Purpose: The purpose of this Benefits Administration Letter (BAL) is to provide general guidance concerning the benefits under the Civil Service Retirement System (CSRS) and the Federal Employees’ Retirement System (FERS) that have been affected by the “National Defense Authorization Act for Fiscal Year 2010”, Public Law 111-84, signed on October 28, 2009. We are doing further analysis related to the effects of these changes. Informational materials and forms will be updated as needed. Additional BALs will be issued as warranted.
Background: The “National Defense Authorization Act for Fiscal Year 2010”,
Public Law 111-84, provides for the following benefits changes under CSRS and FERS.
- Part-Time Reemployment
- Credit for unused sick leave under FERS
- Limited expansion of the class of individuals eligible to receive an actuarially reduced annuity under the CSRS
- Computation of CSRS annuities based on part-time service
- Authority to deposit refunds under FERS
- Retirement credit for service of certain employees transferred from District of Columbia service to federal service
- Non-foreign area retirement equity assurance
General Guidance for Agencies: The following is general guidance for each provision in the order that they are listed in the bill. Please use this guidance in determining retirement eligibility and estimates for individuals retiring or considering retirement. Additional guidance and/or regulations will be provided by OPM after further analysis is completed.
Section 1122 and 1123 – Part-Time Employment
Section 1122 allows reemployment of CSRS and FERS annuitants on a limited basis with receipt of both annuity and salary. The provisions apply to Executive agencies (excluding the Department of Defense and General Accountability Office), the Postal Service, the Judicial Branch, and Legislative Branch agencies (other than GAO, which is excluded under both the Executive and Legislative Branch provisions).
The authority may be used by agencies when they determine that use is necessary to–
(A) fulfill functions critical to the mission of the agency, or any component of that agency;
(B) assist in the implementation or oversight of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5) or the Troubled Asset Relief Program under title I of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5201 et seq.);
(C) assist in the development, management, or oversight of agency procurement actions;
(D) assist the Inspector General for the agency in the performance of the mission of that Inspector General;
(E) promote appropriate training or mentoring programs of employees;
(F) assist in the recruitment or retention of employees; or
(G) respond to an emergency involving a direct threat to life of property or other unusual circumstances.
Individuals reemployed will serve under appointments limited to a year or less. An annuitant may not serve under the authority for more than 520 hours of service during the period ending 6 months following the individual’s annuity commencing date; for more than 1040 hours of service during any 12-month period; or for more than a total of 3120 hours. Reemployment may not exceed 2.5 percent of the full-time workforce at any time, and if 1 percent is exceeded, agencies are required to provide an explanation and justification to the Congress and OPM. Individuals employed under these provisions will not be entitled to any additional annuity benefits based upon that employment.
Agencies may begin using these waivers now. This authority expires on October 27, 2014.
Section 1901 – Credit for unused sick leave under FERS
Section 1901 permits unused sick leave to be used as service credit in the computation of benefits under FERS, but not for establishing title to an annuity or in the computation of average salary. Sick leave will be used in the computations in the same manner it is used in CSRS computations. Effective October 28, 2009, individuals separating with title to an immediate annuity or who die leaving a survivor eligible for a survivor annuity will be entitled to credit for 50 percent of their unused sick leave. Effective for separations and deaths occurring on or after January 1, 2014, 100 percent of the unused sick leave will be available.
The provisions apply to unused sick leave to the individual’s credit under a formal leave system and for which the employee has not received payment. In the case of individuals who have annuities computed under the provisions of both CSRS and FERS, only sick leave not included in the CSRS part of the calculation will be available under FERS. In addition, in the case of an employee who is excepted from subchapter I of chapter 63 under section 6301(2)(x) through (xiii) of title 5, United States Code, (which applies to certain high level officers and employees) the days of unused sick leave include any unused sick leave standing to his or her credit when he or she was excepted from this subchapter.
