Federal Erroneous Retirement Coverage Corrections Act (FERCCA)
Out-of-Pocket Expense Table of Contents
An Out-of-Pocket expense occurs when you use your personal funds as a result of a retirement coverage error. Please refer to the Out-Of-Pocket Guidelines for information concerning the expenses you may claim and reimbursement of those expenses.
As part of FERCCA, you will be receiving a decision package and financial counseling on your decision options. You may submit your expenses before the package arrives or after. While there is no deadline for filing a claim, we are asking that you file your claims within 30 days upon completion of financial counseling to help expedite claims processing.
Introduction
Guidelines for Waiver
Guidelines For Payment of Expenses
Introduction
Overview
Public Law 106-265, the "Federal
Erroneous Retirement Coverage Corrections Act (FERCCA)," was enacted to
relieve problems that had resulted from employees being placed in the
wrong retirement system. Generally, the law gave certain employees who had
been placed in the wrong retirement system the option of either remaining
in that system or transferring to the retirement system in which they
should have been participating. This approach allows employees to receive
the retirement benefit they had expected to receive.
However, a small number of employees received some form of
settlement payments from their agencies in compensation for the error and
are barred from having an election unless the settlement payment is repaid
or waived by OPM. Congress also recognized that merely correcting the
retirement coverage error might not wholly compensate some of the affected
employees for all the expenses arising from a coverage error. Therefore,
section 2208 of FERCCA permits the Office of Personnel Management (OPM) to
waive payments due from eligible employees or to reimburse eligible
employees for out-of-pocket expenses incurred as a result of the
retirement coverage error, or the correction of a retirement coverage
error.
Eligibility of recipient
To be eligible to receive a waiver or
reimbursement of an expense, you must first have had a qualifying
retirement coverage error. This means you must have been erroneously
placed in the wrong retirement system, either CSRS, CSRS Offset, FERS, or
Social Security only, when you should have been in one of the other three.
This erroneous retirement coverage must have:
- Been in effect at the beginning of 1987, or occurred subsequently.
- Lasted for at least 3 years of service after 1986.
Eligibility of amount
To be eligible for waiver, the
obligation for payment must have been created by the correction of the
retirement coverage error, or be a condition for correction of the
coverage error. Also, the payment of the obligation must not be a
candidate for reimbursement as an out-of-pocket expense.
Guidelines For Waiver
Waiver of interest
In some instances, a coverage error may
change the nature of past service for which no retirement deductions were
withheld from FERS service to CSRS service. The amount of the deposit due
(principal and interest) to purchase credit for the non-deduction service
subsequently increases. However, the value of the lifetime benefit payable
under CSRS at retirement also increases significantly. Further, Congress
provided that payment for the increased deposit could be made by actuarial
reduction from your future annuity.
OPM may waive the additional interest you owe for a civilian or
military deposit following correction of the coverage error if you
demonstrate that the higher annuity benefit and the fact that you had use
of the deposit monies during the error period do not fully compensate you
for the error.
Waiver of settlement payment
You may, as a result of litigation over
a retirement coverage error, have received a settlement payment or
court-ordered payment for losses you sustained because of the retirement
coverage error. Generally, you must repay that amount before you can
benefit from the correction of a retirement coverage error under FERCCA.
However, you may request that OPM waive collection of all or part of the
settlement payment or court-ordered payment. To be entitled to waiver, you
must demonstrate why the waiver is necessary to fully compensate you for
your losses.
NOTE: Out-of-pocket expenses that are reimbursable under Section
2208 of FERCCA cannot be offset from the amount of a settlement or court
ordered payment that must be repaid under FERCCA. Instead, you must apply
separately for reimbursement of those expenses under the OPM's OUT-OF-POCKET EXPENSES instructions.
How to apply
Write a letter
You do not need to file a form. All you
need to do is send OPM a signed letter. This letter should contain, or
have attached, specific information that OPM needs before it can act on
your request. The information OPM needs is:
- A description of the retirement coverage error that you believe
makes you eligible for waiver. This description should include:
- The date (month, day and year) of the retirement coverage error.
