Earned Benefits Trust Funds

OPM also manages the risk reserve account for the Federal flexible spending account program (FSAFEDS). These trust funds are among the largest held by the United States Government. For FY 2024, the net assets combined total is $1.2 trillion, receipts total $202 billion, and outlays total $185 billion. These trust funds will finance: the retirement program for 2.8 million Federal civilian employees and provide retirement benefits for retirees and survivors; finance the health insurance for 8.1 million employees, retirees, and eligible family members; and provide life insurance coverage for 4.3 million employees and retirees.

Trust Fund Financing

A key component of OPM’s mission is to: administer retirement; health benefits; long-term care insurance; life insurance; dental and vision benefits; and flexible spending accounts for Federal employees, retirees, and their beneficiaries; and to maintain the integrity of these programs. The table below highlights the receipts and outlays for the Federal health benefit fund.

Employees Health Benefits Fund

The Employees Health Benefits (FEHB) Fund is a revolving Trust Fund created by the Federal Employees Health Benefits Act of 1959. It finances the largest employer-sponsored group health insurance program in the world. The fund exists to collect and disburse health insurance premiums to private insurers who participate in the FEHB Program and to maintain program reserves. Federal employees can choose from among Fee-for-Service (FFS) plans, Health Maintenance Organizations (HMO) plans, Consumer Driven Health plans, and High Deductible plans. The number and type of plans available vary by region or locality.

The FEHB fund provides for the cost of health benefits for:

• active employees;
• employees who retired after June 1960, or their survivors;
• annuitants transferred from the Retired Employees Health Benefits (REHB) program as authorized by Public Law (P.L.) 93-246;
• employees of Indian tribes or tribal organizations carrying out programs under the Indian Self-Determination and Education Assistance Act or the Tribally Controlled Schools Act of 1988 and urban Indian organizations carrying out programs under Title V of the Indian Health Care Improvement Act; and
• eligible family members.

It also provides for OPM expenses to administer the program.

Retired Employees Health Benefits Fund

The Retired Employees Health Benefits (REHB) Fund, created by the Retired Federal Employees Health Benefits Act of 1960, provides for the costs of:

• retired employees and survivors who were enrolled in a Government-sponsored uniform health benefits plan;
• Government contributions to retired employees and survivors who retain or purchase private health insurance; and
• OPM expenses to administer the program.

The REHB program is closed to new enrollees and its enrolled population is dwindling. The projected population is 48 for FY 2023 and 40 for FY 2024.

The FEHB and REHB funds are financed by:

• premium withholdings from active employees and annuitants;
• agency contributions to premiums for active employees;
• Government contributions to premiums for annuitants;
• premium collections from tribal organizations and their employees; and
• contributions made by the United States Postal Service in accordance with the provisions of Public Law 101-508.

OPM maintains a contingency reserve that is funded by employee and Government contributions that may be used to defray future cost increases or provide increased benefits. OPM makes payments to carriers from this reserve whenever carrier-held reserves fall below levels prescribed by OPM regulations or when carriers can demonstrate good cause, such as unexpected claims experience or variations from expected community rates. In determining a biweekly subscription rate to cover program costs, 1.0 percent is added for administrative expenses and 3.0 percent is added for a contingency reserve held by OPM for each carrier. OPM is authorized to transfer unused administrative reserve funds to the contingency reserve.

The FEGLI fund finances payments for Employees’ Life Insurance. FEGLI was established by the passage of the Federal Employees' Group Life Insurance Act of 1954 (P.L. 83-598), on August 17, 1954. FEGLI is group term life insurance, meaning it does not build cash values or paid-up insurance values. The cost of Basic Insurance coverage is shared by non-Postal employees (2/3), and the Federal Government (1/3). Optional and certain post-retirement basic coverage are paid entirely by enrollees.

The FEGLI program is an employer-sponsored life insurance Trust Fund program. This program provides benefit payments to beneficiaries following the death of employees, retired employees, and eligible family members. Employees also have an additional accidental death and dismemberment benefit. It is the largest group life insurance program in the world, covering more than four million Federal employees and retirees, and many of their family members. The above table highlights the estimated receipts and outlays for the Federal life insurance fund.

