Non-Appropriated Fund Instrumentality (NAFI) Program Retirement Coverage
OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE
4000 DEFENSE PENTAGON
WASHINGTON, D.C. 20301-4000
AUG 09 1996
FORCE MANAGEMENT POLICY
MEMORANDUM FOR DISTRIBUTION:
SUBJECT- Retirement Coverage Election Under Section 1043, P.L, 104-106
Attached for appropriate action is DoD policy on subject
election for eligible employees moving between appropriated fund and nonappropriated fund (NAF)
employment systems. A draft of this policy was provided by my memo of July 10, for coordination
by August 2. The policy, effective on August 10, 1996, supplements OPM and Federal
Retirement Thrift Investment Board regulations to be published in the Federal Register with an
effective date of August 10.
The attached policy primarily addresses crediting service to DoD NAF
retirement plans, transferring NAF funds, and the relationship of the new
requirements to the Portability of Benefits for Nonappropriated Fund Employees Act of 1990, OPM is preparing a
Benefits Administration Letter which will provide additional guidance and forms for
employee elections of retirement coverage, Additional DoD guidance will be issued as necessary.
DoD personnel offices may direct questions on entitlements for benefits
under the Civil Service Retirement System or the Federal Employees Retirement
System to the Field Advisory Services Division, Civilian Personnel Management Service (CPMS)
(703-696-630 1, or DSN 426630 1, menu # 1). Questions on entitlements for benefits
under NAF retirement plans may be directed to the DoD NAF Personnel Policy Office, CPMS
(703-696-3310, or DSN 426-3310). Questions on specific NAF retirement plan provisions should be
directed to the NAF employer responsible for the NAF plan.
Thank you for your cooperation in the implementation of this policy.
Diane M. Disney
Deputy Assistant Secretary
Civilian Personnel Policy
DoD Regulations on Retirement Coverage Elections
Provided by P.L. 104-106
I. Summary of Legal Requirements
A. Coverage. Section 1043 of P.L. 104-106, The National Defense Authorization
Act for Fiscal Year 1996, provides new retirement coverage
elections for certain employees who moved between nonappropriated
fund (NAF) and appropriated fund (APF) positions after December 31,
1965. It amends title 5, United States Code (USC, to expand the
retirement election provisions of the Portability of Benefits for
Nonappropriated Fund Employees Act of 1990. Some amendments
liberalize the eligibility requirements for making elections under
the 1990 law and apply on or after the August 10, 1996, effective
date of Office of Personnel Management (OPM) and DoD regulations.
B. Notification. The law requires that
individuals who may be affected by the new
retirement elections be notified of the new provisions. It also
requires that individuals must be provided, upon their request, information concerning their
eligibility to make an election, and the amount of any payment which would be required of the individual in
connection with any such election.
C. Funding. Certain retroactive elections
will require an employee payment for service credit, in the form of a reduction in the monthly
retirement benefit, in addition to a transfer of employee and employer funds between NAF and civil service
retirement systems.
II. Implementation of Retirement Coverage Elections
A. Responsibilities. The Heads of
Components, or their designees, shall take appropriate action to:
1. Provide employee benefit portability entitlements to
eligible employees in accordance with Section 1043 of Public Law
(P.L.) 104-106, OPM regulations at 5 CFR Part 847, Federal
Retirement Thrift Investment Board regulations at 5 CFR Pan 1620,
and this supplementary DoD policy document.
2. Notify employees of the new entitlements and
eligibility requirements. A chart summarizing the prospective retirement elections is at Appendix A,
A chart summarizing retroactive retirement elections is at Appendix B.
These charts may be used by DoD Components, in addition to OPM guidance, to notify
employees,
3. Provide information to employees, upon their request,
regarding their eligibility to make a retirement election, and the amount of any employee payment
that would be required for additional service credit (see paragraph MG,
below). Employees who request a determination of eligibility to make an election, and
who are determined to be ineligible, must receive a final decision in
writing, in accordance with 5 CFR 847 106
4. Ensure that documents of NAF retirement plans under
their responsibility are amended as necessary to comply with the law.
