THE FOREIGN SERVICE JOURNAL | MAY 2024 79 AFSA NEWS As we celebrate the centennial of the founding of the Foreign Service and AFSA, let’s take a moment to note something else of importance created 100 years ago: the Foreign Service Retirement and Disability Fund. The Rogers Act of 1924 created the fund to provide annuities to retired Foreign Service members, their surviving spouses, and qualifying former spouses (the Civil Service has a separate pension fund created in 1920). If you have ever wondered how the fund is invested, how much money is in it, how much it brings in and pays out each year, and how many people it benefits, below are some facts and figures. They come from the fund’s Sept. 30, 2023, annual report written by private sector actuaries contracted by the Department of State. As of the report date, the fund was valued at $21.1 billion. Its assets are held in special-issue bonds issued by the Department of the Treasury that currently pay a 4.5 percent annual rate of return. Fund assets are not held in stocks, corporate bonds, crypto currency, or other private sector investments. In the year ending Sept. 30, 2023, the fund paid benefits totaling $1.14 billion. Retirees received 87 percent of that total, with survivors receiving 11 percent and former spouses getting 2 percent. During that same period, the fund took in $1.54 billion. About one-third came from investment income. Nearly 27 percent came from agency contributions. Just under 5 percent came from employee salary deductions and military service buy-back payments. The remaining one-third of fund additions came from what is called 30-year amortization payments. That is a mechanism by which actuaries each year project the fund’s income and expenses 30 years into the future. If that projection shows a deficit, the U.S. Treasury closes the gap in equal annual installments over 30 years. In the 15 years that I have reviewed the fund’s reports, I have seen the projections of surpluses or deficits vary widely from year to year due to the inevitable guesswork involved in projecting income and expenses three decades ahead. For example, the actuaries have to project future rates of return on investments, future retiree cost of living adjustments, and changeable demographic factors such as the average length of time drawing benefits. Thus, please do not be concerned that the most recent projection foresees an unfunded liability in the year 2053. Approximately every five years, private sector actuaries conduct a special review called an experience study. It checks their past assumptions regarding income, expenses, and other factors against recent actual experience. With those results, the actuaries update the future expectations used in the next five years’ annual fund reports. In terms of beneficiaries, in the year ending last Sept. 30, monthly pensions were being paid to approximately 13,000 retirees (59 percent in the “new” FSPS retirement system covering people hired after 1983 and 41 percent in the “old” FSRDF system), 3,000 surviving spouses, and 1,000 former spouses. Another 3,000 separated former Foreign Service members are waiting to receive a deferred annuity when they meet the age requirement. Also waiting to qualify for pensions are the approximately 15,750 current Foreign Service members—just 15 of whom remained covered by the FSRDF system as of the report date. The only time that most Foreign Service retirees think about the fund is during a federal budget standoff between Congress and the White House. Be reassured, however, that our pension payments continue even during government shutdowns. That money is drawn from the fund, not from congressional appropriations, and the Department of State always keeps enough essential employees working during shutdowns to process the monthly annuity payments. Finally, have you ever wondered how much money you contributed to the fund in salary deductions during your career? If you retired in 2012 or later, then that amount was listed on the first annual Form 1099-R that the State Department finance office issued to you. If you retired before 2012, the finance office should have sent you a letter at retirement detailing the amount that you contributed to the fund. n Follow the Money RETIREE VP VOICE | BY JOHN K. NALAND AFSA NEWS Contact: naland@afsa.org The Rogers Act of 1924 created the fund to provide annuities to retired Foreign Service members, their surviving spouses, and qualifying former spouses.
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