The Civil Service Retirement and Disability Fund (CSRDF) is the oldest and largest of the four trust funds administered by OPM. The fund is financed and structured very differently from the other three trust funds. It is characterized by permanent indefinite budget authority. Budget authority is the authority to incur obligations and pay expenses which become available to an agency during any fiscal year. Once approved, permanent budget authority is permanently available for all future years. Indefinite budget authority is used when the precise amount of budget authority required cannot be forecasted in advance and must be determined at some future point in time (for example, when actual receipts and expenses become known). The above table highlights the receipts and outlays for the Federal retirement and disability fund.

The CSRDF finances two Federal civilian retirement systems: the Civil Service Retirement System (CSRS) established on May 22, 1920, and the Federal Employees Retirement System (FERS) established on June 6, 1986. CSRS is largely a defined benefit plan, covering Federal employees hired prior to 1984. Some CSRS employees (CSRS-Offset) participate in the Social Security system. FERS is one element of a three-tiered pension program that uses Social Security as a base, provides an additional basic benefit, and includes a Thrift Savings Plan. FERS covers employees hired after 1983 and formerly CSRS-covered employees who elected to join FERS. For FY 2024, it is estimated that employees will contribute $7.3 billion to finance FERS and CSRS retirement benefits. Those contributions will come in the form of salary withholdings of 0.8 percent for most employees under FERS-Regular, 3.1 and 4.4 percent for FERS Revised Annuity Employees (FERS-RAE) and FERS Further Revised Annuity Employees (FERS-FRAE) employees, and 7.0 percent for those enrolled in CSRS.

CSRS has been financed under a statutory funding method passed by the Congress in 1969. This funding method is based on the “static” economic assumptions of no future inflation, no future general schedule salary increases, and a 5.0 percent interest rate. Under CSRS, regular employees contribute 7.0 percent of pay. Law enforcement officers, firefighters, and congressional employees contribute an extra 0.5 percent of pay, and members of the Congress an extra 1.0 percent of pay. Under the static funding method for CSRS, the Treasury also pays interest on any static unfunded liabilities that are not being financed by the Postal Service. The Treasury also makes payments to amortize, over a 30-year period, any increases in the static unfunded liability due to salary increases for non-Postal employees that occurred during the year, and pays for the cost of any benefits attributable to military service for both Postal and Non-Postal employees that were paid out during the year.

FERS is funded under a dynamic entry age normal funding method as prescribed in Chapter 84 of Title 5, United States Code. Employees and agencies together contribute the full amount of the dynamic normal cost rate. The normal cost rate is for the defined benefit plan only and does not include the cost of Social Security or the Thrift Savings Plan. FERS regular employees contribute a percentage of salary of 0.8 percent that, combined with the 6.2 percent tax rate under the Old Age, Survivors and Disability Insurance portion of Social Security, is equal to the contribution rate for CSRS employees of 7.0 percent.  Greater employee contribution rates apply for FERS-RAE, and FERS-FRAE.

Effective FY 2023, the normal cost rates are as follows: Regular FERS Non-Postal employees (other than RAE and FRAE), the normal cost rate will be 19.2 percent of pay (employee’s share, 0.8 percent, and employer’s share, 18.4 percent); Regular FERS Postal employees will be 17.0 percent of pay (employee’s share, 0.8 percent, and employer’s share, 16.2 percent); FERS-RAE Non-Postal employees, the normal cost rate will be 19.7 percent of pay (employee’s share, 3.1 percent, and employer’s share, 16.6 percent); FERS-RAE Postal employees will be 17.5 percent of pay (employee’s share, 3.1 percent, and employer’s share, 14.4 percent); FERS-FRAE Non-Postal employees, the normal cost rate will be 19.9 percent of pay (employee’s share, 4.4 percent, employer’s share, 16.6 percent, and less excess of 1.1 percent to be credited back to the assets of the CSRDF); FERS-FRAE Postal employees will be 17.8 percent of pay (employee’s share, 4.4 percent, and employer’s share, 13.4 percent).

