APPENDIX B

ALTERNATIVE COMPARISON

This appendix provides an alternative set of estimates of how federal and private-sector employee benefits compare. In contrast to the estimates in the text, this set reflects economic and other assumptions based on private-sector, rather than federal, experience. The assumptions derive from surveys of actuaries conducted by Watson Wyatt & Company. Both sets of assumptions seem equally plausible. In this set, federal benefits compare less favorably with those of the private sector than do the estimates presented in the text (see Table B-1). The federal advantage reaches at most 5.6 percent rather than 7.2 percent of pay.
 

The alternative assumptions affect only the values covering retirement and retiree health insurance benefits. In general, the assumptions lower the dollar values of federal benefits relative to those in the private sector (see Table B-2). Several factors account for that result. The higher interest rate, all else being equal, lowers the present-value estimates used in comparisons for defined benefit retirement systems--an effect that has a particularly strong impact on programs, such as the Civil Service Retirement System, that consist of only a defined benefit plan. Moreover, the alternative estimates assume fewer early retirements--fewer employees leave government for retirement at points in their careers that take the best advantage of the most generous aspects of the federal retirement program.