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Benefits for federal government employees.

INTRODUCTION

L-1. What are the two retirement systems for federal employees?

There are two retirement systems for federal employees: the Civil Service Retirement System (CSRS) and the Federal Employees' Retirement System (FERS).

The CSRS, created in 1920, was the only retirement system for federal employees until the FERS became public law in 1986. FERS created a new federal retirement program coordinated with Social Security retirement benefits for federal employees hired after 1983. Federal employees in FERS are automatically covered by Social Security and must pay Social Security taxes, while federal employees who remain in CSRS are exempt from Social Security taxes. FERS also provides a guaranteed basic annuity and a tax-deferred savings plan similar to a Section 401(k) retirement plan.

FEDERAL EMPLOYEES' RETIREMENT SYSTEM

L-2. Who is covered under the Federal Employees' Retirement System?

The Federal Employees' Retirement System (FERS) is a three-tier retirement system for federal workers who began work with the government after 1983. In addition, a number of federal employees hired before 1984 elected to transfer from the Civil Service Retirement System (CSRS) to FERS during a 1987 transfer period.

The following are excluded from FERS coverage:

* A person not covered by Social Security, including a person covered by full CSRS.

* A person who has served without a break in service of more than 365 days since December 31, 1983, in the position of: (a) Vice President, (b) member of Congress, (c) a senior executive Service or Senior Foreign Service noncareer appointee, or (d) persons appointed by the President or Vice President to positions where the maximum rate of basic pay is at or above the rate for Level V of the Executive Schedule.

* An employee who is rehired after December 31, 1986, who has had a break in service and who, at the time of the last separation from the service, had at least five years of civilian service creditable under CSRS rules, any part of which was covered by CSRS or the Foreign Service Retirement system.

* An employee who has not had a break in service of more than three days ending after December 31, 1986, and who, as of December 31, 1986, had at least five years of creditable civilian service under CSRS rules (even if none of this service was covered by CSRS).

L-3. Who is eligible for FERS benefits?

Unreduced retirement benefits are provided at age 60 with 20 or more years of service, at age 62 with five or more years of service, and at "minimum retirement age" with 30 years of service. The minimum retirement age is currently 56.

The "minimum retirement age" for employees with 30 or more years of service is gradually increasing. Until the year 2003, an employee with 30 years of service could have retired at age 55. Beginning in the year 2003, the minimum retirement age increased by two months every year until year 2009. Thus, in 2009 the employee must be age 56 to retire with 30 or more years of service. Age 56 continues to be the minimum retirement age until 2020. Beginning in the year 2021, the minimum retirement age again increases by two-month increments until the year 2027. The minimum retirement age for employees with 30 or more years of service is 57 in the year 2027 and after. The minimum retirement age for reduced benefits is also being gradually increased from 55 to 57. An employee must have at least 10 years of service to be eligible for reduced retirement benefits. For an employee retiring with less than 30 years of service, a reduction of 5% per year for each year under age 62 is imposed. Thus, benefits for an employee retiring at age 55 are reduced 35%.

An employee can leave government employment prior to the date that he is eligible for a retirement benefit and still be eligible for a Basic Annuity at a later date. If the employee has five years of creditable service and does not withdraw contributions when he terminates government service, he may receive a deferred, unreduced annuity when he attains age 62 with at least five years of civil service employment; age 60 with at least 20 years of service; or at minimum retirement age (currently age 55) with at least 30 years of service.

An employee is entitled to a Basic Annuity at age 50 with 20 years of service or at any age after completing 25 years of service, if: (1) his retirement is involuntary (except by removal by cause for misconduct or delinquency) and he did not decline a reasonable offer for a position which is not lower than two grades below his present position; or (2) his retirement is voluntary because his agency is undergoing a major reduction in employees, reorganization, or a transfer of function in which a number of employees are separated or downgraded.

Basic Annuity

L-4. What is the Basic Annuity?

The Basic Annuity is the second tier of benefits under FERS. Social Security is the first tier of benefits. Social Security includes retirement, disability, and survivor benefits, and health insurance benefits under Medicare. The Basic Annuity provides retirement, disability, and survivor benefits in addition to those provided by Social Security. The Basic Annuity guarantees a specific monthly retirement payment based on the employee's age, length of creditable service, and "high-3" years' average salary. An employee must have five years of creditable service and be subject to FERS at separation in order to be eligible for a Basic Annuity.

L-5. How much must an employee contribute to the Basic Annuity?

An employee contributes 0.8% of his basic pay to the Basic Annuity. Certain FERS members pay an additional 0.5% to the Basic Annuity. These members include firefighters, law enforcement personnel, air traffic controllers, members of Congress, and Congressional employees. Basic pay does not include bonuses, overtime pay, military pay, holiday pay, cash awards, or special allowances given in addition to basic pay. The federal government makes a contribution to the Basic Annuity plan pursuant to a formula.

L-6. What annuities are available to a retiring employee?

The following annuities are available to a retiring federal employee:

* an annuity with no survivor benefit.

* a lump sum credit of the employee's contributions (excluding interest) with a reduced annuity.

* an annuity to the employee for life, with a survivor annuity payable for the life of the surviving spouse.

* a lump sum credit of the employee's contributions (excluding interest) with a reduced annuity that is further reduced to provide a survivor benefit.

* a reduced annuity with a survivor benefit to a person with an insurable interest, provided the employee is in good health.

Note, however, that an employee cannot elect against providing survivor benefits to his spouse, unless his spouse consents to the election in writing.

L-7. What is the amount of the Basic Annuity?

The amount of the Basic Annuity depends on the employee's years of service and highest three-year ("high-3") average salary. It also depends on whether an annuity supplement is added into the Basic Annuity formula.

For employees under age 62, or age 62 or older with less than 20 years of FERS service, the formula, not including the supplement where applicable, is:

* 1.0% x "high-3" average salary x length of service

For employees age 62 or older with at least 20 years of FERS service, the formula is:

* 1.1% x "high-3" average salary x length of service

(No annuity supplement is payable if the employee is age 62 or older.)

For certain employees, including law enforcement officers, firefighters, air traffic controllers, and employees of Congress, the formula is:

(1) 1.7% x "high-3" average salary x years of service up to 20 years, plus

(2) 1.0% x "high-3" average salary x years of service over 20 years, plus

(3) the annuity supplement, where applicable.

All periods of creditable service are totaled to determine length of service. Years and months of creditable service (extra days are dropped) are then used in the annuity computation formula.

"High-3" average salary is the highest pay obtainable by averaging an employee's rates of basic pay in effect over any three consecutive years of service. The three years need not be continuous, but they must consist of consecutive periods of service. In other words, two or more separate periods of employment that follow each other can be joined to make up the three consecutive years.

Example. Steve James retires at age 65 after 30 years of civil service employment. His "High-3" average salary is $31,000 ($30,000 + $31,000 + $32,000 4 3 = $31,000). His FERS benefit is computed as follows:

(1) 1.1% x $31,000 = $341

(2) $341 x 30 years of service = $10,230 Basic Annuity.

L-8. How is the Basic Annuity adjusted for cost-of-living increases?

The Basic Annuity for employees age 62 or older is adjusted for cost-of-living increases pursuant to the following schedule:

(1) Where the change in the Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI) for the year is less than 2.0%, the annuity is increased by the full amount of the CPI increase.

(2) Where the change in the CPI for the year is at least 2.0% but is not more than 3.0%, the annuity is increased by 2.0%.

(3) Where the change in the CPI for the year is more than 3.0%, the annuity is increased by the CPI less 1%. For example, if the CPI increases 4.5%, the Basic Annuity will increase 3.5%.

