To amend chapters 83 and 84 of title 5, United States Code, to provide for the indexation of deferred annuities; to provide that a survivor annuity be provided to the widow or widower of a former employee who dies after separating from Government service with title to a deferred annuity under the Civil Service Retirement System but before establishing a valid claim therefor, and for other purposes.

SECTION 1. INDEXATION OF DEFERRED ANNUITIES.

    (a) Amendments to Subchapter III of Chapter 83.--Section 8338 of 
title 5, United States Code, is amended--
            (1) in subsection (d) by striking ``(d) An'' and inserting 
        ``(d) Subject to subsection (e), an''; and
            (2) by adding at the end the following:
    ``(e)(1) The average pay used in the computation of an annuity 
authorized by this section shall be equal to the average pay described 
in section 8331(4), increased by the percentage adjustments 
(compounded) in rates of pay of the General Schedule taking effect 
during the period--
            ``(A) beginning on the day after the date of the separation 
        on which title to annuity is based, and
            ``(B) ending on the day before the commencement date of 
        such annuity.
    ``(2) In the case of a former employee or Member who dies after 
having separated from the service with title to an annuity authorized 
by this section but before having established a valid claim for such 
annuity, the average pay used in the computation of any survivor 
annuity payable based on the service of such former employee or Member 
shall be increased in the manner described in paragraph (1), except 
that, in applying subparagraph (B) of paragraph (1) for purposes of 
this paragraph, the commencement date of such survivor annuity shall be 
used instead of the commencement date of the annuity referred to in 
such subparagraph.
    ``(3) Average pay shall not be increased by reason of any 
adjustment under this subsection to an amount which exceeds the rate of 
basic pay that, as of the day before the commencement date of the 
annuity or survivor annuity involved, is payable for the position that 
was held by the employee or Member at the time of earning the highest 
rate of pay taken into account in computing such employee's or Member's 
average pay, as determined under regulations of the Office.''.
    (b) Amendment to Chapter 84.--Section 8415 of title 5, United 
States Code, is amended by adding at the end the following:
    ``(m)(1) The average pay used in the computation of a deferred 
annuity under section 8413 shall be equal to the average pay described 
in section 8401(3), increased by the percentage adjustments 
(compounded) in rates of pay of the General Schedule taking effect 
during the period--
            ``(A) beginning on the day after the date of the separation 
        on which title to annuity is based, and
            ``(B) ending on the day before the commencement date of 
        such annuity.
    ``(2) In the case of a former employee or Member who dies after 
having separated from the service with title to a deferred annuity 
referred to in paragraph (1) but before having established a valid 
claim for such annuity, the average pay used in the computation of any 
survivor annuity payable based on the service of such former employee 
or Member shall be increased in the manner described in paragraph (1), 
except that, in applying subparagraph (B) of paragraph (1) for purposes 
of this paragraph, the commencement date of such survivor annuity shall 
be used instead of the commencement date of the annuity referred to in 
such subparagraph.
    ``(3) Average pay shall not be increased by reason of any 
adjustment under this subsection to an amount which exceeds the rate of 
basic pay that, as of the day before the commencement date of the 
annuity or survivor annuity involved, is payable for the position that 
was held by the employee or Member at the time of earning the highest 
rate of pay taken into account in computing such employee's or Member's 
average pay, as determined under regulations of the Office.''.
    (c) Amendments Relating to Individuals Becoming Subject to FERS by 
Election.--
            (1) Computation of a deferred annuity.--Paragraph (6) of 
        section 302(a) of the Federal Employees' Retirement System Act 
        of 1986 (5 U.S.C. 8331 note) is amended by adding at the end 
        the following:
            ``(C) In determining average pay under this paragraph for 
        purposes of computing a deferred annuity under section 8413 of 
        such title--
                    ``(i) the provisions of section 8338(e)(1) and (3) 
                of such title shall apply, to the extent that such 
                annuity is computed under paragraph (4); and
                    ``(ii) the provisions of section 8415(m)(1) and (3) 
                of such title shall apply, to the extent that such 
                annuity is computed under paragraph (5).''.
            (2) Computation of a survivor annuity.--Paragraph (9) of 
        such section 302(a) is amended by striking ``(9)'' and 
        inserting ``(9)(A)'', and by adding at the end the following:
            ``(B) In computing an annuity under paragraph (3) for 
        purposes of determining the amount of a survivor annuity under 
        subchapter IV of chapter 84 of title 5, United States Code, to 
        which the survivor is entitled based on the service of a former 
        employee or Member who dies in the circumstances described in 
        section 8415(m)(2) of such title--
                    ``(i) paragraph (6)(C)(i) shall apply, to the 
                extent that such annuity is computed under paragraph 
                (4); and
                    ``(ii) paragraph (6)(C)(ii) shall apply, to the 
                extent that such annuity is computed under paragraph 
                (5).''.
    (d) Conforming Amendments.--(1) Section 8331(10) of title 5, United 
States Code, is amended by inserting ``former employee or Member,'' 
before ``or annuitant''.
    (2) Section 8341(h)(1) of title 5, United States Code, is amended 
by striking ``or former Member who was separated from the service with 
title to a deferred annuity under section 8338(b) of this title'' and 
inserting ``or former employee or Member who died after having 
separated from the service with title to a deferred annuity under 
section 8338 but before having established a valid claim for 
annuity,''.
    (3) Clause (iii) of section 8341(h)(2)(B) of title 5, United States 
Code, is amended by striking ``a Member'' and inserting ``an employee 
or Member''.

