FERS consists of three parts: a DB component, a DC component with employer contribution, and Social Security. CSRS consists of two parts: a DB component and a DC component with no employer contribution. The DC component differs between FERS and CSRS. Under FERS, federal agencies automatically contribute an amount equal to 1 percent of salary to the Thrift Savings Plan (TSP) for each covered employee whether or not the employee contributes. In addition, the employer will contribute $1.00 for each $1.00 the employee contributes up to 3 percent of salary; and $.50 for each $1.00 the employee contributes on the next 2 percent of salary, for a maximum total employer contribution of 5 percent. FERS employees may contribute an additional 5 percent of salary with no employer contribution. The DC component in CSRS has no employer contribution; however, employees may contribute up to a total of 5 percent of their salary to the TSP and up to 10 percent of their salary to a separate voluntary contribution account. Except for certain employees who were rehired after December 31, 1983, employees in CSRS are not covered by Social Security through their federal employment. State retirement programs vary widely—not only in their details but also because most jurisdictions have separate programs for special categories of employees, such as law enforcement officers, firefighters, teachers, and elected or judicial officials. Employees who do not fall into one of these categories are usually covered by a retirement system for general employees. In 1911, Massachusetts became the first state to develop a retirement program for general service state employees; and by 1947, every state provided retirement benefits. In addition to Social Security benefits, employers may provide retirement benefits to their employees using two basic types of design components— DB and DC. Under a DB plan, employers bear the full responsibility for providing sufficient funding to guarantee that the benefits promised by the formulas will be paid. A DC plan differs in that there is no guaranteed annual benefit amount at retirement. Therefore, the employee bears the risk of whether the funds available at retirement will provide a desired level of benefits. Because employers may choose to offer a combination of these design components, that is—DB, DC with employer contribution, DC with no employer contribution, and Social Security—retirement programs can differ not only by the benefits they provide, but also by the design components they include. Among the arrangements used by state governments to augment regular employee retirement plans are three DC plans authorized under the Internal Revenue Code at sections 401(k), 403(b), and 457(b). These DC plans are voluntary, supplemental, long-term retirement programs that give employees an opportunity to defer receipt of income until retirement or termination of employment. The key attraction of these plans can be the potential tax savings for employees. Income tax is generally deferred on contributions made to these plans and the associated earnings during an employee’s career. Taxes are due when the individual receives benefits from the plan, usually after retirement. To determine the numbers of state retirement programs open and available to general employees as of July 1, 1998, that included the same design components as FERS and CSRS, and what design components were included in the remaining state retirement programs, we obtained preliminary information from a database developed by the Public Pension Coordinating Council (PPCC) for its report, 1997 Survey of State and Local Government Employee Retirement Systems. We also obtained summary plan documents (e.g., employee handbooks and information brochures) for each of the 50 states and interviewed state retirement officials knowledgeable about the programs. We did not review the underlying statutes that set forth the specific provisions of state retirement plans. We relied on our prior work to identify the design components of FERS and CSRS, which we then used to categorize the state retirement plans. On the basis of our prior work, we defined federal general employees as employees who were covered by FERS and CSRS, excluding those who were covered by special retirement provisions—notably law enforcement officers, firefighters, air traffic controllers, Members of Congress, and congressional staff. We defined state general employees as employees who were not classified as law enforcement officers, firefighters, legislative staff, or elected or judicial officials. We also excluded teachers in those states in which teachers were covered by different retirement plans than the ones that covered general employees. As shown in table 2, we categorized state retirement plans according to the major design components found in FERS and CSRS—specifically DB, DC with employer contribution, DC with no employer contribution, and Social Security. On the basis of the four design components shown above, we classified the states’ design components into six category types as shown in table 3. Our approach was designed to provide the most up-to-date information (as of July 1, 1998) on the current design components and features of state retirement plans; however, it was not designed to provide information on some tiers of multitiered and/or closed plans that states also may be operating. We offset this limitation to some extent by describing the changes that have occurred in the design components of state programs since the programs were established. We also asked retirement officials in each state to confirm the accuracy of the information about their programs used in our report. To describe the changes, if any, that have been made to the design of state retirement programs open and available to state general employees since the programs were established, what design changes states were considering, and the reasons for these changes, we interviewed cognizant state retirement officials. We used this information to determine what design components were previously available to state general employees, as well as those components that would be available if states made the changes they were considering. To provide detailed information on the features of state retirement programs, we also used the database developed by PPCC to obtain specific data regarding eligibility, benefits, and contributions. As a supplement to the database, we reviewed state retirement program summary plan documents and financial reports, and/or we contacted state retirement officials. Plan profiles for each state are presented in appendixes I through VI. The profiles are grouped by type according to their design components and are preceded by summary data we selected to facilitate comparisons with FERS and CSRS. We requested comments on a draft of this report from the Director, Office of Personnel Management (OPM). OPM responded that it had no comments. We did our review from February 1998 to March 1999 in accordance with generally accepted government auditing standards. All of the 50 state retirement programs had two or more of the four design components but few of them had all of the same design components as FERS or CSRS. All states had a DC component, but only nine states contributed to the plan. A defined benefit component was included by 48 states and 43 states included Social Security coverage. A majority of states included three of the design components, but these were not the same components included in either FERS or CSRS. A total of nine states had exactly the same component mix as FERS or CSRS. Of the nine states like FERS or CSRS, three—Minnesota, Missouri, and Oklahoma—had programs similar in design to FERS. These programs included a DB component, a DC component with an employer contribution, and Social Security. The other six states—Colorado, Louisiana, Maine, Massachusetts, Nevada, and Ohio offered retirement programs with the same design components as CSRS to their general employees. That is, these programs included a DB component and a DC component with no employer contribution. The vast majority—35—of the states had retirement programs that included a DB component, a DC component with no employer contribution, and Social Security. The lack of employer contributions distinguished these programs from FERS, and the inclusion of Social Security coverage distinguished them from CSRS. The remaining six states offered retirement programs that included other combinations of the FERS and CSRS design components. For example, Indiana, Tennessee, and Utah had programs with a DB component, a DC component with employer contribution, a DC component with no employer contribution, and Social Security. Michigan and Nebraska had programs that included a DC component with employer contribution, a DC component with no employer contribution, and Social Security. Alaska had a retirement program with a DB component, a DC component with employer contribution, and a DC component with no employer contribution. All states have in some way changed the design components of their retirement programs since the programs were established. For the most part, developments in federal law that might enhance employee benefits prompted these changes—notably, the extension of Social Security eligibility to state employees in the early 1950s and the adoption of tax provisions beginning in the 1970s allowing state employees to contribute on a pretax basis to a DC plan. The vast majority, or 44, of the states provided Social Security coverage after it became available to state employees. Of these states, 43 had provided Social Security coverage by the late 1950s; the last state to add Social Security did so in 1969. Alaska discontinued its Social Security coverage in 1980 after state employees elected to add a DC component with employer contribution to the state’s retirement program. Thus, 43 states currently provide Social Security coverage to their employees. Six states have never added Social Security coverage to their retirement programs. States began establishing deferred compensation plans—voluntary DC plans—to augment their retirement programs in 1972. By 1978, when Congress passed Public Law 95-600, which created a statutory basis for Section 457 of the Internal Revenue Code, almost half of the states had a voluntary DC plan. By 1988, all states had voluntary DC plans available to state employees. Although most state employers did not contribute to these plans, as of July 1998, five states did provide an employer contribution. Table 4 shows the design component changes states have made since their retirement programs were established.