Frequently Asked Questions

Compensation of civilian employees of the federal government consists of wages and salaries and supplements to wages and salaries. Supplements includes employer contributions for employee pension plans, health insurance, life insurance, and government social insurance.

• Wages and salaries consist of the monetary remuneration of civilian employees. Beginning with 1998, they also include payments to subsidize the transportation costs of federal employees who use mass transit to commute to and from work.
• Employer contributions for employee pension and insurance funds consist of payments by the federal government for pension plans, health insurance, and life insurance for its civilian employees.

• The contributions for pension plans include employer contributions to defined-benefit civilian retirement plans (CSRS and FERS) and to the defined-contribution plan known as the Thrift Savings Plan (TSP). Contributions by the federal government to the defined- benefit civilian retirement plans include payroll-based contributions for current employees and federal payments to cover the unfunded liabilities of employee pension plans. Based on figures from the 2007 annual report of the Civil Service Retirement and Disability Fund, about half of the present value of the actuarial accrued liabilities of the civilian retirement plans was unfunded at the end of fiscal year 2006.¹ For 2006, payments to cover the unfunded liabilities for federal government civilian retirement were $28.6 billion or 10.7 percent of total federal civilian compensation.
• The contributions for employee health insurance consist of the federal share of premium payments to private health insurance plans for current employees and retirees.² Similarly, the contributions for employee life insurance consist of the federal share of premium payments to privately administered life insurance plans.

• Employer contributions for government social insurance include payments by the federal government for social insurance programs such as old-age, survivors and disability insurance (social security) and hospital insurance (Medicare Part A). The federal government also pays for unemployment insurance and publicly administered workers' compensation.

Similar to its civilian counterpart, compensation of the military (active duty and reserve) consists of wages and salaries and supplements to wages and salaries.

• Wages and salaries include monetary remuneration of the military and in-kind compensation such as housing allowances, uniform allowances, and rations.
• Employer contributions for employee pension and insurance funds include federal contributions to the defined-benefit pension plan for the military.³ The contributions to the defined-benefit plan consist of payroll-based contributions and federal payments to cover the unfunded liabilities of the military retirement fund--this payment was $28.5 billion, or 18.1 percent, of military compensation, for 2006.⁴

Beginning with 2002, military compensation also includes payments by the Department of Defense for accrual funding of health care benefits for retirees. Employer contributions to the privately administered Service Group Life Insurance are also included.

• Payments for government social insurance for old-age, survivors, disability insurance (social security) and hospital insurance (Medicare Part A), unemployment insurance, and veterans life insurance are also included in military compensation. Payments for health care benefits received by active duty personnel and their dependents at nonmilitary facilities through the program known as TRICARE are also included.

Please see, "Defined Benefit Pensions and Household Income and Wealth," for information on BEA's research on the accrual approach to measuring defined-benefit pension plans.

¹ For more information on the types of payments that the federal government makes to the defined-benefit pension plans, please see the FAQ "How does BEA treat Federal payments to the Military and Civil Service Retirement Funds?". NIPA table 6.11D shows employer contributions for employee pension and insurance funds by industry and by type of fund.

²The unfunded health care liabilites of the Postal Service Retiree Health Benefits Fund are treated as capital transfers to persons and hence are not included in compensation.

³Although U.S. military service members have been participating in the defined-contribution plan (TSP) beginning in 2001, the matching contributions by the Department of Defense are limited to new recruits in certain specialties. Therefore, the employer contributions to the defined-contribution plan are very small at present.

⁴ Not all federal government payments to cover the unfunded liabilities of employee pension and insurance funds are included in compensation. The payment to cover the unfunded liabilities of the health care fund for military retirees (Medicare-Eligible Retiree Health Care Fund) and a portion of the payment to the military retirement fund are excluded from compensation. These payments are recorded as capital transfers to persons (see footnote 1).