Federal Employees' Retirement System; Normal Cost Percentages

Notice.

Citation: "85 FR 19174"

Page Number: "19174"

"Notices"

Agency: "Office of Personnel Management."

SUMMARY: The Office of Personnel Management (OPM) is providing notice of revised normal cost percentages for employees covered by the Federal Employees' Retirement System (FERS) Act of 1986.

   DATES: The revised normal cost percentages are effective at the beginning of the first pay period commencing on or after October 1, 2020. Agency appeals of the normal cost percentages must be filed no later than October 6, 2020.

   ADDRESSES: Send or deliver agency appeals of the normal cost percentages and requests for actuarial assumptions and data to the Board of Actuaries, care of Gregory Kissel, Senior Actuary, Office of Healthcare and Insurance, Office of Personnel Management, Room 4316, 1900 E Street NW, Washington, DC 20415.

   FOR FURTHER INFORMATION CONTACT: Karla Yeakle, (202) 606-0299.

   SUPPLEMENTARY INFORMATION: The FERS Act of 1986, Public Law 99-335, created a new retirement system intended to cover most Federal employees hired after 1983. Most Federal employees hired before 1984 are under the older Civil Service Retirement System (CSRS). Section 8423 of title 5, United States Code, as added by the FERS Act of 1986, provides for the payment of the Government's share of the cost of the retirement system under FERS. Employees' contributions are established by law and constitute only a portion of the cost of funding the retirement system; employing agencies are required to pay the remaining costs. The amount of funding required, known as "normal cost," is the entry age normal cost of the provisions of FERS that relate to the Civil Service Retirement and Disability Fund (Fund). The normal cost must be computed by OPM in accordance with generally accepted actuarial practices and standards (using dynamic assumptions). The normal cost calculations depend on economic and demographic assumptions. Subpart D of part 841 of title 5, Code of Federal Regulations, regulates how normal costs are determined.

In its meeting on April 12, 2018, the Board of Actuaries of the Civil Service Retirement System (the Board) recommended revisions to the long term economic assumptions and recommended changes to the demographic assumptions used in the actuarial valuations of CSRS and FERS, based on revised regulations OPM published on October 25, 2017. The demographic assumptions include assumed rates of mortality, employee withdrawal, retirement, and merit and longevity pay increases. OPM has adopted the Board's recommendations.

The revised regulations that OPM published on October 25, 2017, related to the calculation of the FERS normal cost percentages and added a category of normal cost percentage for employees of the U.S. Postal Service based on assumptions specific to the expected experience of postal employees. As a result of the revised regulations requiring postal-specific rates, OPM first established separate normal cost percentages for the Postal Service when agency contribution rates were previously revised, effective October 1, 2019. Those normal cost percentages for Postal Service employees reflected the postal-specific demographic assumptions recommended at the Board's April 12, 2018 meeting, with the economic assumptions determined by the Board at its June 1, 2017 meeting. For all other categories of employees, the normal cost percentages effective October 1, 2019, were calculated using the demographic and economic assumptions determined by the Board at its June 1, 2017 meeting. The normal cost percentages effective October 1, 2020, for all categories of employees are based on the demographic and economic assumptions determined by the Board at it April 12, 2018 meeting.

With regard to the economic assumptions described under section 841.402 of title 5, Code of Federal Regulations, used in the actuarial valuations of FERS, the Board concluded that it would be appropriate to assume a rate of investment return of 4.25 percent, a reduction of 0.25 percent from the existing rate of 4.50 percent. In addition, the Board determined that the assumed inflation rate should remain at 2.50 percent, that the assumed rate of FERS annuitant Cost of Living Adjustments should remain at 80 percent of the assumed rate of inflation, and that the projected rate of General Schedule salary increases should remain at 2.75 percent. These salary increases are in addition to assumed within-grade increases. These assumptions are intended to reflect the long term expected future experience of the Systems.

The demographic assumptions are determined separately for each of a number of special groups, in cases where separate experience data is available. Based on the demographic and economic assumptions described above, OPM has determined the normal cost percentage for each category of employees under section 841.403 of title 5, Code of Federal Regulations.

Section 5001 of Public Law 112-96, The Middle Class Tax Relief and Jobs Creation Act of 2012, established provisions for FERS Revised Annuity Employees (FERS-RAE). The law permanently increases the retirement contributions by 2.30 percent of pay for these employees. Subsequently, Section 401 of Public Law 113-67, the Bipartisan Budget Act of 2013, created another class of FERS coverage, FERS-Further Revised Annuity Employee (FERS-FRAE). Employees subject to FERS-FRAE must pay an increase of 1.30 percent of pay above the retirement contribution percentage set for FERS-RAE. Separate normal cost percentages apply for employees covered under FERS-RAE and for employees covered under FERS-FRAE.

Section 211 of Title II, Division E of Public Law 116-94, the Further Consolidated Appropriations Act of 2020, provides for separate normal cost percentages for certain members of the Capitol Police as distinct from other Congressional Employees. Prior rules provided for a combined normal cost percentage for members of the Capitol Police and other Congressional Employees.

The normal cost percentages for each category of employee, including the employee contributions, are as follows:

 Normal Cost Percentages for FERS, FERS-Revised Annuity Employee (RAE), and FERS-Further Revised Annuity (FRAE) Groups                                                                                     Group                                             FERS Normal                                       FERS-RAE                                          FERS-FRAE                                                                                            cost                                              normal cost                                       normal cost                                                                                          (percent)                                         (percent)                                         (percent)                                          Members                                           24.4                                              18.6                                              18.8                                               Capitol Police covered under 5 U.S.C. 8412(d) and 37.1                                              37.6                                              37.8                                               5 U.S.C. 8425(c)                                                                                                                                                                                         Other Congressional employees                     25.6                                              18.6                                              18.8                                               Law enforcement officers, members of the Supreme  37.1                                              37.6                                              37.8                                               Court Police, firefighters, nuclear materials                                                                                                                                                            couriers, customs and border protection officers,                                                                                                                                                        and employees under section 302 of the Central                                                                                                                                                           Intelligence Agency Retirement Act of 1964 for                                                                                                                                                           certain employees                                                                                                                                                                                        Air traffic controllers                           37.0                                              37.5                                              37.7                                               Military reserve technicians                      20.9                                              21.3                                              21.6                                               Employees under section 303 of the Central        25.6                                              26.2                                              26.4                                               Intelligence Agency Retirement Act of 1964 for                                                                                                                                                           certain employees (when serving abroad)                                                                                                                                                                  Other employees of the United States Postal       16.5                                              16.9                                              17.1                                               Service                                                                                                                                                                                                  All other regular FERS employees                  18.1                                              18.6                                              18.8                                                

Under section 841.408 of title 5, Code of Federal Regulations, these normal cost percentages are effective at the beginning of the first pay period commencing on or after October 1, 2020.

The time limit and address for filing agency appeals under sections 841.409 through 841.412 of title 5, Code of Federal Regulations, are stated in the DATES and ADDRESSES sections of this notice.

Office of Personnel Management.

Alexys Stanley,

Regulatory Affairs Analyst.

[FR Doc. 2020-07105 Filed 4-3-20; 8:45 am]

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