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: 98-114 Date: November 3, 1998 

Subject: Notifying Employees Who May be Affected by the Decision of the

Court in the Case of Conner v. OPM

Background: Benefits Administration Letter (BAL) 97-107 advised agency personnel

offices of the decision of the United States Court of Appeals for the

Federal Circuit in Conner v. U.S. Office of Personnel Management

(OPM).

Basically the court ruled that our regulations implementing a portion of the

5-year test in the Federal Employees Retirement System (FERS) law were

incorrect. The 5-year test is used to determine whether an employee who

is subject to Social Security is automatically covered by FERS. If an

employee satisfies the 5-year test, he or she is not automatically covered by

FERS, even though he or she may elect FERS coverage. The court's ruling

applies only in cases in which employees were placed in automatic FERS

coverage, not those who elected to join FERS.

Since the new 5-year test applies to all retirement coverage determinations

made on or after January 1, 1987, any employee who was placed in

automatic FERS, despite having completed 5 years of creditable civilian

service before 1987, has been placed in the wrong retirement system. 

Therefore, personnel offices were advised that all affected employees were

to be notified and provided with an election opportunity.

BAL 97-107 provided guidance on the actions required to ensure that all

affected employees would be identified and notified of their options. 

Agencies were given discretion concerning the means they would use to

identify these employees and the methods of notification they would use. 

As stated in BAL 97-107, when agencies become aware that an employee

was erroneously placed in automatic FERS, they must apply the "deemed

FERS" procedures contained in part 11A6 of the CSRS and FERS

Handbook for Personnel and Payroll Offices.
BAL 98-114 2

We conducted an informal survey of larger agencies to gauge the progress

made in 1) identifying employees who are potentially affected by the

Conner decision, 2) notifying affected employees of their options, and 3)

taking action to effect employees' decisions. We found disparities in the

degree of initiative shown by different agencies. Some agencies acted

promptly to take actions, while others still have work to do.

This BAL is being issued to ensure that all affected employees are made

aware of the Conner decision and receive equal consideration. The

following sections provide detailed instructions on the actions that must

be taken by each agency.

Identifying and Notifying Affected Employees

If not already done, agencies must take action to notify affected employees. You have discretion

to determine the most effective means of identifying employees in your agency. A number of

agencies have used general employee notices in the form of bulletins, newsletter articles, earnings

statement messages and employee memorandums, while other agencies have chosen to use

automated personnel reports or Official Personnel Folder (OPF) audits to identify employees. 

You may want to consider using more than one method to identify employees, because it

increases the probability that potentially affected employees will be informed. During the survey

mentioned earlier, we discovered that most cases were located through the combined use of

employee self-identification and agency audits. 

Once employees have been notified, some will request information. It is critical that employees

receive complete information. Making an informed election of retirement coverage is a decision

of great importance to employees. Agencies should ensure that employees are fully informed

concerning the impact their decision will have on their future benefits. Toward this end, we are

providing an attachment that lists necessary actions and highlights key areas of concern that

should be addressed in notices, and provides sample employee letters. Every effort should be

made to provide employees with a notice that is clear, concise, and fully informative. 

Taking Corrective Actions

The employee’s records must be corrected consistent with the election, including the Thrift

Savings Plan account. If the employee opts not to be deemed to have elected FERS coverage,

any contributions to the Thrift Savings Plan in excess of 5%, as well as any agency matching and

automatic 1% contributions, must be backed out of the employee’s account in accordance with

the regulations of the Federal Retirement Thrift Investment Board.

If, while under FERS, the employee made a deposit under FERS rules for military service or for

the nondeduction civilian service performed before erroneous coverage began, the amount due for
BAL 98-114 3

the deposit must be re-computed under Civil Service Retirement System (CSRS) rules, since both

the military and civilian service will either be part of a CSRS component of a FERS benefit (if the

employee elects to remain in FERS), or will be included in the computation of a CSRS Offset

annuity, if the employee elects CSRS Offset. The employee must be informed of the corrected

amount(s) due, and of his or her entitlement to choose to receive repayment of amounts already

paid.

