Retirement

Facts

7

Computing

Retirement

Benefits Under

the Civil Service

Retirement

System

This is a non-technical summary of the laws and

regulations on the subject. It should not be relied upon

as a sole source of information.

United States

Office of

Personnel

Management

Retirement and

Insurance

Service

RI 83-7

March 1995

The June 1994 edition is still usable
2

The information in this publication is a

non-technical summary of the relevant laws and

regulations dealing with this subject. It should

not be relied upon as a sole source of

information. For further information on

computing retirement benefits, you should

contact your current employing or personnel

office.

Other titles in the Retirement Facts Series:

1. The Civil Service Retirement System

2. Military Service Credit Under the Civil

Service Retirement System

3. Deposits and Redeposits Under the Civil

Service Retirement System

4. Disability Retirement Under the Civil

Service Retirement System

5. Survivor Benefits Under the Civil Service

Retirement System

6. Early Retirement Under the Civil Service

Retirement System

8. Credit for Unused Sick Leave Under the

Civil Service Retirement System

9. Refunds Under the Civil Service

Retirement System

10. Voluntary Contributions Under the Civil

Service Retirement System

11. Information for Separating CSRS

Employees Who Are Not Eligible for an

Immediate Annuity

12. Information About Reemployment for

CSRS Annuitants

If you want information on the Federal

Employees Retirement System (FERS), ask your

employing office for a copy of "FERS" (RI 90-1).

If you are planning to retire soon, ask for a copy

of "Thinking of Retirement ?" (RI 83-11).
3

Computing Retirement Benefits

The amount of the basic annuity payable upon

your retirement under the Civil Service Retirement System (CSRS) is directly related to your

length of service and your highest 3 years'

average salary. Once the basic annuity is

computed, based on length of service and your

earnings, it may be reduced for any service for

which you did not make retirement contributions

("deposit service"). The basic annuity may also

be reduced to provide survivor benefits for your

spouse or former spouse after your death or

because you are retiring before age 55. Service

for which you have received a refund of retirement contributions ("redeposit service") will be

used to determine your eligibility for retirement

but cannot be considered when computing your

basic annuity, unless you have paid the entire

redeposit due or are eligible for, and elect, the

Alternative Form of Annuity (except, as we'll

explain, when the refund covered service that

ended before October 1, 1990).

Several other Retirement Facts pamphlets

provide general information on the reductions in

your annuity for unpaid deposits or redeposits

and the effect of early retirement on the amount

of your annuity. In this pamphlet, we'll outline

the computation of the most frequent form of

retirement-- optional retirement of an employee

who is at least 55 with at least 30 years of service.

How are annuities computed under

the General Formula?

Annuities are expressed as a percentage of your

"high 3" average salary. Your "high 3" average

salary is the highest 3 years of base pay or salary

you earned in any consecutive 3-year period

(usually your last 3 years). Your high 3
4

percentage is determined by a three part formula

based on your length of creditable service. You

earn:

1.50% per year for the first 5 years or 7.50% plus

1.75% per year for the next 5 years or 8.75% plus

 16.25%

2.00% per year for service over 10 years.

Thus, after 10 years of service you have earned

16.25% of your "high three" and after 30 years

you have earned 56.25% (16.25% + 2% x 20 =

56.25%). By law, the percentage is limited to

80% (reached after 41 years and 1l months of

service); however, unused sick leave can be used

in the formula to produce a greater result. Your

unused sick leave is converted into months and

days and added to your other service. Credit is

given for whole months only, (30 days).

However, the time representing days of unused

sick leave is not counted toward your "high 3"

years average salary or for establishing eligibility

for retirement. The sample illustration below

shows how you can compute the precise "high-3"

average salary for a given period.
5

"Calculating "High-3" Salary

Basic Salary in Effect From Basic

July 1, 1985, through October

11, 1985

October 12, 1985, through

October 9, 1986

October 10, 1986, through

October 8, 1987

October 9, 1987, through June

30, 1988

Year

0

0

0

0

3

"High-3" years' average salary = $60,001 / 3

 = $20,000

For example, using the average salary of $20,000

and assuming that you've worked for the

Government for 33-1/2 years, are age 55, and

have the equivalent of 6 months of unused sick

leave, the computation (before any applicable

reductions) would be: 

$20,000 x 1.5% x 5 years = $ 1,500

$20,000 x 1.75% x 5 years = 1,750

$20,000 x 2% x 24* years = 9,600

(Basic annuity) 

 $12,850

__________________

*(includes 6 months of unused sick leave)

A quick way to estimate your basic annuity is to

determine your total length of service (34 years)

and subtract two (32 years). Multiply that by two

(32 x 2 = 64) and use that as a percentage (64

percent) of 90 percent of your final salary. If, for

example, your final salary was $22,340 per year,

then 90 percent of $22,340 would equal $20,106.

Therefore, $20,106 x .64 = $12,867 for a basic

annuity. This quick formula is not precise but

will allow you an approximation.
6

Period Salary

was in Effect*

Annual

Salary

 Gross Pay

for this

Period

Months

3

11

11

8

Days

11

28

29

22

@ $17,541

@ 18,779

@ 20, 203

@ 22, 340

$ 4,921.23

 18,674.67

 20,146.88

 16,258.56

33 90

36 months

$ 60,001.00

*For purposes of calculating average salary,

1 month = 30 days, and 1 year = 360 days.

Annuity Reductions

4 Reduction for Deposit Service. In the

example of a voluntary separation we're using,

the first reduction would be for any unpaid

deposit service.