The cost-of-living increase for 2010 is 0.0%.

L-9. What is the Annuity Supplement?

An Annuity Supplement is added to the Basic Annuity as a substitute for Social Security when the employee is receiving the Basic Annuity and is under age 62. It is equal to the

estimated amount of Social Security benefits that the employee would be eligible to receive at age 62 based on civil service employment earnings. The Supplement ends when the employee first becomes eligible for a Social Security retirement benefit (age 62).

The Supplement is payable to: (1) employees who retire after the minimum retirement age (currently age 56) with 30 years of service; (2) employees who retire at age 60 with 20 years of service; and (3) employees who retire involuntarily and have reached minimum retirement age (currently age 56).

The Supplement is not subject to cost-of-living increases, and is reduced for excess earnings after retirement in much the same way that Social Security benefits are reduced for excess earnings. In 2010, the Supplement is reduced by $1 for every $2 that the beneficiary earns over $14,160.

Survivor Benefits

L-10. What survivors' benefits are payable under FERS?

Survivor benefits are paid upon the death of an employee or retired civil service employee. Benefits are paid on a monthly basis or in a lump sum to eligible survivors. The spouse, former spouse, and dependent children of a deceased employee may be entitled to a survivor annuity.

A spouse may be entitled to a "post-retirement survivor benefit." The annuity of a married employee who retires is generally reduced by 10% to provide a survivor annuity for the spouse, unless the employee and his spouse both waive the survivor annuity. A surviving spouse is entitled to 50% of the employee's unreduced annuity increased by cost-of-living benefit adjustments. There is also a 5% reduction in the annuity of a married employee who retires and selects a 25% survivor annuity.

There is a permanent actuarial reduction in the retiree's annuity in the case of a retiree who marries after retirement and elects a survivor benefit. The reduction may not be more than 25% of the retiree's annuity. The reduction is permanent and unaffected by any future termination of the marriage.

The surviving spouse: (1) must have been married to the employee for at least nine months; (2) must be the parent of a child of the marriage at the time of death, or (3) the death of the retired employee must have been accidental.

If the survivor is under age 60 and Social Security survivor benefits are not payable, benefits are the lesser of: (1) current CSRS survivor benefits; or (2) 50% (25% if elected) of accrued annuity plus a Social Security "equivalent." When Social Security survivor benefits are payable, FERS pays 50% (25% if elected) of the deceased retiree's annuity.

If the employee was unmarried at the time of retirement and then married after retirement, he may elect a reduced annuity with a survivor benefit for his spouse. Such an election must take place within two years after the marriage.

If the spouse dies before the retired employee, and the retired employee remarries, the new spouse is eligible to receive the same survivor benefits as the former spouse. The retired employee must elect to take a reduced annuity with a survivor benefit for his new spouse.

A retired employee and spouse who have elected against a survivor benefit can change their election within 18 months. The retired employee must pay the full cost of providing the survivor annuity if an election is made during this second election period.

There is also a survivor benefit for the spouse of an employee who dies prior to retirement. The surviving spouse is entitled to the basic employee death benefit, which is a guaranteed amount of $29,722.95 (in 2010), plus 50% of the employee's final salary or, if higher, his "high-3" average. In addition, if the deceased employee completed 10 or more years of service, the surviving spouse is entitled to an annuity equal to 50% of the unreduced annuity the employee would have been entitled to had he reached retirement age. Survivor benefits are subject to cost-of-living adjustments.

The $29,722.95 payment, which is indexed to the Consumer Price Index, can be paid in a lump sum or in monthly installments over a three-year period.

The surviving spouse: (1) must have been married to the employee for at least nine months, or (2) must be the parent of a child of the marriage, or (3) the death of the employee must have been accidental. The deceased employee must also have at least 18 months of creditable service while subject to FERS.

L-11. Is the former spouse of a deceased employee entitled to a survivor benefit?

The former spouse of a deceased employee may be entitled to a survivor benefit if he or she: (1) was married to the deceased employee for at least nine months; (2) has not remarried prior to age 55; and (3) a court order or court-approved property settlement agreement provides for payment of a survivor annuity to the former spouse.

The survivor annuity is payable to a former spouse when: (1) the deceased employee has at least 18 months of creditable service under FERS; or (2) the deceased former employee has title to a deferred annuity and has 10 years of service.

A former spouse who does not meet the requirements listed above may still be entitled to an annuity if the retiree, at the time of retirement, elected to provide the former spouse with a survivor annuity.

The amount of the survivor annuity for a former spouse is the same as that for a spouse, except that the Guaranteed Amount ($29,722.95, see L-10) is not payable unless payment is required under a court order or agreement.

L-12. Is there a survivor benefit for the children of a deceased employee?

If a retiree or an employee has 18 months of creditable service under FERS before he dies, his dependent children are entitled to monthly annuities reduced by the amount of any Social Security survivor benefits they receive. The annuity begins on the day after the

death and ends on the last day of the month before the one in which the child: (1) dies; (2) marries; (3) reaches age 18; or (4) if over 18, becomes capable of self-support. The annuity of a child who is a student ends on the last day of the month before the child: (1) marries; (2) dies; (3) ceases to be a student; or (4) attains the age of 22. If a student drops out of school or his annuity is terminated, it can be restored if he later returns to school and is still under age 22 and unmarried.

Annuity payments restart again if the child's marriage has ended and he or she is still eligible for benefits because of disability or enrollment as a full-time student while under age 22. If a child's marriage ends because of divorce or death, the child's annuity and health benefits coverage is restored beginning the first day of the month in which dissolution of the marriage occurs.

The amount of the benefit depends on whether the child is eligible to receive Social Security benefits and whether the deceased worker's spouse is still living.

If the retiree or employee is survived by a spouse or the child has a living parent, each eligible child is entitled to receive an annuity in 2010 equal to the lessor of:

(1) 60% of the employee's "high-3" average pay, divided by the number of qualified children.

(2) $1,409 per month, divided by the number of qualified children.

(3) $469 per month.

If the retiree or employee is not survived by a spouse or the child has no living parent, each eligible child is entitled to receive an annuity in 2010 equal to the lessor of:

(1) 75% of the employee's "high-3" average pay, divided by the number of qualified children.

(2) $1,691 per month, divided by the number of qualified children.

(3) $563 per month.

L-13. Is a person with an insurable interest in a retiree or employee eligible for a survivor benefit?

A retiree or employee can designate that a survivor annuity be paid to a person with an insurable interest in the life of the retiree or employee. The benefit is equal to 50% of the retiree's benefit, but is reduced depending on the difference in the age of the person with the insurable interest and the age of the retiring employee.

If the age difference is 30 years or more, the annuity is reduced 40%; if the age difference is 25 to 29 years, the reduction is 35%; if the age difference is 20 to 24 years, the reduction is 30%; if the age difference is 15 to 19 years, the reduction is 25%; if the age difference is 10 to 14 years, the reduction is 20%; if the age difference is five to nine years, the reduction is 15%; if the age difference is less than five years, the reduction is 10%.

L-14. When is a lump sum survivor benefit paid?

A lump sum survivor benefit is payable immediately after the death of an employee if the employee: (1) has less than 18 months of creditable service; or (2) leaves no widow(er), former spouse, or children who are eligible for a survivor annuity.

The lump sum survivor benefit is the amount paid into the Civil Service Retirement and Disability Fund by the employee. It also includes accrued interest.