In cases where the coverage error was directly caused by an erroneous OPM regulation and an

employee has made service credit deposits based on information that is now erroneous, OPM will

waive a portion of the interest that normally accrues on the service credit deposit for employees

who elect to remain in FERS. For employees who have fully completed payment of a deposit and

elect to remain in FERS, no interest will be assessed on the additional principal now owed. If the

employee has made partial payment of a deposit and elects to remain in FERS, interest on the

additional principal amount will be assessed prospectively. Interest will fully accrue on deposits

for which the employee has made no payments and if the employee elects CSRS Offset coverage. 

These interest rules apply only in cases where the FERS coverage is wrong as a result of the

Conner decision where the court ruled that OPM’s regulations implementing the 5-year test were

incorrect. They do not apply to other deemed FERS elections where an employee can elect to

remain in FERS because his or her agency erred in placing the employee under FERS.

In order to have a successful undertaking, there must also be careful coordination and

communication between the personnel and payroll offices and the employee. Employees who will

have their benefits and contributions adjusted based on their election should have a contact person

in both personnel and payroll, who will be able to explain the changes to them, or the name of an

individual who can address both personnel and payroll matters. Personnel should make sure that

the employee is fully informed of the options available, and payroll must in turn ensure that the

employee is kept abreast of any changes to his or her account. Each employee should receive a

detailed written accounting of any changes to their funds. The attached procedures can help

ensure that you take all necessary actions.

Reporting Requirements

Each agency headquarters will be responsible for coordinating the efforts of the field installations. 

By no later than January 31, 1999, each agency must submit a written report to OPM detailing

the results of this undertaking. By that date, we expect that virtually all affected employees will

have completed their elections. Please cover the following in your reports:

 1. Identification method used (e.g., general employee notice, OPF review, etc.)

2. Total number of Conner cases identified

3. Total number of cases in which employees elected deemed FERS
BAL 98-114 4

4. Total number of cases in which employees elected CSRS Offset

5. Total number of cases in which employees elected FICA only

6. If all cases have not been corrected by the end of this year, state the date on which all

actions are expected to be completed.

Completed reports should be forwarded to the following address by close of business January 31,

1999:

Office of Personnel Management

Agency Services Division

P.O. Box 57

1900 E Street, NW

Washington, DC 20415-0001

If there are questions about actions to be taken, please call your Agency Services Division liaison

person. You may also submit questions and your completed reports by faxing us on (202) 606-

1108, or emailing asd@opm.gov. 

Mary M. Sugar, Chief

Agency Services Division

Attachment
BAL 98-114

5

Procedures for Processing Conner Cases

If you determine that the employee is in the wrong retirement system as a result of the Conner v.

OPM decision, apply the deemed FERS regulations in Section 846.204(b)(1) of Title 5, Code of

Federal Regulations. Affected employees can choose between a retroactive correction of

retirement coverage to the appropriate retirement coverage or to be deemed to have elected

FERS. For additional information, see part 11A6 of the CSRS and FERS Handbook for

Personnel and Payroll Offices. Take the following steps:

1. Notify employee of the retirement coverage error. See sample letters–Attachments 1 and 2.

VI. Explain how you discovered the error and how the error occurred.

VII. Discuss Conner case and how it changed the 5-year test.

VIII. Advise employee that if s/he chooses to have coverage corrected, retirement

coverage will be corrected retroactively from FERS to CSRS Offset (or Social

Security only).

IX. Advise employee that unless s/he elects in writing within 60 days of the date of the

notice to be corrected retroactively to CSRS Offset (or Social Security only) coverage, s/he

will be deemed to have elected FERS.

X. Explain how Conner decision affects nondeduction service and any military service

performed before the error occurred and any deposit paid for the service. See the following

tables for more information.

XI. Explain how election will affect Thrift Savings Plan account.

XII. Give name and phone number of a counselor, preferably at a local level, who will be

correcting the retirement coverage and the Thrift Savings Plan account.

2. Give employee a copy of the FERS Transfer Handbook and Standard Form 3109, Election

of Coverage, or a form letter to document the election.

3. Do annuity projections for employee as of the earliest entitlement date to help him or her

compare CSRS Offset and FERS benefits. (Also, do projections for an employee who is

choosing between Social Security-only coverage and FERS.) Do not use the FERS

Transfer Model: It will not let you enter retroactive FERS transfer dates.

