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: 99-103 Date: January 27,1999

Subject: Cost-of-Living Adjustments for Annuities; New Variable Interest

Rate

Background: This letter provides information about cost-of-living adjustments

(COLA) for annuities, the variable interest rate for 1999, and

other annual figures affecting retirement benefits.

Civil Service Retirement

System Cost-of-Living

Adjustment

Annuitants who retired under the Civil Service Retirement

System (CSRS) received a cost-of-living adjustment (COLA)

effective December 1, 1998. They received the increases in their

January 2, 1999, annuity payments. (See The CSRS and FERS

Handbook for Personnel and Payroll Offices, Chapter 2,

subchapter 2A.) The increase is 1.3 percent for all annuitants

retired under CSRS, except those who have not been on the

annuity roll for a full year. The 1.3 percent increase was derived

by computing the percentage increase in the Consumer Price

Index (CPI) for urban wage earners and clerical workers from the

third quarter average of 1997 to the third quarter average of

1998.

Proration of CSRS

Retiree's First COLA

By law, a retiree's first COLA must be prorated. Retirees

received one-twelfth of the applicable cost-of-living increase for

each month they were on the annuity roll before December 1,

1998, not to exceed 12 months. To get the full December 1,

1998, increase, a retiree's annuity must have begun no later than

December 31, 1997. To get one-twelfth of the December 1,

1998, increase, the annuity must have commenced no later than

November 30, 1998.
Civil Service Federal Employees Federal Employees Federal Employees

Retirement Group Life Health Benefits Retirement

System Insurance Program System

CSRS Proration Table The following table shows the actual prorated percentage

increases that apply to CSRS retirees according to the month in

which the annuity began to accrue:

Annuity Began Amount of Increase

December 1997 or earlier - 1.3%

January 1998 1.2%

February 1998 1.1%

March 1998 1.0%

April 1998 0.9%

May 1998 0.8%

June 1998 0.7%

July 1998 0.5%

August 1998 0.4%

September 1998 0.3%

October 1998 0.2%

November 1998 0.1%

Federal Employees

Retirement System

(FERS) Cost-of-Living

Adjustments Summary

Eligible annuitants who retired under the Federal Employees

Retirement System (FERS) also received a COLA in their

January 2, 1998, annuity payments. (See The CSRS and FERS

Handbook for Personnel and Payroll Offices, Chapter 2,

subchapter 2B.) The full increase is 1.3 percent. When the CPI

increase is less than 3 percent, the FERS COLA is the CPI

increase, or 2 percent, whichever is less. Since the CPI increase

last year was 1.3 percent, as explained in the section on CSRS

Cost-of-Living Adjustments, the full FERS COLA is 1.3 percent.

Proration of FERS

Retiree's First COLA 

For FERS retirees who have not been on the annuity roll for a

full year, COLA's will be prorated as explained in the section on

Proration of CSRS Retiree's First COLA. 
BAL 99-103 3

FERS Proration Table The table below shows the actual prorated percentage increase

that applies to FERS retirees according to the month in which

the annuity began to accrue.

Annuity Began Amount of Increase

December 1997 or earlier - 1.3%

January 1998 1.2%

February 1998 1.1%

March 1998 1.0%

April 1998 0.9%

May 1998 0.8%

June 1998 0.7%

July 1998 0.5%

August 1998 0.4%

September 1998 0.3%

October 1998 0.2%

November 1998 0.1%

FERS Annuitants

Who Are Under Age

62

FERS COLA's apply to retirees who were age 62 as of December 1,

1998 as well as --

- disability annuitants (see section below on Disability

Annuitants),

- military reserve technicians whose separation from technician

service results from loss of military membership on account

of disability after attaining age 50 and completing 25 years of

service, and

- employees who retired under the special provisions for law

enforcement officers, firefighters, or air traffic controllers.
BAL 99-103 4

Disability Annuitants COLA's are payable to disability annuitants without regard to their

age. However, COLA's are not payable on FERS disability annuities

during the annuitant's first year in receipt of benefits if the annuity

rate is based on 60 percent of average salary. COLA's are payable,

however, during the first year if the annuitant's rate is based on an

earned benefit or the annuity is redetermined because the annuitant

has reached age 62.