The employee, former employee, or annuitant has the right to name the lump sum survivor benefit beneficiary. If no beneficiary is named, the lump sum is payable to the widow(er); if there is no widow(er), it is paid to his living children in equal shares; if no children, it is paid to his parents; if no parents, it is paid to the executor or administrator of his estate; if none of the above, it is paid to the next of kin under the laws of the state where the deceased was domiciled.

Disability Benefits

L-15. What disability benefits are paid under FERS?

Disability benefits are payable to an employee with 18 months of creditable service who, because of injury or disease, can no longer perform his job in a useful and efficient manner. The beneficiary is entitled to a benefit equal to 60% of his "high-3" average pay during the first year of disability, reduced dollar for dollar by any Social Security disability benefit. After the first year, the beneficiary is entitled to 40% of his "high-3" average pay, reduced by 60% of the Social Security disability benefit. The benefit is further adjusted at age 62 to equal the lesser of: (1) a retirement benefit computed as if he had worked during his years of disability; or (2) the disability benefit he would receive after the benefit is offset by any Social Security disability benefit. Disability benefits are adjusted after the first year of disability by the increase in the Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI). Where the change in the CPI for the year is less than 2.0%, the benefit is increased by the full amount of the CPI increase. Where the change in the CPI for the year is at least 2.0% but is not more than 3.0%, the benefit is increased by 2%. Where the change in the CPI for the year is more than 3.0%, the benefit is increased by the CPI less 1%. Periodic medical examinations are required until the beneficiary reaches age 60.

Thrift Savings Plan

L-16. What is the Thrift Savings Plan for FERS employees?

The Thrift Plan creates a third tier of benefits under FERS. A thrift plan account is set up automatically for every employee covered under FERS. Members of the uniformed services may also participate in the Plan (see M-4).

The government contributes 1% of pay to an account for each employee, even if the employee declines to contribute to the plan. In addition, the government matches employee contributions as follows:

(1) Contributions up to the first 3% of pay, dollar for dollar;

(2) Contributions that are more than 3% but not more than 5% of pay, 50 cents per dollar.

A FERS employee may contribute up to 100% of his salary towards the Thrift Plan. However, the maximum amount that a FERS employee can contribute is $16,500 in 2010.

Federal employees who are 50 or older are allowed to make additional "catch-up" contributions of $5,500 in 2010.

Contributions, and earnings on contributions, are not subject to federal income taxation until distributed to the employee at retirement. In addition, contributions reduce the employee's gross income for federal income tax purposes. (Contributions are subject to Social Security taxes, however.)

Contributions can be directed by employees to five investment funds:

(1) Government Securities Investment (G) Fund;

(2) Fixed Income Index Investment (F) Fund;

(3) Common Stock Index Investment (C) Fund;

(4) Small Capitalization Stock Index Investment (S) Fund; and

(5) International Stock Index Investment (I) Fund.

FERS employees may elect to invest any portion of their current account balances and/or future contributions in the G Fund, F Fund, C Fund, S Fund, or I Fund.

The Thrift Savings Plan also allows participants to invest in five Lifecycle funds. These Lifecycle funds are L 2040, L 2030, L 2020, L 2010, and L Income. These L funds invest their assets in the G, F, C, S, and I funds in different proportions. It is recommended that if a participant chooses a lifecycle fund, that he choose the one closest to when the money will be needed.

Thrift Plan payments may be made in the following manner:

(1) At retirement or disability, if eligible for a Basic Annuity, the payment may be made as an immediate or deferred annuity, a lump sum payment, a fixed term payment, or by transfer to an IRA or other qualified pension plan.

(2) At death, funds in the Thrift Plan are paid to eligible survivors or to beneficiaries as specified by FERS.

(3) At termination of employment, if eligible for a deferred Basic Annuity, the payment may be made as an immediate or deferred annuity, a transfer to an IRA or other qualified pension plan, or over a fixed term after the employee retires with a Basic Annuity.

(4) At termination of employment, if not eligible for a deferred Basic Annuity, the payment must be transferred to an IRA or qualified pension plan.

(5) At age 59V2 or during a period of financial hardship. (See below.)

A participant must withdraw his account balance in a single payment or begin receiving his Thrift Savings Plan account balance in monthly payments (or in the form of a Thrift Savings Plan annuity) by April 1 of the later of: (1) the year following the year in which the participant reaches age 70V2, or (2) the year following the year in which the participant separates from federal service. If the participant does not make an election so that payment can be made by this deadline, the Federal Retirement Thrift Investment Board must use the Thrift Savings Plan to purchase an annuity for the participant.

A participant who has turned age 59V2 can withdraw an amount up to his vested Thrift Savings Plan account balance before separating from government employment. A participant is allowed only one withdrawal under this provision. In addition, a participant can obtain a withdrawal before separating from government employment on the basis of financial hardship. A financial hardship withdrawal is limited to the amount the participant contributed to the Thrift Savings Plan (plus the earnings attributed to those contributions). There is no limit on the number of such withdrawals. The participant may ask the Thrift Savings Plan to transfer all or a portion of the withdrawal to an IRA or other eligible retirement plan.

A participant can continue to contribute to the Thrift Savings Plan after obtaining an aged-based withdrawal, but is not eligible to contribute to the Thrift Savings Plan for a period of six months after obtaining a financial hardship withdrawal. After six months of ineligibility to contribute, the participant can resume Thrift Savings Plan contributions only by making a new Thrift Savings Plan election on Form TSP-1.

The spouse of a FERS participant must consent to an in-service withdrawal and the spouse of a CSRS participant is entitled to notice when the participant applies for an in-service withdrawal.

Federal employees who separate or enter leave-without-pay status to serve in the military may make up contributions to the Thrift Plan missed because of military service. A federal employee would be permitted to contribute an amount equal to what an employee would have been eligible to contribute. The federal government must give such an employee two to four times the length of his military service to make up the Thrift Plan contributions. The government would match employee contributions in the same manner as regular matching contributions under the Thrift Plan.

L-17. Can members of the Civil Service Retirement System take advantage of the

Thrift Plan?

Yes, but the government does not contribute to the employee's plan, no matter how much the employee contributes. The Federal employee may contribute up to 100% of annual pay, but the contribution is limited to $16,500 in 2010. Additional catch-up contributions of $5,500 are allowed for those who are age 50 or older in 2010.

CIVIL SERVICE RETIREMENT SYSTEM

L-18. Which federal employees are covered under the Civil Service Retirement System?

The Civil Service Retirement System (CSRS) covers employees of the U.S. government and the District of Columbia who were hired before January 1, 1984, unless coverage is specifically excluded by law. Among the exclusions from CSRS coverage are employees who are subject to another federal retirement system. Employees subject to the Federal Employees' Retirement System (FERS) are excluded from participation in CSRS.

CSRS coverage for pre-1984 employees is automatic for all federal employees except those who are employed by Congress. Congressional employees had to elect coverage.

L-19. Who is eligible for a CSRS retirement annuity?

An employee must meet two requirements in order to be eligible for a CSRS retirement annuity. First, the employee must complete at least five years of civilian service with the government. Second, the employee, unless retiring on account of total disability, must have been employed under the CSRS for at least one year out of the last two years before separation from service.

The total service of an employee or member of Congress is measured in full years and months. Anything less than a full month is not counted. An employee's service is credited from the date of original employment to the date of separation. No credit is allowed for a period of separation from service in excess of three calendar days.

An employee is allowed credit for periods of military service if performed prior to the date of separation from his civilian position.

L-20. How are CSRS benefits paid for?

