Retirement coverage is mandatory and not an option that you can choose, although some employees may be eligible to choose which system they are covered under based on their prior service. The retirement programs are governed under 5 Code of Federal Regulations (5 CFR), Part 831 and 842. The Office of Personnel (OPM) has overall responsibility for administering the retirement programs while Agency Headquarters are responsible for managing and administering the retirement programs within the agency.
There are two primary Federal retirement systems, the Civil Service Retirement System (CSRS) - which includes CSRS-Offset - and the Federal Employees’ Retirement System (FERS). Both provide retirement pensions, disability income and survivor's benefits. Most Federal civilian employees are covered by one of these two retirement systems.
Retirement coverage is determined by the type of appointment you are hired under and your prior Federal service, if applicable. Retirement eligibility is based upon years of creditable service and age.
Retirement coverage determinations are made at the onset of your appointment based upon the service history available at the time. If you have prior Federal service that is not reflected in your Official Personnel File (OPF); that service may be creditable for retirement purposes and could affect the coverage determination. Please take a moment to review the history of the retirement systems, the different retirement plans, and your past service history. This information will help you understand why you have been placed in your current system. If you find you have prior service for which you may be eligible to receive credit for or you think you should be covered under a different retirement system, please notify your Personnel Customer Representative (PCR), Site Manager or servicing Human Resources Management Team (PMT) immediately to avoid an error in coverage determination. You can find your retirement plan code and description on your Standard Form 50, Notification of Personnel Action, Block 30.
Keep in mind determining retirement coverage is different than determining your eligibility for retirement. There are many decisions that go into making a retirement coverage determination, including the fact you could very well receive credit for prior service towards retirement coverage but may not be able to receive the same credit for retirement eligibility. Depending upon when the service was performed you could be required to make a deposit or redeposit for a period of service in order to receive credit toward meeting retirement eligibility.
History of the Retirement System
A chronological history on the evolvement of the retirement systems can be summarized as follows.
1920 - Civil Service Retirement System (CSRS) Established
- CSRS is not a portable system
- Employees can not roll contributions over to another retirement plan
1935 - Social Security System Established
- Civilian and Military Exempt
- Military started paying Social Security in 1957
1965 - Medicare System Established
- Federal Government’s Health Care System
- Provides coverage for the disabled and person age 65 and over
1983 - Social Security Amendments Act
- CSRS employees required to pay Medicare Tax
- All employees now pay 1.45% of salary toward Medicare Tax
- Mandated OPM establish a new flexible retirement system and attach to it a 401(k) plan similar to the private sector
- Federal employees were no longer exempt from Social Security Taxes
1984 - Civil Service Retirement System (CSRS Interim)
- Created as a temporary plan for employees newly, rehired or converted to a retirement covered appointment position
1987 - Federal Employees’ Retirement System (FERS)
- On January 1, 1987, OPM established FERS
- Employees covered under CSRS Interim acquired coverage under FERS or CSRS depending on the rules and categories of coverage
- Thrift Savings Plan established mirroring many 401(k) private corporation plans
What Retirement System am I Covered Under?
Civil Service Retirement System (CSRS)
Covers most employees first hired prior to January 1, 1984.
Employees who have had a break in coverage of less than 1 year (365 days) also retain their CSRS coverage. However, if you have a break in service of at least 4 days, upon rehire you have a 6-month opportunity period to elect to transfer to FERS.
Civil Service Retirement System (CSRS) INTERIM
Covers employees first hired, rehired or converted to an appointment subject to retirement on or after January 1, 1984. CSRS Interim was a version of CSRS established pending the creation of the new retirement system. When the new system (FERS) was established on January 1, 1987, personnel offices were instructed to review the OPF of all employees covered under CSRS Interim to determine whether or not the employees, by law, were:
- Vested, meaning you had at least 5 years of creditable civilian service under the CSRS. If so, your retirement coverage would be either CSRS or CSRS Offset, or
- If you were not vested in CSRS, you would be covered automatically under FERS.
Civil Service Retirement System (CSRS) OFFSET
CSRS Offset is a version of CSRS established for employees who become subject to Old Age Survivors and Disability Insurance (OASDI) also know as FICA taxes and have completed at least 5 years of creditable civilian service.
Generally, CSRS Offset coverage applies to employees rehired after a break of more than 365 days with 5 or more years of prior creditable civilian service as of:
- December 31, 1986, or
- As of the date of your last separation and you had at least 1 day of CSRS coverage or Foreign Service Retirement System coverage.
- Employees with at least a 4-day break in service have a 6-month opportunity to transfer to FERS.
Federal Employees’ Retirement System (FERS)
FERS became effective January 1, 1987 and covers most employees first hired on or after January 1, 1984.
Employees rehired after a break in service of more than 365 days with less than 5 years of creditable civilian service.
Employees who elected FERS coverage during transfer opportunities.
Federal Insurance Contributions Act (FICA)
A Federal law that is monitored by the Social Security Administration that requires employees to pay social security tax on their earned income that provides future pension and other social security benefits. The Federal Insurance Contributions Act (FICA) establishes a Social Security and Medicare Tax on employers and employees. The employee's portion of the tax is deducted from the paycheck and then matched by the employer's portion of the tax. The tax applies to:
- Most employees on appointments specifically excluding them from any Federal retirement system coverage. For example, a temporary appointment not to exceed 1 year.
- Most employees first hired in Federal service before January 1, 1984 but were not covered under a Federal retirement system until after December 31, 1983, i.e. temporary employees and,
- Employees rehired after a break in service or break in CSRS coverage (covered service) of more than 365 days, which ended after December 31, 1983.
- Employees first hired on/or after January 1, 1984, with no prior federal employment.
- Employees covered under CSRS Offset and FERS.
The Civil Service Retirement and Disability Fund is appropriated for the payment of benefits provided under the CSRS and FERS. Part of its funding includes employee contributions withheld from your basic pay and agency contributions. The exact amount of retirement deductions withheld from your basic pay and the agency contribution is set by law.
CSRS and FERS are substantially different in the statutory provisions regarding deductions and contributions. Individuals covered under full CSRS pay CSRS employee deductions and the agency must contribute to the Retirement Fund an amount equal to the retirement deductions withheld from the employee’s pay.
CSRS Offset employee deduction rates are the same as full CSRS minus the OASDI or FICA tax rate. For example, current full CSRS rate is 7.0% - 6.20% (OASDI tax as of 1990) = .80%. When the total basic pay paid in a calendar year reaches the Social Security maximum taxable wage base, the deduction rate reverts to the full CSRS employee withholding. However, the agency contribution rate for Offset employees is not offset by the OASDI tax. Agencies pay the full applicable rate in addition to the employer OASDI tax (which matches the employee tax) for Offset employees.
FERS employee deduction rates are the same as Offset employees but the agency contribution is much higher. This is because FERS is a fully funded pension meaning the normal cost of the system derives completely from withholdings from the salaries of covered employees and contributions from the employing agency.
The CSRS and FERS program is complex and in-depth. There are many exceptions which may apply to crediting certain types of civilian service, especially if you had employment under other retirement systems. Special provisions apply to Senior Officials, Firefighters and Law Enforcement Officers which are not addressed in this document. You are encouraged to learn as much as possible about your retirement system. Starting early in planning and preparing for your retirement will alleviate having to make last minute decisions which could impact you financially.
You may obtain detailed information; download a variety of pamphlets, and brochures regarding retirement directly from OPM’s Web-site at U.S. Office of Personnel Management Home Page. You may also seek assistance from your PCR, Site Manager or Benefits Unit.