FERS Survivor

Annuitants

Spouse, former spouse, insurable interest, and child survivor

annuitants under FERS are entitled to COLA's regardless of age. 

After survivor annuities (other than children's annuities, which are

based on CSRS COLA rules) commence, they are subject to FERS

COLA rules, even if they are based on an annuity that includes a

CSRS component.

The supplementary annuity paid to certain surviving spouses and

former spouses is also increased by FERS COLA's.

FERS Employee

Annuitants with a

CSRS Component

Certain FERS retirees are entitled to a CSRS annuity computation

for a portion of their annuity. This CSRS component is subject to

CSRS COLA rules. The full CSRS COLA effective December 1,

1998, is 1.3 percent. The CSRS COLA rules also provide for

proration of the increase depending on the number of months the

annuity was payable before the effective date of the increase. CSRS

COLA rules do not require the annuitant to be age 62. Therefore,

the CSRS portion of the annuity may increase even though no FERS

increase is payable.

FERS Annuity

Supplement

The retiree annuity supplement, if any, is not increased. COLA's

apply only to a retiree's basic annuity.

COLA Increase on

the FERS Basic

Employee Death

Benefit

Under FERS, a basic lump-sum benefit is payable to the qualifying

surviving spouse (or former spouse) of a deceased employee who

had at least 18 months creditable service. The law provides that this

lump-sum benefit is an amount equal to 50 percent of the employee's

final annual pay (or average pay, if higher), plus $15,000, adjusted

for COLA's under CSRS rules. The latter amount, including prior

COLA's, is currently $21,783.34. Since the CSRS COLA this year

is 1.3 percent, the benefit increases to $22,066.52 for any case in

which the employee dies on or after December 1, 1998, and before

December 1, 1999.
BAL 99-103 5

Reemployed

Annuitants -- CSRS

and FERS 

a. Reemployed annuitants, both CSRS and FERS, whose

salaries are being reduced by the amount of their annuity must take

an additional reduction in salary earned on or after December 1,

1998. The following rules apply:

- For CSRS annuitants, the reduction is equal

to the 1.3 percent increase (or applicable

prorated portion if this is the first increase)

in the annuity.

- For annuitants whose annuity was

computed solely under FERS rules (i.e., the

annuity does not include a CSRS

component), the reduction is equal to the

1.3 percent FERS increase (or applicable

prorated portion) if the annuitant is eligible

for a FERS COLA.

- For reemployed FERS annuitants whose

annuity includes a CSRS component (see

section above on FERS Employee

Annuitants With a CSRS Component),

the additional reduction in their salary is

determined by applying CSRS COLA rules

to the CSRS portion of their annuity. If no

FERS COLA is payable, the additional

reduction in salary for a reemployed

annuitant is based only on the increase in

the CSRS portion.

b. To determine the new monthly rate to be used for reducing

the reemployed annuitant's salary, adjust the old monthly rate

upward by the appropriate percentage and round to the next lowest

dollar. An adjustment must be at least one dollar. The new monthly

salary reduction must be sent to the Civil Service Retirement and

Disability Fund via Retirement and Insurance Transfer System

(RITS) or the SF 2812. If you cannot determine the reemployed

annuitant's new rate, contact the U.S. Office of Personnel

Management (OPM). Your inquiry must include the annuitant's full

name, date of birth, and retirement claim (CSA) or social security

number.
BAL 99-103 6

Internet and/or Email

Address

At this time, due to concerns about security over the Internet, we

will not accept or respond to agency requests for individual annuity

adjustment amounts by email. We will review this procedure when

Internet security is more assured.

Written Inquiries U.S. Office of Personnel Management

Retirement Operations Center

P. O. Box 45

Boyers, Pennsylvania 16017-0045

Telephone Inquiries Retirement Information Office

(888) 767-6738

(202) 606-0500 - Washington DC area

Telecommunication

Device for the Deaf

(TDD)

(800) 578-5707

Annuity Payable to

Children of Deceased

Employees and

Retirees

The children’s survivor benefit is a specific dollar amount that is

established by the formula in U.S.C. 8341(e)(2) and increased by

CSRS COLA’s. The following rates are payable from January 1,

1999, through December 31, 1999. These rates will increase by

future CSRS COLA’s that occur on or after December 1, 1999. 

