Approximately 5.8 million active employees participate in the 34 federal government defined benefit plans. The largest federal defined contribution plan is the Thrift Savings Plan, which has 2.1 million participants, or 97 percent of the participants enrolled in federal government defined contribution plans. In addition, some defined benefit plans are supplemented with defined contribution plans and Social Security benefits, and others are not. Because contributions to most agency plans, under applicable requirements, have covered less than the full accruing cost of retirement benefits to covered employees, the agencies’ budgets have not reflected the full cost of government programs. Retirement System Financing

For the most recent plan filings, 21 of the 34 federal government defined benefit plans—3 of the 15 agency plans and 18 of the 19 plans sponsored by the nonappropriated fund activities and federal reserve and farm credit entities—were fully funded under the static Accumulated Benefit Obligation measure. Therefore, because special issue Treasury securities are used, whether the obligation is funded or unfunded has no effect on current budget outlays. Also, the obligation is not a measure of the government’s ability to pay retirement benefits in the future. The Treasury must obtain the necessary money through tax receipts or borrowing to pay plan benefits to annuitants when those benefits are due for plans having trust funds invested in special issue Treasury securities and for pay-as-you-go plans. Assets in the 17 federal government defined contribution plans are primarily invested in various marketable stock, bond, and government security funds.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the status of public pension plan funding, focusing on federally sponsored defined benefit and contribution plans subject to reporting requirements legislation.

What GAO Found

GAO found that: (1) 34 federal government defined benefit plans have over 10 million participants and 17 defined contribution plans have 2.2 million participants; (2) the 34 defined benefit plans vary considerably and have benefits of over $1.2 trillion; (3) most of the defined benefit plans are administered as trust funds which almost exclusively invest in nonmarketable, special issue Treasury securities, while 6 plans pay benefits from their current year appropriations; (4) most agency plans, except for the Federal Employees Retirement System, are underfunded; (5) the 19 nonappropriated fund activity, federal reserve, and farm credit defined benefit plans are fully funded; (6) the use of trust funds has no effect on current budget outlays and is not a measure of the government's ability to pay future retirement benefits out of tax and other receipts; (7) agencies' budgets have not reflected the full cost of their pension plan programs; (8) the 17 defined contribution plans have more than $28 billion invested in stocks, bonds, and government securities, with the Thrift Savings Plan having about $26 billion in Treasury securities; and (9) defined contribution plan obligations are limited to the employee and employer contributions made and any earnings on them.