4. Give employee 60 days from date of notice to make election.

5. Identify the counselor, preferably at a local level, who will be correcting the retirement

coverage and the Thrift Savings Plan Account. This person needs to be someone who can

answer the employee's questions and will be able to discuss the impact of correcting

retirement coverage and its effect on future retirement benefits. The counselor should also

be able to explain the payroll office process and keep the employee abreast of any changes

to his or her account. If the counselor cannot answer questions about the payroll changes,

identify a contact person in payroll who can answer those questions. It’s the agency’s
BAL 98-114

6

responsibility for counseling the employee about the consequences of the election.

6. Seek assistance, if necessary, from the Social Security Administration.

When An Employee Has More Than One Period of Erroneous FERS Coverage

Some employees may have more than one period of service following the erroneous FERS

coverage. If the employee would have had an opportunity to transfer to FERS during the

subsequent period of service, s/he can choose during which period of service a deemed FERS

election would become effective.

Example

An employee was placed in FERS during her term appointment on January 6, 1989. 

(Although she had 8 years of prior service, she had no prior retirement coverage.) The term

appointment ended on January 5, 1993. She had a 9-month temporary appointment with

Social Security-only coverage in 1994. On July 5, 1996, she received a career-conditional

appointment and was again placed in FERS.

As a result of Conner, her FERS coverage on January 6, 1989, and later on July 5, 1996,

was erroneous because she had more than 5 years of creditable civilian service before 1987. 

She should have had only Social Security coverage on January 6, 1989, and been given a

6-month election opportunity to transfer to FERS.

Under the deemed FERS regulations, she can elect to remain in FERS or have her

retirement coverage corrected to Social Security-only on January 6, 1989. If she chooses to

have her coverage corrected to Social Security for that period of service, then she will have

to choose whether she wants to remain in FERS on July 5, 1996, or have her coverage

corrected to CSRS Offset. Regardless which she chooses, her service before July 5, 1996,

will be credited under CSRS rules. That means that she can pay a CSRS deposit for both

the 4-year term appointment and 9-month temporary appointment to have the service used

in computing her retirement benefit even though both were after 1988. Under CSRS rules,

no deposit is necessary for the service to count toward eligibility for retirement.

If, instead, she chooses to be deemed to have elected FERS on January 6, 1989, her 9

months of temporary service in 1994 falls under the rules for FERS. Therefore, the service

is not creditable because it was performed after 1988. Her FERS coverage resumes on

July 5, 1996.

The employee was automatically placed in FERS twice when she should have been given the

opportunity to elect FERS. Therefore, if she wants FERS coverage, she can choose on

which of those two appointments she wants her FERS coverage to begin.

The Next Steps
BAL 98-114

7

The next steps depend upon the type of retirement coverage the employee elects. An employee in

a permanent position must choose between CSRS Offset coverage and FERS. An employee in a

nonpermanent position that is excluded from CSRS but not from FERS (for example, term

appointments, excepted indefinite appointments, or overseas limited appointments) must choose

between Social Security-only coverage and FERS. An employee who was erroneously placed in

FERS while in a CSRS-excluded position but who was later converted to a permanent position

must choose between Social Security-only coverage and FERS on the date of the erroneous

coverage. However, since the employee currently has a permanent position, if s/he chooses to

have the retirement coverage corrected to Social Security only, that coverage becomes CSRS

Offset effective on the date of the permanent appointment. The employee would not have a

second opportunity to elect FERS coverage on the date of the conversion to a permanent position

because there was no break in service.

The following sample letters and tables should help you notify and counsel employees about the

effects of a coverage decision and also tell you what steps need to be taken based on the

employee’s decision.

Attachment 1: Sample Letter to Employee Who Was Erroneously Placed in FERS Rather Than

CSRS Offset

The letter is only a sample and will have to be modified to fit each employee’s

particular situation. In the sample, the erroneous FERS coverage began on

April 1, 1990; there was no break in service after the erroneous coverage; the

employee is married; she has nondeduction service both before and after

October 1, 1982; her deposit for her civilian service is computed at 7 percent of

her base pay; she has no military service; and she contributed a full 10 percent

of her pay to her Thrift Savings Plan account. The decision tables in

Attachments 3, 5, and 6 will help you determine which issues to cover and how

to modify your letter for each affected employee.