Effective FY 2024, the normal cost rates are as follows: Regular FERS Non-Postal employees (other than RAE and FRAE), the normal cost rate will be 19.2 percent of pay (employee’s share, 0.8 percent, and employer’s share, 18.4 percent); Regular FERS Postal employees will be 16.9 percent of pay (employee’s share, 0.8 percent, and employer’s share, 16.1 percent); FERS-RAE Non-Postal employees, the normal cost rate will be 19.6 percent of pay (employee’s share, 3.1 percent, and employer’s share, 16.5 percent); FERS-RAE Postal employees will be 17.3 percent of pay (employee’s share, 3.1 percent, and employer’s share, 14.2 percent); FERS-FRAE Non-Postal employees, the normal cost rate will be 19.9 percent of pay (employee’s share, 4.4 percent, employer’s share, 16.5 percent, and less excess of 1.0 percent to be credited back to the assets of the CSRDF); FERS-FRAE Postal employees will be 17.6 percent of pay (employee’s share, 4.4 percent, and employer’s share, 13.2 percent).

This account receives from the Postal Service: 1) the pension savings provided to the Postal Service by the Postal Civil Service Retirement System Funding Reform Act of 2003 (P.L.108–18) that were held in escrow during 2006; 2) payments defined within P.L.109–435, and modified by P.L. 111–68, to begin the liquidation of the Postal Service's unfunded liability for post-retirement health benefits; and 3) beginning in 2017, payments for the actuarial cost of Postal Service contributions for the post-retirement health benefits for its current employees. This account also receives any surplus resources of the Civil Service Retirement and Disability Fund that are not needed to finance future retirement benefits under the Civil Service Retirement System to current or former employees of the Postal Service that are attributable to civilian employment with the Postal Service. The above table highlights the receipts and outlays for the Postal retiree health benefit fund.

Effective FY 2017, as provided under the current law, the Postal Service stopped paying annual premium costs for its current annuitants and these premium payments are paid directly from the Postal Service Retiree Health Benefits Fund. Payments for a proportion of the premium costs of Postal Service annuitants' pre-1971 service continues to be paid by the General Fund of the Treasury through the Government Payment for Annuitants, Employees Health Benefits account.

The Federal Flexible Spending Account Program (FSAFEDS) is a voluntary tax-advantaged benefit plan established under Section 125 of the Internal Revenue Code. These accounts allow Federal employees to pay for eligible out-of-pocket health care and dependent care expenses with pre-tax dollars. The average person will save about 30.0 percent on dependent care and health care expenses after taxes.

There are three types of accounts under the FSAFEDS:

• Health Care Flexible Spending Accounts (HCFSA);
• Limited Expense Health Care Flexible Spending Account (LEX HCFSA); and
• Dependent Care Flexible Spending Account (DCFSA).

The funds cannot be transferred between accounts. In 2022, DCFSAs had a minimum annual election of $100 and $10,500 maximum ($5,250 for married couples, filing separately). HCFSAs and LEX HCFSAs had a minimum annual election of $100 and $2,750 maximum. There are currently 488,171 unique participants (548,609 total accounts) in the FSAFEDS program with a little over 457,437 HCFSAs, 11,788 LEX HCFSAs, and 79,384 in DCFSAs.

The Risk Reserve account contains the accumulated balance of fees which are collected from reserve fees and forfeited funds. The reserve fees are from employing agencies whose employees participate in the FSAFEDS and from forfeitures of FSAFEDS participants who have unclaimed balances. The agency fees are calculated based on the number of employees from each agency participating in the program. Resources are obligated to indemnify the FSAFEDS program administrator when claims against FSA accounts exceed resources contributed to the accounts from participating employees (early in the program year). Once account contributions exceed benefits, the FSAFEDS program administrator reimburses the reserve account. Account resources are also used for the agency’s administration of the program. The above table highlights the receipts and obligations for the FSAFEDS.

OPM’s actuaries have determined that the current value of the risk reserve account is more than sufficient to indemnify the program administrator. Since FY 2013, OPM has used risk reserves to offset agency fees paid to the program administrator to reduce the surplus balance and meet its target account level.