5. Transfer civil service or NAF retirement plan employee
and employer contributions covering the additional service to be credited,
B. Elections to Continue Retirement Coverage After
a Move on or after August 10, 1996, the Effective Date of DoD and OPM Regulations.
1. This policy document supersedes the retirement coverage
policy published by DASD (CPP/EO) memorandum on April 16, 1991, as
Section J, "Retirement," Appendix F, DoD 1401.1-M.
2. Heads of Components are delegated the authority
provided in 5 CFR 847.206 to waive the 30 day time limit for making
an election. Waivers may be granted to employees who, despite due
diligence, are prevented by circumstances beyond their control from
making an election within the time limit. This waiver authority
may be delegated to another appropriate level of responsibility,
C. Employee and Employer Retirement Contributions
After a Move on or after August 10, 1996.
1. Per 5 CFR 847.209, NAF employers will make salary
deductions and employer contributions for NAF employees who elect to continue Civil Service
Retirement System (CSRS) or Federal Employees Retirement System (FERS)
coverage. Thrift Savings Plan (TSP) salary deductions and contributions will also be
remitted, where applicable, in accordance with 5 CFR Part 1620. Established
Defense Finance and Accounting Service (DFAS) procedures provide further
information on submitting NAF employee and employer contributions for CSRS,
FERS, and TSP.
2. Employee and employer contributions for employees who
elect to remain in a NAF retirement plan following a move to an APF position will be
calculated in exactly the same way as the actual contribution for a NAF employee in the
NAF plan. Employee and employer contributions to NAF 401(k) plans will also
be calculated as if for a NAF employee in tile NAF plan. Established DFAS
procedures provide further information on submitting civil service employer and
employee contributions to NAF retirement plans and 401(k) plans.
D. Elections of Coverage Under the Retroactive
Provisions (Covering moves after December 31, 1965, and before August 10, 1996).
1. Per 5 CFR 847.304, the time limit for making an
election under the retroactive election provisions in 5 CFR Part 847, Subpart D, is August 11,
1997. Heads of Components, or their designees, must waive this time limit in the
event the employee did not receive timely notice or counseling regarding the
opportunity to make a retroactive election,
2. When an APF employee covered by FERS elects to have
previous NAF service credited toward FERS, the NAF service ceases to be creditable for
purposes of NAF retirement.
3. An employee who had a prior election under the 1990
Portability Act to continue retirement coverage following a move between employment Systems is
ineligible to retroactively return to the previous retirement system under the
provisions of 5 CFR 847.411 or 847.44 1, as applicable. However, such a prior
election does not exclude the employee from electing to have service covered by the
previous retirement system credited in the employee's current retirement
system under the provisions of 5 CFR 847.421 or 847.43 1, as applicable.
(a) For example, a DoD NAF employee who previously
elected not to retain coverage in the NAF retirement plan following a move to a DoD) APF
position, but instead moved to FERS, does not have an election to return to
the NAF retirement plan. The employee does have an election to remain
in FERS and have NAF service credited.
(b) An employee who elected, under the 1990
Portability Act, to retain retirement coverage following a move made an irrevocable decision
and has no further election under the new legislation,
4. Employees who make retirement coverage elections under
the retroactive provisions continue to be covered by that retirement system for all
future periods of APF or NAF service not otherwise excluded from retirement
coverage, This includes APF or NAF service performed as a reemployed annuitant.
E. Waiver of 30 Day Time Limit for Making an
Election under the Provisions of the 1990 Portability Act.
1. By memorandum dated March 4, 1996, the DASD(CPP)
exercised DoD's authority to waive the 1990 Portability Act requirement that retirement
elections be made within 30 days of the move. The waiver applies to employees who
moved on or after February 10, 1996, but before August 10, 1996. It permits
employees to delay making an election until after the retroactive service credit
benefits of P.L. 104-106 are available and the election process established. The
DoD) waiver is hereby extended through December 31, 1996.
