	Background

Most civilian federal employees who were hired before 1984 are covered by the Civil Service Retirement System (CSRS). Under CSRS, employees do not pay Social Security taxes or earn Social Security benefits. Federal employees first hired in 1984 or later are covered by the Federal Employees' Retirement System (FERS). 66-215) to provide pension benefits for civilian federal employees. Under the CSRS offset plan, 6.2 percentage points of the employee's payroll contribution and an equal share of the employer contribution are diverted from CSRS to the Social Security trust fund. Retirement Age and Years of Service

Under CSRS, a worker with at least 30 years of service can retire at the age of 55; a worker with at least 20 years of service can retire at the age of 60; and a worker with 5 or more years of service can retire at the age of 62. The FERS minimum retirement age (MRA) for an employee with 30 or more years of service was 55 for workers born before 1948. The MRA for employees born between 1953 and 1964 is 56. It will increase to 57 for those born in 1970 or later. The Thrift Savings Plan

The TSP is a defined contribution (DC) retirement plan similar to the 401(k) plans provided by many private-sector employers. In 2015, federal employees can contribute up to $18,000 to the TSP. Employees aged 50 and older can contribute an additional $6,000. In addition, employees enrolled in FERS can receive employer matching contributions equal to 4% of pay, according to the schedule shown in Table 2 . Federal workers covered by CSRS also may contribute to the TSP, but they receive no matching contributions from their employing agencies. Employer and Employee Contributions to CSRS and FERS

Both CSRS and FERS require participants to contribute toward the cost of their future pensions through a payroll tax. Under CSRS, employees contribute 7.0% of base pay to the Civil Service Retirement and Disability Fund (CSRDF). Under FERS, employees first hired before 2013 contribute 0.8% of pay to the CSRDF and they also pay Social Security taxes (6.2% on salary up to the maximum taxable wage base of $118,500 in 2015). Members of Congress contribute 8.0% of salary to the CSRDF if covered by CSRS; 1.3% of salary to the CSRDF if under FERS and first covered prior to 2013; 3.1% of salary to the CSRDF if under FERS and first covered in 2013; or 4.4% of salary to the CSRDF if under FERS and first covered after 2013. The federal government's share of the estimated normal cost of CSRS is 22.3% of payroll. Effective beginning FY2015, OPM has estimated the normal cost of the FERS basic annuity to be 14.0% of payroll for employees first hired before 2013 and 14.2% of payroll for employees first hired in 2013 or later. The federal government has three other mandatory costs for employees enrolled in FERS: (1) Social Security, (2) the 1% agency automatic contribution to the TSP, and (3) agency matching contributions to the TSP. All agencies must contribute an amount equal to 1% of employee pay to the TSP. The normal cost of FERS to the federal government is therefore is at least 20.4% (13.2 + 6.2 + 1 = 20.4) of pay for employees first hired before 2013 and 18.3% (11.1 + 6.2 + 1 = 18.3) for employees hired in 2013 or later. At the same time, the civil service trust fund had an unfunded actuarial liability of $785.0 billion, with $751.4 billion in unfunded liability attributable to CSRS and $33.6 billion in unfunded liability attributable to FERS. Although the CSRDF has an unfunded liability, it is not in danger of becoming insolvent.
Most civilian federal employees who were hired before 1984 are covered by the Civil Service Retirement System (CSRS). Federal employees hired in 1984 or later are covered by the Federal Employees' Retirement System (FERS). Both CSRS and FERS require participants to contribute toward the cost of their pensions through a payroll tax. Employees who are covered by CSRS contribute 7.0% of pay to the Civil Service Retirement and Disability Fund (CSRDF). They do not pay Social Security taxes or earn Social Security benefits. Employees enrolled in FERS and first hired
before 2013 contribute 0.8% of their pay to the CSRDF, in 2013 contribute 3.1% of pay to the CSRDF, and after 2013 contribute 4.4% of pay to the CSRDF.
All FERS employees contribute 6.2% of wages up to the Social Security taxable wage base ($118,500 in 2015) to the Social Security trust fund.
The minimum retirement age (MRA) under CSRS is 55 for workers who have at least 30 years of service. The FERS MRA is 55 for employees born before 1948. The MRA for employees born between 1953 and 1964 is 56, increasing to the age of 57 for those born in 1970 or later. Both FERS and CSRS allow retirement with an unreduced pension at the age of 60 for employees with 20 or more years of service and at the age of 62 for employees with at least 5 years of service.
The Thrift Savings Plan (TSP) is a retirement savings plan similar to the 401(k) plans provided by many employers in the private sector. In 2015, employees covered under either CSRS or FERS can contribute up to $18,000 to the TSP. Employees aged 50 and older can contribute an additional $6,000 to the TSP. Employees under FERS receive employer matching contributions of up to 5% of pay from their federal employing agency. Federal workers covered by CSRS also can contribute to the TSP, but they receive no matching contributions from their employing agencies.
The Office of Personnel Management (OPM) estimates the cost of CSRS to be an amount equal to 29.3% of employee pay. Of this amount, the federal government pays 22.3% and employees pay 7.0%. Effective for FY2015, OPM estimates the cost of the FERS basic annuity at an amount equal to 14.0% of pay for employees first hired before 2013 and 14.2% for employees first hired in 2013 or later. Of this amount, for FERS employees first hired
before 2013, the federal government contributes 13.2% and employees pay the other 0.8%, in 2013 or later, the federal government contributes 11.1% and employees pay the remaining 3.1%, and after 2013 pay 4.4% (with the additional sums above the cost of FERS going to pay down the CSRS unfunded liability).
Employers pay three other costs for employees under FERS: (1) both the employer and employee pay Social Security taxes equal to 6.2% of pay up to the maximum taxable amount; (2) agencies automatically contribute an amount equal to 1% of employee pay to the TSP; and (3) agencies make matching contributions to the TSP equal to up to 4% of pay.
At the end of FY2014, the CSRDF had an unfunded liability of $785.0 billion, consisting of a $751.4 billion deficit for CSRS and a $33.6 billion deficit for FERS. Although the civil service trust fund has an unfunded liability, it is not in danger of becoming insolvent. OPM projects that the balance of the CSRDF will continue to grow through at least 2080, at which point it will hold assets equal to more than 5.3 times total payroll and about 20 times total annual benefit payments.
This report provides an overview of current benefits and financing under CSRS and FERS. For summary information on recent reform proposals related to CSRS and FERS, see CRS Report IF10243, Civilian Federal Retirement: Current Law, Recent Changes, and Reform Proposals, by [author name scrubbed].