Fiscal Year 2004 Performance and Accountability Report Published November 15, 2004
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Federal Employee Benefits
Imputed Expenses-Employee Benefits years ended September 30, |
2004 |
2003 |
Civil Service Retirement System |
$ 366 |
$ 351 |
Federal Employees Health Benefits |
788 |
641 |
Federal Employees Group Life Insurance |
2 |
2 |
Total Imputed Expenses-Employee Benefits |
$ 1,156 |
$ 994 |
Veterans Benefits
Certain veterans who die or are disabled from military service-related causes, as well as their dependents, receive compensation benefits. Also, veterans are provided with burial flags, headstones/markers, and grave liners for burial in a VA national cemetery or are provided a plot allowance for burial in a private cemetery. These benefits are provided in recognition of a veteran's military service and are recorded as a liability on the balance sheet.
Federal Employee and Veterans Benefits Liabilities as of September 30,
|
2004 |
2003 |
FECA |
$ 1,753 |
$ 1,888 |
Compensation |
921,500 |
951,600 |
Burial |
3,300 |
3,200 |
Total Federal Employee and Veterans Benefits Liabilities |
$ 926,553 |
$ 956,688 |
VA provides certain veterans and/or their dependents with pension benefits, based on annual eligibility reviews, if the veteran died or was disabled from nonservice-related causes. The actuarial present value of the future liability for pension benefits is a non-exchange transaction and is not required to be recorded on the balance sheet. The projected amount of future payments for pension benefits (presented for informational purposes only) as of September 30, 2004 and 2003 was $102.2 and $102.7 billion, respectively.
Assumptions Used to Calculate the Veterans Benefits Liability
Several significant actuarial assumptions were used in the valuation of compensation, pension, and burial benefits to calculate the present value of the liability. A liability was recognized for the projected benefit payments to: (1) those beneficiaries, including veterans and survivors, currently receiving benefit payments; (2) current veterans who will in the future become beneficiaries of the compensation and pension programs; and (3) a proportional share of those in active military service as of the valuation date who will become veterans in the future. Future benefits payments to survivors of those veterans in classes (1), (2), and (3) are also incorporated into the projection.
All future benefits were discounted. Discount rates were based on rates for securities issued by Treasury on September 30, 2004, ranging from 2 to 5.23 percent, and on September 30, 2003, ranging from 1.15 to 4.91 percent. Beginning in FY 2004, the discount rates used were based on U.S. Treasury's spot rates rather than corresponding constant maturity rates, which were used in previous years. Benefit payments were assumed to occur at the midpoint of the fiscal year.
All calculations were performed separately by attained age for the Compensation and Pension programs, while the Burial liability was calculated on an aggregate basis. Life expectancies of beneficiaries collecting benefits from the Compensation and Pension programs were based upon studies of mortality experience of those beneficiaries between 1995 and 2003. Life expectancies of veterans not yet collecting these benefits used in the calculation of the liability for future beneficiaries are based on mortality derived from the 1990 U.S. decennial census and beneficiary mortality experience. Applying mortality improvements at a rate of 1 percent per annum brought both sets of mortality rates forward. In addition, rates of benefit termination of beneficiaries due to reasons other than mortality are also reflected.
The amount of benefits by category and age were based on current amounts being paid and future cost of living adjustments (COLAs) to determine the average benefits per veteran for each future time period. A COLA of 2.7 percent was assumed for FY 2005. For fiscal years after 2005, COLAs have been determined from OMB's estimates prepared in conjunction with the Administration's annual budget. Expected changes in benefits due to other reasons were also reflected.
Expected benefit payments have been explicitly modeled for the next 75 years. This period is the same as that used by the Office of the Actuary of the Social Security Administration. However, unlike Social Security, (1) estimates of expected benefit payments after this 75-year period were incorporated in the liability based on extrapolations reflecting expected aggregate experience by beneficiary category between the years 70 and 75 and (2) SSA uses an open population model, while the C&P projections only reflect benefits associated with military service through September 30, 2003.
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