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HEHS-96-66R 1 (1995-11-14)

handle is hein.gao/gaobackzk0001 and id is 1 raw text is: United States GAO General Accounting Office Washington, D.C. 20548 Health, Education and Human Services Division B-270487 November 14, 1995 The Honorable Constance A. Morella House of Representatives Dear Ms. Morella: Thank you for the opportunity to discuss our recent report with you. In that report, Federal Pensions: Thrift Savings Plan Has Key Role in Retirement Benefits (GAO/HEHS- 96-1, Oct. 19, 1995), we addressed how many federal employees contribute to the Thrift Savings Plan (TSP) and the amounts they contribute, how well TSP's educational materials inform participants, and whether additional investment options were desirable. This letter responds to two questions you raised in discussions with us. First, you asked us to amplify our discussion of the reasons that the Congress replaced the Civil Service Retirement System (CSRS) with the Federal Employees Retirement System (FERS) in 1986. Second, you asked for our assessment of the Federal Retirement Thrift Investment Board's (the Board) recent response to our recommendation that the Board include in its educational materials an explanation of how much participants need to contribute to their TSP retirement accounts to achieve particular retirement income goals. Consideration of a new system to replace the CSRS pension program began after the Social Security Amendments of 1983 mandated Social Security coverage for all new federal employees hired after December 31, 1983. Until that time, federal employees in CSRS were not covered by Social Security. Without some change in CSRS, most new federal employees would have been covered by and contributed to both Social Security and CSRS--a situation that would have been very expensive for employees and the government. The combination of both these pension programs would not only have been very costly, it would have provided combined retirement benefits that exceeded the salary levels of many employees. To avoid the increase in pension costs, a new retirement program to supplement Social Security was needed. The Congress replaced the CSRS pension system with FERS for new employees hired after December 1986. FERS was devised to provide a retirement benefit that comprises GAO/HEHS-96-66R Thrift Savings Plan

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