Q. I am getting ready to retire in three weeks after 37 years with the Civil Service Retirement System. While working with the personnel office and getting the package ready to send to OPM, I brought up about the CSRS contribution balance. Back in 1986 they converted to the new system and I had a rather large balance in the CSRS contributions. We noticed that our balance went to zero when the new pay stubs were issued. They told us not to worry back then and the money would be added back in when we retired. My current leave and earnings statementshows again a large amount of contributions. I asked the Human Resources Office about a document that combined both balances and they had no knowledge of this requirement. I am trying to search for a reference so I can get this resolved. I already found out they changed the legal binding contract for my retirement back in 1986 and now I have to follow IRS Publication 721, which states I will only get a small percentage back each year. It will take 331 months to get the entire balance returned. Can someone tell me where it is written that they have to combined both amounts so I can submit the entire amount using IRS Publication 721?
A. When you retire, OPM will provide you with a statement that includes all your contributions to the retirement system. That’s the figure you’ll use when calculating the tax-free amount of your annuity. The way to do that is laid out in IRS Publication 721, which you mentioned.
While you assert that you had a legally binding contract, that contract was amended by a new law requiring that anyone retiring on or after July 1, 1986, would no longer be able to receive a tax-free refund of his retirement contributions and then be taxed on the full amount of his annuity. Since that change in the law, the tax-free portion of an annuity has been based on actuarial tables provided by the Internal Revenue Service.