CSRS benefits are funded by deductions from the basic pay of covered employees, matching contributions from their employing agencies, and by payments from the General Treasury for the balance of the cost of the system. Under the current law, the employee and the employing agency each contribute:

* 8.0% of basic pay for Members of Congress,

* 7.5% of basic pay for Congressional employees, law enforcement officers, and firefighters, and

* 7.0% of basic pay for other employees.

The portion of compensation withheld and contributed to the retirement and disability fund is includable in the employee's gross income in the same taxable year in which it would have been included if it had been paid to the employee directly. No refund is allowed for taxes attributable to mandatory contributions from the employee's salary to the Civil Service Retirement Fund.

L-21. Who is entitled to an immediate annuity?

An immediate annuity begins no later than one month after separation from the service. This includes an annuity for an employee who retires optionally--for age, for disability, or due to involuntary separation from the service. It does not include an annuity for a separated employee who is entitled to a deferred retirement annuity at a future date.

An employee who is separated from the service is entitled to an annuity:

(1) at age 55 with 30 years of service;

(2) at age 60 with 20 years of service;

(3) at age 62 with five years of service;

(4) at age 50 with 20 years of service as a law enforcement officer or firefighter, or a combination of such service totaling at least 20 years.

An employee whose separation is involuntary, except for removal for cause on charges of misconduct or delinquency, is entitled to a reduced annuity after 25 years of service or after age 50 and 20 years of service. However, no annuity is payable if the employee has declined a reasonable offer of another position in the employee's agency for which the employee is qualified, which is not lower than two grades (pay levels) below the employee's grade, and which is within the employee's commuting area.

Also entitled to this reduced annuity is an employee who, while serving in a geographic area designated by the Office of Personnel Management, is voluntarily separated during a period in which: (1) the agency in which the employee is serving is undergoing a major reorganization, a major reduction in force, or a major transfer of function; and (2) a significant percentage of employees serving in this agency will be separated or subject to an immediate reduction in the rate of basic pay.

Such early retirements must be approved by the Office of Personnel Management. The annuities are reduced by 2% for each year the employee is under age 55.

L-22. Are there alternative forms of CSRS retirement annuities?

Yes, an employee may, at the time of retirement, elect the following alternative forms of annuities:

(1) payment of an annuity to the employee for life;

(2) payment of an annuity to the employee for life, with a survivor annuity payable for the life of a surviving spouse;

(3) payment of an annuity to the employee for life, with benefit to a named person having an insurable interest;

(4) election of lump sum credit option and reduced monthly annuity.

L-23. What is an annuity for life?

The annuitant has a right to receive monthly payments during his lifetime unless he is convicted of certain offenses against the United States. Upon the annuitant's death, any accrued annuity that remains unpaid will be paid to: (1) the deceased annuitant's executor or administrator; or (2) if there is no executor or administrator, to the decedent's next of kin under state law, after 30 days have passed from the date of death.

L-24. What are the features of an annuity with a survivor benefit?

An annuity with survivor benefit entitles the survivor to an annuity equal to 55% of the annuity amount prior to reduction for the election of the survivor benefit. An annuity for a married employee will automatically include an annuity for a surviving spouse unless the employee and spouse waive the spouse's annuity in writing. The written waiver requirement can be overcome only in instances where the employee's spouse cannot be located or where other exceptional circumstances are present.

Generally, the survivor benefit is paid until the survivor dies or remarries. However, remarriage of a widow or widower who is at least age 55 does not terminate the survivor annuity. Where the survivor annuity is terminated because the survivor had remarried prior to reaching age 55, the annuity may be restored if the remarriage is dissolved by death, annulment, or divorce.

Where the spouse properly consents, an employee may elect to reduce that portion of the annuity that is to be treated as a survivor annuity.

The portion of the employee's annuity treated as a survivor annuity will be reduced according to a formula. The reduction is 2.5% of the first $3,600 chosen as a base, plus 10% of any amount over $3,600. For example, if the employee chooses $4,800 as a base, the reduction in the annual annuity would be 2.5% of the first $3,600 ($90 a year), plus 10% of the $1,200 balance ($120 a year), making a total reduction of $210 ($90 + $120) a year.

If marriage is terminated after retirement by the divorce, annulment, or death of the spouse named as beneficiary, the retiree may elect to have the annuity recomputed and payment at the single-life unreduced rate will be made for each full month the employee is not married. Should the employee remarry, he has two years from the date of remarriage to notify the Office of Personnel Management in writing that he wants the annuity reduced again to provide a survivor annuity for the new spouse.

If a retired employee dies, absent a waiver of benefits by the survivor, the surviving spouse will receive 55% of the yearly annuity that the deceased employee had earned at the time of death. This earned annuity is computed in the same manner as if the deceased employee had retired, but with no reduction for being under age 55, and no increase for voluntary contributions.

The surviving spouse's annuity begins on the day after the employee's death and terminates on the last day of the month before the surviving spouse dies or remarries before age 55.

L-25. How does an annuity with benefit to a named person having an insurable interest work?

If the employee is in good health at retirement, he may elect an Annuity with Benefit to Named Person Having an Insurable Interest. A disabled dependent relative or former spouse is considered as having an insurable interest. An employee electing this annuity will have his annuity reduced by a percentage amount as follows:
       Age of Named Person In Relation          Reduction in Annuity
         to Retiring Employee's Age             of Retiring Employee

Older, same age, or less than 5 years younger           10%
5 but less than 10 years younger                        15%
10 but less than 15 years younger                       20%
15 but less than 20 years younger                       25%
20 but less than 25 years younger                       30%
25 but less than 30 years younger                       35%
30 or more years younger                                40%


Upon the employee's death after retirement, the named beneficiary will receive an annuity equal to 55% of the employee's reduced annuity rate. The survivor's annuity begins on the day after the retired employee's death and terminates on the last day of the month before the survivor dies. However, if the person named as having an insurable interest dies before the employee, the employee's annuity will be restored to life rate upon written request.

L-26. Is there a lump sum credit option upon retirement under CSRS?

Employees are allowed to receive a payment equal to the value of the contributions they made to the retirement program over their working years. The lump sum payments is paid in one payment at first and then in two installments of equal amounts. Workers eligible to voluntarily retire who have a critical or life-threatening illness can receive the lump sum in one payment.

L-27. How is the reduced annuity computed?

First, determine the amount of the member's contributions into the plan. The member's regular annuity is then calculated. To determine the amount of monthly reduction of the annuity, the computation is as follows:

* LS/PV = monthly reduction in annuity

* where LS equals the lump sum credit and PV equals the present value factor of the annuity

The present value factors of CSRS and FERS appear in the Reduced Annuity Tables, below.

To obtain the amount of the reduced monthly annuity, subtract the monthly reduction figure obtained above from the amount of the regular (unreduced) monthly annuity.

Example. Mr. Edwards, a member of the CSRS, is 64 at the time he retires from government service. His contributions to CSRS total $25,000. His present value factor (from the table) is 168.2. Using the formula above, $25,000 -f 168.2 = $148.63. Mr. Edwards' monthly annuity would therefore be reduced by $148.63.

Computing the CSRS Annuity

L-28. How is the amount of the CSRS annuity determined?

The amount of an annuity depends primarily on the employee's length of service and "high-3" average pay. These two factors are used in a formula to determine the basic annuity, which may then be reduced or increased for various reasons.

The "high-3" average pay is the highest pay obtainable by averaging the rates of basic pay in effect during any three consecutive years of service, with each rate weighted by the time it was in effect. The three years need not be continuous, but they must consist of consecutive periods of service. Thus, two or more separate periods of employment that follow each other may be joined to make up the three consecutive years of service on which the "high-3" average pay is based. The pay rates for each period of employment are weighted on an annual basis.