- The erroneous retirement coverage (CSRS, CSRS Offset, FERS, or
Social Security only).
- The date the retirement coverage error was corrected.
- The corrected retirement coverage (CSRS, CSRS Offset, FERS, or
Social Security only).
- The dates of any break(s) in service that occurred during the
period of the retirement coverage error.
- A statement of the specific dollar amount you wish to have waived
and why you think it should be waived.
- Your name, address, telephone number, and Social Security number.
- The name, address, and telephone number of your current or last
Federal employer.
- A copy of the court order or settlement agreement that awarded the
payment, and any other document you believe that OPM should consider
when reviewing your request.
Address
Send your request for waiver to:
US Office of Personnel Management
OPM FERCCA IMPLEMENTATION TEAM
1900 E Street NW, Room 4H28
Washington DC 20415
How OPM Makes Its Decision
Decision made on written record
OPM will base its decision on only the written record,
including all of your submissions and other documentation in OPM's
possession.
Agency report when needed
At OPM's discretion,
OPM may request your latest employing agency, or a previous employing
agency, if the qualifying retirement coverage error did not occur at your
latest employing agency, to provide an administrative report. The report
may include:
- A description of the retirement coverage error;
- The agency's recommendation for resolution of the claim; and
- Any other information the agency believes OPM should
consider.
No appeal of final decision
The law provides that OPM's decision will be the final
decision. It will not be subject to appeal, or any other kind of
administrative or judicial review.
Guidelines For Payment Of Expenses
Expense caused by retirement coverage error
Not all out-of-pocket expenses are
reimbursable. To be reimbursable, an out-of-pocket expense must be
directly caused by the retirement coverage error, or its correction.
Certain expenses that are a direct result of the correction of a
retirement coverage error, such as additional retirement deductions, are
clearly caused by the retirement coverage error. However, when the
out-of-pocket expense was not solely caused by the retirement coverage
error, but also involved the employee's reaction to the retirement
coverage error, then the causal connection is not so
clear.
Expense is reasonable
In a case where the out-of-pocket
expense is a result of the employee's reaction to the retirement coverage
error, OPM must determine whether the employee's reaction, under the
circumstances, was reasonable. An employee's reaction is reasonable when
it is not taken rashly, but only after some thought, and on its face can
be expected to mitigate a problem caused by the retirement coverage error,
and when no less expensive action could have easily been identified to
have the same consequence.
Expense is not contrary to long term retirement interests
In reaction to the retirement coverage
error, the employee should have considered the long term effect on his or
her retirement interests. In trying to correct one problem caused by the
retirement coverage, the employee should not have created a greater
problem. Therefore, as a general rule, a reasonable reaction is also one
that is not contrary to the employee's long term retirement
interests.
Unrelated expenses are not reimbursed
Expenses that are not directly caused by
the retirement coverage error cannot be reimbursed, even though they
occurred close in time to the retirement coverage error, or its
correction. This is because the expense was either not caused by the
retirement coverage error, or the retirement coverage was not the primary
cause of the expense. In the latter case, while the retirement coverage
error may have had some relationship to the expense, it was not the most
significant or controlling factor.
Prohibited expenses
FERCCA specifically prohibits payment of
losses related to foregone contributions and earnings under the Thrift
Savings Plan (TSP). This would include, by inference, expenses incurred in
connection with a non-governmental retirement investment program, meant to
compensate for foregone TSP contributions and earnings, and expenses
incurred in the liquidation of property or other investments to fund
makeup contributions to the TSP.
Examples
Examples not exclusive
Set out below are examples of the kinds of out-of-pocket expenses that
may be reimbursed and may not be reimbursed. These examples do not exclude
consideration of any kind of expense that is not listed. However, any
claim for another kind of expense is expected to provide a persuasive
rationale, consistent with the guidelines above, that the expense was
reasonable.
