If you were hired under the Civil Service Retirement System (CSRS), or are retired from that system, there is a host of information available to you to understand the CSRS annuity that is due to you. This article discusses and provides references to some of that information.
CSRS Annuity Basics
Your basic CSRS annuity is computed based on your length of service (including your unused sick leave if you retire on an immediate annuity) and “high-3” average pay. The high-3 average pay includes locality pay and annual premiums for standby duty and availability, if applicable. Other pay such as differentials, overtime, allowances and others are not included.
To determine your length of service for computation of your CSRS annuity, add all your periods of creditable service, and the period represented by your unused sick leave, then eliminate from the total any fractional part of a month. Your “high-3” average pay is the highest average basic pay you earned during any three consecutive years of service. Generally, your basic CSRS annuity cannot be more than 80% of your “high-3” average pay, unless the amount over 80% is due to crediting your unused sick leave.
Your yearly basic CSRS annuity is computed by adding:
- 1.5% of your “high-3” average pay times the number of years of service up to 5 years;
- 1.75% percent of your “high-3” pay times the number of years of service over 5 and up to 10; and
- 2% of your “high-3” pay times the number of years of service over 10.
Your basic CSRS annuity will be reduced if:
- you retire before age 55 (unless you retire for disability reasons or under the special provisions for law enforcement officers, air traffic controllers, and firefighters);
- 1. you didn’t make a deposit for service performed prior to October 1, 1982, during which no deductions were taken from your pay (non-deduction service after that date is not used in the computation of benefits if the deposit is not paid)
- 2. you didn’t make a redeposit of a refund for a service period that ended before October 1, 1990
- 3. you provide for a survivor annuitant.
If you are married, your CSRS annuity will be reduced automatically to provide the maximum survivor annuity for your spouse, unless you and your spouse jointly agree to provide a lesser amount of survivor annuity or none at all. Your spouse’s survivor annuity would be 55% of your basic CSRS annuity or any lesser amount you and your spouse agree to. Your own CSRS annuity would be reduced by 2.5% of the first $3,600 in basic annuity and 10% of the remainder of your basic annuity. You should review the information on electing a survivor’s annuity .
CSRS Cost-of-Living Adjustments (COLA)
Your CSRS annuity is increased periodically by cost-of-living increases (COLAs) that occur after you retire. Your initial COLA will be prorated based on how long you have been retired when that cost-of-living increase is granted.
Redeposit of CSRS contributions
If you left federal service earlier in your career, cashed out your retirement account, and then returned to federal service, your previous time in federal service still counts towards years in service but your CSRS annuity will be reduced if you don’t redeposit what you withdrew earlier in your career.
CSRS Annuity Part-time Service Computations
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 CSRS 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 CSRS annuity calculation for service performed before April 7, 1986, utilizes a high-three average salary based on 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 was 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 the 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.
CSRS Annuity Tax Considerations
Because the CSRS plan is only offered to government employees (not to the general public) it is an employer-sponsored plan, unlike Social Security and IRAs. This topic generally comes up with IRA use, and information on this can be found on page 13 of: http://www.irs.gov/pub/irs-pdf/p590.pdf (an IRS publication on Individual Retirement Arrangements).
Tax information about the federal retirement programs is available at: http://www.irs.gov/pub/irs-pdf/p721.pdf (“Tax Guide to US Civil Service Retirement Benefits”). You should seek the guidance of a professional tax preparation specialist or the IRS for specific tax information.
Special Computation for Law Enforcement Officers, Firefighters and Nuclear Material Couriers
There is a special CSRS annuity formula if you retired under the special provision for firefighters, law enforcement officers or nuclear material couriers.
For the first 20 years of CSRS law enforcement officer, firefighter and/or nuclear material courier service, you receive 2.5% of your high-3 salary for each year. For all remaining service, you receive an additional 2% of your high-3 average salary for each year.
CSRS Annuity Disability Retirement Computation
If you retire for reasons of disability, you may be guaranteed a minimum annuity equal to the lesser of:
40% of your “high-3 average salary” or the regular annuity obtained after increasing your service by the time between the date of your retirement and your 60th birthday.
The guaranteed minimum applies if you are under age 60 when you retire and your earned annuity based on your actual service is less than this minimum.
The guaranteed minimum does not apply if you are receiving military retired pay and/or compensation from the Veterans Administration in lieu of all or part of your military retired pay. However, if your earned annuity plus your military benefit (or compensation) is less than what it would have been under the guaranteed minimum, the annuity is increased to bring it up to that level.
Disability annuities for individuals who performed service in an enhanced position such as law enforcement officer, firefighter, nuclear materials courier, Capitol Police, or Supreme Court Police will be credited at the higher 2.5% for that service.