Annuities based on optional (voluntary) retirement commence on the first day of the month after separation, or after the last day in a pay status, provided the age and service requirements for annuity eligibility are met. An exception is made for annuitants who voluntarily retire on day 1, 2, or 3 of the month, in which case the annuity commences either on the day after separation or after the last day in a pay status. Annuities based on disability or discontinued service retirement begin the day after the employee’s last day in a pay status (or the day after separation) provided the disability or age and service requirements for annuity eligibility are met on that date.
Annuity payment ends on the day of the annuitant’s death or on the date the annuitant becomes ineligible for a continuing annuity. Survivor annuities are paid through the last day of the month before death or any other terminating event, such as a survivor annuitant’s remarriage.
Bargaining unit employees with leave balances subject to forfeiture must be counseled to use the excess annual leave prior to the effective date of their retirement.
Employees who have requested disability retirement and who are unable to work while their applications are under review by OPM continue on the rolls in a leave status (with or without pay) pending notification by OPM of its decision on the application.
Primary factors are:
- Length of service, including credit for unused sick leave.
- High–3 average pay.
Other factors are:
- Retirement before age 55.
- Failure to make deposit.
- Election of reduced annuity to provide a survivor annuity.
- Increases for voluntary contributions. (See 565.4.)
- Election of lump–sum credit (see 566.6).
For annuity computation purposes, length of service is determined by adding together all periods of the employee’s creditable civilian and military service and the period credited to the employee for unused sick leave. After obtaining total service, the fractional part of a month is dropped because annuity is computed on the basis of years and months. No credit is allowed for the remaining odd days of total service.
The 3–year period starts and ends on the dates producing the highest average pay. The period need not start on the first day of any month or on the date of a pay change.
The 3–year period need not be continuous but must be consecutive.
Example: Two or more separate periods of employment may be joined provided there is not an intervening period of service to be considered.
The 3–year period may include service for which retirement deductions have been refunded, even though not redeposited.
The high–3 average pay is determined by averaging the rates of an employee’s basic pay over a period of 3 consecutive years of creditable service, with each rate weighted by the period of time during which it was in effect.
Basic pay for retirement purposes includes higher level pay but does not include Territorial Cost of Living Allowances, overtime pay, night differential, military pay, allowances, premium pay, or lump-sum terminal leave benefits.
The basic annuity under the general formula is obtained as follows: Step 1. Take: 1–1/2 percent of the high–3 average pay and multiply the result by 5 years of service. Step 2. Add: 1–3/4 percent of the high–3 average pay multiplied by the number of years of service between 5 and 10. Step 3. Add: 2 percent of the high–3 average pay multiplied by all service over 10 years.
Instead of using 1–1/2 percent, 1–3/4 percent, and 2 percent, a substitution of 1 percent of the high–3 average pay plus $25 may be made for any or all of the percentages if a higher annuity is produced.
Regardless of length of service, the following rules apply in computing basic annuities under the general formula. If the high–3 average pay is:
- $5,000 or More, the highest basic annuity is obtained by using Steps 1 through 3.
- Between $3,334 and $4,999, the highest annuity is obtained by substituting the 1 percent plus $25 in Step 1 and then using Steps 2 and 3.
- Between $2,501 and $3,333, the highest annuity is obtained by substituting the 1 percent plus $25 in Steps 1 and 2 and using Step 3.
- $2,500 or less, the highest annuity is obtained by taking 1 percent of the high–3 average salary, adding $25, and multiplying the result by total service, eliminating Steps 1 through 3.
The basic annuity of a retiring employee may not exceed 80 percent of high–3 average salary except when an annuity in excess of 80 percent results from crediting unused sick leave. (See 562.4.) If an annuity computed under the general formula exceeds 80 percent, it is reduced to an amount equal to 80 percent of the high–3 average salary. The reduction is made prior to applying any reductions or increases.
If employees have service in excess of the years and months required to provide the 80 percent maximum (usually 41 years and 11 months), retirement deductions withheld after they have completed the service requirements may be:
- Credited to their voluntary contribution accounts if their regular deduction obligations have been satisfied. (If employees owe a deposit or redeposit, the money is first applied to that, and any balance is credited as voluntary contributions.)
- Refunded to employees if they elect the refund before their annuity is granted and if no deposit or redeposit is due.
- Paid in a lump sum to eligible survivors if the employee dies.
An employee under age 60, retiring on disability, is allowed a minimum basic annuity if it is greater than the basic annuity computed under the general formula. The minimum basic annuity is the lesser of the following:
- 40 percent of the high–3 average pay.