This new provision is not applicable to Veterans Health Administration nurses who are already entitled to full credit for unused sick leave under prior legislation. The amendments made by section 1901 apply only to annuities based on a separation from service occurring on or after October 28, 2009.
Section 1902 – Limited expansion of the class of individuals eligible to receive an actuarially reduced annuity under the CSRS
Under existing law applicable only to CSRS, individuals who received refunds of retirement deductions for a period of service ending prior to October 1, 1990, may make a redeposit of the refund by actuarial annuity reduction in lieu of cash redeposit. Section 1902 now permits actuarial reductions in lieu of cash redeposit for refunds covering periods of service ending prior to March 1, 1991.
The amendment applies only to non-disability annuities based on a separation from service occurring on or after October 28, 2009.
Section 1903 – Computation of CSRS annuities based on part-time service
Previously, individuals retiring under CSRS who were employed on a part-time basis during their final three years of service have had their annuities computed using two different high-three average salaries. The annuity calculation for service performed on or after April 7, 1986, utilizes what is referred to as a “deemed high-three” average salary which is computed using the full-time equivalent rates of pay for the high-three period. The annuity calculation for service performed before April 7, 1986, utilizes a high-three average salary based upon the highest rates of pay actually received by the individual, which may be for a period prior to the final three years of service. In other words, under law prior to this amendment, one high-three average salary was based on the pay actually received and the other based on pay the individual would have received assuming they worked full-time (the deemed high-three).
Section 1903 provides that the “deemed high-three” average salary will be utilized for all service, regardless of when performed. Section 1903 does not change the other provisions applicable to calculation of annuities involving part-time service. The amendment applies only to annuities based on a separation from service occurring on or after October 28, 2009.
Section 1904 – Authority to deposit refunds under FERS
Since FERS was enacted, the law has provided that individuals who took refunds of their FERS employee contributions irrevocably lost service credit for the period of service covered by the refund. Section 1904 permits individuals who are subsequently reemployed to make a redeposit of the amount refunded, plus interest, and to have credit for the service reinstated. For the purpose of survivor annuities, redeposit may also be made by survivors.
Interest will be based upon the same basic rules applicable to CSRS. OPM will issue new regulations and revised forms prior to the redeposits being accepted.
Section 1904 applies to individuals who are employed under FERS on or after October 28, 2009. Individuals retiring on or after October 28, 2009, and employed under FERS will be given the opportunity to make the redeposit upon the adjudication of their benefit.
Section 1905 – Retirement credit for service of certain employees transferred from District of Columbia service to federal service
Section 1905 is a new and unique provision under CSRS and FERS. It affects certain specified service performed in District of Columbia positions that were subsequently brought under Federal benefits, and that was not previously creditable under CSRS or FERS. Such specified service will now be creditable for retirement eligibility purposes only, including specified service being creditable towards law enforcement officer retirement eligibility. However, such service will NOT be creditable in the computation of annuity benefits.
Credit for such service will be based upon certification of the appropriate personnel official of the government of the District of Columbia or other independent employing entity concerning whether an individual performed qualifying District of Columbia service and the length of the period of such service the individual performed. Individuals will be eligible for credit only if they are employed under CSRS or FERS on or after October 28, 2009.
Section 1911-1919 – Non-foreign area retirement equity assurance
For decades, individuals employed in certain non-foreign areas outside of the contiguous 48 states (Alaska, Hawaii, Puerto Rico, and other U.S. territories or possessions) have been eligible for a non-foreign Cost of Living Allowance (COLA). While such non-foreign COLA payments are not subject to income tax, they are also not basic pay for retirement purposes. Individuals receiving non-foreign COLA payments have not been eligible for locality pay, with the result that their basic pay has fallen further behind the rest-of-US (RUS) locality pay each year.
