[Federal Register: April 18, 1997 (Volume 62, Number 75)] [Notices] [Page 19152-19153] ----------------------------------------------------------------------- OFFICE OF PERSONNEL MANAGEMENT Federal Employees Retirement System; Normal Cost Percentages AGENCY: Office of Personnel Management. ACTION: Notice. ----------------------------------------------------------------------- SUMMARY: The Office of Personnel Management (OPM) is providing notice of revised normal cost percentage 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, 1997. Agency appeals of the normal cost percentages must be filed no later than October 20, 1997. ADDRESSES: Send or deliver agency appeals of the normal cost percentages to the Board of Actuaries, care of William E. Flynn, III, Associate Director for Retirement and Insurance, Office of Personnel Management, Room 4A10, 1900 E Street, NW., Washington, DC 20415. Send requests for actuarial assumptions and data to the Office of the Actuary, Room 4307 STOP, Office of Personnel Management, Washington, DC 20415. FOR FURTHER INFORMATION CONTACT: Harold L. Siegelman, (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 small fraction 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 practice and standards (using dynamic assumptions). Subpart D of Part 841 of Title 5, Code of Federal Regulations, regulates how normal costs are determined. The Board of Actuaries of the Civil Service Retirement System approved a revised set of economic assumptions for use in the dynamic actuarial valuations of CSRS and FERS. These assumptions were adopted after the Board reviewed statistical data prepared by the OPM actuaries and considered trends that may affect future experience under the Systems. Based on its analysis, the Board concluded that it would be appropriate to continue to assume a 7% rate of investment return, while reducing the anticipated rate of inflation from 4.5% to 4% and lowering the projected rate of General Schedule salary increases from 4.5% to 4.25%. These salary increases are in addition to assumed in-grade increases that reflect past experience. In setting the new inflation assumption, the Board took into account technical changes in the calculation of the Consumer Price Index that were announced on April 1, 1996. It has been estimated that these changes will lower the annual rate of increase in the Index by about .25 of a percentage point. The new assumptions anticipate that over the long term the annual rate of investment return will exceed inflation by 3% and General Schedule salary increases will exceed inflation by .25% a year, as compared to 2.5% and 0%, [[Page 19153]] respectively, under the previous assumptions. The Board also adopted new demographic or ``non-economic'' assumptions. The new demographic rates are based on methodology adopted by the Board in December 1995, in conjunction with its comprehensive review of an extensive 10-year experience study prepared by the OPM actuaries. The normal cost calculations depend on both the economic and demographic assumptions. 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 new economic assumptions and demographic factors, OPM has determined the normal cost percentage for each category of employees under Sec. 841.403 of Title 5, Code of Federal Regulations. The Government-wide normal cost percentages, including the employee contributions, are as follows: Members...........................................................16.5% Congressional employees...........................................16.7% Law enforcement officers, firefighters, and employees under section 302 of the Central Intelligence Agency Act of 1964 for Certain Employees 24.6% Air traffic controllers...........................................23.1% Military reserve technicians......................................11.9% Employees under section 303 of the Central Intelligence Agency Act of 1964 for Certain Employees (when serving abroad)...........16.3% All other employees...............................................11.5% Under Sec. 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, 1997. The time limit and address for filing agency appeals under Secs. 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. James B. King, Director. [FR Doc. 97-10081 Filed 4-17-97; 8:45 am] BILLING CODE 6325-01-M