Let's say that the first year you worked for the

Government was under a temporary appointment

during which you were not eligible to pay into the

CSRS. This would represent a period of deposit

service. We'll assume that the amount you would

have paid in as a permanent employee, plus

interest to the date of your retirement, equals $900.

Your basic annuity will be reduced by one-tenth of

that amount--$90. Therefore, your basic annuity of

$12,850 would be reduced to $12,760 per year. For

periods of deposit service performed on or after

October 1, 1982, a deposit must be made (unless

you are eligible for and elect an Alternative Form

of Annuity) or the time cannot be used in

computing your annuity. The time will be used to

determine your eligibility to retire whether or not

you make the deposit payment.

 
7

 

4 Reduction for Survivor Benefits. If you are

married, your annuity will be reduced

automatically to provide the maximum survivor

annuity for your spouse, unless you and your

spouse jointly agree to provide a lesser amount or

none at all. Your spouse's survivor annuity would

be 55 percent of your basic annuity or any lesser

amount you and your spouse agree to. Your

annuity would be reduced by 2 1/2 percent of the

first $3,600 in basic annuity and 10 percent of the

remainder of your basic annuity. In our example,

we've used the entire basic annuity, already

reduced to $12,760 per year for unpaid deposit

service, in the following:

Basic annuity $12,760

Annuity reduced to provide a survivor benefit (2

1/2 percent of the first $3,600 [$90] and 10

percent of the amount over $3,600)

[$12,760-$3,600 $9,160

$9,160 x 10 percent = $916].

$90 + $916 = $ 1,006 ‹ -1006

 $11,754

Your basic annuity of $11,754 would be $979 per

month and provide a survivor annuity after your

death of $584 per month. In computing the

monthly annuity rate payable either to the

retiring employee or the survivor annuitant, the

annuity rate is rounded down to the next lower

dollar, not to the nearest dollar.

4 Reduction for Age. If you retire before

reaching age 55 due to an involuntary separation,

such as in a reduction-in-force situation, your

basic annuity of $ 12,850 per year would be

reduced by one-sixth of 1 percent for each full

month you were under 55.
8

4 Reduction for Alternative Annuity Election.

Your basic annuity will be further reduced if you

are eligible for, and elect, an Alternative Form of

Annuity (AFA). Under this option, you receive an

actuarially-reduced monthly benefit, plus a

lump-sum payment equal to all of your

contributions into the retirement fund. You may

not elect the AFA unless you have a lifethreatening medical condition. Also, you cannot

choose the AFA if you are retiring for disability

or if you have a former spouse who is entitled to

court-ordered benefits based on your service. To

determine the monthly amount of reduction in

your annuity if you are eligible, and do elect the

AFA, you divide the amount of contributions to

your credit in the retirement fund by the

appropriate "present value" factor for your age at

the time of retirement. They may be changed in

the future to conform to changes in the economic

assumptions on which they are based. For

example, assuming you retire at age 55, and your

retirement contributions are $40,000, your

monthly annuity of $979 would be reduced by

$189 ($40,000 divided by 212.16) to provide you

an annuity of $790 per month if you elect the

AFA. The survivor annuity of your spouse would

not be affected by the election.
9

Present Value Factors

Age at

Retirement Factor

Age at

Retirement Factor

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

294.4

290.0

285.5

280.8

276.2

270.4

264.7

259.2

253.5

247.2

240.4

235.0

229.8

224.4

218.6

212.6

207.5

202.4

197.0

192.3

188.3

182.9

177.0

171.9

166.5

161.1

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

156.0

150.7

145.4

140.2

134.7

129.4

124.0

118.8

113.6

108.5

103.5

98.7

93.9

89.4

84.9

80.5

76.3

72.3

68.4

64.7

61.2

57.9

54.7

51.8

48.9

4 Reduction Because of Unpaid Redeposit for

Certain Refunded Service. If, when you retire,

you owe a redeposit for a refund of retirement

contributions covering a period of service that

ended before October 1, 1990, you will not have

to pay the redeposit in order to receive credit for

the service (unless you retire for disability).

Instead, full credit for the refunded service will

be allowed in computing your annuity, but the

annuity will be actuarially reduced based on your

age and the amount of redeposit you owe at the

time you retire. To calculate the monthly amount

of the reduction, you divide the deposit you owe

at that time of retirement, including interest, by
10

the appropriate "present value" factor, using the

table shown on the previous page. The procedure

is the same as that used to compute the AFA

reduction. Remember this alternative to payment

of a redeposit does not apply to any refund you

receive for service that ends on or after October

1, 1990. Of course, you may elect to pay the

redeposit, plus interest, and avoid the actuarial

reduction.

4 Reduction Because of CSRS Offset. If you

are a "CSRS Offset" employee (one of the

relatively few employees covered by CSRS and

Social Security at the same time), your annuity

will be reduced when you become eligible for

Social Security benefits (usually at age 62). The

amount of the reduction will be the amount of the

Social Security benefit attributable to your

service after 1983 that was covered by both

CSRS and Social Security. If you are not eligible

for a Social Security benefit, there will be no

reduction in your annuity.

Deductions From Gross Monthly Annuity

The annuity of $790 per month in this example

would be further reduced for any applicable

health benefits and life insurance premiums and

Federal and State income tax withholding.

Commencing Date

If you retire voluntarily during the first 3 days of

the month, your annuity will commence the

following day. Otherwise, your annuity begins on

the first day of the month following the month in

which you retire. This "first-of-the-month after"

provision does not apply to survivor annuities,

disability annuities or discontinued service

annuities. These annuities commence on the day

after separation, death, or last day of pay, as

appropriate.