These provisions permit a phased conversion from non-foreign COLA to locality pay over a three year period beginning in 2010. Individuals who separate from service from 2010 through 2012 will have the right to elect to have the non-foreign COLA allowances received during that period count towards retirement credit, to the extent that the non-foreign COLA allowances plus any locality pay received do not equal more than the RUS locality pay. Such election must be filed not later than December 31, 2012. The statute makes provisions for agency and employee payments based upon those elections, which must be made to OPM. OPM will issue regulations to carry out the election and payment process.
On October 28, 2009, the President signed the National Defense Authorization Act for Fiscal Year 2010 (NDAA). The NDAA allows the head of an agency to grant their own dual compensation (salary off-set) waivers on a temporary basis under certain specified circumstances. Agencies may begin using these waivers now, but, by statute, must adhere to the following conditions:
- Agencies must report to OPM on their use of this authority no later than February 1, 2010, and no later than February 1 of each year through 2015;
- Appointments are limited to one-year or less;
- Hours worked by any annuitant reemployed under these provisions are limited to 520 during the first 6 months of retirement, 1,040 during any 12-month period, and 3,120 for total hours worked during any period;
- Reemployment may not exceed 2.5 percent of the full-time workforce at any time, and if 1 percent is exceeded agencies are required to provide an explanation and justification to the Congress and OPM; and
- This authority expires on October 27, 2014.
The statute confers authority upon OPM to promulgate regulations providing for the administration of this provision, including regulations setting standards for the maintenance and form of necessary records of employment. OPM plans to publish for notice and comment regulations that would impose an obligation to maintain the following:
- The name of the individual for whom the waiver is being requested;
- The appointing authority the agency intends to use to reemploy the annuitant;
- The position to which the agency intends to reemploy the annuitant;
OPM would require that agencies report to OPM on their use of this authority no later than February 1 of each year through 2015.
In order to assist in the orderly administration of this provision and establish accurate and complete data, OPM requests that agencies begin maintaining their case files immediately, and report to OPM on February 1, 2010 on use of this authority through December 31, 2009.
Current Cost of Living Adjustments (COLA)
The Cost-of-Living Adjustment (COLA) is effective December 1, 2008, and is first reflected in the annuity payment dated January 2, 2009.
Retired Federal employees and entitled surviving family members of deceased Federal employees and retirees received a Cost-of-Living Adjustment (COLA) effective December 1, 2008, which will be first reflected in the benefit payable January 2, 2009.
Under the Civil Service Retirement System (CSRS) and the Organization Retirement and Disability System (ORDS), the Cost-of-Living Adjustment (COLA) will be 5.8 percent for those who have received benefits for at least one year. The 5.8 percent increase was determined by computing the percentage increase in the Consumer Price Index (CPI) for urban wage earners and clerical workers from the third quarter average of 2007 to the third quarter average of 2008, as provided by the U.S. Department of Labor, Bureau of Labor Statistics.
Under the Federal Employees Retirement System (FERS) and FERS Special, the COLA will be 4.8 percent for those who have received benefits for at least one year. This amount was derived from the same CPI comparison as CSRS.
Federal Employees Retirement System (FERS) and FERS Special Cost-of-Living Adjustments are not provided until age 62, except for disability, survivor benefits, and other special provision retirements. FERS disability retirees get the adjustment, except when they are receiving a disability annuity based on 60 percent of their high-3 average salary. Also, under FERS, if you have a CSRS component, the component is subject to the CSRS COLA calculation. FERS survivors receive the FERS increase on their entire annuity, even where component service is involved.
To get the full COLA, a retiree or survivor annuity must have begun no later than December 31, 2007. If not, the increase is prorated under both plans. Prorated accounts receive one-twelfth of the increase for each month they received benefits. For example, if the benefit commenced November 30, 2008, the prorated COLA would be one-twelfth of the full COLA.
Under both plans, benefits are paid on the first business day of the month after the month in which they accrue. Benefits which accrue in December 2007 are payable on January 2, 2009.
