CSRS and FERS explained

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Q. Block 19 tells me what I have contributed to the retirement fund, but what happens to that money? How can I factor it into my retirement, or don’t I?

A. Both CSRS and FERS are defined benefit systems. They are based on formulas that let you know in advance what your annuity will be when you retire. When you retire, you’ll first receive the money you contributed to the retirement system. After that money is gone, you’ll begin receiving the government’s money. Unfortunately, because of a change in the tax code, only a portion of your contributions will be tax deductible. For more information about how federal annuities are taxed, go to www.irs.gov/pub/irs-pdf/p721.pdf.

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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.

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  1. Your contributions reduce the taxable portion of your annuity prorate. Each annuity payment will have a portion as non-taxable return of contributions. Your year-end tax statement from OPM should tell you what your total contributions were and in most cases it will tell you what portion of your total annuity is taxable. See a tax professional for additional information.

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