United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency 

Benefits Administration Letter 

Number: 04-303 Date: March 22, 2004 

Subject: 2004 Retroactive Pay Raise – Effect on CSRS/FERS and FEGLI 

On March 3, 2004, President Bush signed an Executive Order that provides Federal employees a 

retroactive 4.26 percent pay raise. As expected, the total 4.26 percent raise will be paid out as 2.7 

percent across-the-board and the funds for the other 1.56 percentage points divided up as locality pay. 

The Executive Order raises the average 2 percent that took effect in January by default because no raise 

figure was legislated last year, and will be retroactive to the first day of the first pay period that began 

on or after January 1, 2004. 

For both CSRS/FERS and Federal Employees’ Group Life Insurance Program (FEGLI) purposes, the 

2.26 percent average retroactive pay increase is basic pay. As a consequence, it will require the 

following actions on the parts of the payroll provider: 

Retirement 

Payroll providers must remit CSRS/FERS withholdings and contributions to OPM on the 2.26 

percent retroactive pay increase on the date it is actually paid to employees. For employees, who 

separated after the first day of the first pay period of calendar year 2004, payroll providers must 

submit a supplemental Individual Retirement Record (IRR), documenting the revised salary rate and 

additional employee withholdings. The IRR must be submitted to OPM with a SF 2807/3103, 

Register of Separations and Transfer. 

FEGLI 

The 2.26 percent retroactive pay increase will affect withholdings and contributions for Basic life 

insurance and withholdings for Additional optional coverage [Option B]. For both Basic life insurance 

and Option B coverage, withholdings (and contributions for Basic) will increase if the employee moves 

into a different $1,000 bracket. 
Payroll providers need to calculate the amount of FEGLI withholdings (and contributions for Basic) 

that should have been made, based on the new basic pay and compare that with what actually was 

withheld for all pay periods beginning on or after January 1, 2004. The following illustration will help 

clarify this: 

Sally Jones is 42 years-old and works in Tampa, Fl. She has Basic life insurance and two multiples of 

Option B and in 2003 had basic pay of $70,346, which she receives biweekly. Sally’s Basic life 

insurance amount (BIA) was $73,000 and her Option B coverage was two times $71,000 or 

$142,000. 

On the effective date of the 2 percent pay raise, Sally’s basic pay became $71,753, increasing her 

BIA to $74,000 and her Option B coverage to two times $72,000 or $144,000. Effective with the 

first pay period that began on or after January 1, 2004, Sally’s FEGLI withholdings and his employing 

agency’s contributions were: 

Biweekly Withholdings and Contributions 

[effective with the first pay period that began on or after January 1, 2004] 

Withholdings Contributions 

Basic [$74,000] $11.10 $5.55 

Option B [$144,000] $8.64 0 

Sally’s APO paid her the retroactive 2.26 percent average pay raise on the pay date associated with 

the fifth pay period that began on or after January 1, 2004. Thus, four pay periods have ended since 

the 2.0 percent pay raise was effective. The first four full pay periods in calendar year 2004, Sally’s 

actual withholdings and her employing agency’s actual contributions were: 

Actual Withholdings and Contributions 

[through the first four full pay periods in 2004] 

Withholdings Contributions 

Basic [$74,000] $44.40 $22.20 

Option B [$144,000] $34.56 0 

An additional 2.26 percent pay raise, Sally’s basic pay increased to $73,342, increasing her BIA to 

$76,000 and her Option B coverage to two times $74,000 or $148,000. Since the additional 2.26 

percent pay raise is retroactive to the first pay period that began on or after January 1, 2004, 

Sally’s withholdings and her employing agency’s contributions through the first four full pay 

periods in calendar year 2004 should have been: 

2 
Withholdings and Contributions Should Have Been 

[through the first four full pay periods in 2004] 

Withholdings Contributions 

Basic [$76,000] $45.60 $22.80 

Option B [$148,000] $35.52 0 

Thus, on the pay date associated with the fifth pay period that began on or after January 1, 2004, in 

addition to the normal biweekly withholdings and contributions, Sally’s APO must remit for her: 

Additional Withholdings and Contributions 

[for fifth full pay period in 2004] 

Withholdings Contributions 

Basic [$76,000] $1.20 $0.60 

Option B [$148,000] $0.96 0 

The revised salary tables are located at http://www.opm.gov/oca/04tables/index.asp. 

If you have any questions regarding this information, we would prefer that you email us at 

finance@opm.gov, so that we have a record of our communication. You may also contact us 

on (202) 606-0606. 

Robert A. Yuran, Manager 

Financial Policy Group 

Center for Financial Services 

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