Federal Employee Demographics and Integration of State Retirement Plans With Social Security

Pursuant to a congressional request, GAO provided information on social security coverage for Federal civilian employees, including demographic data on employees now covered by the civil service retirement system (CSRS) and an analysis of the approaches used by several States to integrate social security into their staff retirement plans for general employees. GAO also reviewed the Tennessee Valley Authority's (TVA) retirement system, because it is the largest Federal retirement system that is integrated with social security.

GAO found that, during the past 10 years, Federal employees generally retired at age 61, while the average age of all Federal annuitants averaged almost 70 years of age. Only 40 percent of all new Government employees are expected to receive benefits from the CSRS, and only 23 percent will eventually qualify for optional retirement. When a retirement plan is integrated with social security, it attempts to compensate for the fact that social security benefits as a percent of salary decrease as income levels increase. However, most of the eight State plans reviewed by GAO were not integrated with social security, primarily because the State plans predated social security enactment or the State's decision to elect social security coverage. Of the three States in the study that do have integrated plans, one uses a step rate approach, one an offset approach, and the third uses a form of the step rate approach. The step rate and offset approaches facilitate integration of benefits with social security across income levels, but several officials advised against the use of the offset approach because of administrative problems. Three State plans and TVA have a level income benefit option for individuals taking retirement before they are eligible for social security. This option attempts to equalize total retirement benefits before and after social security begins.