Issue Briefs

Report: The unfunded liability of the CSRDF has already peaked, will steadily decline, and is projected to be eliminated by FY2085.

Following is the portion of a recent Congressional Research Service report examining financing of federal retirement benefits, including the “unfunded liability” issue.

Both CSRS and FERS are financed through one federal trust fund, the Civil Service Retirement and Disability Fund (CSRDF), which is administered by the Office of Personnel Management (OPM). When CSRS was established in 1920, it was not pre-funded. When Congress established FERS in 1986, however, it required all pension benefits earned under FERS to be fully pre-funded by the sum of employer and employee contributions and the interest earned by the U.S. Treasury bonds held by the CSRDF. Congress required pre-funding of FERS retirement benefits so that federal agencies would have to recognize these costs in their budgets. Pre-funding promotes more efficient allocation of resources between personnel costs and other expenses because it forces federal agencies to recognize the full cost of employee compensation when they prepare their annual budget requests.


Employees who are covered by CSRS contribute 7.0% of pay to the CSRDF. Federal agencies employing CSRS workers also contribute 7.0% of employees’ pay to the CSRDF. Additional funds from the U.S. Treasury are also transferred into the CSRDF to pay for CSRS benefits.

Employees enrolled in FERS and first hired before 2013 contribute 0.8% of their pay to the CSRDF, employees first hired (or rehired with less than five years of service) in 2013 contribute 3.1% of pay, and employees first hired (or rehired with less than five years of service) after 2013 contribute 4.4% of pay. In addition, employing agencies currently contribute 18.4% of pay for regular employees hired before 2013 and 16.6% of pay for employees hired after 2012 to the CSRDF.

How is the CSRDF invested?

The CSRDF is similar to the Social Security trust funds in that, by law, 100% of its assets are invested in special-issue U.S. Treasury bonds or other bonds backed by the full faith and credit of the U.S. government. When the trust fund needs cash to pay retirement benefits, it redeems the bonds and the Treasury disburses an equivalent dollar value of payments to CSRS and FERS beneficiaries.

What is the projected long-term solvency of the CSRDF?

As of the beginning of FY2020, CSRS had an unfunded liability of $823.5 billion, and FERS had an unfunded liability of $201.5 billion. Because the full costs of CSRS benefits are not met by the combined total of employee contributions, agency contributions, interest earnings, and the supplemental payments from the Treasury, some future CSRS benefits will of necessity be paid from contributions that were made to the CSRDF on behalf of employees who are enrolled in FERS. This will add to the unfunded liability for FERS, which will be paid off through a new series of 30-year amortization payments from the general fund of the Treasury to the CSRDF.

Yet CSRS has been closed to new entrants since 1984, and FERS was designed by Congress to be pre-funded. Thus, the unfunded liability of the CSRDF has already peaked, will steadily decline, and is projected to be eliminated by FY2085. Actuarial estimates indicate that the unfunded liability of the CSRS does not pose a threat to the solvency of the trust fund. There is no point over the next 80 years at which the assets of the CSRDF are projected to run out. In its current annual report, OPM has stated that “total assets of the CSRDF … including both CSRS and FERS are expected to continue to grow throughout the term of the projection under the existing statutory funding provisions.”


Footnote: P.L. 91-93 (1969) requires three payments to be made annually from the general revenues of the U.S. Treasury into the CSRDF. These payments are the amount necessary to amortize (pay off with interest) over a 30-year period any increase in pension liability that results from (1) pay increases (but not retiree COLAs) or from bringing newly covered groups of workers into the CSRS; (2) the amount of the employer’s share of the cost of benefits attributable to military service; and (3) interest, fixed at a rate of 5%, on the estimated amount of the previously accrued liabilities of the CSRS for which contributions have not yet been made to the CSRDF. The costs of retiree COLAs, which also are not part of the static normal cost of the CSRS, are not included in the annual transfer from the Treasury to the CSRDF and will ultimately be paid from the general fund of the Treasury.

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