In recent decades, concerns have been expressed about two related labor force problems in the federal civil service: (1) insufficient turnover among mid- and late-career personnel and (2) the loss of key senior personnel to retirement as soon as they become eligible (generally, age 55). Lack of turnover can clog the promotion pipeline, preventing the hiring or advancement of better-trained or more-skilled individuals. The premature loss of senior personnel can impose significant direct and indirect costs: it is often difficult and time-consuming to find qualified replacements. Some observers have attributed these problems in large part to the Civil Service Retirement System (CSRS), which was thought to create "golden handcuffs" by significantly reducing the value of retirement benefits of those leaving prior to their first age of eligibility. These observers hypothesized that the new, redesigned system called the Federal Employees Retirement System (FERS), introduced in 1987, would correct these problematic separation and retirement patterns.

In 1987 a new retirement system, called the Federal Employees Retirement System (FERS), was introduced for federal civil service personnel. Some observers have hypothesized that FERS would alter the retirement and separation outcomes produced by FERS' predecessor, the Civil Service Retirement System (CSRS). This report compares the retirement and separation incentives embedded in FERS versus those in CSRS to see whether the incentives embedded in FERS are consistent with these hypotheses. It also examines which system is more generous in terms of providing greater expected net lifetime earnings and retirement wealth. To compare the systems, the authors compute expected net wealth associated with different separation and retirement ages for a representative individual. The authors also conduct sensitivity analyses to see how their comparisons differ under alternative assumptions. Finally, the authors use data on Department of Defense civil service personnel from fiscal year 1983 through fiscal year 1996 to examine empirically how separation rates differ for early and mid-career personnel under FERS and under CSRS.

Estimates the effects of three worksforce-shaping policies among DoD workers covered by the Civil Service Retirement System.