2. The DoD waiver applies only to employees who (a) are
eligible for a retirement election under the 1990 Portability Act. (b) moved on or after
February 10, 1996, but before August 10, 1996, and (c) did not make an election, These
employees have through December 31, 1996, to exercise the election provided
by the 1990 Portability Act, or to make an election under the retroactive rules
provided by 5 CFR Part 847, Subpart D. Until the employee makes an election, he
or she is in the retirement plan of the gaining employment system, and retirement
contributions are remitted under the provisions of that system's retirement plan.
3. P.L. 104-106 permits employees moving from APF
positions covered by FERS to NAF positions covered by a NAF retirement plan, and vice versa, to
elect retroactive service credit. This is a benefit not provided by the
1990 Portability Act. Therefore, eligible employees who want service credit in the
gaining employment system's retirement plan may decide to make an election
under the retroactive rules in 5 CFR Part 847, Subpart D. Employees who,
after reviewing the retroactive service credit opportunities provided by PL
104-106, decide instead to retain coverage in their previous retirement plan, should elect
to do so under the provisions of the 1990 Portability Act, before amendments,
4. Per PL 104-106, employees who moved on or after
February 10, 1996, but before August 10, 1996, who, notwithstanding the waiver provided, made an
election under the 1990 Portability Act, are not eligible for an election
under the retroactive service credit rules.
F. Transfers of Contributions Under the Retroactive
Provisions (Covering moves after December 31, 1965, and before August 10, 1996).
Civil service and NAF retirement plan contributions will be transferred in accordance with 5 CFR Part
847, Subpart E.
1. When an employee elects to retroactively return to CSRS
or FERS coverage, or to have NAF service credited towards FERS. employee contributions and
government contributions made to the NAF retirement plan transfer to the Civil
Service Retirement and Disability Fund, Government contributions means the
amount credited to the NAF retirement plan, by the NAF employer, on behalf
of the employee for the period of NAF service to be credited towards civil
service retirement.
2. Where an employee participated in more than one NAF
retirement plan, each NAF retirement plan is responsible for submitting contributions
attributable to that particular plan.
G. Employee Payment for Cost of Service Credit Under
the Retroactive Provisions (Covering moves after December 31, 1965, and before August 10.
1996). Heads of Components, or designees, who are responsible for NAF retirement
plans shall establish written policy on determining the cost of crediting APF service to the NAF
plan, and the affect on NAF annuity payments as a result of the credit. The policy shall
include methodology which parallels that described in 5 CFR Part 847, Subpart F, for crediting NAF
service to CSRS or FERS. The policy shall include tables of present value factors necessary to
determine the cost and the actuarial reduction in the NAF annuity payable, The respective actuarial
assumptions in cacti plan's most recent annual report to Congress required by Public Law (P.L.)
95-595 shall be used.
H. Reporting Requirement. Components shall
provide a report to the DASD (CPP) by January 2, 1998, indicating the number of employees who made
retroactive retirement elections under P.L. 104-106, based upon a move after December 31, 1965. but
before August 10, 1996, The report shall be broken down by type of retirement election selected.
III. Related Provisions on Portability of Pay and
Benefits.
A. Reduction in Force.
1. Section 1043(d) of P.L. 104-106 amended section 3502(a)(C) of 5 USC
to allow credit for NAF service for reduction in force purposes for
employees moving from DoD NAF to DoD APF positions on or after January 1, 1966, without
a break in service of more than three days,
2 This DoD policy document hereby provides that employees
who move from DoD APF positions to DoD) NAF positions on or after January 1, 1966,
without a break in service of more than three days, shall be granted NAF Business
Based Action (BBA) retention credit for APF service.
B. Pay and Other Benefits. The Portability
of Benefits for Nonappropriated Fund Employees Act of 1990 provides
pay, leave, and other benefit protection for employees who move,
after January 1, 1987, between DoD APF and DoD NAF positions
without a break in service of more than three days. Details of
these benefits are provided in 5 USC, 5 CFR, DoD 1401.1-M, and OASD
policy memorandums.
For further assistance or counseling on options under the law,
contact your Nonappropriated Fund
office.
For additional background information, see the guidance issued
by the Office of Personnel Management.