Examples of reimbursable expenses:
FICA tax
OPM will reimburse you for FICA tax (social security deductions)
on pay items which were not subject to CSRS deductions, such as overtime
and awards, if you were erroneously covered by CSRS, and which, as a
result of the correction of the retirement coverage error, are subject to
retroactive FICA tax.
Retirement deductions
OPM will reimburse you for CSRS Offset
or CSRS retirement deductions you were required to pay because your
employer corrected a retirement coverage error. This will generally
involve only retirement coverage errors that were corrected before FERCCA
became effective. Your employer is required to pay any additional
retirement deductions resulting from a retirement coverage error that is
corrected under FERCCA.
Additional interest on deposit
In some instances, a coverage error may
change the nature of past service for which no retirement deductions were
withheld from FERS service to CSRS service. The amount of the deposit due
(principal and interest) to purchase credit for the non-deduction service
subsequently increases. However, the value of the lifetime benefit payable
under CSRS at retirement also increases significantly. Further, Congress
provided that payment for the increased deposit could be made by actuarial
reduction from your future annuity.
OPM may reimburse you for the additional interest you paid for a
civilian or military deposit following correction of the coverage error.
This is if you demonstrate that the higher annuity benefit and the fact
that you had use of the deposit monies during the error period does not
fully compensate you for losses resulting from the error.
Financial planning fees
OPM will reimburse you for reasonable
financial planning fees incurred because a retirement coverage error, or
the correction of a retirement coverage error, resulted in a need to
adjust your household budget and/or long term retirement planning. OPM's
reimbursement will be limited to the amount normally paid for these
services.
EXAMPLE: You should have been placed under FERS when you came to work,
but were placed under CSRS instead. Later, your retirement coverage is
corrected to FERS. In order to take full advantage of FERS, you want to
pay makeup contributions to the TSP through payroll deduction. Before you
can do that, however, you need to reduce the amount you spend monthly on
other items. To accomplish this, you consult a financial management
specialist on how to consolidate debt and/or set up a household budget.
OPM will reimburse you for fees you pay for this service.
Expenses that are not reimbursable
Where there is no out-of-pocket loss
Before OPM can reimburse an
expense, there must be an actual, out-of-pocket loss on your part. When a
retirement coverage error is corrected, funds may be transferred from one
Government account to another. However, unless you have to pay out
additional funds, there is no out-of-pocket expense.
EXAMPLE: A common situation involves retirement and social security
deductions. If you were under CSRS you would pay 7 percent of your base
pay in retirement contributions, while if you were under CSRS Offset you
would pay 6.2 percent of your pay in social security deductions and .8
percent in retirement deductions, up to the social security maximum. For
pay in excess of the social security maximum, you would pay 7 percent
retirement deductions. You would pay the same total amount in retirement
and social security deductions whether you were under CSRS or CSRS Offset.
Consequently, if your CSRS retirement coverage is erroneous, and you are
changed to CSRS Offset, the Government will move some of the money from
the retirement deduction account to the social security deduction account.
This is done at no additional expense to you, so there is no expense to be
reimbursed. This is true whether your CSRS deductions are adjusted for
FICA by your payroll office while you are an employee, or by OPM after you
separate. The fact that you expected to receive a full refund of your CSRS
retirement deductions when you separated does not convert this offset to
an out-of-pocket loss. Further, you will receive full Social Security
credit for all years covered by the error.
Indirect expenses
While OPM may reimburse you for expenses
caused by a retirement coverage error, it will not reimburse you for
expenses you incurred in paying the initial expense. That is because these
other expenses are not directly caused by the retirement coverage error.
EXAMPLES: If you paid a reimbursable expense with a credit card, OPM
will not reimburse you for credit card interest. If you sell property to
raise funds to pay your attorneys' fees, OPM will not reimburse you for
commissions you paid and other expenses incurred in the sale of the
property. If you obtain a debt consolidation loan as a consequence of
financial counseling, OPM may reimburse you for the financial counseling
fee, but it will not reimburse you for the loan origination fee.
