csrs and fers overview - february 2018...retirement system federal employees retirement...
TRANSCRIPT
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CSRS and FERS OverviewFebruary 2018
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Retirement Systems
• Civil Service Retirement System (CSRS) • CSRS Offset (CSRS and FICA coverage) • Federal Employees Retirement System • Federal Employees Retirement System-
Revised Annuity Employee (RAE/FRAE)
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Retirement SystemCivil Service Retirement System (CSRS)
• CSRS Act effective August 1920• Defined benefit• Contributory retirement system• Most employees pay 7% & employing
agency pays 7%• Option of paying up to 10% into Voluntary
contribution account• No Social Security taxes or TSP Matching• Must pay Medicare tax (1.45% of pay)
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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
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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
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Retirement System
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
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Retirement System
Federal Employees Retirement System-Revised Annuity Employee (FERS-RAE)
PL 112-96, “Middle Class Tax Relief and Job Creation Act” of 2012
Beginning 1/1/2013:• 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
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FERS‐FRAEFERS‐Further Revised Annuity Employees (FRAE)‐ Section 401 of the “Bipartisan Budget Act of 2013”
Beginning 1/1/2014, 1. Employees hired after December 31, 2013,
who are not excluded from FERS coverage become subject to FERS‐FRAE coverage and must pay even higher employee contributions for the FERS basic benefit than FERS‐RAE employees
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FERS‐FRAE2. Employees who meet the requirements to
retain original FERS coverage based on their status as of December 31, 2012, will continue to be subject to original FERS coverage.
3. Employees who are not eligible for original FERS coverage may still be eligible for FERS‐RAE coverage based on their status as of December 31, 2013.
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FERS‐FRAE4. The basic FERS benefits for congressional
employees and Members of Congress covered under FERS‐FRAE are the same as the benefits those groups receive under FERS‐RAE
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Basic Coverage DeterminationsEmployee Retains FERS coverage
An individual hired in 2014 or later will be subject to original FERS coverage if any of these exceptions apply:
– the individual on December 31, 2012, was covered under FERS; or
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Basic Coverage DeterminationsEmployee Retains FERS Coverage
– 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 performing service as a Peace Corps volunteer or may have been covered under another retirement system from which service credit may be transferred to FERS, such as CSRS, CSRS‐Offset, Foreign Service, Federal Reserve, or CIARDS), or
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Basic Coverage Determinations Employee Retains FERS Coverage
– 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 civilianservice creditable or potentially creditable under FERS, including service subject to CSRS or CSRS‐Offset.
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Basic Coverage Determinations Employee Retains FERS Coverage
• See BAL 13‐102 for additional details relating to an employee’s status on December 31, 2012.
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Retirement Application
CSRSCSRS Offset
Application for Immediate RetirementSF 2801
FERS FERS-RAE
FERS-FRAEApplication for
Immediate RetirementSF 3107
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Types Of Retirements
• Regular/Optional• Early Retirement• Disability• Special Provisions• Deferred• Phased Retirement
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Age and Service Requirements for Regular Retirement
Age Service
MRA 30 years
60 20 years
62 5 years
MRA 10 years
Age Service
55 30 years
60 20 years
62 5 years
CSRS FERS
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Pre-1948
1953 -
19641970 +
55
56
57
1948…..... 1965….
