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CSRS and FERS Overview November 2012

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1 CSRS and FERS Overview November 2012

2 Retirement System Civil Service Retirement System (CSRS)
CSRS Offset (CSRS and FICA coverage) Federal Employees Retirement System (FERS) Federal Employees Retirement System- Revised Annuity Employee (FERS-RAE) 2

3 Civil Service Retirement System (CSRS)
CSR Act effective August 1920 Defined benefit Contributory retirement system Most employees pay 7% & employing agency pays 7% Option of paying into Voluntary contribution account CSRS-The Civil Service Retirement Act, which became effective on August 1, 1920, established a retirement system for certain Federal employees.  The Civil Service Retirement System (CSRS) is a defined benefit, contributory retirement system.  Employees share in the expense of the annuities to which they become entitled. CSRS covered employees contribute 7, 7 1/2 or 8 percent of pay to CSRS and, while they generally pay no Social Security retirement, survivor and disability (OASDI) tax, they must pay the Medicare tax (currently 1.45 percent of pay).  The employing agency matches the employee's CSRS contributions. CSRS employees may increase their earned annuity by contributing up to 10 percent of the basic pay for their creditable service to a voluntary contribution account.  See Chap 31 & SF2804. Employees may also contribute a portion of pay to the Thrift Savings Plan (TSP).  There is no Government contribution, but the employee contributions are tax-deferred.  For more information about TSP, see the TSP website. 3

4 CSRS Offset (CSRS and FICA coverage)
Retirement System CSRS Offset (CSRS and FICA coverage) 1983 Social Security Laws changed SS FICA coverage for most “new” Federal employees hired > 12/31/1983 or employees rehired > 12/31/1983 after a break in retirement coverage of > one year, placed in an “interim” retirement system 1/1/1987, Congress created the CSRS Offset System CSRS Offset- In 1983, the Social Security Laws changed to require, Social Security Federal Insurance Contribution Act coverage for most “new” federal employees hired after 12/31/1983 or employees re-hired after 12/31/1983 after a break in retirement coverage of more than 1 year. These employees were placed in an “Interim” retirement system that provided for FULL social security deductions from pay and reduced CSRS deductions. On 01/01/1987, Congress created the CSRS Offset Retirement Plan. CSRS Offset applies to employees who had a break in service of more than 1 year, and had 5 years of creditable service as of 1/1/ An example of this is: Began Federal career on 06/13/1977 Left Federal service on 06/13/1992 with 15 years of CSRS covered service Reinstated on a career appointment on 11/1/1993 and placed in CSRS Offset Another category of employees that this applies to are those hired before 01/1984, acquired CSRS Interim coverage between 1984 and 1987 with at least 5 years of creditable civilian service by 01/01/ An example of this is: Began Federal career on a Temporary appt on 06/01/1980 Has 4 years of creditable temporary time Began career appointment on 06/01/1984 Placed in the “Interim” retirement plan “Interim” plan becomes CSRS Offset on 01/01/1987 4

5 Retirement System CSRS Offset applies to Federal employees who had a break in service > year and had 5 years of creditable service as of 12/31/1986 https://registration.golearnportal.org The following online courses are currently available: Course Title Cost Course Description CSRS Offset Retirement System $75.00 OPM's CSRS Offset training covers the major aspects of the CSRS Offset program from a benefits officer's point of view including Coverage determinations, Decision factors, Service requirements and other benefits, Annuity provisions, Offset computations, and Interrelationship with Social Security. 5