Example. Mr. Smith's final three years of government service included pay rates of:
6 months at $14,500  - 1/2 year     X  $14,500 = $7,250
18 months at $15,000 - 1 1/2 years  X  $15,000 = 22,500
12 months at $15,000 - 1 year       X  $15,000 = 15,000

                                                $44,750


Mr. Smith's average pay is computed as:

$44,750 /3 = $14,917 = (Average Pay)

A three-step formula is used to determine the basic annuity.

* Step I. 1.5% x Average Pay x number of years of service up to five years, plus

* Step II. 1.75% x Average Pay x number of years of service over five and up to 10 years, plus

* Step III. 2% x Average Pay x number of years of service over 10.

Note that for employees with over 10 years of service, all three steps apply. For those with less than 10 years of service, only steps I and II apply. For those with less than 5 years of service, only step I applies.

Example. Mr. Martin retires from civil service employment with 30 years of service. The three consecutive years of service with the highest rates of basic pay were his last three years before retirement.
Rate of pay during 28th year of service $14,500
Rate of pay during 29th year of service  15,000
Rate of pay during 30th year of service  15,500

                                        $45,000 (total)

$45,000 / 3 =  $15,000  =  (Average Pay)


The general formula, using Mr. Martin's $15,000 average pay and 30 years of service, is applied as follows:
1. 1 1/2   X $15,000  X 5 years  = $1,125.00
2. 1 3/4%  X $15,000  X 5 years  =  1,312.50
3. 2%      X $15,000  X 20 years =  6,000.00

                Basic Annuity    = $8,437.50


The employee's basic annuity may not exceed 80% of his average pay. If the formula produces an amount exceeding the 80% maximum, it must be reduced to an amount that equals 80% of the average pay.

L-29. What is the substitute computation method?

A substitute computation method is provided as an alternative for employees with a "high-3" of under $5,000. Instead of taking the 1.5%, 1.75%, and 2% of the "high-3" average pay, the employee may substitute 1% of the "high-3" average pay plus $25 for all parts of the general formula. If the "high-3" average pay is between $2,500 and $3,333, substitute the 1% plus $25 for the 1.5% and 1.75% in the first and second parts of the general formula. If the "high-3" average pay is between $3,334 and $4,999, substitute the 1% plus $25 for the 1.5% in the first part of the general formula.

L-30. How is the benefit determined for disability retirement?

An employee under age 60 who retires on account of total disability will receive no less than the guaranteed minimum annuity, which is the lesser of:

(1) 40% of the employee's "high-3" average pay; or

(2) the amount obtained under the general formula after adding to years of actual service the number of years the employee is under age 60 on the date of separation.

An employee must have completed at least five years of government service in order to be eligible for disability benefits. The provision for a minimum disability annuity does not apply to employees over age 60. The disability annuity rate for an employee over age 60 is always computed by using actual service in the general formula.

L-31. Can an employee obtain a larger retirement annuity by making voluntary contributions?

An employee can obtain a larger retirement annuity by making voluntary contributions, in multiples of $25, to purchase an additional annuity. Total voluntary contributions may not exceed 10% of the employee's total basic pay.

Voluntary contributions are interest-bearing. The interest rate is determined at the end of each year by the Treasury Department. Each $100 in the account provides an additional annuity in the amount of $7, plus 20 cents for each full year the employee is over age 55 at retirement.

Death Benefits

L-32. Is there a death benefit under the CSRS?

Death benefits are of two kinds: survivor annuities and lump sum payments. Survivor annuities are payable to an employee's surviving spouse and children upon the death of the employee. A lump sum benefit is payable upon the death of the employee if there is no spouse or dependent children entitled to an annuity, or, if one is payable, after the right of the last person entitled thereto has been terminated.

While not formally called a "death benefit," where the employee has retired, annuities are payable to the surviving spouse (unless the spouse had waived survivor benefit entitlement) and, where applicable, payable to a named person with an insurable interest.

Annuity Eligibility Requirements

L-33. Who is eligible for a survivor annuity?

Employee's Spouse. In order for the surviving spouse to qualify for a survivor annuity:

(1) The spouse must have been married to the employee for at least nine months before death, or

(2) The spouse must be the parent of the deceased's child born of the marriage.

However, these requirements are waived where: (1) the employee dies as a result of an accident; or (2) the employee had previously married and subsequently divorced the surviving spouse, and the aggregate time married is at least nine months.

Employee's Child. Generally, for a deceased employee's child to qualify for the survivor annuity, the child must be unmarried, under 18 years of age, and a dependent of the employee. The following rules also apply:

(1) An adopted child is considered to be the employee's child.

(2) A stepchild is considered to be the employee's child, even if the child did not live with the deceased employee. An illegitimate child, however, must prove he was dependent upon the deceased employee.

(3) An illegitimate child is considered to be the employee's child, even if the child did not live with the deceased employee. An illegitimate child, however, must prove he was dependent upon the deceased employee.

(4) A child who lived with the employee and for whom the employee had filed an adoption petition is considered to be the employee's child, but only where the surviving spouse did in fact adopt the child following the employee's death.

Notwithstanding the age requirement above, each of the following persons is considered to be a child for purposes of the survivorship annuity:

(1) An unmarried dependent child, regardless of age, who is incapable of self-support because of a mental or physical disability incurred before age 18.

(2) An unmarried dependent child between 18 and 22 who is a "student" (pursuing a full-time course of study or training in residence in a high school, trade school, college, university, or comparable recognized educational institution).

Benefits for a child end upon marriage. However, annuity payments restart again if the child's marriage has ended and he or she is still eligible for benefits because of disability or enrollment as a full-time student while under age 22. If a child's marriage ends because of divorce or death, the child's annuity and health benefits coverage is restored beginning the first day of the month in which dissolution of the marriage occurs.

Computing The Survivor Annuity

L-34. How do you compute the survivor annuity?

If an employee dies after completing at least 18 months of civilian service, there is a guaranteed minimum survivor annuity based upon the employee's average pay over the total civilian service. The annuity, however, is at least 55% of the smaller of: (1) 40% of the deceased employee's "high-3" average pay, or (2) the regular computation obtained after increasing service by the period of time between the date of death and the date the employee would have become age 60.

This guaranteed minimum does not apply if 55% of the employee's earned annuity produces a higher benefit than the guaranteed minimum. Also, since active service cannot be projected beyond age 60 in any case, the guaranteed minimum does not apply where the employee dies after reaching age 60.

Where an employee is survived by a spouse and is survived by children who qualify for survivor benefits, each surviving child is entitled to a benefit equal to whichever of the following amounts is the least: (1) 60% of the employee's high-3 average pay, divided by the number of qualified children, (2) $1,409 per month, divided by the number of qualified children, or (3) $469 per month.

When an employee leaves no surviving spouse but leaves children who qualify for survivor benefits, each child will be paid the least of: (1) 75% of the employee's high-3 average pay, divided by the number of qualified children; (2) $1,691 per month, divided by the number of qualified children; or (3) $563 per month.

A child's annuity begins on the day after the employee or annuitant dies and continues until the last day of the month before the child marries, dies, or reaches age 18, except in the following cases:

(1) For a child age 18 or over who is incapable of self-support because of a disability that began before age 18, payments stop at the end of the month before the child becomes capable of self-support, marries, or dies.

(2) The annuity of a student age 18 or over stops at the end of the month before the child ceases to be a student, reaches age 22, marries, or dies, whichever occurs first.

Lump Sum Death Benefit

L-35. When does the lump sum death benefit become payable?