Note: A benefit will not be increased if it would cause the annuitant to receive payments in excess of any cap amount specified by law.
The tables below show the actual prorated percentages that apply, under both plans, according to the month in which the annuity began.
Civil Service Retirement System (CSRS) and Organization
Retirement and Disability System (ORDS)
Federal Employees Retirement System (FERS) and FERS
Special Disability System
Washington, D.C. — The U.S. Office of Personnel Management today announced premiums and benefits in the FEHB Program, which covers approximately 8 million federal employees, retirees and their dependents.
Federal employees and retirees can choose from among 269 health-plan options to be offered in the 2009 Federal Employees Health Benefits Program, including 10 nationwide fee-for-service options that are available to all enrollees and 27 High Deductible Health Plans.
Enrollees with self-only coverage will pay, on average, $4.83 more each pay period (about $125 per year) next year. Family coverage will cost an average $11.12 more per pay period. FEHB enrollees pay - on average - 30 percent of the total cost of a plan’s premium, while the government pays 70 percent.
This year’s Open Season begins November 10 and runs through December 8, 2008, giving employees the opportunity to change or add to their portfolio of health- and family-care insurance products.
In 2009, 10 fee-for-service plans and a number of Health Maintenance Organizations (HMO) will expand coverage of hearing benefits for adults. This enhancement follows OPM’s challenge last year to health carriers - which a number accepted - to improve the coverage of diagnostic tests and hearing aids for children in 2008.
Often cited as a model health-care system, the FEHB Program is not immune to external factors that influence the cost of medical care. In fact, two private studies predict medical costs next year will rise between 9.6 percent and 10.6 percent, with the aging population, the rise of prescription drug costs and patient demand for services fueling much of the increase.
Next year’s rise in the average FEHB premium is significantly less than rate hikes some are predicting for large, employer-sponsored private-sector programs.
Premiums, including the government share and the enrollee share, will increase an average 7.0 percent next year. Overall, the average enrollee share of the premium will increase 7.9 percent. Twenty percent of FEHB enrollees would see their share of premiums rise by less than 5.0 percent, based on 2008 enrollment data.
Enrollees in the Blue Cross Blue Shield Standard Option, the most popular FEHB plan choice, would see their share of the premium increase 12.9 percent for self-only coverage and 13.4 percent for self and family coverage.
“I appreciate the tough environment in which the FEHB Program currently operates,” said Nancy Kichak, OPM’s Associate Director for Strategic Human Resources Policy. “While we worked very hard to contain premium costs — and we were more successful with some health plans than with others — federal employees and retirees can take comfort in knowing they are enrolled in a solid program that provides outstanding benefits and customer service.”
Enrollees in Coventry Healthcare of Kansas (standard option, self and family plan) will see their premium share drop by 49.5 percent; others will see increases up to 173 percent.
“One hallmark of the FEHB Program is ‘choice’, meaning employees and retirees can use the Open Season to shop among plans and, perhaps, move to one that better meets their medical and financial needs,” said Kay Ely, OPM’s Associate Director for Human Resources Products and Services.
OPM conducts an annual Open Season to give federal employees and retirees the opportunity to select a new health plan; during the Open Season, current federal employees who are not enrolled may elect FEHB coverage. The Open Season also gives employee and retirees the chance to select supplemental dental and/or vision coverage.
The Open Season also gives employees the opportunity to elect coverage under a tax-deferred Flexible Spending Account (FSA) for health care and/or dependent care, or to adjust an existing FSA. Current FSA enrollees must re-enroll for coverage in 2009 during the Open Season. In 2007, nearly 246,000 individuals had a Flexible Spending Account. By law, retirees are not eligible for FSA benefits.
The Open Season also can be used by employees and retirees to enroll in supplemental dental and/or vision insurance coverage. In 2008 - in only its second year of availability - the Federal Employees Dental and Vision Insurance Program (FEDVIP) had more than 1 million enrollments.