6 Federal Employees Retirement System (FERS)
Congress created the FERS effective 1/1/1987 New system for new employees, certain rehired employees & those who elected 3 different sources: Basic Benefit Plan Social Security Thrift Savings Plan FERS-Congress created the Federal Employees Retirement System (FERS) in 1986, and it became effective on January 1, 1987.  Since that time, new Federal civilian employees who have retirement coverage are covered by FERS. FERS is a retirement plan that provides benefits from three different sources:   a Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP).   Two of the three parts of FERS (Social Security and the TSP) can go with you to your next job if you leave the Federal Government before retirement.   The Basic Benefit and Social Security parts of FERS require you to pay your share each pay period.  Your agency withholds the cost of the Basic Benefit and Social Security from your pay as payroll deductions.  Your agency pays its part too.  Then, after you retire, you receive annuity payments each month for the rest of your life. The TSP part of FERS is an account that your agency automatically sets up for you.  Each pay period your agency deposits into your account amount equal to 1% of the basic pay you earn for the pay period.  You can also make your own contributions to your TSP account and your agency will also make a matching contribution.  These contributions are tax-deferred.  The Thrift Savings Plan is administered by the Federal Retirement Thrift Investment Board. 6

7 Retirement System Federal Employees Retirement System- Revised Annuity Employee (FERS-RAE) PL , “Middle Class Tax Relief and Job Creation Act” of 2012 Beginning in 2013: New Federal employees will have to pay 2.3% higher employee contributions New Members of Congress & Congressional employees will pay the higher employee contributions and will receive the same retirement benefits as regular employees FERS-RAE- Public Law , Section 5001, established the FERS Revised Annuity Employee Plan, Effective on 01/01/2013, new employees hired will be placed under FERS-RAE and will have to pay an additional 2.3 percent of salary toward retirement benefits. Also, under this public law new Members of Congress and Congressional employees will accrue retirement benefits at the same rate as regular employees. FERS-RAE coverage will generally apply to any individual who receives an appointment not excluded from FERS coverage on or after January 1, 2013, and who would normally be placed in FERS. There are three exceptions to this general rule, however, and the date December 31, 2012, is a key date for each of those exceptions. An individual will be excluded from FERS-RAE coverage if any of these exceptions apply: the individual on December 31, 2012, was covered under FERS; OR the individual on December 31, 2012, was performing civilian service which is creditable or potentially creditable service under FERS (for example the individual may have been covered under another retirement system from which service credit may be transferred to FERS, such as Foreign Service, Federal Reserve, or CIARDS) the individual on December 31, 2012, was not covered under FERS and was not performing civilian service which is creditable or potentially creditable service under FERS, but as of December 31, 2012 had performed at least five years of civilian service creditable or potentially creditable under FERS. 7

8 Retirement Application
CSRS CSRS Offset FERS FERS-RAE Application for Immediate Retirement SF 2801 Application for Immediate Retirement SF 3107 2801 dated June 2007 3107 dated May 2012 8