The lump sum death benefit becomes payable to the estate of the proper party where the employee dies:

(1) without a survivor; or

(2) with a survivor, but the survivor's right to an annuity terminates before a claim for a survivor annuity has been filed.

The lump sum benefit consists of the amount paid into the Civil Service Retirement and Disability Fund by the employee, plus any accrued interest.

If all rights to a CSRS annuity cease before the total annuity paid equals the lump sum credit, the difference between the lump sum credit and the total annuity paid becomes payable to the estate of the proper party. Thus, if an employee leaves a spouse or children who are eligible for a survivor annuity, a lump sum death benefit may be payable after all survivors' annuities have been paid. The lump sum benefit would consist of that portion of the employee's lump sum credit that has not been exhausted by the annuity payments to survivors.

Annuity Payments

L-36. How are annuity payments made?

Annuities are paid by monthly check. The Office of Personnel Management authorizes the payment, and the Treasury Department issues the check. After the initial check, each regular check is dated the first workday of the month after the month for which the annuity is due. For example, the annuity payment for the month of April will be made by a check dated May 1.

An employee annuity begins on the first day of the month after: (1) separation from service, or (2) pay ceases and the service and age requirements for entitlement to an annuity are met. Any other annuity payable begins on the first day of the month after the occurrence of the event on which payment is based.

Disability Retirement

L-37. When is an annuity payable for disability retirement?

An immediate annuity is payable to an employee for disability retirement when each of the following conditions is met:

(1) The employee has completed five years of civilian service.

(2) The employee has become totally disabled for useful and efficient service in the position occupied, or the duties of a similar position at the same grade or level.

A claim for disability retirement must be filed with the Office of Personnel Management before separation from service or within one year thereafter. The one-year requirement may be waived in cases of incompetency.

The annuity payable will be the earned annuity based on the high-3 average salary, the years of actual service, and the three-part formula (see L-28), but not less than: (1) 40% of the high-3 average salary, or (2) the amount computed under the general formula after adding to years of actual service the number of years he is under age 60 on the date of separation.

Unless the disability is permanent in nature, an employee receiving a disability retirement annuity must be medically examined annually until age 60. The Government pays for the examination.

Upon recovery before reaching age 60, the annuity is continued temporarily (not to exceed one year) to give the individual an opportunity to find a position. If reemployed in Government service within the year, the annuity stops on reemployment. If the individual is not reemployed, the annuity stops at the expiration of the 180 day period.

Cost-of-Living Adjustments

L-38. Is there a cost-of-living adjustment to CSRS annuities?

Annuities for retirees and survivors are subject to a cost-of-living adjustment in December of each year. The increases are reflected in the annuity payment received the following month. The percentage of the cost-of-living increase each year is determined by the average price index for the third quarter of each year over the third quarter average of the Consumer Price Index for Urban Wage Earners and Clerical Workers of the previous year.

Annuitants receive a 0.0% cost-of-living adjustment in 2010.

Refund of Contributions

L-39. Is there a refund of contributions if an employee leaves government service?

Yes, an employee who leaves government service or transfers to government work under another retirement system may withdraw his retirement lump sum credit (contributions plus any interest payable), so long as the employee: (1) is separated from the job for at least 31 consecutive days, (2) is transferred to a position that is not subject to CSRS or FERS and remains in that position for at least 31 consecutive days, (3) files an application for a refund of retirement deductions, (4) is not reemployed in a position subject to CSRS or FERS at the time the application is filed, and (5) will not become eligible to receive an annuity within 31 days after filing the application.

LIFE INSURANCE BENEFITS

L-40. In general, what life insurance benefits are available to federal civil service employees?

All federal civil service employees--whether CSRS or FERS members--and employees of the District of Columbia are automatically insured under the provisions of a group policy purchased by the U.S. Office of Personnel Management.

Basic insurance coverage may be declined by written notice only. If coverage has been declined, the employee cannot obtain coverage for at least one year and, then, only if the applicant is in good health. Special rules apply if the employee has experienced a break in service of at least 180 days. Under this exception, all previous waivers of life insurance coverage are canceled, but any of the optional coverages must be affirmatively elected within 31 days after the employee's return. Each insured receives a certificate setting forth the group insurance benefits, to whom benefits are payable, to whom claims are submitted, and summarizing the provisions of the policy. The group insurance is underwritten by a large number of private insurance companies and claims are settled by the Office of Federal Employees' Group Life Insurance, P.O. Box 2627, Jersey City, N.J. 07303-2627.

Group insurance includes: (1) group term life coverage without a medical examination, and (2) accidental death and dismemberment insurance protection. The amount of each type of insurance is based on the employee's "basic insurance amount," which is determined by rounding the employee's annual salary to the next higher multiple of $1,000 and adding $2,000. However, in no case may the basic insurance amount be less than $10,000.

The group accidental death and dismemberment insurance provides payment for: (1) loss of life or loss of two or more members, and (2) loss of one hand or one foot or for permanent and total loss of sight in one eye. The accidental death benefit equals the employee's basic insurance amount and is paid in addition to the group life insurance.

An insured individual who is certified by a doctor as terminally ill may elect to receive a lump sum payment of Basic Insurance. Optional insurance is not available for payment as a Living Benefit. The effective date of a Living Benefit election is the date on which the Living Benefit payment is cased or deposited. Once an election becomes effective, it can't be revoked. No further election of Living Benefits can be made. If the insured individual has assigned his insurance, he cannot elect a Living Benefit; nor can an assignee elect a Living Benefit on behalf of an insured individual. If an individual has elected a Living Benefit, he may assign his remaining insurance. An individual may elect to receive either a full Living Benefit (all of the Basic Insurance) or a partial Living Benefit (a portion of the Basic Insurance, in a multiple of $1,000). The amount of Basic Insurance elected as a Living Benefit will be reduced by an actuarial amount representing the amount of interest lost to the fund because of the early payment of benefits.

An individual may assign ownership of all life insurance, except Option C (which covers family members). If an individual wishing to make an assignment owns more than one type of coverage, he must assign all the insurance; an individual cannot assign only a portion of the coverage. Option C cannot be assigned. If the insurance is assigned to two or more individuals, corporations, or trustees, the insured individual must specify percentage shares, rather than dollar amounts or types of insurance, to go to each assignee.

L-41. How does an employee designate the beneficiary or beneficiaries?

An employee's designation of beneficiary or beneficiaries is made in a signed and witnessed writing that is received before the employee's death by his employing office. If no beneficiary is designated when the employee dies, payment is made in the following order: to the employee's widow or widower; or, if none, to the child or children of the employee in equal shares and descendants of deceased children by representation; or, if none, to the parents of the employee in equal shares or the entire amount to the surviving parent; or, if none, to the duly appointed executor or administrator of the employee; or, if none, to the next of kin of the employee under the law of the employee's domicile at the time of death.

Beneficiaries receiving insurance proceeds in excess of $7,500 receive a money market account instead of a check from the government. Beneficiaries entitled to less than $7,500 receive a single check from the government for the full amount of insurance coverage. Insurance proceeds earn interest in the money market account. Beneficiaries receive special checkbooks and can write checks on the money market account for $250 up to the full amount of the insurance payment.

L-42. When does insurance coverage cease?

Subject to the exceptions below, an employee's group insurance coverage ceases on the earliest of: (1) the date of separation from the service, (2) the date on which a period of 12 months of continuous non-pay status ends, or (3) the date of any other change in employment that results in the employee's ineligibility for insurance coverage. In addition, coverage may be terminated at the end of the pay period in which it is determined that periodic pay, after all other deductions, is insufficient to cover the required withholdings (such as court-ordered child support) to a point at which deductions for federal employee group life insurance cannot be made.