- The annuity obtained by using the general formula after increasing the total service by the length of time elapsing between the date of separation and the date that the employee would reach age 60.
If the employee is eligible for immediate annuity benefits under the general formula based on age and service, and, if the general formula yields a larger annuity than the prescribed minimum, the general formula is used.
The guaranteed minimum contains no provisions for projection of service past age 60. Therefore, the disability annuity rate of an employee who is age 60 or over must be computed by using the employee’s actual service in the general formula regardless of whether the result would be greater or less than 40 percent of the employee’s high–3 pay.
An employee who retires under the disability retirement provisions of CSRS and who is receiving military retired or retainer pay, or compensation from the Veterans Administration in lieu of retainer pay, is not eligible for the guaranteed minimum disability annuity. The employee will receive his earned annuity based on length of service (excluding credit for military service) and high–3 average salary. This applies even if a waiver of retired or retainer pay for CSRS purposes has been initiated. (The above limitations on benefits do not apply if military retired pay is awarded on account of a service–connected disability incurred in combat with an enemy of the United States, or caused by an instrumentality of war and incurred in line of duty during a period of war, or awarded under the reserve retirement provisions of Chapter 67, Title 10, U.S. Code).
If the high–3 average pay is:
- $4,839 or more, and:
- If the employee’s actual service is at least 21 years and 11 months, actual service in the general formula is used. A computation under the guaranteed minimum provides no advantage.
- If the employee’s actual service is less than 21 years and 11 months but service would, if projected to age 60, total at least 21 years and 11 months, then 40 percent of the employee’s high–3 average salary produces the highest allowable basic annuity, which is the guaranteed minimum.
- If the employee’s combination of actual and projected service totals less than 21 years and 11 months, use of such total service in the general formula produces the highest allowable basic annuity, which is the guaranteed minimum.
- Between $2,500 and $4,838, the following table and computations are used to determine the basic disability annuity rate:
- Table.
High–3 Average Salary Table for Determining Basic Annuity Rates for Disability Retirement
Salary
|
Years
|
Service Months
|
|---|
$2,500 to $2,542
|
20
|
1
|
$2,543 to $2,586
|
20
|
2
|
$2,587 to $2,631
|
20
|
3
|
$2,632 to $2,678
|
20
|
4
|
$2,679 to $2,727
|
20
|
5
|
$2,728 to $2,777
|
20
|
6
|
$2,778 to $2,830
|
20
|
7
|
$2,831 to $2,884
|
20
|
8
|
$2,885 to $2,941
|
20
|
9
|
$2,942 to $2,999
|
20
|
10
|
$3,000 to $3,061
|
20
|
11
|
$3,062 to $3,124
|
21
|
0
|
$3,125 to $3,191
|
21
|
1
|
$3,192 to $3,260
|
21
|
2
|
$3,261 to $3,333
|
21
|
3
|
$3,334 to $3,488
|
21
|
4
|
$3,489 to $3,658
|
21
|
5
|
$3,659 to $3,846
|
21
|
6
|
$3,847 to $4,054
|
21
|
7
|
$4,055 to $4,285
|
21
|
8
|
$4,286 to $4,545
|
21
|
9
|
$4,546 to $4,838
|
21
|
10
|
- Computations.
- If the employee’s actual service is equal to, or greater than, the service shown in the preceding table for the applicable high–3 average salary range, use the actual service in the general formula. (A computation under the minimum guarantee provides no advantage.)
- If the employee’s actual service is less than the service shown in the table for the applicable high–3 average salary range, but would, if projected to age 60, total at least that much, 40 percent of the high–3 average salary produces the highest allowable basic annuity, which is the guaranteed minimum.
- If the employee’s combination of actual service and service projected to age 60 totals less than the service shown in the table for the applicable high–3 average salary range, use of such total service in the general formula produces the highest basic annuity, which is the guaranteed minimum.
$2,499 or Less, the disability annuity rate is obtained as follows:
- Compute the employee’s annuity rate under the general formula, using the employee’s actual service.
- Compute the employee’s annuity rate under the guaranteed minimum, using (a) actual service plus projected service to age 60 in the general formula and (b) 40 percent of high–3 average salary.
- Discard the higher annuity rate obtained under the guaranteed minimum.
- Compare the lower rate obtained under the guaranteed minimum with the rate obtained by using the employee’s actual service in the general formula, and select whichever is higher as the basic annuity.
Examples are as follows:
- An employee disabled at an early age may be entitled to a higher basic annuity than an older disabled employee with more actual service and a greater high–3 average salary.
- Disabled employees with identical high–3 average salaries but different lengths of service may be entitled to the same basic annuities.
