Analysis of OPMs Financial Statements
In accordance with the Chief Financial Officers Act of 1990 and the Government Management Reform Act of 1994, OPM prepares consolidated and consolidating financial statements, including OPM operations and the individual financial statements of the Retirement, Health Benefits, and Life Insurance Programs. An independent certified public accounting firm, Grant Thornton LLP, audits these statements. For the 24th consecutive year, OPM received an unmodified audit opinion on its consolidated financial statements and the consolidating financial statements including the Retirement, Health Benefits, and Life Insurance Programs. These consolidated, consolidating, and combining financial statements are:
- Balance Sheet
- Statement of Net Cost
- Statement of Changes in Net Position
- Statement of Budgetary Resources
Balance Sheet
The Balance Sheet represents OPM’s financial condition at the end of the fiscal year. It shows the resources OPM holds to meet its statutory requirements (Assets), the amounts it owes that will require payment from these resources (Liabilities), and the difference between them (Net Position).
Assets
At the end of FY 2023, OPM held $1,162.9 billion in assets, an increase of $23.4 billion from $1,139.5 billion at the end of FY 2022. The majority of OPM’s assets are intragovernmental, representing claims against other Federal entities. The Balance Sheet separately identifies intragovernmental assets from all other assets.
The largest category of assets is investments at $1,153.1 billion, which represents 99.2 percent of all assets. OPM invests all Retirement, Health Benefits, and Life Insurance Program collections not needed immediately for payment in special securities issued by the Department of the Treasury (Treasury). As OPM routinely collects more money than it pays out, its investment portfolio and its total assets increase over the course of normal business.
In FY 2023, the Total Earned Retirement Program Revenue was less than the applicable cost applied to the Pension Liability by $18.9 billion. When the net effect is favorable, the Retirement Program has the ability to reinvest interest earnings and apply the excess funds to the Treasury Transferred-In to subsidize the underfunding of the Civil Service Retirement System (CSRS). The CSRS transfer was approximately $35.5 billion for FY 2023.
Liabilities
At the end of FY 2023, OPM’s total liabilities were $3,139.0 billion, an increase of 5.7 percent from $2,969.8 billion at the end of FY 2022. Federal Employee Benefits Payable, which primarily consists of Pension Liability, Post-Retirement Health Benefits Liability, and Life Insurance Liability, accounts for 99.9 percent of OPM’s liabilities. [See below and Note 5 Federal Employee Benefits Payable for discussion of these liabilities.] These liabilities reflect estimates by professional actuaries of the future cost, expressed in today’s dollars, of providing benefits to participants in the future.
To compute these liabilities, the actuaries make assumptions about economic factors and the demographics of the future of Federal employee workforce and annuitants, retirees, and their survivors’ populations.
The Pension Liability, which represents an estimate of the future cost to provide CSRS and FERS benefits to current employees and annuitants, is $2,676.1 billion at the end of FY 2023, an increase of $197.1 billion, or 8.0 percent from the end of FY 2022. [See discussion of the Net Cost to Provide CSRS and FERS Benefits below].
The Post-Retirement Health Benefits Liability, which represents the future cost to provide health benefits to active employees after they retire and current annuitants, is $380.1 billion at the end of FY 2023. This reflects a decrease of approximately $(31.5) billion from the end of FY 2022, or (7.7) percent. [See discussion of the Net Cost to Provide Health Benefits below].
The Actuarial Life Insurance Liability differs from the Pension and Post-Retirement Health Benefits Liabilities. Whereas the other two are liabilities for “post-retirement” benefits only, the Actuarial Life Insurance Liability is an estimate of the future cost of life insurance benefits for both deceased annuitants and for employees who die in service. The Actuarial Life Insurance Liability increased by approximately $3.2 billion in FY 2023 to $64.5 billion, or 5.3 percent from the end of FY 2022. [See discussion of the Net Cost to Provide Life Insurance Benefits below].
Net Position
OPM reports its Federal employees’ benefit programs funds in accordance with Statement of Federal Financial Accounting Standard (SFFAS) No. 43, Funds from Dedicated Collections: Amending SFFAS No. 27, Identifying and Reporting Earmarked Funds. This Statement among other provisions, adds “an explicit exclusion for any fund established to account for pensions, other retirement benefits (ORB), other post-employment benefits (OPEB), or other benefits provided for Federal employees (civilian and military).”
OPM’s Net Position is classified into two separate balances. The Cumulative Results of Operations comprise OPM’s net results of operations since its inception. Unexpended Appropriations is the balance of appropriated authority granted to OPM against which no outlays have been made.
