Civil Service Federal Employees Federal Employees Federal Employees

Retirement Group Life Health Benefits Retirement

System Insurance Program System

United States

Office of Personnel Management

Retirement and Insurance Service

Benefits Administration Letter

Number: 97-106 Date: August 13, 1997

Subject: Retirement Changes in the Balanced Budget Act of 1997

This is to advise you of changes in the Civil Service Retirement System (CSRS) and the

Federal Employees Retirement System (FERS), as contained in the Balanced Budget

Act of 1997, Public Law 105-33, signed by the President on August 5, 1997. Details

of implementation will be provided separately in a Payroll Office Letter.

Retirement

The Balanced Budget Act of 1997 includes CSRS and FERS changes as follows:

CSRS and FERS employee deductions (for all employees in all agencies) will

increase by 0.25% in January 1999, by an additional 0.15% in January 2000,

and by 0.10% more in January 2001, for a total increase of 0.50%. These

higher employee deduction rates will be in effect through December 2002.

The following chart reflects employee deduction rates for regular employees

under CSRS and FERS. The employee deduction rates for special employee

groups (i.e., law enforcement officers, Members of Congress, etc.) will be either

0.5% or 1.0% higher than the regular employee deduction rates, as they

currently are.

Period CSRS FERS

Now-12/98 7.00% 0.80%

01/99-12/99 7.25% 1.05%

01/00-12/00 7.40% 1.20%

01/01-12/02 7.50% 1.30%
Service credit deposits required for creditable military, civilian, and volunteer

(Peace Corps and VISTA) service performed from 1999 through 2002 will be

increased by the same percentages as employee deductions are increased for

CSRS and FERS covered service performed during the same period.

There will be a temporary increase of 1.51% in agency contributions for CSRS

only. This provision takes effect in October 1997, and applies through

September 2002. The Postal Service and Metropolitan Washington Airports

Authority will not be subject to the increased agency contribution rates.

In October 2002, CSRS agency contribution rates do not return to current levels. 

Beginning in October 2002, the contribution rate for agencies will match the

higher employee deduction rates which will then be in effect. The Postal Service

and Metropolitan Washington Airports Authority are also exempted from this

increase in agency contribution rates.

The Act explicitly specifies that when employee deductions increase beginning in

1999, FERS agency contributions will not be reduced. Agencies will continue to

make contributions at the same percentage rates shown in the right hand column

of the following schedule, which will be in effect at that time, even though the

combined employee deduction and agency contributions will exceed the normal

cost.

As previously published in the Federal Register, and announced in Payroll Office

Letter 97-07, FERS normal cost percentages are changing, effective October 1,

1997. These changes are not related to any provision of the Balanced Budget

Act of 1997, but are based upon revised economic and demographic assumptions

adopted by the Board of Actuaries of the Civil Service Retirement System. The

following schedule reflects the normal cost, employee deduction, and agency

contribution percentage rates for the various types of FERS employees which

will become effective beginning with the first pay period beginning on or after

October 1, 1997.

Normal Employee Agency

Type of Employee Cost % Deduction Contrib.

Members of Congress 16.5% 1.3% 15.2%

Congressional employees 16.7% 1.3% 15.4%

Law enforcement officers, firefighters 24.6% 1.3% 23.3%

Air traffic controllers 23.1% 1.3% 21.8%

Military reserve technicians 11.9% 0.8% 11.1%

Regular employees 11.5% 0.8% 10.7%
Health Benefits and Life Insurance

Information regarding the Balanced Budget Act of 1997 and the Federal Employees

Group Life Insurance and Federal Employees Health Benefits programs will be

provided by the Insurance Policy Division.

John E. Landers, Chief

Retirement Policy Division