Attachment 2: Sample Letter to Employee Who Was Erroneously Placed in FERS Rather Than

Social Security Only

The letter is only a sample and will have to be modified to fit each employee’s

particular situation. In the sample, the erroneous FERS coverage began on

April 1, 1994, with the employee’s term appointment; the term appointment has

not ended; the employee is married; he has nondeduction service both before

and after October 1, 1982; he has no military service; and he contributed 5

percent of his pay to his Thrift Savings Plan account. The decision tables in

Attachments 4, 5, and 7 will help you determine which issues to cover and how

to modify your letter for each affected employee.

Attachment 3: FERS versus CSRS Offset Coverage Decision Table
BAL 98-114

8

Attachment 4: FERS versus Social Security Only Decision Table

Attachment 5: Thrift Savings Plan Account (If employee elects deemed FERS coverage)

Attachment 6: Thrift Savings Plan Account (If employee elects to have retirement coverage

corrected to CSRS Offset)

Attachment 7: Thrift Savings Plan Account (If employee elects to have retirement coverage

corrected to Social Security Only)
Attachment 1

9

Sample Letter to Employee

 (Who Was Erroneously Placed in FERS Rather Than CSRS Offset)

This letter is only a sample and will have to be modified to fit each employee’s

particular situation. In this sample, the erroneous FERS coverage began on April 1,

1990; there was no break in service after the erroneous coverage; the employee is

married; she has nondeduction service both before and after October 1, 1982; her

deposit for her civilian service is computed at 7 percent of her base pay; she has no

military service; and she contributed a full 10 percent of her pay to her Thrift

Savings Plan account. The decision tables in Attachments 3, 5, and 6 will help you

determine which issues to cover and how to modify your letter for each affected

employee.

Thank you for bringing your case to our attention.

We asked all employees who had been automatically placed in the Federal Employees Retirement

System (FERS) and who had completed 5 years of creditable civilian service as of December 31,

1986, to contact us. After a careful review of your employment history, we found that you are in

the wrong retirement system. You must now decide whether you want to remain where you are

or have your retirement coverage corrected to Civil Service Retirement System (CSRS) coverage

as a CSRS Offset employee.

You have 60 days from the date of this notice to decide whether you want to remain in FERS or

have your coverage retroactively corrected to CSRS Offset coverage. If you make no election,

you will be deemed to have elected FERS.

Both CSRS Offset and FERS are good retirement plans. Social Security is a part of both, so no

matter which you choose your Social Security coverage continues. Each plan has advantages and

disadvantages. Either way, your decision deserves careful thought.

The enclosed FERS Transfer Handbook will help you choose. It contains an overview of both

retirement systems, discusses the differences between FERS and CSRS, and provides examples. 

Please read it carefully before making your decision.

Although the FERS Transfer Handbook provides a good comparison of CSRS and FERS, it was

written for employees who are in the proper retirement system. There are a few things we want

to point out before you make your decision. The enclosure, “Considerations In Choosing

Between CSRS Offset and FERS Coverage,” explains how the coverage error occurred. It also

discusses how your decision will affect your benefits and provides additional information that

should help you choose. All of the information in the enclosure applies to you, so consider the

information carefully before making a choice.
Attachment 1

10

We can help, too. We can provide projections of your retirement benefits under both FERS and

CSRS Offset. We can also project your Social Security and, based on assumed rates of return

and future contributions, Thrift Savings Plan benefits, so you can compare your total benefits

under both plans.

Your Official Personnel Folder has been forwarded to your local Human Resources Office for its

temporary use. [Joan Smith], your Benefits Officer, will be able to counsel you regarding FERS

and CSRS Offset benefits, do benefits projections, and explain your potential benefits under both

retirement systems. 

We included a copy of Standard Form 3109, Election of Coverage, with the FERS Transfer

Handbook. Please sign Part 1 of the election form.* Your signature verifies that you received the

election form and the FERS Transfer Handbook. It is not an election of retirement coverage. If

you decide that you want to remain in FERS, complete Part 2 of the election form and return it to

your Human Resources Office. Remember that if you choose to remain in FERS, you can’t

change your mind later, so you want to choose carefully.

We realize this error may cause you some concern, and we regret that. We want to make this as

easy for you as we can. [Joan Smith] of your local Human Resources Office, extension 1234, is

available to provide counseling and information to you about CSRS and FERS, Social Security, 

and the Thrift Savings Plan and to answer any questions you may have.

