Q. I’m a CSRS employee with 41 years and 10 months of service. Is there a maximum annuity calculation? Is it based on my high-3 during that final three years or will it include the salaries of any years after that?
A. Your high-3 will be based on your highest three consecutive years of basic pay whenever they occur in your career. If you work for 41 years and 10 months, you’ll be entitled to the maximum earned annuity, which is 80 percent of your high-3. While retirement contributions will continue to be taken from your pay, when you retire you’ll have the option of accepting a refund of those excess contributions or purchasing additional annuity that isn’t subject to the 80 percent limit. Also not subject to the 80 percent limit is any unused sick leave you may have when you retire.
Hi Reg, In “Maximum annuity calculation” you say “While retirement contributions will continue to be taken from your pay, when you retire you’ll have the option of accepting a refund of those excess contributions or purchasing additional annuity that isn’t subject to the 80 percent limit.” I’m not understanding. If I work 1 year and 3 month past 41 yrs 10 mos are you saying I can purchase additional annuity not subject to the 80% limit? I thought no amount of employment after 41 yrs 10 mos could convert to additional annuity above 80% other than converted Sick Leave. I’m CSRS retiring with a total of 44 years 3 month (which includes 1 yr 3 mo SL); I’m only expecting approx. 82.25% of my high three. Am I wrong?
Yes, you are wrong. While your earned annuity can’t exceed 80 percent, any contributions to the retirement fund made after that point can be used to purchase additional annuity. To see how that’s done, go to http://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c031.pdf and scroll to Part 31A3.1-1.
Yes. When you retire OPM will ask you whether you want a refund of those excess contributions or instead use them to purchase additional annuity that isn’t subject to the 80 percent limit on an earned annuity.
REG — I have a redeposit issue AND contributions past 41/11. It is my understanding reading the cited OPM 31A3 from you, that the over contributions can not be used for extra annuity because the redeposit isn’t going to be made by me before retirement date of 12/1. I have already calculated the ‘hit’ to my annuity using the factor for my age and can live with that reduction. So, that leaves no option but to take the over payment in a lump and no extra annuity?
Thanks. I have a follow up question. I found this information from my search on the issue of over payments and just reread it —https://www.fedsmith.com/2015/03/02/40-years-of-service-what-happens-to-those-extra-retirement-contributions-2/. If this is true, that any over payment will be credited to the deposit and redeposit issues from 1966 and 1972 respectively, which will OPM credit first? In my case it will wipe out the deposit and make a dent in the redeposit.
I found it in OPM. For anyone else interested, it is 32A1.1-10 and look under D.
Also found the application of excess contributions from an old payment statement found in my eOPF. Pre-1982 redeposit and then Pre-1982 deposit.
Reg, thanks for all the advice you dispense. I found an old column in FedWeek on actuarial reductions written by you. The word lifetime is the key word in making a decision on taking the reduction or making at least some of the redeposit. Rethinking my decision on payments.
Thanks for the additional information, and for your kind words.