The Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) are the two largest retirement programs for federal civilian employees. We did not independently verify the accuracy of the Watson Wyatt database or the benefit amounts calculated. Comparative Benefit Levels Available From FERS, CSRS, and Private Sector Retirement Programs

The comparative benefit amounts available to employees in FERS and CSRS and the average benefit amounts available from the retirement programs in the contractor’s private sector database can differ considerably, depending on a number of factors and how these factors interact with the retirement programs’ designs. These factors include (1) the ages at which employees retire and at which programs provide unreduced benefits, (2) the extent to which employees and employers contribute to the DC plans that are integral components of FERS and most private sector programs, and (3) the impact of inflation and cost-of-living adjustments provided through the retirement programs. 2.1.) Accordingly, to obtain the greatest available benefits from FERS, employees must contribute a total of 12 percent of their salaries. By contributing to their DC plan, FERS employees can obtain greater benefits than are available from CSRS at all ages, but they will pay more to receive the greater benefit amounts. All of the officials agreed with our conclusion that there is no definitive answer to the question of whether federal retirement programs offer greater or smaller benefits than private sector programs.
Why GAO Did This Study

Pursuant to congressional requests, GAO reviewed federal and nonfederal retirement programs, focusing on: (1) an update of the reports on nonfederal retirement programs GAO completed for Congress when the Federal Employees Retirement System (FERS) was being designed; and (2) a comparison of current nonfederal programs with FERS and the Civil Service Retirement System (CSRS). GAO did not independently verify the accuracy of the Watson Wyatt Worldwide database or the benefit amounts calculated.

What GAO Found

GAO noted that: (1) the results of GAO's review revealed that there is no clear, bottom-line answer to the question of whether FERS and CSRS offer greater benefits, or smaller benefits, than private sector retirement programs; (2) the benefits available from FERS and CSRS can be smaller, similar, or greater than the average of the programs in the contractor's private sector employer database, depending on a number of factors and how these factors interact with the retirement programs' designs; (3) chief among these factors are the: (a) ages at which employees retire and at which programs provide unreduced benefits; (b) extent to which employees and employers contribute to the defined contribution plans that are integral components of FERS and most private sector programs; and (c) impact of cost-of-living adjustment practices on benefit amounts over the long term; (4) in fact, FERS and CSRS can provide quite different benefit amounts because of their different designs; and (5) as a rule, greater benefits are available from FERS than from CSRS, but FERS employees must contribute higher percentages of their salaries to receive the greater benefit amounts.