Please acknowledge receipt of this notice by returning a signed and dated copy of this letter.*

Enclosure

 

Signature Date

* Note to agency representatives: You need to be able to document that you notified the

employee of the coverage error and his or her options. Having the employee sign the receipt

copy of the letter and SF 3109 is one way to accomplish this. However, you may use any method

that accomplishes the purpose. See Section 11A6.1-1D in Chapter 11 of the CSRS and FERS

Handbook for Personnel and Payroll Offices for more information about the documentation

requirement.
Attachment 1

11

Considerations In Choosing Between CSRS Offset and FERS Coverage

How the Coverage Error Occurred

This coverage error is the result of a recent decision of the United States Court of Appeals for the

Federal Circuit in the case of Conner v. OPM. The court ruled that the U.S. Office of Personnel

Management’s regulations that tell agencies how to apply the 5-year test were incorrect. The

5-year test is used to determine whether an employee who is subject to Social Security is

automatically covered by FERS. If an employee satisfies the 5-year test, he or she is not

automatically covered by FERS, even though the employee may elect FERS coverage.

Because of the ruling in Conner, a new rule now applies. It states that an employee who

performed 5 years of creditable civilian service before January 1, 1987, is excluded from

automatic FERS coverage. This new rule revises the 5-year test. The revised 5-year test applies

to all retirement coverage determinations made on or after January 1, 1987. It affects you

because you had more than 5 years of civilian service before 1987.

Below is a summary of your employment history.

Dept. of Interior Temporary Appointment June 27, 1976, to June 26, 1977

Dept. of Army Term Appointment March 1, 1980, to February 29, 1984

OPM Temporary Appointment September 14, 1985, to September 13, 1986

XYZ Agency Career-Conditional April 1, 1990, to present

 Appointment

On April 1, 1990, when you received a career-conditional appointment with us, we placed you in

FERS. Based on the revised 5-year test, that retirement coverage is now wrong. You should

have been placed under CSRS Offset coverage with the right to elect FERS.

CSRS Offset Benefits

Although your Social Security benefits will be the same under both systems, the amount of your

Social Security benefit will affect a CSRS Offset annuity. (When a CSRS Offset employee retires,

her annuity is computed under the same rules that apply to other CSRS retirees. However, when

she becomes eligible for Social Security benefits, her annuity will be reduced, or offset, by the

value of the Social Security benefit she earned during her CSRS Offset service.)

If you have a record of your Social Security earnings or an estimate of your Social Security

benefits from the Social Security Administration, we can provide a more realistic projection of

your CSRS Offset benefit when you become eligible for Social Security. If you don't already have

that information, you can request a Personalized Earnings and Benefit Estimate Statement from

the Social Security Administration. [Joan Smith] can help you request one. You can also do it
Attachment 1

12

yourself by accessing the Social Security web site at www.ssa.gov.

Correction of Your Records

If you elect to have your records corrected to CSRS Offset coverage, that coverage will be made

retroactive to April 1, 1990. If you remain in FERS, the effective date of your FERS coverage

will not change, but your Standard Form 50 showing your career-conditional appointment will be

corrected to show that you elected FERS coverage effective April 1, 1990, rather than being

automatically placed in FERS on that date. This changes how your service performed before

April 1, 1990, is treated.

The amount withheld from your salary for Social Security and retirement is the same under FERS

and CSRS Offset. However, if you choose to have your records corrected to CSRS Offset, the

retirement money will have to be moved from your FERS account to a new CSRS account. The

payroll office would take care of that.

[Note to agency representatives: The amount is the same except for highly compensated persons

whose earnings exceed the Social Security maximum wage base in any calendar year. In those

cases, you’ll need to replace the above paragraph. CSRS Offset would be more expensive, since

the CSRS contribution reverts to 7% when the employee’s basic pay meets the maximum for

retirement earnings. In addition, there can be a gap if the employee had earnings that aren’t

basic pay for retirement, for example, awards or overtime. Use language similar to the

following: “The amount withheld from your salary for Social Security is the same under FERS

and CSRS Offset. However, if you choose to have your coverage corrected to CSRS Offset, you

will owe additional money to the retirement fund. That’s because, under CSRS Offset, when an

employee’s earnings exceed the Social Security maximum wage base in any calendar year, his

retirement contribution rate changes from .8% of his basic pay to 7%. This means that in

calendar years 19xx through 19xx, your salary was overpaid when your earnings from your

basic pay exceeded the Social Security maximum. If you elect CSRS Offset coverage, you would

have been overpaid $ for those years.”]

