Total Compensation Comparability for Federal Employees

GAO was requested to review the Administration's proposed total compensation comparability system and to determine how it would affect civilian employees in the Federal Government. In assessing the feasibility of total compensation comparability, GAO addressed the appropriateness of benefits included in the Office of Personnel Management's (OPM) analysis, the importance of the secondary benefits to any total compensation comparison, the difficulties encountered in measuring benefits, how these measurements could affect the total comparability results, the assumptions OPM used in its actuarially based benefit evaluation models, and the methodology to be used in making annual compensation comparability adjustments.

GAO found that secondary benefits are important. Some benefits received by many private sector employees were not included in the formal benefit models of OPM. A national survey of these secondary benefits showed that these benefits represent about 3 percent of a private sector employee's base salary. Other benefits for which GAO did not obtain cost information could also be important. The failure to adequately consider these benefits in determining total compensation comparability could result in an understatement of the value of private sector compensation. GAO found that many benefits are complex and difficult to measure. The Congressional Budget Office estimates that Federal fringe benefits may range anywhere from the equivalent of 2.8 percent of pay behind private sector programs to 7.4 percent of pay ahead of the private sector, depending on what benefits are included and how they are measured. OPM has many decisions to make in implementing its pension model. On a few of these decisions, GAO favors choices other than the ones made by OPM in its full-scale test. Inequities will result unless differences in benefits between white- and blue-collar workers are recognized. GAO found that the benefits differ on a locality basis. Surveys in five localities showed that benefits varied by almost 10 percentage points of pay. A plan being considered by OPM would utilize locality pay and national benefits to adjust compensation in a specific locality. This could create serious inequities.