Each Open Season, OPM publishes the popular Guide to Federal Benefits. This year, it identifies 42 FEHB carriers for their best-practices on health-care cost and quality transparency. OPM also will unveil a new Federal Benefits website (www.opm.gov/insure), which will let enrollees look at their overall health-related coverages and give them a better understanding of the coordination of benefits between, for instance, the FEHB Program and the supplemental dental/vision coverage.
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To make logging into your account easier, you can now create a Custom User ID to use in place of your 13-digit TSP account number. To do this, log into Account Access using your account number and Web password, then choose “Create/Modify Custom ID” from the Account Access menu. Your custom ID is interchangeable with your TSP account number on the Web site — you can use your custom ID or your 13-digit TSP account number, along with your Web password, any time you log in to access your account. Here are some of the advantages of creating your own custom ID:
- It is an ID that you can remember more easily than your TSP account number;
- It is effective immediately;
- It is interchangeable with your TSP account number: you can still use your TSP account number any time you log in to access your account;
- If you forget your custom ID, you can easily retrieve it by logging in using your 13-digit TSP account number. When you select “Create/Modify Custom ID” from the Account Access menu, you will be able to view your current custom ID, and if you wish, change it to one that you can remember more easily;
- If you believe that someone else may know your custom ID (along with your Web password), you can instantly create a new one by choosing “Create/Modify Custom ID” from the Account Access menu. (You should also instantly change your Web password by choosing “Change Web Password” from the Account Access menu.)
Washington, DC - The U. S. Office of Personnel Management (OPM) has chosen Accenture, LLP to be the agency’s new lead financial systems integrator. The choice of Accenture was made after a number of negotiation and market research sessions.
“We have worked long and hard to find a company that can meet our financial demands,” said OPM Director Linda M. Springer.
Accenture, as the lead systems integrator, will provide OPM with all required integration services, systems hosting, and software. It also will replace two principal financial systems, one supporting the Agency’s administrative funds (Revolving Fund and Salaries & Expenses Funds) and the other supporting the Trust Fund with a single integrated financial management system. Implementing a best in government standard solution for financial management will greatly improve OPM’s access to timely and accurate financial information.
In addition, the new system will be implemented to standardize and integrate financial and business management processes, improve program performance, mission support, and decision-making, while complying fully with all federal financial system standards and requirements.
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Washington, DC - The U.S. Office of Personnel Management (OPM) today announced it has suspended work by Hewitt Associates on its part of the agency’s effort to modernize processing of Federal employee retirements. OPM issued a stop work order for the implementation of the calculation engine, one of the three components of the modernization project known as RetireEZ. In addition to the stop work order, OPM issued a show cause notice to Hewitt giving them 10 calendar days to respond to the performance issues OPM raised.
The other two components of RetireEZ, data conversion and change management, will continue unabated. Progress to date on those two components has already resulted in improvements in the Federal retirement processing. This foundation, when joined with a successful calculation engine, will enable all Federal employees to plan for and process their retirements electronically. Annuitants will not be adversely impacted by this action.
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Washington, DC- The U.S. Office of Personnel Management (OPM) yesterday released its first post-initial rollout report on its transformational retirement administration program RetireEZ. The report responds to recommendations made by the Government Accountability Office (GAO) and provides an expanded update on the initial rollout of the program.
On February 25, 2008, OPM successfully began the rollout of RetireEZ to Wave 1 employees, as planned. Approximately 26,000 employees in agencies serviced by the General Services Administration’s (GSA) payroll processing center are now covered under the new system.
Prior to RetireEZ, retirees in all three branches of government and the U.S. Postal Service could anticipate a period of interim reduced annuity payments upon commencement of their retirement. The decades old paper-based administrative process responsible for this poor customer service was destined to deteriorate with the onset of the pending retirement wave. Under RetireEZ, this practice is ending.
