Q. I am CSRS and made 41 years, 11 months in August 2011. I continue to have deductions for retirement taken out of my pay. As I understand it, the Office of Personnel Management will send me a lump sum for my excess payment after I retire. My options are to accept the refund or return the money to buy additional annuity.
1. Will the excess retirement dollars from September 2011 to Dec. 29, 2012 (date of retirement) equate to another 2 percent annuity?
2. Do I have the option of putting that money in a Voluntary Contributions Program account?
3. Can I take that refund and put it in my Individual Retirement Account, without taxes being withheld at the time of IRA deposit?
A. OPM will refund your excess retirement contributions, plus interest, and offer you the opportunity to buy additional annuity. The method used to determine the amount is the same one used in the Voluntary Contributions Program. As such, how much you can buy depends on your age and the amount of the refund. At age 55, each $100 would buy you $7 of additional annuity. The amount increases by 20 cents for each full year you are older than 55. So, for example, if you retired at age 62, every $100 would buy you $8.40 of additional annuity. Although it wouldn’t be increased by any cost-of-living adjustments applied to your regular annuity, you’d receive that increase for the rest of your life.
While you can’t roll the excess contributions into a VCP account, which would be pointless anyway because interest payments stop when an employee retires, you can roll over the non-interest portion of your refund into an IRA.