SEC. 2. AMENDMENT TO PROVIDE THAT THE WIDOW OR WIDOWER OF A DEFERRED 
              ANNUITANT WHO DIES BEFORE ESTABLISHING A VALID CLAIM FOR 
              ANNUITY UNDER CSRS SHALL BE ELIGIBLE FOR A SURVIVOR 
              ANNUITY IN THE SAME WAY AS APPLIES CURRENTLY UNDER FERS.

    Subsection (f) of section 8341 of title 5, United States Code, is 
amended to read as follows:
    ``(f) If an employee or Member dies after having separated from the 
service with title to a deferred annuity under section 8338 but before 
having established a valid claim for annuity, and is survived by a 
widow or widower to whom married on the date of separation, the widow 
or widower--
            ``(1) is entitled to an annuity equal to 55 percent of the 
        deferred annuity of the employee or Member commencing on the 
        day after the employee or Member dies and terminating on the 
        last day of the month before the widow or widower dies or 
        remarries before age 55; or
            ``(2) may elect to receive the lump-sum credit instead of 
        annuity if the widow or widower is the individual who would be 
        entitled to the lump-sum credit and files application therefor 
        with the Office before the award of the annuity.
Notwithstanding the preceding sentence, an annuity payable under this 
subsection to the widow or widower of a former employee or Member may 
not exceed the difference between--
            ``(A) the annuity which would otherwise be payable to such 
        widow or widower under this subsection; and
            ``(B) the amount of the survivor annuity payable to any 
        former spouse of such former employee or Member under 
        subsection (h).''.

SEC. 3. EFFECTIVE DATES.

    (a) Amendments Made by Section 1.--
            (1) In general.--The amendments made by section 1 shall 
        apply to any annuity or survivor annuity commencing before, on, 
        or after the date of the enactment of this Act, subject to 
        paragraph (2).
            (2) Recomputations.--In the case of any individual who is 
        entitled to an annuity or survivor annuity based on a 
        separation from service which occurred before the date of the 
        enactment of this Act--
                    (A) such annuity or survivor annuity shall be 
                recomputed to take into account the amendments made by 
                section 1 only if application therefor is made within 
                12 months after the effective date of regulations 
                prescribed by the Office of Personnel Management to 
                carry out such amendments; and
                    (B) any change in an annuity or survivor annuity 
                resulting from a recomputation under subparagraph (A) 
                shall be effective only with respect to amounts 
                accruing for months beginning on or after the date of 
                the enactment of this Act.
    (b) Amendment Made by Section 2.--The amendment made by section 2 
shall take effect as of the date of the enactment of this Act. Upon 
timely application to the Office of Personnel Management, such 
amendment shall also apply to the widow or widower of a former employee 
or Member who died before such date of enactment, except that no amount 
shall be payable--
            (1) for any period beginning before such date of enactment; 
        or
            (2) in any case in which all annuity rights under 
        subchapter III of chapter 83 of title 5, United States Code, 
        have been voided due to the lump-sum credit having been taken.
    (c) Savings Provision.--Nothing in section 2 shall affect the right 
of an individual to a survivor annuity, based on a death occurring on 
or after the date of the enactment of this Act, if such individual 
would (upon filing claim therefor) have been entitled to such annuity 
had section 2 not been enacted.
    (d) Definitions.--For purposes of this section--
            (1) the terms ``widow'' and ``widower'' have the respective 
        meanings given them by section 8341 of title 5, United States 
        Code; and
            (2) the term ``lump-sum credit'' has the meaning given such 
        term by section 8331(8) of such title.

Summary: Amends Federal civil service law to provide for the indexation of deferred annuities, including survivor annuities, under the Civil Service Retirement System (CSRS), Federal Employees' Retirement System (FERS), and for individuals becoming subject to FERS by election. Terminates for remarriage before age 55 a survivor's entitlement to an annuity based on the service of a deferred annuitant who dies before establishing a valid claim for annuity under CSRS .