Review of OMB Circular A-76 Health Benefit Cost Factor Needed Page: 2 of 8
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factors that are in effect as of the solicitation closing date, revised to reflect projected
changes to these factors during the performance period. To estimate personnel costs,
for example, agencies add to basic pay a standard overall factor of 32.85 percent to
account for fringe benefits. This overall factor is comprised of several components,
including a standard cost factor of 5.7 percent to account for insurance and health
benefits, as shown in table 1.
Table 1: Components of Circular A-76 Civilian Position Full Fringe Benefits Cost Factor
Standard cost factor Percentage of basic pay
Insurance and health benefitsb 5.7
Standard civilian retirement benefit 24.0
Medicare benefit 1.45
Miscellaneous fringe benefits 1.7
Source: Circular A-76, attachments C and D.
aCircular A-76 defines basic pay as a civilian employee's annual salary plus other applicable employee pay
entitlements, such as premium pay for civilian law enforcement officers.
bln addition to FEHBP, employees may receive life insurance benefits through the Federal Employees Group
Life Insurance program.
The standard civilian retirement benefit cost factor includes the government share for pension benefits (Social
Security, Thrift Savings Plan, Federal Employees or Civil Service Retirement Systems) and the accruing costs
for post-retirement health benefits.
According to OMB staff, the 5.7 percent cost factor reflects 0.2 percent for life
insurance and 5.5 percent for health benefits. The current insurance and health
benefit cost factor is based on actuarial estimates made in 1999.
Health Benefit Factor Not Revised during
Period of Substantial FEHBP Cost Growth
Certain factors used in Circular A-76 calculations for computing the government's
non-pay and personnel costs are routinely reviewed and adjusted by OMB. These
include the standard inflation factor for supplies and equipment and annual federal
pay raise assumptions. This periodic review helps to ensure that the cost factors are
up to date in order to reflect accurately the full estimated cost of performance.
Nonetheless, our discussions with competitive sourcing officials and review of OMB's
transmittal memoranda indicate that the insurance and health benefits cost factor has
not been reviewed and adjusted with the same frequency as other factors, but rather
has been set at 5.7 percent of a position's basic pay since 1999.3
3Circular No. A-76 (Revised), Transmittal Memorandum No. 19, Performance of Commercial Activities, March 24, 1999. In this
memorandum, OMB revised the then 5.6 percent cost factor for insurance and health benefits up by 0.1 percentage points (on
the health insurance side) to 5.7 percent.
GAO-06-87R Circular A-76 Cost Factor
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United States. Government Accountability Office. Review of OMB Circular A-76 Health Benefit Cost Factor Needed, text, November 17, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc298451/m1/2/: accessed December 18, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.