9 Types Of Retirements Regular/Optional Early Retirement Disability
Special Provisions Deferred Phased Retirement Both CSRS and FERS offer several types of retirements. When you retire, it is important you know which provision you retire under. The type of retirement can impact, among other things: the amount of your benefit; when your retirement can begin; whether or not you are entitled to continue your Federal health and life insurance coverage after you leave the government; and what happens to your retirement rights if you return to work with the Federal government after you retire. The most common type of retirement is the “regular optional” retirement. Under certain conditions, an employee who does not qualify for a regular optional retirement may qualify for retirement under the “early” retirement provisions. If an employee becomes disabled, the retirement system provides for benefits. The retirement system also has special provisions for certain employee groups such as law enforcement officers, firefighters, and air traffic controllers. If you leave government before qualifying for one of the retirements mentioned above, you may qualify for a deferred retirement that begins at a later date. Phased Retirement: On July 6, President Obama signed the “Moving Ahead for Progress in the 21st Century Act” into law. It includes the phased retirement option for federal employees that will allow the employee to continue working while they sample retirement. It is a nice option for employees and a valuable tool for managers to enable senior employees to mentor and train those who will eventually replace them. Use of the option requires the mutual consent of the employee and the agency. Employees will be eligible to participate if they have worked full-time for the preceding three year Employees must be eligible to retire in order to choose phased retirement. For those in the CSRS, that means at least age 55 with 30 years of service or 60 with 20 years of service. Under FERS, employees must be the minimum retirement age (55-57, depending on year of birth) with 30 years of service, or 60 years old with 20 years of service. (OPM did not mention retirement eligibility at age 62 with five years of service, which is available as a full retirement option under both CSRS and FERS. It is unclear if such employees will be offered the phased retirement choice.) Employees who are subject to mandatory retirement are not eligible. This includes law enforcement officers, firefighters and air traffic controllers. The additional time worked during the period of phased retirement will be added to increase an employee’s retirement benefit when he or she chooses to retire fully. Initially, the only option will be to work 20 hours per week and receive 50 percent of the earned retirement benefit. The employee will be permitted to return to full-time employment if the employing agency agrees to the change. If the employee chooses to return to full-time work, then the period of phased retirement would be treated as a period of part-time service. One year of part-time service scheduled at 20 hours per week would result in 50 percent of the normal annuity for that period of service.  Sick leave will not be used to compute the phased retirement benefit. The balance of unused sick leave will be added to the computation of the final full retirement benefit. The employee will continue to be eligible for benefits under the Federal Employees Health Benefits Program and Federal Employees Group Life Insurance. The coverage amount will be based on the full-time salary for the position. The FEHBP employer contribution will be the same as for other full-time employees (rather than the pro-rated amount that part-time employees receive). If an employee owes a civilian or military service credit deposit, the decision to pay or not pay it must be made prior to entry into the phased retirement program. The effect of non-payment of a deposit will be permanent and no deposits or redeposit can be made at a later time. Who’s would be a good candidate for phased retirement? An employee who: Is eligible to retire Is mentally ready to retire Is financially able to afford to be retired Is happy in their federal position Wants to continue to provide service to the agency before full retirement Wants to ease into retirement, rather than retiring cold turkey Is interested in working part-time Is not interested in pursuing a second career Who is not a good candidate for this option? An employee who: Is not eligible for retirement Is not able to afford to retire Is not happy in their current position Needs a change of scenery from their current position Wishes to have a second career while collecting full federal retirement Has other plans for retirement, such as relocating, traveling or pursuing other interests (although these can certainly follow a period of phased retirement) 9

10 Age and Service Requirements for Regular Retirement
55 30 years 60 20 years 62 5 years CSRS FERS Age Service MRA 30 years 60 20 years CSRS: In order to retire voluntarily you must meet both the age and service requirements outlined in this slide. Once you meet these requirements you can retire at any time. Generally, your benefits will begin on the first of the month after you retire unless you retire within the first three days of the month. If you retire within the first 3 days of the month your benefits will begin on the day after you retire. FERS: The minimum retirement age starts at age 55 and gradually increases until age 57 depending on your year of birth. Under FERS you may also retire on a regular retirement once you reach your MRA provided you have at least 10 years of service. If you retire under the MRA + 10 provision, your retirement benefit will be subject to an age reduction that equals 5% for each year you are under age 62 at the time your benefits begin. Under FERS your benefits will generally begin on the first of the month unless you retire under the MRA + 10 provision. If you retire under the MRA + 10 provision, you may choose to postpone receiving your benefits until a later date to reduce or eliminate the age reduction. Age Reduction If you have 10 or more years of service and are retiring at the Minimum Retirement Age, your annuity will be reduced for each month that you are under age 62.   The reduction is 5% per year (5/12 of a percent per month).  However, your annuity will not be reduced if you completed at least 30 years of service, or if you completed at least 20 years of service and your annuity begins when you reach age 60.  You can reduce or eliminate this age reduction by postponing the beginning date of your annuity. Postponing the Beginning Date of Annuity to Reduce or Avoid the Age Reduction You can reduce or eliminate the age reduction if you choose to have your annuity begin at a date later than the Minimum Retirement Age (MRA).  You can choose any beginning date between your MRA and 2 days before your 62nd birthday. However, you cannot begin your annuity while you are reemployed. If you postpone the beginning date of your annuity, you should be aware of the following— Life Insurance You cannot continue your life insurance coverage unless you are receiving an annuity.  Therefore, if you Postpone the beginning date of your annuity, your life insurance enrollment will terminate. When your annuity begins, the life insurance coverage you had when you separated from your employment will resume. Health Insurance If you postpone the beginning date of your annuity, you will be eligible to temporarily continue your health benefits coverage for 18 months from the date of separation from your employing agency; however, you must contact your agency within 60 days and pay the total premium, plus a 2% administrative charge.  When your annuity payments begin, you will again have the opportunity to enroll in a health benefits plan under the regular Federal Employees Health Benefits Program, and OPM will pay the Government share of the premium. Federal Long Term Care Insurance If you already have Long Term Care Insurance Coverage when you separate for retirement, but postpone the commencing date of your annuity, your coverage will continue as long as you continue to pay premiums. If you are not enrolled in the Federal Long Term Care Insurance Program when you separate for retirement, you can apply for enrollment anytime after your separation, even if you postpone the commencing date of your annuity. COLAs If you delay your annuity beginning date, your annuity rate will not include any cost-of-living adjustments (COLAs) that occur before you begin to receive the annuity. Once your annuity begins, you will be entitled to COLAs on any portion of your annuity which was computed under CSRS rules. However, you will not receive COLAs on the FERS part of your benefit until you are 62. Survivor Benefits If you defer receipt of your annuity and die before you begin to receive it, your spouse can still receive FERS survivor benefits. NOTE: Under certain conditions, active duty military service may count toward the 30 year, 20 year or 10 year requirements. We will discuss this a little later. 62 5 years MRA 10 years 10