S When the child has a living parent who was married to the

employee or retiree, the benefit payable to that child is:

>$348< per month per child; or

>$1044< per month divided by the number of eligible

children

S When the child has no living parent who was married to the

employee or retiree, the benefit payable to that child is:

>$418< per month per child; or

>$1254< per month divided by the number of eligible

children.
BAL 99-103 7

1999 Interest Rate The Department of the Treasury has informed OPM that the variable

interest rate applied for certain purposes under both the Federal

Employees Retirement System and the Civil Service Retirement

System is 5.75 percent for calendar year 1999.

Prior Interest Rates

Before 1948 4%

1948 - 1984 3%

1985 13%

1986 11.125%

1987 9%

1988 8.375%

1989 9.125%

1990 8.75%

1991 8.625%

1992 8.125%

1993 7.125%

1994 6.25%

1995 7.00%

1996 6.875%

1997 6.875%

1998 6.75%

The interest on the FERS lump sum credit in 1984 was 11 percent.
BAL 99-103 8

Interest Rates Under

FERS Rules

The 5.75 percent interest rate for 1999 and the interest rates shown

in the Interest Rate Chart above, apply to all deposits or refunds

under FERS rules and FERS lump-sum credit death benefit

payments.

For CSRS employees, and for employees who transferred from

CSRS to FERS with entitlement to have part of their benefits

computed under CSRS rules, those interest rates also apply to:

- redeposits, if the agency or OPM received the refund

application after September 30, 1982;

- deposits for noncontributory service performed after

September 30, 1982;

- deposits for post-1956 military service; and

- interest paid on voluntary contributions.

Fixed Interest Rate A fixed 3 percent interest rate will continue to be applied in the

following cases:

- refunds of CSRS deductions;

- redeposits (including CSRS component redeposits) if the

agency or OPM received the refund application before

October 1, 1982;

- deposits for noncontributory CSRS service performed before

October 1, 1982; and

- CSRS deductions withheld from the first of the month after

an employee has performed sufficient service to entitle him or

her to the maximum annuity (excess deductions).

Significant Social

Security Figures for

1999

On October 16, 1998, the Social Security Administration published a

Fact Sheet that listed 1999 figures that are significant for retirement

matters. A copy of that Fact Sheet is available at Social Security

Administration's Internet site, Social Security Online at

(http://www.ssa.gov/press/1999fact.htm). These figures are

included here for the convenience of agency personnel.
BAL 99-103 9

Social Security

Maximum Wage Base

The Social Security maximum taxable wage base for 1999 is

$72,600.

Hospital Insurance

Contribution Base

The limitation on the amount of earnings subject to the Hospital

Insurance contribution was repealed (Public Law 103-66, section

13207). The Hospital Insurance tax is due on the total remuneration

paid during the year.

Average Total Wages The amount of average total wages for 1997 is $27,426.00.

Bend Points The dollar amounts, or bend points, used in the benefit formula for

workers who become eligible for benefits in 1999, and in the formula

for computing maximum individual benefits for 1999, are $505 and

$3,043.

FERS Retiree

Annuity Supplement

Earnings Limit

The Social Security earnings limitation for 1999 is $9,600.00. Any

FERS annuitant who is receiving a FERS annuity supplement (unless

he or she is under age 55 and retired under one of the special

provisions for law enforcement officers, firefighters, air traffic

controllers, or military reserve technicians separated for loss of

military membership) will have his or her annuity supplement offset

in 2000 by $1.00 for every $2.00 over this amount earned in 1999. 

TSP Referral Limit For Tax Year 1999, the Internal Revenue Service announced that the

annual limit elective deferrals will continue to be $10,000. For

purposes of the Thrift Savings Plan (TSP), the term "elective

deferrals" refers to Employee Contributions, which are made on a

tax, deferred basis. The 1999 elective deferral limit also may be

obtained from the TSP Web site (www.tsp.gov).

Mary M. Sugar, Chief

Agency Services Division

Retirement and Insurance Service