Information for FERS Annuitants
The alternative form of annuity is an option which is only available to
non-disability annuitants who have a life-threatening affliction or other
critical medical condition. If you elected the alternative annuity, you
received a lump sum payment equal to your retirement contributions and a
reduced monthly annuity.
Reduction In Annuity If Alternative Annuity Elected
The reduction in your annuity if you elected the alternative annuity is an
actuarial reduction. This reduction is permanent. The reduction is equivalent
to that portion of your Federal Employees' Retirement System annuity attributable
to your contributions to the retirement system.
Effect on Survivor Benefit
Choosing the alternative annuity does not affect your spouse's survivor annuity.
Your spouse's survivor annuity will be computed based on your annuity
before the alternative annuity reduction.
Tax Liability for Alternative Annuity Lump Sum Payment
Part of the Alternative Annuity lump sum is taxable in the year paid unless
it is rolled over into an Individual Retirement Arrangement. Please refer to
Publication 721, published by the Internal Revenue Service, to determine your
taxes on the alternative annuity lump sum payment.
The special retirement supplement is paid in addition to gross monthly
Federal Employees' Retirement System (FERS) annuity benefits. It represents
what you would receive for your FERS service from the Social Security
Administration (SSA) and is calculated as if you were eligible to receive
SSA benefits on the day you retired. Eligibility for the annuity supplement
continues until the earlier of (1) the last day of the month before the
first month for which you would be entitled to actual social security
benefits or (2) the last day of the month in which you reach age 62.
Eligibility for Annuity Supplement
If you retired voluntarily on an immediate
annuity which is not reduced for age, you may be receiving a special
retirement supplement which adds to your monthly benefit. You may also be
receiving this supplement if you retired involuntarily before attaining
your Minimum Retirement Age (MRA) or voluntarily because of a major
reorganization, reduction in force, or an early retirement for Members of
Congress. However, in these three instances, you were not eligible for the
special retirement supplement until you reached your Minimum Retirement Age
(MRA). If you are receiving a deferred benefit or an immediate MRA+10 benefit,
you are not eligible for a special retirement supplement.
If your annuity has a Civil Service Retirement System (CSRS) and a Federal
Employees Retirement System (FERS) component, you can still receive an annuity
supplement. However, you must complete one full calendar year of service
subject to FERS computation rules. One full calendar year means any year
which begins January 1 and ends December 31.
Computation of Annuity Supplement
The supplement is computed as if you were age 62 and fully insured for a social
security benefit when the supplement begins. By law, the Office of Personnel
Management (OPM) first estimates what your
full career (40 years) social security benefit would be. Then we calculate the
amount of your civilian service under FERS and reduce the estimated full
career social security benefit accordingly. For example, if your estimated
full career social security benefit would be $1,000 and you had worked 30
years under FERS, we would divide 30 by 40 (.75) and multiply
($1,000 x .75 = $750). The result would be your special retirement
supplement, prior to any reductions.
Changes in the Amount of the Supplement
Like social security benefits, your
retirement supplement is subject to an earnings test. It is reduced if
you earn more than the exempt amount of earnings (called the minimum
level of earnings) in the immediately preceding year. Your
supplement is reduced by $1.00 for every $2.00 of earnings over
the minimum level. It is possible that your supplement could
reduce to $0. However, your FERS basic benefit will not be reduced.
If you are receiving a supplement, you must report your earnings
to OPM. You will receive instructions on how to report your earnings
when it is required.
There is no reduction until after the first calendar year you receive
the special retirement supplement. Then, your earnings during that first
calendar year are compared to the social security minimum level
of earnings for the same year. Your monthly annuity supplement in the
second calendar year is then reduced by 1/12 of the excess earnings. Excess
earnings are 50% of the amount by which your earnings exceed the social
security minimum.
Minimum Level of Earnings
The amount you may earn without affecting your special
retirement supplement is determined by the Social Security Administration each year.
It will increase with the annual increases in average wages
for the national workforce. You can contact the Office of Personnel Management (OPM)
to obtain the current year amount.
Definition of Earnings
Your Federal Employees' Retirement System (FERS)
basic benefit is not considered earnings. Your earnings for any year will consist
of the sum of wages for service performed in the year, plus all net earnings from
self-employment for the year, minus any net loss from self-employment for the year.
Eligibility for Cost-of-Living Adjustments (COLAs)
Your annuity will be increased for cost-of-living adjustments, if:
- You are over age 62; or
- You retired under the special provision for air traffic controllers, law enforcement personnel, or firefighters; or
- You retired on disability, except when you
are receiving a disability annuity based on 60% of your "high-3"
average salary. This is generally during the first year of receiving
disability benefits; or
- Your retirement includes a portion computed under Civil Service Retirement System (CSRS) rules.
Retirees under age 62 who do not fall into one of the categories in items 2, 3 or 4 above, are not eligible for cost-of-living increases until they reach age 62.
If you've been receiving retirement benefits for less than 1 year and are eligible for a cost-of-living adjustment (COLA), you'll get a percentage of the cost-of-living increase. The percentage depends
on how long you were receiving your annuity before the effective date of the increase. When you receive an increase, we'll send you complete information about its effect on your annuity.
How COLA Amounts are Determined
The amount of the COLA is determined by the percentage increase in the Consumer Price Index (CPI), according to the following table:
0% to 2%
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Change in CPI
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2% to 3%
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2%
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Over 3%
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Change in CPI, less 1%
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Cost of Living Adjustments (COLA) If You Transferred to Federal Employees
Retirement System (FERS) and You Have A Civil Service Retirement System (CSRS) Component to Your Annuity
If you elected to transfer to FERS from CSRS and part of your benefit is computed under CSRS rules, that part of your benefit will be increased by CSRS COLAs, regardless of your age and type of retirement. Civil Service Retirement System COLAs are equal to the percentage change in the Consumer Price Index (CPI), regardless of the amount of the change. The FERS portion of your benefit will be increased as discussed above.
RI 90-8
Revised January 2000
Previous edition is not usable
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