Expenses caused by inadequate information
You may have made a decision in regard
to your retirement, or another benefit or investment program based on
inadequate information that resulted in an unwanted expense. That expense
cannot be reimbursed unless you can demonstrate that, despite due
diligence, you were unable to obtain accurate retirement information from
an appropriate source.
Attorneys' Fees
Reimbursable amounts
Attorneys' fees, and other costs
related to administrative and judicial action you incurred to correct or
mitigate the adverse effects of the retirement coverage error may be
reimbursed by OPM. This includes not only the actual attorneys' fees but
also court costs, expert witness fees, and other litigation expenses. If
the attorney bills separately for clerical or office expenses, those
amounts would also be reimbursable.
Litigation not necessary
Attorney fees incurred by you in an
attempt to correct a retirement coverage error are reimbursable even if you did not
go to court.
EXAMPLE: You believe that your agency has placed you in the wrong
retirement system. You consult an attorney to see what can be done to correct
the matter. The attorney researches the law, believes that you are correct, and
writes a letter to your employeer demanding that your retirement coverage be
changed. Your employer denies the request. The attorney advises
you that he will need a $10,000.00 retainer before he can take the matter to
court. Because you are unable or unwilling to pay the retainer, you drop the
matter. Nevertheless, the amounts you paid the attorney for the initial
consultation, to do the research, and write the letter to the agency are
reimbursable by OPM.
You do not need to win
If your legal efforts to correct your
retirement coverage error did involve litigation, it is not necessary for
you to have won in court for OPM to reimburse you for your attorneys' fees
and other litigation expenses.
EXAMPLE: Your employer erroneously places
you under CSRS instead of CSRS Offset. Four years later they make a
retroactive correction. You ask OPM to refund your excess CSRS deductions,
but it refuses. You appeal OPM's decision, but ultimately the court rules
in OPM's favor. The attorneys' fees you incurred throughout the process
may be reimbursed by OPM, even though you did not ultimately win.
Fees and expenses must be reasonable
As required by the general guidelines
outlined elsewhere in these instructions, reimbursable attorneys' fees and
other litigation expenses must be reasonable. In determining whether the
expenses are reasonable and necessary, OPM will consider the following
factors:
- The type and the amount of the expense;
- The circumstances that gave rise to the expense;
- Whether the expense is directly related to litigation or other legal
activity concerning a retirement coverage error, and
- Whether the charges are consistent with amounts usually charged in
matters of similar complexity.
Attorneys' fees awards
In making this determination, it will be necessary for OPM to review the attorney's itemized billing records. (See the section entitled Proving Your Case for further information.)
OPM will not pay for legal services that have already been reimbursed
by another source, such as an attorneys' fees award by a court or agency,
or legal insurance. However, if you only received partial reimbursement
from an attorneys' fees award or legal insurance, OPM will consider
reimbursing you for the remaining amount.
How To Apply
Write a letter
You do not need to file a form.
All you need to do is send OPM a signed letter. This letter should
contain, or have attached, specific information that OPM needs before it
can act on your request. The information OPM needs is:
- A description of the retirement coverage error that you believe
makes you eligible for reimbursement of a loss. This description should
include:
- The date (month, day and year) the retirement coverage error
began.
- The erroneous retirement coverage (CSRS, CSRS Offset, FERS, or
Social Security only).
- The date the retirement coverage error was corrected.
- The corrected retirement coverage (CSRS, CSRS Offset, FERS, or
Social Security only).
- The dates of any break(s) in service that occurred during the
period of the retirement coverage error.
- A description of the specific dollar amounts you wish to have
reimbursed and why you think they should be reimbursed.
- Your name, address, telephone number, and Social Security number.
- The name, address, and telephone number of your current or last
Federal employer.
- Any information or documents you believe that OPM should consider
when reviewing your request. (For further information, see the following
section, "Proving Your Case.")