Payment Accounts

OPM receives “such sums as necessary” mandatory appropriations for payments from the General Fund to the Civil Service Retirement and Disability Fund, the Employees Health Benefits Fund, and the Employees Group Life Insurance Fund. The purposes and amount of these payments are described in this section.

This appropriation funds the Government’s share of health benefit costs for annuitants and survivors. OPM requests the appropriation necessary to pay this contribution to the Employees Health Benefits Fund and the Retired Employees Health Benefits Fund. This appropriation covers:

• the Government’s share of the cost of health insurance for annuitants as defined in sections 8901 and 8906 of Title 5, United States Code;
• the Government’s share of the cost of health insurance for annuitants (who were retired when the Federal employee’s health benefits law became effective), as defined in the Retired Federal Employees Health Benefits Act of 1960; and
• the Government’s contribution for payment of administrative expenses incurred by OPM in administration of the Retired Federal Employees Health Benefits Act.

For FY 2024, budget authority and obligations will increase by $420 million due to projected growth in the cost of health insurance and in the number of annuitants with FEHB coverage.

Funds appropriated to this account remain available until expended for the purpose of funding the Government’s share of health benefits costs for annuitants and survivors who no longer have an agency to contribute the employer’s share. OPM has the authority to notify the Secretary of the Treasury of “such sums as may be necessary” to carry out these provisions.

P.L. 96-427, Federal Employees’ Group Life Insurance Act of 1980, enacted October 10, 1980, requires that all employees under age 65 who retired on or after January 1, 1990, continue to make contributions toward their basic life insurance coverage (currently $0.33 per month for each $1,000 of coverage). As with active Federal employees, the Government is required to contribute one-third of the cost of the premium (currently $0.17 per month for each $1,000 of coverage) for basic coverage for annuitants. OPM, acting as the payroll office on behalf of Federal retirees, is requesting the funds necessary to make the required Government contribution for annuitants’ post-retirement basic life coverage.

For FY 2024, budget authority and obligations will increase $2.0 million due to the number of annuitants under age 65 with FEGLI coverage.

Funds appropriated to this account remain available until expended for the sole purpose of financing post- retirement life insurance benefits. OPM notifies the Secretary of the Treasury of “such sums as may be necessary” to carry out these provisions each fiscal year.

The Payment to the Civil Service Retirement and Disability Fund (CSRDF) consists of an appropriation and a permanent indefinite authorization to pay the Government’s share of retirement costs as defined in the Civil Service Retirement Amendments of 1969 (P.L. 91-93), the Federal Employees Retirement Act of 1986 (P.L. 99-335), and the Civil Service Retirement Spouse Equity Act of 1985 (P.L. 98-615). The payment is made directly from the General Fund of the U.S. Treasury into the Civil Service Retirement and Disability Fund and is in addition to appropriated funds that will be contributed from agency budgets.

Current Appropriation: Payment of Government Share of Retirement Costs

P.L. 91-93 provides for an annual appropriation to amortize, over a 30-year period, all increases in Civil Service Retirement System costs resulting from acts of Congress granting new or liberalized benefits, extensions of coverage, or pay raises, exclusive of the effects of cost-of-living adjustments (COLAs). OPM notifies the Secretary of the Treasury each year of “such sums as may be necessary” to carry out these provisions.

Permanent Indefinite Authorization: Transfers for Interest on Static Unfunded Liability and Payment of Military Service Annuities

P.L. 91-93 also provides permanent indefinite authorization for the Secretary of the Treasury to transfer, on an annual basis, an amount equal to 5.0 percent interest on the Civil Service Retirement System’s current static unfunded liability, which is calculated based on static economic assumptions and annuity disbursements attributable to credit for military service. These values reflect the additional liability for military service credit of former United States Postal Service employees. This provision was enacted by the Postal Accountability and Enhancement Act (P.L.109-435).

For FY 2024, the Permanent Indefinite Authorization will increase $200 million due to an increase in the amount of interest to be transferred from the Treasury.

Payment for Spouse Equity

P.L. 98-615 provides the Secretary of the Treasury to transfer an amount equal to the annuities granted to eligible former spouses of annuitants who died between September 1978 and May 1985 who did not elect survivor coverage.

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