U.S. Department of State Fiscal Year 2019 Agency Financial Report

Department recognizes an expense and imputed financing source for the annualized unfunded portion of CSRS, post- retirement health benefits, and life insurance for employees covered by these programs. The additional costs are not owed or paid to OPM, and thus are not reported on the Consolidated Balance Sheet as a liability. Instead, they are reported as an imputed financing source from costs absorbed from others on the Consolidated Statement of Changes in Net Position. O. Future Workers’ Compensation Benefits The Federal Employees’ Compensation Act (FECA) provides income and medical cost protection to cover Federal employees injured on the job or who have incurred a work-related occupational disease, and beneficiaries of employees whose death is attributable to job-related injury or occupational disease. The DOL administers the FECA program. DOL initially pays valid claims and bills the employing Federal agency. DOL calculates the actuarial liability for future workers’ compensation benefits and reports to each agency its share of the liability. P. Foreign Service Retirement and Disability Fund The Department manages the Foreign Service Retirement and Disability Fund (FSRDF). To ensure it operates on a sound financial basis, the Department retains an actuarial firm to perform a valuation to project if the Fund’s assets together with the expected future contributions are adequate to cover the value of future promised benefits. To perform this valuation the actuary projects the expected value of future benefits and the stream of expected future employer and employee contributions. The valuation serves as a basis for the determination of the needed employer contributions to the retirement fund and is based on a wide variety of economic assumptions, such as merit salary increases and demographic assumptions, such as rates of mortality. Since both the economic and demographic experience change over time, it is essential to conduct periodic reviews of the actual experience and to adjust the assumptions in the valuation, as appropriate. The Department’s actuary completes an Actuarial Experience Study approximately every five years to ensure the assumptions reflect the most recent experience and future expectations. The Department’s last study was completed in 2018. The U.S. Embassy Dublin, Ireland in the 1950’s. Department of State/OBO economic assumptions changes from the experience study are different from the economic assumptions changes determined under SFFAS No. 33 Pensions, Other Retirement Benefits, and Other Postemployment Benefits . See Note 9, After-Employment Benefit Liability , for the Department’s accounting policy for FSRDF retirement-related benefits and the associated actuarial present value of projected plan benefits. Q. Foreign Service Nationals’ After-Employment Benefits Defined Contributions Fund (DCF): This fund provides retirement benefits for FSN employees in countries where the Department has made a public interest determination to discontinue participation in the Local Social Security System (LSSS) or deviate from other prevailing local practices. Title 22, Foreign Relations and Intercourse, Section 3968, Local Compensation Plans, provides the authority to the Department to establish such benefits as part of a total compensation plan for these employees. 2019 A gency F inancial R eport U nited S tates D epartment of S tate | 75 NOTES TO THE PRINCIPAL FINANCIAL STATEMENTS | FINANCIAL SECTION