Model letter
A model
letter is provided for your convenience. Use of the model letter will
assure that OPM has all the information it needs to process your
request.
Address
Send your request for reimbursement to:
OPM/FERCCA Processing Center
P.O. Box 19321
Washington, DC 20036
Proving Your Case
Burden of proof
You bear the burden of proof. If
you wish to be reimbursed for expenses, you must show in a clear and
convincing manner that the expenses you claimed actually occurred, are
reasonable, and that they were directly caused by the retirement coverage
error. The following paragraphs describe the minimum kind and amount of
evidence that must be submitted before OPM may consider allowing your
request.
Proof of Payment
Proof that the expense in question has
been paid must accompany any claim for reimbursement of expenses. This
proof can take many forms. If it is an expense that you paid directly out
of your own funds, the proof could be cancelled checks, receipts, credit
card statements, and any other documents which show that you paid the
bill(s). If the amount in question was paid by payroll deduction, payroll
statements showing the amount that was deducted would be appropriate.
Attorneys' fees and other litigation expenses
The following documents should be submitted with a request for payment:
- A copy of your fee agreement(s) with the attorney(s).
- Itemized statements or bills from your attorney(s). Each line item
should describe the task performed to a sufficient degree that it can be
determined that the task was related to the retirement coverage error,
the amount of time spent on that task, and the rate at which that time
was billed.
- If the matter went to litigation, a copy of the complaint or other
pleading filed by the attorney with the court or administrative hearing
body. This document should clearly state that the litigation has been
initiated to either correct or recover damages for a erroneous
retirement coverage decision.
- Itemized bills or statements from the clerk of the court and any
other agencies or persons who collected fees and costs from you in
connection with the litigation.
- A copy of any award for attorneys' fees and litigation expenses that
reimbursed you for some or all of the expenses you incurred in
connection with the litigation. This would include any payment resulting
from a legal insurance policy. If there was no such award, you should
state so in your letter.
- Affidavits or declarations made under penalty of perjury by the
attorney(s) or other providers which cure any deficiencies in the
itemized statements and other billing documents.
FICA, CSRS Offset or FERS deductions
When claiming reimbursement for FICA tax
charged on items that were not subject to CSRS deductions, or CSRS-Offset
or FERS retirement deductions that were not withheld because of the
retirement coverage error, but paid later, you should submit a copy of the
letter from the agency demanding payment and proof of payment.
Financial management planning fees
If you request reimbursement of
financial planning fees, you should submit a statement that explains why
the financial planning was necessitated by a retirement coverage error or
the correction of a retirement coverage error, and a copy of the bill you
received from the person or organization that provided the service.
Additional interest on deposit
The following documents should accompany a request for reimbursement of additional interest on a deposit for military service:
- The original bill, showing the deposit without interest, and the
interest due.
- A corrected bill showing the deposit without interest, and the
interest due.
- Proof of payment. If you are requesting reimbursement of additional
interest on a deposit for civilian service, you need only provide your
CSD account number.
In addition, you must explain why coverage under CSRS or CSRS Offset
does not make you financially whole.
Other expenses
To be reimbursed for expenses other than
those enumerated above, you must submit a bill or other document you
received at the time of the expense which states the amount of the expense
and why it occurred, and a detailed explanation of why you believe that
this expense was directly caused by the retirement coverage
error.
How OPM Makes Its Decision
Written record only
OPM will base its decision on
only the written record, including all of your submissions and other
documentation in OPM's possession.
Agency report
At OPM's discretion, OPM may request
your latest employing agency, or a previous employing agency, if the
qualifying retirement coverage error did not occur at your latest
employing agency, to provide an administrative report. The report may
include:
- A description of the retirement coverage error;
- A statement as to whether a settlement or other court-ordered award
was made;
- The agency's recommendation for resolution of the claim; and
- Any other information the agency believes OPM should consider.
Final decision: no right of appeal
The law provides that OPM's decision
will be the final decision. It will not be subject to appeal, or any other
kind of administrative or judicial review.