An exception to the termination rule occurs where: (1) the employee retires on an immediate annuity, or (2) the employee becomes entitled to workers' compensation.

An employee who does not want insurance may waive group insurance coverage. In such a case, coverage ceases on the last day of the pay period in which the agency receives the employee's waiver of coverage.

L-43. Can an employee convert to an individual policy?

If coverage ceases as a result of one of the occurrences described in L-42 above, the employee may apply for an individual life insurance policy. The employee's coverage cannot exceed the amount for which he was insured at the time of the terminating event. The conversion excludes the Option C coverage. (See L-45.)

The employee's request for conversion information must be submitted to the Office of Federal Employee's Group Life Insurance and postmarked within 31 days following the date of the terminating event or within 31 days of the date the employee received notice of loss of the group coverage and right to convert, whichever is later. Detailed information concerning how to apply for the policy may be obtained from the Office of Federal

Employees' Group Life Insurance, P.O. Box 2627, Jersey City, N.J. 07303-2627.

L-44. What is the cost of basic insurance?

The employee pays two-thirds, by means of salary withholding, of the cost of that amount of group term life and accidental death and dismemberment that equals his basic insurance amount. The cost of the additional group term life (i.e., that amount in excess of his basic insurance amount) is paid entirely by the government. The amount withheld from the bi-weekly pay of an employee is 15 cents for each $1,000 of his basic insurance amount; the amount withheld from the monthly pay of an employee is 32.5 cents for each $1,000 of coverage. The following table shows the amount withheld from pay to meet the employees' share of the cost.

INSURANCE WITHHOLDINGS

L-45. What optional insurance coverages are available to the civil service employee?

Optional insurance coverages currently available include: (1) optional life insurance (termed Option A--Standard Insurance); (2) additional optional life insurance (Option B--Additional Insurance); and (3) optional life insurance on family members (Option C--Family Coverage). Beneficiary provisions for optional insurances on the life of the employee are the same as for basic (regular) insurance.

Option A--Standard Insurance

Employees covered under the basic life insurance program can purchase $10,000 of optional group term life insurance. This coverage includes accidental death and dismemberment.

The premium is paid entirely by the employee through withholding, and the cost is as follows:
                   Withholding for
                  $10,000 Insurance

Age Group        Biweekly     Monthly

Under age 35      $0.30        $0.65
35 through 39      0.40         0.87
40 through 44      0.60         1.30
45 through 49      0.90         1.95
50 through 54      1.40         3.03
55 through 59      2.70         5.85
60 and over        6.00        13.00


Where Option A insurance has been declined, the employee is eligible to enroll for this coverage only by meeting the two requirements for canceling a waiver of basic life insurance. Neither a retiree nor an employee receiving basic life insurance while receiving workers' compensation can cancel a previous declination of Option A--Standard.

Option B--Additional Optional Insurance

An employee with basic life insurance can purchase Option B--additional optional life insurance on himself--without regard to whether he has purchased Option A insurance. Option B coverage comes in one, two, three, four, or five multiples of an employee's annual pay (after the pay has been rounded to the next higher thousand).

The cost of Option B insurance, like Option A, is paid entirely by the employee through withholdings. The rates per $1,000 of coverage are as follows:
                      Withholding for $1,000
                           Insurance

Age Group          Biweekly           Monthly

Under age 35         $0.03            $0.065
35 through 39        0.04              0.087
40 through 44        0.06              0.130
45 through 49        0.09              0.195
50 through 54        0.14              0.303
55 through 59        0.28              0.607
60 through 64        0.60              1.300
65 through 69        0.72              1.560
70 through 74        1.20              2.600
75 through 79        1.80              3.900
80 and over          2.40              5.200


Retiring employees or compensationers can elect to continue Option B coverage on an unreduced basis by continuing to pay premiums after age 65. Annuitants and compensationers who elect unreduced Option B can later cancel that election and have the full reduction.

Option C--Family Coverage

Option C--life insurance coverage on the life of spouse and dependents--is available in either one, two, three, four, or five multiples of coverage. One multiple is equal to $5,000 for a spouse and $2,500 for each dependent child. The cost of this insurance is paid entirely by the employee through withholding. The rates for coverage of the spouse and child (or children) are as follows:
                      Withholding per Multiple

Age of Person       Biweekly           Monthly

Under age 35         $0.27             $0.59
35 through 39         0.34              0.74
40 through 44         0.46              1.00
45 through 49         0.60              1.30
50 through 54         0.90              1.95
55 through 59         1.45              3.14
60 through 64         2.60              5.63
65 through 69         3.00              6.50
70 through 74         3.40              7.37
75 through 79         4.50              9.75
80 and over           6.00             13.00


Retiring employees can choose to elect unreduced Option C coverage by continuing to pay premiums after age 65. Annuitants and compensationers who elect unreduced Option C can later cancel that election and have the full reduction.

Foster children are covered under Option C. Dependency of the foster child must be established before the child is approved for coverage under Option C.

L-46. May a retiring employee continue life insurance coverage?

With respect to basic (regular) life insurance, an employee who retires on an immediate annuity can continue his basic life insurance (excluding accidental death and dismemberment) so long as he satisfies the "five or less than five" rule. This requires that the retiree be insured either: (1) through the five years of service immediately preceding his retirement; or (2) if less than five years, then throughout the period or periods of service during which he was entitled to coverage. An additional requirement for continuing basic insurance is that the employee cannot have converted the policy to an individual life policy.

The retiring employee's basic life options are as follows:
                                           Monthly Cost   Monthly Cost
    Election                                Before 65       After 65

1.  75% REDUCTION--Amount                   $.325 per      No Cost
    of insurance reduces 2% per             $1,000 *
    month after age 65 to a minimum of
    25% of Basic Insurance Amount at
    retirement.

2.  50% REDUCTION--Amount                   $.925 per      $.60 per
    of insurance reduces 1% per             $1,000 *       $1,000 *
    month after age 65 to a minimum of
    50% of Basic Insurance Amount at
    retirement.

3.  NO REDUCTION--100% of                   $2.155 per     $1.83 per
    Basic Insurance Amount at               $1,000 *       $1,000 *
    retirement is retained after age 65.

* of Basic Insurance Amount at retirement


Where the employee chooses the 75% Reduction and retired before December 31, 1989, there is no cost to the individual after retirement, regardless of age. If the employee retires after December 31, 1989 and elects the 75% Reduction, the life insurance withholdings will be at the same rate to age 65 as for active employees and withholdings will be deducted from his annuity. After the individual reaches age 65, withholdings will stop.

Where the employee chooses the 50% Reduction or No Reduction, the full cost of the additional protection is deducted from the retiree's monthly annuity check. The withholdings begin at retirement and continue for life or until the election is canceled or coverage is otherwise discontinued.

Where the employee elected Option A--Standard Insurance, the retiree may continue the insurance so long as it was in force during the "five or less than five" period explained earlier. The cost of the Option A life insurance will be withheld from the annuity until the end of the calendar month in which he attains age 65. After that time, the Option A life insurance will be continued without cost to the retiree.

Option A life insurance, in all cases, is subject to a reduction of 2% at the end of each full calendar month following the date on which the employee attains age 65 or retires, whichever occurs later. These reductions continue until a minimum (but in no event, less than 25% of the amount of Option A life in force before the first reduction) is reached.

