Q. What is the percentage paid by the U.S. Treasury toward our monthly annuity account when we retire under CSRS?
A. It’s not surprising that no one could answer the question, because there isn’t any one answer. It all depends. If an employee retired before June 2, 1986, all of his annuity payments were considered to be a return of his retirement contributions and weren’t taxable, since they had already been taxed as income while he was working. When the amount in his account ran out, all of the annuity payments he received were from the government and, as such, 100 percent taxable. If he retired after that date, the amount he received in each annuity payment depended on two things: first, if he was filing under the general rule or the simplified rule; second, his age at retirement. A third factor was added shortly thereafter: whether he re-elected a survivor annuity and in what amount. To learn more about this mare’s nest of rules, go to www.irs.gov and download a copy of IRS Publication 721, Tax Guide to U.S. Civil Service Retirement benefits.
