Updating Interest Rates Charged on Outstanding Civil Service Retirement Contributions Would Save Millions

Gao ID: FPCD-82-39 August 4, 1982

GAO assessed an outdated provision of the civil service retirement system which establishes the rate of interest charged to employees who owe contributions to the retirement fund.

Many retiring federal employees owe the retirement fund for periods of prior civilian service for which contributions were not made. GAO estimates that, if the interest charged on those contributions had been 5 percent rather than 3 percent over the past 20 years, the fund would have realized a long-term savings of $79.6 million for fiscal year 1980 retirees alone. Significant savings can be realized each year in the future if the provision regarding interest charges is amended. The fund has lost investment income because the Office of Personnel Management (OPM) staff responsible for processing owed contributions was reassigned to higher priority work. Furthermore, contrary to a specific statutory prohibition, OPM is giving retirees credit for periods of prior service before their refunds are repaid.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Rosslyn S. Kleeman Team: General Accounting Office: Federal Personnel and Compensation Division Phone: (202) 512-9204


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