OPM’s total liabilities exceeded its total assets at the end of FY 2023 by $1,976.1 billion, primarily due to the large actuarial liabilities and a $22.7 billion allowance for doubtful accounts for U.S. Postal Service (USPS). However, it is important to note that the Retirement, Health Benefits, and Life Insurance Programs are funded in a manner that ensures there will be sufficient assets available to pay benefits well into the future. Table 6 – Net Assets Available for Benefits – shows that OPM’s net assets available to pay benefits have increased by $23.0 billion in FY 2023 to $1,144.7 billion.
Statement of Net Cost
The Statement of Net Cost (SNC) in the Federal Government differs from a private-sector income statement in that the SNC reports expenses first and then subtracts the revenues that financed those expenses to arrive at a net cost.
OPM’s SNC presents its cost of providing four major categories of benefits and services: Civil Service Retirement and Disability Benefits (CSRS and FERS), Health Benefits, Life Insurance Benefits, and HR Services. OPM derives its Net Cost by subtracting the revenues it earned from the gross costs it incurred in providing each of these benefits and services.
OPM’s total FY 2023 Net Cost of Operations was a loss of $210.5 billion, as compared with a loss of $291.4 billion in FY 2022. The primary reasons for the reduction in net loss are due to changes in the actuarial assumptions.
Net Cost to Provide CSRS Benefits
As indicated in Table 7, the Net Cost of Operations for CSRS Benefits was $62.9 billion in FY 2023, a decrease of $(70.0) billion from FY 2022. As reported on the SNC, there was a current year loss of $61.3 billion for CSRS due to changes in actuarial assumptions, primarily an increase to the assumed long-term inflation rate. The actuarial gain due to experience is largely due to greater short-term rates of annuitant mortality than were assumed in the prior year valuation.
There are three prime determinants of OPM’s cost to provide net CSRS benefits: one cost category - the actuarially computed Pension Expense, and two categories of earned revenue: 1) contributions by and for CSRS participants, and 2) earnings on CSRS investments. The Pension Expense for the CSRS is the amount of future benefits earned by participants during the current fiscal year, including net actuarial losses and interest costs on the accrued actuarial liability.
Contributions by and for CSRS participants increased in FY 2023 by $2,617 million from FY 2022 and OPM’s earnings on CSRS investments increased by approximately $14,491 million from the prior fiscal year.
SFFAS No. 33, Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates, requires gains and losses from changes in long-term assumptions to be displayed on the statement of net cost separately from other costs. OPM’s CSRS benefits expense was $27.4 billion in FY 2023, as compared to the $27.2 billion in FY 2022. The increase in benefits paid is due to higher interest expense.
Net Cost to Provide FERS Benefits
As shown in Table 8, the Net Cost to Provide FERS Benefits in FY 2023, increased by $20.4 billion from FY 2022 resulting in a Net Cost of Operations of $157.8 billion for FY 2023. As with the CSRS, there are three prime determinants of OPM’s net cost to provide FERS benefits: one cost category, the actuarially computed Pension Expense; and two categories of earned revenue: 1) contributions by and for participants, and 2) earnings on FERS investments. The Pension Expense for FERS is the amount of future benefits earned by participants during the current fiscal year, including net actuarial losses and interest costs on the accrued actuarial liability.
For FY 2023, OPM incurred a Pension Expense for FERS of $124.2 billion, as compared with $116.7 billion in FY 2022. The primary reason for the increase in FERS pension expense was a larger loss due to changes in long-term actuarial economic assumptions. The FY 2023 Pension Expense also reflected an experience loss primarily due to actual rates of general salary increase being greater than assumed rates. In addition, the FERS program incurred an actuarial loss from assumptions of $93.4 billion in FY 2023 due to greater assumed longer-term rates of annuitant COLA and general salary increases.
Contributions by and for FERS participants increased by $2,800 million, or 5.4 percent from FY 2022, due to the increase in FERS payroll primarily as a result of general salary increases.
In FY 2023 OPM paid FERS benefits of $30.8 billion, compared with $26.6 billion in FY 2022. The increase is due to the growing number of FERS retirees.
Net Cost to Provide Health Benefits
The Net Cost to Provide Health Benefits in FY 2023 decreased by $(31.1) billion from that in FY 2022, see Table 9. There are three prime determinants of OPM’s net cost to provide Health Benefits: two cost categories: the actuarially computed Post-Retirement Health Benefits Expense (see Note 5), and Current Benefits and Premiums, and one earned revenue category: contributions by and for participants.