11 FERS Minimum Retirement Age
Pre- 1948 1970 + 55 56 57 1948…..... 1965…. The Minimum Retirement Age is determined as follows: Before 1948, 55 years years, 2 months years, 4 months years, 6 months years, 8 months years, 10 months 1953 to 1964, 56 years years, 2 months years, 4 months years, 6 months years, 8 months years, 10 months 1970 and after, 57 years 11

12 Age and Service Requirements for Early Retirement
For both CSRS and FERS Age Service Any 25 years 50 20 years 12

13 Additional Requirements for Early Retirement
Early Retirement Authority, or Involuntary separation (except for misconduct or delinquency) Early Retirement Authority is voluntary (See Chap 43) Involuntary Separation (See Chap 44) Under CSRS, must meet the “one out of two”= An employee must be covered by CSRS for at least 1 year within the 2-year period immediately preceding the separation on which the annuity is based. The 1 year of service does not have to be continuous. The year of service does, however, have to be service subject to CSRS deductions. 13

14 Selecting A Retirement Date
CSRS CSRS Offset FERS Last day of the month or 1st 2nd 3rd Last day of the month 14

15 Service Crediting Service WHEN you can retire HOW MUCH you’ll get
Everyone’s service history is different. It’s not like it used to be where you are hired under CSRS and continue to work for years with the Federal Gov’t. (See Chap 20) Factors include: Non-deduction or temporary time Service under another retirement plan for Federal employees Part time, Full-time, Intermittent time Questionable service WHEN you can retire HOW MUCH you’ll get 15

16 Amount of Creditable Service
Federal Civilian Service is normally credited from the beginning to ending date of an appointment Exceptions LWOP WAE Seasonal WAE 16

17 Crediting Military Service
Honorable, Active Duty Service Military Retired Pay Considerations Post Considerations 17

18 Crediting Post-1956 Military Service
CSRS FERS Military deposit equals 7% of base pay plus interest Military deposit equals 3% of base pay plus interest 18

19 Civilian Service Deposits
CSRS nondeduction service performed prior to Creditable for eligibility and computation purposes, regardless of whether or not a deposit for the service is paid Annuity will be reduced by 10% of deposit amount owed I usually takes at least 10 years to recover the deposit in increased annuity payments. 19

