U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

Technical and Procedural Considerations

The following are specific technical and procedural concerns that will have an impact on civil service retirement issues. Consideration of these issues will help the agency develop settlements that are proper and consistent with retirement laws and these guidelines.

Specification of Grade or Pay Level for Retirement Computations

Under the provisions of both CSRS and FERS, annuity rates are computed on the basis of formulas using length of Federal service and "average pay" computations. Such computations require knowledge of grade or pay levels for specific periods of service. A settlement providing merely for reinstatement of an individual and payment of a lump sum amount representing back pay cannot support computation of the intended higher annuity rates. See Reed v. Office of Personnel Management, 32 M.S.P.R. 290, aff'd, 837 F.2d 1097 (Fed. Cir., 1987) (table); 5 U.S.C. §§ 8339, 8415. To implement any retirement benefit, the agreement must provide for personnel actions that include all necessary documentation, such as date of a promotion or a within grade increase.

Employee and Agency Deductions for Retirement

If a settlement provides for retroactive reinstatement of an employee with entitlement to additional civil service retirement credit, CSRS or FERS retirement, deductions must be paid into the Retirement Fund covering such service. The amounts due as employee deductions and employing agency contributions will vary dependent upon whether the employee is subject to CSRS, FERS, or the hybrid "CSRS Offset" requirements. In some cases, the computation will further depend on the employee's occupation. In any case where the question of which retirement program is applicable to a particular employee or the rate of individual or agency retirement contributions is uncertain, please consult OPM in advance.

Social Security Deductions

Employees subject to the FERS or CSRS Offset systems are subject to Federal Insurance Contributions Act (FICA) deductions from their pay. (CSRS employees are not subject to FICA deductions.) Therefore, in any case involving a FERS or CSRS Offset employee, FICA deductions (which are offset against the total employee retirement deduction) must also be withheld.

Deductions for Federal Employees Group Life Insurance (FEGLI) Program and the Federal Employees Health Benefits (FEHB) Program

The FEGLI Act, 5 U.S.C. § 8701 et seq., and FEHB Act, 5 U.S.C. § 8901 et seq., create two programs for which most Federal employees are eligible. Unlike the CSRS and FERS retirement programs, participation is optional. If an employee or former employee has or had FEGLI or FEHB coverage, payments to these accounts should be considered in a settlement. FEHB - Consider a case involving the involuntary separation or suspension without pay of an employee enrolled under FEHB. If the case is settled by reinstating the employee retroactively, or deeming the employee to have been in a pay status retroactively, both the employee deductions and agency contributions for the employee's FEHB coverage must be deposited into the FEHB Fund, if the employee intends to file claims for benefits for the affected period. If the employee does not intend to file claims for benefits under FEHB for the period of separation or suspension, no employee deductions or agency contributions need to be deposited into the FEHB Fund.

FEGLI

1. In a case not involving an involuntary separation or suspension without pay, such as a retroactive promotion, settled with a retroactive adjustment in pay, both employee deductions and agency contributions for applicable FEGLI coverage must be deposited in the Federal Employees' Life Insurance Fund.
2. Consider a settlement that involves an involuntary separation or suspension without pay where the employee is deemed to have performed service or been in a pay status for the period covered by the settlement. In such case, employee deductions and agency contributions for basic FEGLI coverage must be deposited in the Federal Employees' Life Insurance Fund only if the employee died during the intervening period or suffered dismemberment entitling benefits under FEGLI.

Thrift Savings Plan

Both CSRS and FERS employees are entitled to participate in the Thrift Savings Plan (TSP) although under different rules governing contribution rates. The Federal Retirement Thrift Investment Board, not OPM, administers this program. If an employee participated in the TSP at the time of the personnel action, it would be necessary to include appropriate deposits to the Thrift Savings Fund in any back pay award.