Current Benefits and Premiums increased $20.3 billion in FY 2023 mostly due to assumption changes resulting in actuarial gains related to Non-Postal Employer Group Waiver Plans. Contributions (for and by participants) increased by $2,291 million from FY 2022 to FY 2023.
Due to accounting standards, current year costs incurred that relate to claims, premiums and administrative expenses adjust the ending PRHB Actuarial Liability. The actual costs to provide health benefits are presented in Table 10 (see Note 5)
Net Cost to Provide Life Insurance Benefits
As seen in Table 11, the Net Cost (Net Income) to Provide Life Insurance Benefits decreased from a Net Cost of $2.1 billion in FY 2022 to Net Cost of $1.9 billion in FY 2023. Gross Cost increased $0.5 billion for FY 2023 compared to FY 2022, with a current year actuarial loss of $1.2 billion. The Associated Revenues were $5.1 billion in FY 2023 and $4.5 billion in FY 2022 for an increase of $0.6 billion. In applying SFFAS No. 33 for calculating the Actuarial Life Insurance Liability (ALIL), OPM’s actuary used salary increase and interest rate yield curve assumptions consistent with those used for computing the CSRS and FERS Pension Liability in FY 2023 and FY 2022. This entails determination of a single equivalent interest rate that is specific to the ALIL. The rate of increases in salary assumptions were higher for FY 2023 as compared to FY 2022 due to the General Salary increase of 4.6% for FY 2023.
Actuarial Gains and Losses
Due to actuarial gains and losses, OPM’s Net Cost to Provide Retirement, Health Benefits, and Life Insurance Benefits can vary widely yearly. Actuarial gains decrease OPM’s Net Cost, while actuarial losses increase it.
In computing the Pension, Post-Retirement Health Benefits, and Actuarial Life Insurance Liabilities, OPM’s actuaries must make assumptions about the future. When the actual experience of the Retirement, Health Benefits, and Life Insurance Programs differs from these assumptions, as it generally will, actuarial gains and/or losses will occur. For example, if the Cost of Living Adjustment factor (COLA) increase is less than the actuary assumed, there will be an actuarial experience gain. A decrease in the assumed future rate of inflation would produce a gain due to a revised actuarial assumption.
Statement of Budgetary Resources
In accordance with Federal statutes and implementing regulations, OPM may incur obligations and make payments to the extent it has budgetary resources to cover such items. The Statement of Budgetary Resources (SBR) presents the sources of OPM’s budgetary resources, their status at the end of the year, obligated balances, and the relationship between its budgetary resources and the outlays it made against them.
As presented in the SBR, a total of $317.1 billion in budgetary resources was available to OPM for FY 2023. OPM’s budgetary resources in FY 2023 included the following:
- Balance carried over from FY 2022 of $72.9 billion plus adjustments of $0.1 billion
- Appropriations Received of $64.6 billion
- Trust Fund receipts of $131.0 billion, less $21.7 billion not available equals $109.3 billion
- Spending authority from offsetting collections (SAOC) of $70.2 billion
The $21.7 billion in Trust Fund receipts that is not available pursuant to public law is made up of $25.3 billion from the Retirement program and $(3.6) billion from the Postal Service Retiree Health Benefits fund.
Appropriations are funding sources resulting from specified Acts of Congress that authorize Federal agencies to incur obligations and to make payments for specified purposes. OPM’s appropriations partially offset the increase in the Pension Liability in the Retirement Program, and fund contributions for retirees and survivors who participate in the Health Benefits and Life Insurance Programs. See Tables 12 and 13 for information on Sources of Budgetary Resources and Obligations Incurred by Program.
Trust Fund Receipts are Retirement Program and PSRHB Fund contributions and withholdings from participants, and interest on investments. Spending Authority from Offsetting Collections includes contributions made by and for those participating in the Health Benefits and Life Insurance, and revenues in Revolving Fund Programs.
| Obligation | FY 2023 | FY 2022 |
|---|---|---|
| Retirement Benefits | 63.5% | 62.6% |
| Health Benefits | 34.3% | 35.0% |
| Life Insurance Benefits | 1.6% | 1.9% |
| Other | 0.6% | 0.6% |
From the $317.1 billion in budgetary resources OPM had available during FY 2023, it incurred obligations of $243.7 billion. This includes $64.4 billion of obligations that were incurred moving warranted appropriations received from OPM general funds into expenditures trust funds accounts for benefits to be paid for participants in the Retirement, Health Benefits and Life Insurance Programs.
The total budgetary resources also include $32.1 billion in the PSRHB Fund of the Health Benefits Program, and $1,028 billion in the Retirement Program that is precluded from obligation (Note 10). These budgetary resources are invested and not available for obligation pursuant to public law.