20 Civilian Service Deposits
CSRS nondeduction service performed on or after Creditable for eligibility, regardless of whether or not a deposit for the service is paid Creditable for computation only if a deposit is paid It usually takes less than one year to recover the deposit in increased annuity payments. 20

21 Civilian Service Deposits
FERS nondeduction service performed prior to Creditable for eligibility and computation purposes only if a deposit is paid FERS nondeduction service performed on or after Generally not creditable and a deposit cannot be made FERS nondeduction service performed on or after 1/1/1989 is generally not creditable. Exceptions: Peace Corps/Vista service Foreign Service Senate Childcare workers 21

22 Civilian Service Deposits
CSRS FERS Deposit equals 7% of earnings plus interest Deposit equals 1.3% of earnings plus interest 22

23 CSRS refunded service ending before
03/01/1991 Creditable for eligibility and computation purposes, regardless of whether or not a redeposit for the service is paid Annuity will be subject to an actuarial reduction Refunded service=Service for which retirement deductions were withheld and later refunded to the former employee based on a properly completed Refund App, as long as eligibility reqs. were met to receive the refund. (CSRS: SF2802 dated June 2011 & FERS: SF3106 dated August 2011) Actuarial reduction=An actuarial reduction allows you to receive benefit without having to pay an amount due in a lump sum. OPM reduces your annuity in a way that, on average, allows the Retirement Fund to recover the amount of the missing lump sum over your lifetime. The actuarial reduction becomes a permanent reduction in the benefit. The amount of the actuarial reduction depends on age and the amount of the lump sum you would otherwise have to pay at the time you retire. To compute an actuarial reduction, OPM divides the lump sum amount by the present value factor for your age at retirement. 23

24 CSRS refunded service ending on or after 03/01/1991
Generally creditable for eligibility, regardless of whether or not a redeposit is paid Creditable for computation only if a redeposit is paid It usually takes a retiree less than 3 years to recover the redeposit in increased annuity payments. 24

25 Refunded Service FERS P.L , Section 1904 permits individuals who are subsequently reemployed to make a redeposit of the amount refunded, plus interest, and to have credit for the service reinstated For the purpose of survivor annuities, redeposits may also be made by survivors Employees who are employed under FERS on or after October 28, 2009 are given the opportunity to make a redeposit for a refund. National Defense Authorization Act (NDAA) of FY 2010. Service Credit Applications: CSRS: SF 2803 FERS: SF 3108 25

26 Crediting Unused Sick Leave CSRS and FERS
Sick leave may be added to the length of service used to compute an immediate annuity Not creditable for establishing retirement eligibility FERS Sick Leave 50% through 12/31/2013 100% after 01/01/2014 As a result of the NDAA of FY 2010, FERS SL was allowed to be added to the annuity computation. 26

27 Crediting Unused Sick Leave CSRS and FERS
For FERS Retirement with CSRS Component 100% of sick leave at time of FERS election is added to the CSRS calculation Difference between total sick leave at retirement and sick leave used for CSRS component added to the FERS calculation 50% until 12/31/2013 100% after 01/01/2014 What is a FERS Retirement with CSRS component? If the employee had 5 or more years of service prior to the FERS election, the service is credited under CSRS provisions for computation purposes (that is, the employee is entitled to a CSRS component in his or her FERS annuity). 27

28 How Much Will I Get? Annuity Computation
Who can tell me what is involved in calculating the annuity? 28

29 Basic Annuity Annuity is based on a percentage of the High 3 year average salary Percentage is determined by the amount of creditable service and the appropriate annuity formula 29

30 $ 3 Consecutive Years High-3 Average Salary 30
The high 3 average salary is the highest pay obtained by averaging the rates of basic pay in effect during any 3 consecutive years of service, with each rate weighted by the time it was in effect. The 3 years need not be continuous, but they must consist of consecutive period of service. Two or more separate periods of employee that follow each other my be combined to make up the 3 years of service. The 3 year period may start and end on whichever dates give the highest 3 years of basic pay. Since employee pay usually increases the longer you work, the high-3 usually occurs during the last 3 years of service. However, any 3 years will be used if it produces a higher average salary. A break of 3 calendar days or less will be used to compute the high-3. LWOP status for 6 months or less may be used in the high-3, however, LWOP over 6 months will not be used to compute the high-3. Military pay will not be used in computing the high-3 unless the military service interrupts the civilian service and the employee exercises reemployment or restoration rights, civilian pay is projected over the period of military service and used to compute the high-3. 30

