In my last two columns I wrote about calendar year 2015 changes in the dollar amounts or percentages affecting your pay (1 percent increase), cost-of-living adjustments for eligible retirees and more, survivors and Social Security beneficiaries (1.7 percent increase), the Social Security earnings limit ($15,720), Medicare Part B (premiums unchanged), death benefits and children’s benefits (both higher by 1 percent). In this final column, I’ll tell you about interest rates, the salary cap, military deposits, present value factors, the maximum taxable wage base, and the Thrift Savings Plan deferral limit.
Interest is charged when you make a deposit to capture or recapture service, including active duty military, periods of federal employment where deductions weren’t taken from your pay, and when you left the government and took a refund of your retirement contributions. From 1948 through 1984, that rate was 3 percent. Since 1985, those interest rates have fluctuated, from a high of 11.25 percent in that first year to a low in 2013 and 2014 of 1.625 percent. In 2015 the rate has moved up to 2.0 percent.
While the salaries of most employees fall below the annual salary cap, there are others who are blocked from being paid any more than that amount. This is a two-edged sword for them because they don’t receive any additional pay to which they would normally be entitled and their high-3 will be based on what they actually receive, not what they would have received but for the pay cap.
The biweekly pay of General Schedule and other covered employees cannot exceed the greater of the biweekly rate payable for GS-15, step 10 (including any applicable locality payment or special rate supplement) or the rate payable for Level V of the Executive Schedule. You’ll find the pay rates for all employees at opm.gov.
The amount you have to deposit to get credit for military service has remained stable for most years since 1982, when they were first required to be paid: 7 percent for Civil Service Retirement System (CSRS) and 3 percent for Federal Employees’ Retirement System (FERS). However, during a budgetary upheaval in the late 1990s, the interest rates were increased. So, if you were on active-duty service in 1999, the CSRS rate for buying back that time is 7.25 percent and for FERS 3.25 percent. For 2000 it’s 7.40 percent and 3.40 percent.
Waiver of military retired pay
If you are an employee who receives military retired pay, you can make a deposit to get credit for your active-duty service. However, in most cases, you’ll have to waive your military retired pay when you retire from your civilian jobs. To do that, you’ll have to submit your request to the following address 30 days before your planned retirement date: Defense Finance and Accounting Service, U.S. Military Retired Pay, London, KY 40742-7130.
On the other hand, if you are an employee who will be receiving reserve retired pay, you can make a deposit to get credit for any periods of active duty service and, when you retire from your civilian job, get both that reserve retired pay and your annuity without a reduction in either.
Present value factors
There are several situations in which your annuity will be actuarially reduced based on your age at retirement and the amount you owe the government. Among them are CSRS and FERS benefits when you:
- Elect the Alternative Form of Annuity because of a medical condition that results in a life expectancy of less than two years;
- Have a CSRS component in your annuity and get credit for refunded service that ended before Oct. 1, 1990, but you didn’t pay the deposit you owe for that service;
- Marry after retirement and elect to provide a survivor annuity for your new spouse;
- Elect to credit Nonappropriated Fund Instrumentality (NAF) service for retirement purposes under Public Law 104-106 or Public Law 107-107; or
- Have certain kinds of retirement coverage errors and can receive credit for service by taking an actuarial reduction under the provisions of the Federal Erroneous Retirement Corrections Act (FERCCA).
Social Security maximum wage base
I suppose I don’t have to remind you that Social Security (FICA) taxes are deducted from your pay if you are covered by either FERS or CSRS Offset. But you may need to be reminded that There is also an upper salary limit from which those deductions can be taken. In 2015, that maximum taxable wage is $118,500.
If you are a FERS employee who earns that much, your take-home pay for the rest of the year will increase. However, if you are a CSRS Offset employee, your take-home pay won’t change. Here’s why. Up to the point where you reached the maximum taxable wage, 6.2 percent of your pay goes to Social Security and 0.8 percent goes to CSRS. After you reach that wage limit, the whole 7 percent will go to CSRS.
Thrift Savings Plan elective deferral limit
For 2015 the maximum amount you can contribute to your TSP account is $18,000. However, if you are 50 or over, you can make tax-deferred “catch-up” contributions from your basic pay to your TSP account. These are a supplement to your regular employee contributions and don’t count against the Internal Revenue Code’s elective deferral limit. However, the catch-up contribution has its own limit:. In 2015 that’s $6,000.
Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to email@example.com.