s salary. United States Court of Federal Claims judge retirees  continue to receive the same salary payable to active United States Court  of Federal Claims judges.
Those in the Judicial Retirement System and the United States Court of  Federal Claims Judges’ Retirement System are eligible to retire when the  number of years of service and the judge’s age total at least 80, with a  minimum retirement age of 65, and service ranging from 10 to 15 years.  Those in the Judicial Officers’ Retirement System are eligible to retire at  age 65 with at least 14 years of service or may retire at age 65 with 8  years of service, on a less than full salary retirement. Participants in all  three judicial retirement systems may contribute to and receive Social  Security benefits.
section_title: Appendix II: Aggregate Funding Method Used to Determine the Federal Government’s Contribution Rate
paragraphs: The aggregate funding method used by the Judicial Survivors’ Annuities  System (JSAS) plan defines the normal cost rate as the level percentage  of future salaries that is projected to be sufficient, along with investment  earnings and the plan’s assets, to pay the plan’s benefits for current  participants and beneficiaries.The following discussion is intended to  illustrate the use of the aggregate funding method.
For plan year 2010, the JSAS’s actuary estimated that the present value  of future benefits for participating judges and beneficiaries was  $889,109,891, while JSAS had assets amounting to $530,175,757. The  difference between these amounts, $358,934,134, must be financed  through future contributions to be paid by the participating judges and the  federal government. Using the same assumptions as used to estimate the  present value of future benefits, the actuary estimated the present value  of participating judges’ future salaries to be $4,727,919,865 so that the  amount to be financed represented 7.59 percent ($358,934,134 divided  by $4,727,919,865) of the participating judges’ future salaries. This  percentage is JSAS’s normal cost rate. If all the actuarial assumptions  proved exactly correct, then a total contribution of 7.59 percent of the  participating judges’ salaries annually would make up the difference  between JSAS’s future payments and its assets (the $358,934,134  mentioned above). The JSAS’s actuary also estimated the present value  of participating judges’ future contributions to be $127,723,509. Thus, the  federal government’s share of the present value of future contributions is  the difference between $358,934,134 and $127,723,509, or  $231,210,625.
Under this method, for plan year 2010, the federal government’s  actuarially recommended contribution rate is equal to the federal  government’s share of future financing ($231,210,625) divided by the  present value of the participating judges’ future salaries ($4,727,919,865).  For plan year 2010, the rate was 4.89 percent ($231,210,625 divided by  $4,727,919,865). Thus, the actuarially recommended federal government  contribution for a particular year is the product of the federal  government’s actuarially recommended contribution rate and the  participating judges’ salaries for that year. The actual federal government  contribution is approved through annual appropriations, which could vary  above and below the actuarially recommended amount. According to  AOUSC, the amount appropriated is usually equal to the actuarially  recommended amount. However, there is a time lag between the AOUSC  budget preparation and the issuance of the actuarial valuation reports.  For example, the appropriations received for fiscal year 2010 were based  on the recommended contributions from the actuarial valuation report for  fiscal year 2008 (that is, the valuation as of October 1, 2007) as it was the  most current report available when the fiscal year 2010 budget was  prepared.
section_title: Appendix III: Comments from the Administrative Office of the United States Courts
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the individuals named above, Julie Phillips (Assistant  Director), Jehan Chase, and Nina M. Rostro made key contributions to  this report.