31 Basic Pay Includes: Regular Pay Locality Pay
Night Differential for Wage Employees Premium Pay (for FF and LEOs) See Chapter 30 for list of inclusions. 31

32 Basic Pay Does Not Include:
Bonuses Overtime Allowances Special Pay for Recruiting and Retention Purposes 32

33 General Formula CSRS FERS Retirement Factor Retirement Factor
1.5% x 5 years + 1.75%x 5 years + 2% x service over 10 years 1% or 1.1% x years of service The general formula is used to compute basic annuities for voluntary, early voluntary, discontinued service, and deferred retirements. It is also used to compute disability retirements when the employee is over age 60 or the earned annuity is greater than the disability guaranteed minimum. Under FERS, the general formula applies to the FERS component of an employee who transferred to FERS. While the CSRS general formula would apply to the CSRS component of an employee who transferred to FERS. Retirement Factor Retirement Factor 33

34 General Formula 30 Years Total Service 1.5% x 5 1.75% x 5 2.0% x 20 =
7.50% 8.75% 40.00% 56.25% 1 % x 30 = 30% or 1.1% x 30 = 33% Chapter 50, see Charts Retirement Factor 34

35 CSRS Calculation Example
Employee has 30 years of service and their high-3 average salary is $98,000 1.5% of $98,000 ($1,470) x 5 years = $ 7,350 1.75% of $98,000 ($1,715) x 5 years = $ 8,575 2.0% of $98,000 ($1,960) x 20 years = $ 39,200 Basic Annuity (per year) = $55,125 or CSRS Example: Employee has 30 years of service and high-3 average salary of $98,000 1.5% of $98,000 (or $1470) x 5 years = $7,350 1.75% of $98,000 (or $1715) x 5 years = $8,575 2% of $48,000 (or $1960) x 20 years = $39,200 Basic Annuity (per year) = $55,125 (/12 = $4,593 per month) 35

36 CSRS Calculation Example
1.5% x 5 years = 7.50% 7.50% x $98,000 = $ 7, % x 5 years = 8.75% 8.75% x $98,000 = $ 8,575 2% x 20 years = 40.00% 40% x $98,000 = $ 39,200 Basic Annuity (per year) $ 55,125 36

37 FERS Calculation Example
Employee, age 62, has 24 years of service and high-3 average salary of $98,000 1.1% of $98,000 or $1,078 x 24 = $25,872 or 1.1% x 24 = 26.4% 26.4% x $98,000 = $25,872 FERS Example: Employee, age 62, has 24 years of service and high-3 average salary of $98,000 1.1% of $98,000 (or $1,078) x 24 = $25,872 (/12 = 2,156 per month) 37

38 FERS Annuity With a CSRS Component
CSRS Part - 20 years FERS Part - 10 years + 10% (or 11%) 36.25% 2% 1¾% Chapter 50: Employees who elect to transfer from CSRS coverage to FERS coverage after completing 5 or more years of creditable civilian service as of the effective date of the transfer (excluding service covered by both CSRS and Social Security deductions) will have a CSRS annuity component in their FERS benefit. 1½% or 1% 1.1% 5 yrs 5 yrs 10 yrs 10 yrs 38

39 FERS Annuity with a CSRS Component Calculation Example
Employee, age 62, has 20 years of CSRS service, elected FERS and has 10 years FERS Service with high-3 average salary of $98,000 CSRS Component: 1.5% of $98,000 ($1,470) x 5 = $ 7, % of $98,000 ($1,715) x 5 = $ 8, % of $98,000 ($1,960) x 10 = $19,600 Basic Annuity = $ 35,525 $35,525 / 12 = $2,960 per month 39