FERS Minimum Retirement Age
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Age and Service Requirements for Early Retirement
Age Service
Any 25 years50 20 years
For both CSRS and FERS
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Additional Requirements for Early Retirement
• Early Retirement Authority, or• Involuntary separation (except for misconduct or delinquency)
• Discontinued Service Retirement (DSR)
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Selecting A Retirement Date
Last day of the month or
1st 2nd 3rd
CSRS CSRS Offset
FERS
Last day of the month
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How To Credit Service
WHENyou can retire
Service
HOW MUCH you’ll get
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Amount of Creditable Service
Federal Civilian Service is normally credited from the beginning to ending
date of an appointment
ExceptionsLWOP- 6 months
WAESeasonal WAE
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Crediting Military Service
• Honorable, Active Duty Service
• Military Retired Pay Considerations
• Post 1956 Considerations
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Crediting Post‐1956Military Service
CSRS FERS
Military deposit equals 7% of base pay plus
interest
Military deposit equals 3% of base pay plus
interest
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Civilian Service Deposits
CSRS nondeduction service performed prior to 10-01-1982
• 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
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Civilian Service Deposits
CSRS nondeduction service performed on or after 10-01-1982
• Creditable for eligibility, regardless of whether or not a deposit for the service is paid
• Creditable for computation only if a deposit is paid
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Civilian Service Deposits
FERS nondeduction service performed prior to 01-01-1989
• Creditable for eligibility and computation purposes only if a deposit is paid
FERS nondeduction service performed on or after 01-01-1989
• Generally not creditable and a deposit cannot be made
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CSRS FERS
Deposit equals 7% of earnings
plus interest
Deposit equals 1.3% of earnings
plus interest
Civilian Service Deposits
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Refunded Service
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
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Refunded Service
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
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Refunded Service
• P.L. 111-84, 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
• National Defense Authorization Act 2010• For the purpose of survivor annuities,
redeposits may also be made by survivors• Service Credit Applications SF 2803/3108
FERS
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Crediting Unused Sick LeaveCSRS 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
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Crediting Unused Sick LeaveCSRS 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
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How Much Will I Get?
Annuity Computation
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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
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High‐3 Average Salary
3 Consecutive Years
$ $ $ $ $
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Basic Pay Includes:
• Regular Pay
• Locality Pay
• Night Differential for Wage Employees
• Premium Pay(for FF and LEOs)
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Basic Pay Does Not Include:
• Bonuses• Overtime
• Allowances• Special Pay for Recruiting and Retention
Purposes
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General Formula
CSRS FERS
1.5% x 5 years +1.75%x 5 years +2% x service over
10 years
Retirement Factor
1% or 1.1% x years of service
Retirement Factor
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General Formula
Retirement Factor
30 Years Total Service
1.5% x 51.75% x 52.0% x 20
===
7.50%8.75%
40.00%
56.25%
1 % x 30 = 30%
or
1.1% x 30 = 33%
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CSRS Calculation ExampleEmployee 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
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CSRS Calculation Example
1.5% x 5 years = 7.50%7.50% x $98,000 = $ 7,350
1.75% 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) $ 55,12536
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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
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10 yrs
1½%
CSRS Part - 20 years
or
1¾%2%
10 yrs5 yrs 5 yrs
1%
FERS Part - 10 years
FERS Annuity With a CSRS Component
1.1%
36.25% + 10% (or 11%)
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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 = $ 7,3501.75% of $98,000 ($1,715) x 5 = $ 8,5752.0% of $98,000 ($1,960) x 10 = $19,600
Basic Annuity = $ 35,525
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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
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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/$16,920 for 2017• Not subject to COLAs but does increase over time
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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)
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Reductions Applied to Basic Annuity
• Age• Non-Deduction
Service• Survivor Annuity
Election• Refunded Service• CSRS Offset
CSRS FERS
• CSRS component, if before Age 55
• MRA + 10 Age• Survivor Annuity
Election
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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
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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
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Reduction for Survivor Annuity
• 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
Applies if an employee
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Survivor Annuity Reduction
CSRS
2 1/2 % x $3600+
10 % x Amount of base in excess of
$3600
Survivor receives 55% of the base
elected by retiree
FERSFull survivor annuity (50%)10% of annuity
Partial survivor annuity (25%)5% of annuity
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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%
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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
• June 26, 2015‐ Supreme Court Ruling “Marriage for All”
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Other Reductions
Social Security benefit minus
Social Security benefit computed without CSRS Offset service
CSRS Offset
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Maximum Annuity
• 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
CSRS FERS
There is no maximum
annuity under FERS
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Returning to Government Work After Retirement
Exceptions (FERS)• Disability annuitants• Dual comp waivers
Generally, annuity continues and salary is offset by amount of annuity
Exceptions (CSRS)• Disability annuitants• Dual comp waivers• DSR• Presidential
appointments
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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
• 2015- 1.7%• 2016 NO COLA• 2017- 0.3%
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Cost of Living Adjustments (COLAS)
CSRS FERS
Equals the percent change in the Consumer Price Index (CPI)
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
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More Information
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Questions
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