- A disabled employee may be entitled to a higher basic annuity than an employee with more service and a greater high–3 average salary who is retiring at or over age 62 under a provision other than disability.
The situations in 566.422 result from the concept underlying the guaranteed minimum for disability annuitants. Disability interrupts a career that otherwise would have extended to age 60, and basic annuity, therefore, should include credit for the time which the employee normally would have served, subject to a maximum limitation of 40 percent of the high–3 average salary.
Previously, all federal retirees reemployed by the federal government, with very limited exceptions, had the amount of their annuities deducted from their federal earnings. The National Defense Authorization Act (NDAA) for Fiscal Year 2010 gives the head of an agency limited authority to waive the offset requirement for reemployed CSRS and FERS annuitants.
For Postal Service employees, the postmaster general has the authority to reemploy annuitants without the offset for up to:
- 520 hours during the 6 months following the date the individual’s annuity begins.
- 1040 hours during any 12-month period; and
- A total of 3120 hours.
Certain reemployed annuitants, on termination of reemployment which was on a continuous full–time or part-time basis and such reemployment is the equivalent of at least 1 year, are eligible for supplemental annuity based on the period of reemployment. Those who serve the equivalent of at least 5 years may elect to have their annuity rate redetermined. If they desire, reemployed annuitants may elect another type of annuity at this time (with regard to survivor benefits). The annuitant makes a deposit to cover the reemployment service in order to have a complete recomputation of annuity. An individual working on a part-time basis (halftime) must work 2 years to meet the equivalent of at least 1 year of reemployment service.
The following provisions apply:
- Continuous Employment. Supplemental annuity (566.51) is computed on all periods of continuous reemployment service that is the equivalent of at least 1 year after the employee’s retirement. Such periods are considered as part of the employee’s total service. Employment is considered continuous unless interrupted by a separation from service exceeding 3 calendar days. Leave of absence, with or without pay, does not break continuity.
- General Formula. The supplemental annuity is computed under the general formula (566.3). It is computed only at the end of reemployment and is based on the average basic salary (before annuity deduction) received during periods of continuous employment. (Employee’s salary during reemployment is reduced by the amount of annuity.)
- Average Salary. The full rates of basic salary in effect during all periods of reemployment, with each rate weighted by the time it was in effect, are used to determine the average salary rather than any high–3 average salary. The new average salary and the length of service computed on the basis of all reemployment service and unused sick leave are applied in the formula to obtain the supplemental annuity.
- Using Steps of General Formula. In determining which steps of the general formula to use, all the annuitant’s service (before and after retirement) is added together. Unless the 1 percent plus $25 must be substituted, the 1–3/4 percent in Step 2 is applied to as much of their reemployment service as makes the total service between 5 and 10 years. The 2 percent in Step 3 is applied to as much of the reemployment service as makes the total service in excess of 10 years. (The result is a higher supplemental annuity than could be obtained if the general formula were applied to the reemployment service separately.)
If the final period of continuous employment consists of the equivalent of at least 5 years of service, the annuitant may at separation make a deposit to cover the reemployment service and elect a redetermination of annuity. By this election, the annuitant receives a complete redetermination of annuity based on the law in effect on the date of separation, instead of existing annuity, plus the supplemental benefit. This special computation treats the annuitant as if retiring for the first time, and gives the annuitant a new right of election as to the type of annuity as well as any liberalization of benefits provided since original retirement.
Employees diagnosed with a life–threatening medical condition who are eligible to retire under an optional retirement may choose the Alternative Form of Annuity. This option allows a refund of all employee contributions made to the CSRS retirement fund in addition to an actuarially reduced monthly benefit. This option is not available to those employees filing for disability retirement. Also, even if the conditions for this alternative annuity (as outlined above) are met, if a court order has been established to provide annuity benefits for a former spouse, this election is not allowed. Married employees must have the current spouse’s consent to elect an AFA.
To compute the AFA, the basic monthly annuity is calculated as if the AFA had not been elected. This amount is then reduced by an amount equal to the retiring employee’s lump–sum credit divided by an actuarial factor for the employee’s attained age (in full years) at the time of retirement. A table indicating the actuarial factors is published annually by the Postal Service.
Election of AFA has no impact on a survivor annuity. The survivor annuity is determined based on the retiring employee’s basic annuity as if AFA had not been elected.
Note: The lump sum payable to voluntary retirees whose annuities commence after January 3, 1988, and before October 1, 1989, will be broken into two portions. The first is payable at retirement and represents 60 percent. The remaining 40 percent is paid, with interest, 1 year after retirement.