40 FERS Annuity with a CSRS Component Calculation Example
FERS Portion: 1.1% of $98,000 ($1,078) x 10 = $10,780 Total Annuity: $ 10,780 $ 35,525 $ 46,305 per year 40

41 FERS Annuity Supplement
Substitutes for the Social Security part of the total FERS benefit until age 62 Approximates the Social Security benefit earned under FERS Subject to earnings test Not subject to COLAs The FERS Annuity Supplement is paid to certain FERS employees who retire before age 62. The supplement is an estimate of the amount of Social Security benefits earned during FERS civilian service. If you retire before you reach age 62, you will be able to receive your FERS Basic Benefit, and if you choose, your Thrift Savings Plan benefit. You will not be able to receive your Social Security benefit until you reach age 62. However, you may qualify to receive the FERS Annuity Supplement until you reach age 62. FERS Annuity Supplement---Chapter 51 Substitutes for the Social Security part of the total FERS benefit until you reach age 62. Approximates the SS benefit earned while you worked under FERS. Subject to the Social Security earnings test. If you work after retirement, your post-retirement earning could reduce or eliminate your FERS Supplement. The 2012 SS earnings limitation is $14,640. See BAL Annual Changes. No COLAs 41

42 FERS Annuity Supplement
To be eligible for the Supplement Employee must have 1 full calendar year of deductions under FERS, and Must qualify for an immediate, non-disability retirement (other than an MRA+10 retirement) You can receive this supplement if you have worked under FERS for at least 1 calendar year, and you retire on an immediate, non-disability annuity (other than the “MRA + 10” retirement provision). If you retire before you reach your MRA under an Early Optional or Discontinue Service Retirement, you have to wait until your MRA before you start receiving the Supplement. 42

43 Reductions Applied to Basic Annuity
CSRS FERS Age Non-Deduction Service Survivor Annuity Election Refunded Service CSRS Offset If CSRS component, Age MRA + 10 Age Survivor Annuity Election Chapter 50- The basic annuity may be reduced for: Retirement before age 55 Unpaid deposit for nondeduction service performed prior to October 1, 1982 Election of (or court ordered) survivor annuity benefits for a spouse and/or former spouse; Election of a survivor annuity benefit for a person with an insurable interest Unpaid redeposit for refunded service performed prior to March 1, 1991 (credited & actuarially reduced); Election of the alternative annuity; and An offset amount for offset employees who are eligible for Social Security benefits. 43

44 CSRS Age Reduction Permanent Reduction
Equals 2% for each full year under age 55 Applies to CSRS annuities or FERS annuities with a CSRS component 1/6 of 1% for each full month. Eg, Early Out authority, DSR (Chart 5) 44

45 FERS Age Reduction Applies if the employee retires on an MRA + 10 retirement Employee begins receiving annuity before age 62 Permanent reduction equals 5% for each full year under age 62 The annuity of an employee who retires under early deferred or MRA + 10 provisions is reduced by five-twelfths of 1 percent for each full month (5 percent a year) the employee is under age 62 at the commencing date of the annuity. 45

46 Reduction for Survivor Annuity
Applies if an employee Elects a survivor annuity for a spouse and/or former spouse Has a former spouse entitled to a survivor annuity based on a valid court order, and/or Elects to provide someone with an insurable interest annuity 46