An employee who retires on an immediate annuity can continue the amount of Option B--Additional Life Insurance so long as it was in force for the required "five or less than five" period explained above. The full cost of the Option B life that is continued will be withheld from the retiree's annuity until the calendar month in which the retiree attains age 65. Beginning with the end of that calendar month, Option B life insurance will be continued without cost to the retiree. The amount of Option B life insurance is subject to a reduction of 2% each month beginning with the second calendar month after the date on which the employee attains age 65 or retires, whichever occurs later. These reductions continue for 50 months, at which time the Option B life coverage ends.

Retiring employees or compensationers can elect to continue Option B coverage on an unreduced basis by continuing to pay premiums after age 65. Annuitants and compensationers who elect unreduced Option B can later cancel that election and have the full reduction. Annuitants and compensationers who have Option B coverage on a reduction schedule will be offered the opportunity to elect an unreduced schedule on a prospective basis.

An employee who retires on an immediate annuity may continue his Option C Family Coverage that was in force during the "five or less than five" period. The full cost of the optional family coverage that is continued will be withheld from the retiree's annuity until the calendar month in which the retiree attains age 65. Beginning with the end of that calendar month, the optional family life coverage will be continued without cost to the retiree. Optional family life coverage that is continued after retirement is subject to the same method of reduction as is the additional optional life insurance (see above). Thus, coverage of optional family life will end following the expiration of the same 50 months.

Retiring employees can choose to elect unreduced Option C coverage by continuing to pay premiums after age 65. Annuitants and compensationers who elect unreduced Option C can later cancel that election and have the full reduction.

A recipient of federal workers' compensation avoids a termination of federal employee group life insurance so long as he has met the "five or less than five" rule. This rule applies to basic life insurance, as well as any of the optional coverages. No accidental death and dismemberment insurance is available to the workers' compensation recipient.
REDUCED ANNUITY TABLES
CSRS

Present Value Factors

Age at Retirement    Factor

40                   277.6
41                   274.7
42                   272.1
43                   269.1
44                   265.0
45                   260.0
46                   255.1
47                   250.8
48                   245.9
49                   240.3
50                   234.8
51                   230.2
52                   225.9
53                   221.4
54                   216.8
55                   211.9
56                   207.2
57                   202.3
58                   197.6
59                   193.1
60                   188.7
61                   183.7
62                   178.3
63                   173.2
64                   168.2
65                   163.0
66                   157.9
67                   153.1
68                   148.0
69                   142.8
70                   138.0
71                   133.1
72                   128.0
73                   123.1
74                   118.4
75                   113.5
76                   108.2
77                   103.2
78                    98.2
79                    93.1
80                    88.4
81                    83.6
82                    78.4
83                    73.7
84                    69.5
85                    65.8
86                    62.0
87                    57.9
88                    54.0
89                    50.7
90                    47.2

FERS

Age at Retirement    Factor

40                   185.6
41                   185.3
42                   185.2
43                   184.9
44                   184.1
45                   182.8
46                   181.6
47                   180.7
48                   179.5
49                   177.9
50                   176.4
51                   175.4
52                   174.7
53                   174.1
54                   173.3
55                   172.5
56                   171.8
57                   171.2
58                   170.7
59                   170.5
60                   170.5
61                   170.1
62                   167.5
63                   163.0
64                   158.5
65                   154.0
66                   149.4
67                   145.1
68                   140.5
69                   135.9
70                   131.5
71                   127.0
72                   122.4
73                   118.0
74                   113.6
75                   109.0
76                   104.1
77                    99.5
78                    94.9
79                    90.1
80                    85.7
81                    81.1
82                    76.2
83                    71.8
84                    67.8
85                    64.2
86                    60.6
87                    56.7
88                    52.9
89                    49.7
90                    46.4

INSURANCE WITHHOLDING

Amount of Witholdings Per Pay Period

  Basic
Insurance
 Amount        Biweekly           Monthly

$18,000          $2.70             $5.85
19,000           2.85              6.18
20,000           3.00              6.50
21,000           3.15              6.83
22,000           3.30              7.15
23,000           3.45              7.48
24,000           3.60              7.80
25,000           3.75              8.13
26,000           3.90              8.45
27,000           4.05              8.78
28,000           4.20              9.10
29,000           4.35              9.43
30,000           4.50              9.75
31,000           4.65              10.08
32,000           4.80              10.40
33,000           4.95              10.73
34,000           5.10              11.05
35,000           5.25              11.38
$36,000          $5.40            $11.70
37,000           5.55              12.03
38,000           5.70              12.35
39,000           5.85              12.68
40,000           6.00              13.00
41,000           6.15              13.33
42,000           6.30              13.65
43,000           6.45              13.98
44,000           6.60              14.30
45,000           6.75              14.63
46,000           6.90              14.95
47,000           7.05              15.28
48,000           7.20              15.60
49,000           7.35              15.93
50,000           7.50              16.25
51,000           7.65              16.58
52,000           7.80              16.90
53,000           7.95              17.23
$54,000          $8.10            $17.55
55,000           8.25              17.88
56,000           8.40              18.20
57,000           8.55              18.53
58,000           8.70              18.85
59,000           8.85              19.18
60,000           9.00              19.50
61,000           9.15              19.83
62,000           9.30              20.15
63,000           9.45              20.48
64,000           9.60              20.80
65,000           9.75              21.13
66,000           9.90              21.45
67,000           10.05             21.78
68,000           10.20             22.10
69,000           10.35             22.43
70,000           10.50             22.75
71,000           10.65             23.08
72,000           10.80             23.40
73,000           10.95             23.73
74,000           11.10             24.05
75,000           11.25             24.38
76,000           11.40             24.70
77,000           11.55             25.03
78,000           11.70             25.35
79,000           11.85             25.68
80,000           12.00             26.00
81,000           12.15             26.33
82,000           12.30             26.65
83,000           12.45             26.98
84,000           12.60             27.30
85,000           12.75             27.63
86,000           12.90             27.95
87,000           13.05             28.28
88,000           13.20             28.60
89,000           13.35             28.93
90,000           13.50             29.25
91,000           13.65             29.58
92,000           13.80             29.90
93,000           13.95             30.23
94,000           14.10             30.55
95,000           14.25             30.88
96,000           14.40             31.20
97,000           14.55             31.53
$98,000         $14.70            $31.85
99,000           14.85             32.18
100,000          15.00             32.50
101,000          15.15             32.83
102,000          15.30             33.15
103,000          15.45             33.48
104,000          15.60             33.80
105,000          15.75             34.13
106,000          15.90             34.45
107,000          16.05             34.78
108,000          16.20             35.10
109,000          16.35             35.43
110,000          16.50             35.75
111,000          16.65             36.08
112,000          16.80             36.40
113,000          16.95             36.73
114,000          17.10             37.05
115,000          17.25             37.38
116,000          17.40             37.70
117,000          17.55             38.03
118,000          17.70             38.35
119,000          17.85             38.68
120,000          18.00             39.00
121,000          18.15             39.33
122,000          18.30             39.65
123,000          18.45             39.98
124,000          18.60             40.30
125,000          18.75             40.63
126,000          18.90             40.95
127,000          19.05             41.28
128,000          19.20             41.60
129,000          19.35             41.93
130,000          19.50             42.25
131,000          19.65             42.58
132,000          19.80             42.90
133,000          19.95             43.23
134,000          20.10             43.55
135,000          20.25             43.88
136,000          20.40             44.20
137,000          20.55             44.53
138,000          20.70             44.85
139,000          20.85             45.18
140,000          21.00             45.50
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Publication:Social Security Source Book
Date:Jan 1, 2010
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