Federal Retirement

GAO found no clearcut answer to the question of whether federal retirement programs offer greater or smaller benefits than those offered by private sector retirement programs. The benefits available from the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) can be smaller, similar, or greater than those offered by the private sector, depending on a range of variables. Chief among these factors are the (1) ages at which employees retire and which programs provide reduced benefits, (2) extent to which employees and employers contribute to the defined contribution plans that are integral components of FERS and most private sector programs, and (3) impact of cost-of-living adjustments on benefit amounts over the long term. In fact, FERS and CSRS can provide quite different benefit amounts because of their different designs. As a result, greater benefits are available from FERS than from CSRS, but FERS employees must contribute larger percentages of their salaries to receive the higher benefits.

GAO noted that: (1) the results of GAO's review revealed that there is no clear, bottom-line answer to the question of whether FERS and CSRS offer greater benefits, or smaller benefits, than private sector retirement programs; (2) the benefits available from FERS and CSRS can be smaller, similar, or greater than the average of the programs in the contractor's private sector employer database, depending on a number of factors and how these factors interact with the retirement programs' designs; (3) chief among these factors are the: (a) ages at which employees retire and at which programs provide unreduced benefits; (b) extent to which employees and employers contribute to the defined contribution plans that are integral components of FERS and most private sector programs; and (c) impact of cost-of-living adjustment practices on benefit amounts over the long term; (4) in fact, FERS and CSRS can provide quite different benefit amounts because of their different designs; and (5) as a rule, greater benefits are available from FERS than from CSRS, but FERS employees must contribute higher percentages of their salaries to receive the greater benefit amounts.