47 Survivor Annuity Reduction
CSRS FERS Full survivor annuity (50%) 10% of annuity Partial survivor annuity (25%) 5% of annuity 2 1/2 % x $3600 + 10 % x Amount of base in excess of $3600 Survivor receives 55% of the base elected by retiree CSRS-A spousal survivor annuity is 55% of an annuity computed as if the employee had retired on a disability retirement as of the date of death. A spouse receives 55% of the HIGHER of 1 or 2 below: An annuity computed under the general formula (see Chap 50) based on the deceased employee's Hi-3 avg salary and length of service to DoD, including credit for unused sick leave. A "guaranteed minimum" which is the LESSER of: 40% of the deceased employee's Hi-3 average salary; or The regular annuity obtained after increasing the deceased employee's length of service by the period of time between the date of death and the date he or she would have been age 60. FERS--A spousal survivor annuity is computed as if the employee retired optionally (with no age reduction) on the date of death. Survivor receives 50% of the employee's basic annuity, based on the deceased employee's type of service, age, length of service, and high-3 average salary at date of death. (See Chapter 50.) For employees with a CSRS annuity component, the spouse receives 50 percent of the combined CSRS and FERS benefit. 47

48 Insurable Interest A person who has a reasonable expectancy of financial benefit in the continued life of the employee Reduction to provide a survivor annuity to someone with an insurable interest ranges between 10 and 40% Named survivor for II annuity will receive an annuity at 55% of the retiree’s reduced annuity rate. The amount of reduction will vary according to the relative age difference between the retiring employee & the named survivor. 48

49 Insurable Interest New regulations effective July 20, 2012
Presumed Insurable Interest for Same Sex Domestic Partners The modification of the pre-existing rule now includes same-sex domestic partners in the class of persons presumed as having an insurable interest in the continued life of the employee/retiree Final rule: Fed Register Previously, there were 5 groups presumed, now 8, including current, former & intended same-sex domestic partner. 5 CFR and 49

50 Other Reductions CSRS Offset
Social Security benefit minus Social Security benefit computed without CSRS Offset service The offset reduction will be the lesser of : The difference between the Social Security monthly benefit amount with and without CSRS offset services (service after 12/31/1983, covered under the interim CSRS provisions or CSRS Offset provisions); or The product of the Social Security monthly benefits, with federal earnings, multiplied by a the employees total CSRS offset service rounded to the nearest whole number of years and then divided by 40 EXAMPLE: A CSRS offset employee with 3 years and 8 months of Offset service: First computation: Social Security monthly benefit with offset service = $600 Social Security monthly benefit without offset service = $550 Difference of $50 Second Computation: Social Security monthly benefit with offset service = $600 x 4 years = $2400 divided by 40 = $60 The lesser of the two is a $50 offset reduction. 50

51 There is no maximum annuity under FERS
CSRS FERS 80% of the high-3 average salary Equivalent to 41y and 11m service 35 years of LEO/FF service Limit may be exceeded with unused sick leave credits There is no maximum annuity under FERS 51

52 Returning to Government Work After Retirement
Generally, annuity continues and salary is offset by amount of annuity Exceptions (CSRS) Disability annuitants Dual comp waivers DSR Presidential appointments Exceptions (FERS) Disability annuitants Dual comp waivers Reemployed annuitants, Chapter 100 Dual Comp Waiver= Approval for DCW goes to OPM’s POC in the Agency & Veterans Support office 52

53 Cost of Living Adjustments (COLAS)
CSRS FERS Generally not applied until the December after age 62 Exceptions Disability LEO/FF ATC Begins the first December after retirement First COLA is prorated COLAs are not automatic. There was no COLA payable for retirees in 2010 & 2011 Consumer Price Index (CPI) for urban wage earners and clerical workers from the third quarter average of the previous year to the third quarter average for the current year. COLA for 2013? OPM website has the list of all COLAs at: 53

54 Cost of Living Adjustments (COLAS)
CSRS FERS If the percent change in the CPI is: 0-2% the COLA equals the CPI increase 2-3% the COLA equals 2% Over 3% the COLA equals the change in the CPI - 1 Equals the percent change in the CPI Rounded down to the next whole dollar. 2% or less---2% >2% but < 3%---2% > 3%---3% minus 1 54

55 Sign up to receive the BenefitsInfo listserv emails!
More Information Sign up to receive the BenefitsInfo listserv s! Log into the OPM webpage at: 55

56 Questions 56


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