U.S. Department of State Fiscal Year 2020 Agency Financial Report

The Department of State provides after-employment benefits to both Foreign Service Officers (FSOs) and Foreign Service Nationals (FSNs). FSOs participate in the Foreign Service Retirement and Disability pension plans. FSN employees participate in a variety of plans established by the Department in each country based upon prevailing compensation practices in the host country. The table below summarizes the liability associated with these plans (dollars in millions) . For the Year Ended September 30, 2020 2019 Foreign Service Officers Foreign Service Retirement and Disability Fund $ 25,014 $ 23,401 Foreign Service Nationals Defined Contribution Fund 273 247 Defined Benefit Plans 19 48 Lump Sum Retirement and Voluntary Severance 593 463 Total FSN 885 758 Total After-Employment Benefit Liability $ 25,899 $ 24,159 Details for these plans are presented as follows. Foreign Service Retirement and Disability Fund The FSRDF finances the operations of the FSRDS and the FSPS. The FSRDS and the FSPS are defined-benefit, single- employer plans. FSRDS was originally established in 1924; FSPS in 1986. The FSRDS is a single-benefit retirement plan. Retirees receive a monthly annuity from FSRDS for the rest of their lives. FSPS provides benefits from three sources: a basic benefit (annuity) from FSPS, Social Security, and the Thrift Savings Plan. The Department’s financial statements present the Pension Actuarial Liability of the Foreign Service Retirement and Disability Program (the “Plan”) as the actuarial present value of projected plan benefits, as required by the SFFAS No. 33, Pensions, Other Retirement Benefits, and other Post Employment Benefits: Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates . The Pension Actuarial Liability represents the future periodic payments provided for current employee and retired Plan participants, less the future employee and employing Federal agency contributions, stated in current dollars. Future periodic payments include benefits expected to be paid to (1) retired or terminated employees or their beneficiaries; (2) beneficiaries of employees who have died; and (3) present employees or their beneficiaries, including refunds of employee contributions as specified by Plan provisions. Total projected service is used to determine eligibility for retirement benefits. The value of voluntary, involuntary, and deferred retirement benefits is based on projected service and assumed salary increases. The value of benefits for disabled employees or survivors of employees is determined by multiplying the benefit the employee or survivor would receive on the date of disability or death, by a ratio of service at the valuation date to projected service at the time of disability or death. The Pension Actuarial Liability is calculated by applying actuarial assumptions to adjust the projected plan benefits to reflect the discounted time value of money and the probability of payment (by means of decrements such as death, disability, withdrawal or retirement) between the valuation date and the expected date of payment. The Plan uses the aggregate entry age normal actuarial cost method, whereby the present value of projected benefits for each employee is allocated on a level basis (such as a constant percentage of salary) over the employee’s service between entry age and assumed exit age. The portion of the present value allocated to each year is referred to as the normal cost. The table below presents the normal costs for 2020 and 2019. Normal Cost: 2020 2019 FSRDS 41.07% 37.36% FSPS 32.18% 29.78% Actuarial assumptions are based on the presumption that the Plan will continue. If the Plan terminates, different actuarial assumptions and other factors might be applicable for 9 A fter -E mployment B enefit L iability 86 | U ni ted S tates D epartment of S tate 2020 A gency F inanci al R eport FINANCIAL SECTION | NOTES TO THE PRINCIPAL FINANCIAL STATEMENTS