RetireEZ is now processing Wave 1 agency retirements that have occurred subsequent to the initial rollout. As a safeguard, all retirements continue to be calculated under a legacy process, which itself uses newly automated data files created as part of the modernization process.
“We are pleased to report the majority of cases that processed to date under RetireEZ matched the legacy calculation,” said OPM Director Linda M. Springer. “In all Wave 1 cases OPM paid full retirement benefits at the payment commencement date. No longer are retirees under the new system receiving interim payments and waiting for months until their actual payment amounts are calculated. This success is directly attributable to the transformation of millions of paper records to automated data that underlies the modernization. All Wave 1 new retirees are getting better service because of RetireEZ.”
OPM is building on this successful beginning for RetireEZ and will periodically migrate remaining functionality into the system when fully tested. Work also continues in support of adding agencies in Wave 2 and beyond, as well as the continued automation and cleansing of employee records.
The technology underlying RetireEZ is the Defined Benefits Technology Solution (DBTS), a best of breed private sector solution which is being modified to comply with Federal laws and regulations. OPM had previously pursued building its own system and spent considerable resources on this path. It also re-evaluated options and determined that this functionality could be purchased as a service yielding lower cost, lower risk, and better performance. Up to now, however, the lifecycle costs shown in the Retirement Systems Modernization (RSM) Office of Management and Budget Exhibit 300 included $69.6 M of non-FTE historical costs for that abandoned approach that were not related to the current RetireEZ approach.
The Exhibit 300 now correctly presents non-FTE project costs as planning and acquisition cost of $106.53 M and operations and maintenance cost covering the period through 2016 of $254.19 M
“RetireEZ is already improving service for Federal employees and its benefits will expand to future retirees as the rollout continues,” Springer said. “That is the ultimate measure of success.”
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Statement by OPM Director Linda M. Springer:
“I commend the members of the House Committee on Oversight and Government Reform for their actions yesterday, which will allow this important piece of legislation to come to the floor for a full vote,” Springer said.
“Enactment of this bill would enable Federal employees covered by the Civil Service Retirement System to work part-time prior to retirement without incurring penalties to the annuity they have so rightly earned.”
“I would like to thank bill sponsor Rep. James Moran, Committee chairman Henry Waxman, Ranking Member Tom Davis, Subcommittee chairman Danny Davis and Rep. Kenny Marchant for their support of this measure, which will continue to help us ensure the Federal government has an effective civilian workforce.”
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Washington, D.C. - U.S. Office of Personnel Management (OPM) Director Linda M. Springer today submitted a proposal to both chambers of Congress to establish a short-term disability insurance program to protect federal employees who suffer an injury or illness which temporarily prevents them from performing their normal job duties.
“If we are to maintain an efficient and effective Federal workforce, it is imperative to ensure workers are protected in the unlikely event of a short-term disability,” Director Springer said. “Health care costs can be economically devastating to many employees, especially those who have not yet accumulated sufficient sick and annual leave.”
OPM would leverage the purchasing power of the 2.6 million Federal employees in the Executive, Legislative, and Judicial branches, as well as the U.S. Postal Service, to obtain the best coverage at affordable premiums. Under the proposal, participation would be voluntary and insurance premiums would be fully paid by the policy holder.
Springer said an added benefit to this insurance product would be its ability to attract a quality work force. A sound short-term disability insurance benefit will fill the gap in an otherwise attractive and competitive Federal benefit program.
“Recent college graduates, or men and women only a few years removed from college campuses who are thinking about starting families will find this benefit to be an inducement to considering a career in the Federal civil service,” Springer said. “If they know they will not be penalized should something occur before they have had enough time to accumulate sufficient sick leave, they will be more likely to consider public service.”
Springer noted the program would benefit employees in a variety of short-term situations, including childbirth, adoption, unforeseen injury to the employee or a close family member, and emergency surgery.
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