	Objectives, Scope, and Methodology

Our objectives were to determine whether participating judges’  contribution rates for the 2008, 2009, and 2010 plan years funded 50  percent of the JSAS costs and, if not, what adjustments in the contribution  rates would be needed to achieve the 50 percent ratio. To satisfy our  objectives, we used the normal cost rates determined by actuarial  valuations of the system for each of the 3 plan years and determined the  judges’ normal cost share of the plan’s total normal cost rate. History of JSAS

JSAS was created in 1956 to help provide financial security for the  families of deceased federal judges. Judges’ Share of JSAS Normal Cost Was Less Than Half of Plan’s Costs

For JSAS plan years 2008 to 2010, the participating judges’ share of  normal cost was, on average, about 41 percent of the plan’s costs. However, increasing the judges’ contribution rates could adversely  affect participation in the plan, which would be contrary to one of the  major reasons for the structural changes made to JSAS over the years. The federal government’s share of JSAS normal costs  increased over the years included in our review, from approximately 53  percent in plan year 2008, to 61 percent in plan year 2009, and to  approximately 64 percent in plan year 2010. The government’s average  share of total normal costs for the 3-year period under review was about  59 percent. Most of the increase in the recommended federal government’s  contribution rate over the 3 years under review was due to (1) less  favorable actual economic and demographic outcomes over this period  than predicted by the actuarial assumptions (known as losses from  economic and demographic “experience”) and (2) changes in actuarial  assumptions regarding future economic and demographic outcomes. Adjustment That Would Be Needed in Judges’ Contribution Rates

Based on our review of the judges’ contribution rates for JSAS, we  determined that to cover 50 percent of the projected JSAS costs, based  on an average of the past three actuarial valuations, the participating  judges’ contribution rates would have to be increased 0.66 percentage  points above the current rates. Although AOUSC’s AFSD provided to the actuary the number of  participants who enrolled during the open season, AFSD did not notify the  actuary that these judges contributed 2.75 percent of pay as authorized  by the 2009 act, instead of the 2.2 percent required by the Federal Courts  Administration Act of 1992. To prevent these errors from occurring in the future, AOUSC issued  revised procedures in November 2012 that incorporated internal controls  to help ensure that information provided to the actuary for future actuarial  valuation reports is complete and accurate. We determined that the revised procedures  developed by AOUSC, if properly implemented, are sufficient to address  the issues we identified in this report. Consequently, we are not making  any recommendations in this report. AOUSC’s Director also stated that AOUSC has implemented several  improvements to strengthen the administration of JSAS, including the  incorporation of better internal controls, improved communication and  coordination between offices with JSAS responsibilities, and  documentation of the new process. We are sending copies of this report to interested congressional  committees and the Director of the Administrative Office of the United  States Courts. This  percentage is JSAS’s normal cost rate.
Why GAO Did This Study

JSAS was created in 1956 to provide financial security for the families of deceased federal judges. JSAS is administered by AOUSC. Active and senior judges currently contribute 2.2 percent and 2.75 percent of their salaries to JSAS, depending on when they elected coverage, and retired judges contribute 3.5 percent of their retirement salaries to JSAS.
Pursuant to the Federal Courts Administration Act of 1992 (Pub. L. No. 102-572), GAO was required to review JSAS costs every 3 years and determine whether the judges' contributions fund at least 50 percent of the plan's costs during the 3-year period. If the contributions funded less than 50 percent of these costs, GAO was to determine what adjustments to the contribution rates would be needed to achieve the 50 percent ratio. GAO used the normal cost rates determined by actuarial valuations of the system and compared the judges' normal cost rate against the plan's total normal cost rate. On December 28, 2012, the GAO audit requirement was repealed by the GAO Mandates Revision Act of 2012 (Pub. L. No. 112-234). Thus, this is the final GAO report.

What GAO Found

GAO found that for the 2008 to 2010 time frame covered by this review, the participating judges' share of normal cost was, on average, about 41 percent of the Judicial Survivors' Annuities System (JSAS) total normal costs, and the federal government's share of normal cost was about 59 percent of JSAS total normal costs. The federal government's share of JSAS normal costs increased over the years included in GAO's review, from approximately 53 percent in plan year 2008, to 61 percent in plan year 2009, and to approximately 64 percent in plan year 2010. The increase was a result of (1) less favorable actual economic and demographic outcomes over this period than predicted by the actuarial assumptions and (2) changes in actuarial assumptions regarding future economic and demographic outcomes.
GAO determined that to cover one-half of the projected JSAS costs, based on an average of the past three actuarial valuations, the participating judges' contribution rates would have to be increased 0.66 percentage points above the current rates. However, increasing the judges' contribution rates could adversely affect participation in the plan, which would be contrary to one of the major reasons for the structural changes made to JSAS over the years.
GAO also identified errors in the actuarial valuation report for plan year 2010 and the Administrative Office of the United States Courts (AOUSC) actuary subsequently issued a corrected report. To prevent these errors from occurring in the future, AOUSC revised its procedures for the preparation of the actuarial valuation reports in November 2012 that incorporated appropriate internal controls to help ensure that information provided to the actuary for future actuarial valuation reports is complete and accurate. GAO determined that the revised procedures developed by AOUSC, if properly implemented, are sufficient to address the errors identified.

What GAO Recommends

GAO is not making any recommendations in this report. In his comments on the draft report, the Director of AOUSC stated that the report accurately reflects the federal governments and participating judges contribution rates. He further commented that AOUSC has implemented several improvements to strengthen the administration of JSAS.