Service Credited Under CSRS Rules Even If You Remain Under FERS

Whether you remain in FERS or elect to have your coverage corrected to CSRS Offset, your

civilian service before April 1, 1990, is credited under CSRS rules. The “Service Credit Deposits

and Refunds” section in the FERS Transfer Handbook explains how civilian service is credited

under CSRS when no retirement deductions were withheld from your salary. Your service before

October 1, 1982, is treated differently from your service on and after October 1, 1982. All of the

service counts in deciding whether you have enough service to be eligible to retire, but the service

on and after October 1, 1982, can be used to compute your retirement benefit only if you pay a

deposit for the service. The service before October 1, 1982, is used to compute your retirement

benefit even if a deposit is not paid for the service, but your annuity is reduced because the

deposit is not paid.
Attachment 1

13

The deposit under CSRS is 7 percent of your earnings during the period when no deductions were

withheld, plus interest. That's different from a FERS deposit which is 1.3 percent of your

earnings. If you already paid a FERS deposit for the service, let us know. You will owe

additional money. We will contact the U.S. Office of Personnel Management, so they can

compute a CSRS deposit and give you credit for the deposit amount already paid. You also can

choose to have the money you already paid returned to you.

Social Security Benefits Are Not Affected by Your Decision

The FERS Transfer Handbook discusses the Government Pension Offset and Windfall Elimination

Formula. Both can affect the amount of Social Security benefits payable to certain Federal

employees. The Government Pension Offset affects a spouse's share of a worker's Social Security

benefit while the worker is living and the survivor benefit after the worker dies. If you expect to

be eligible for spouse and survivor benefits from Social Security based on your husband’s Social

Security earnings, we want you to know that you do not need to consider the Government

Pension Offset when making your decision. Because you are automatically covered by Social

Security, neither the Social Security spouse benefit nor the survivor benefit will be subject to the

Government Pension Offset whether you choose CSRS Offset or FERS coverage.

If you have always had Social Security deducted from your pay during your employment both

inside and outside of the government, your Social Security benefit will not be subject to the

Windfall Elimination Formula. This is true whether you elect CSRS Offset or FERS coverage.

Effect on Your Thrift Account

You have been contributing 10 percent of your pay to your Thrift Savings Plan (TSP) account

and receiving agency automatic (1%) and agency matching contributions. You became eligible to

participate in the TSP on [insert date]. However, as a FERS Transfer employee, you would have

become eligible to participate in the TSP on April 1, 1990 [insert effective date of deemed FERS

election]. Consequently, if you elect to remain in FERS, you are entitled to retroactive agency

automatic (1%) contributions for the period April 1, 1990, [insert effective date of deemed FERS

election] to [insert date employee became eligible to participate in the TSP]. You will also have

the opportunity to make up employee contributions missed during this period. If you make up

employee contributions, you will receive associated retroactive agency matching contributions. In

addition, you are entitled to lost earnings on the retroactive agency contributions that are made to

your account.

If you choose CSRS Offset coverage, you are not entitled to the agency contributions and

attributable earnings to your account, and they will be removed from your account. Also, we will

ask the TSP to remove the excess employee contributions from your account (i.e., employee

contributions that exceed the CSRS five percent limit), and we will refund these excess employee

contributions to you with your pay. In addition, you may request a refund of the remainder of the

employee contributions in your TSP account, and if you do so, we will also ask the TSP to

remove these contributions and refund them to you with your pay. All the employee contributions
Attachment 1

14

that are refunded to you will be taxable as ordinary income for the year in which they are

refunded. The earnings attributable to your refunded employee contributions will remain in your

TSP account. Please contact [Joan Smith] for additional information and assistance.

[Note to agency representatives: The employee’s latest TSP Participant Statement will show the

total amount of employee contributions and attributable earnings, agency automatic (1%)

contributions and attributable earnings, and agency matching contributions and attributable

earnings in the TSP account. If the employee requests updated amounts, please call the Federal

Retirement Thrift Investment Board. Only the agency payroll office, however, can determine the

amount of the excess employee contributions it deposited in the employee’s account. For more

information about correcting TSP accounts, see the TSP error correction regulations at 5 CFR

part 1605 and the lost earnings regulations at 5 CFR part 1606.]

FERS Open Season

If you choose to have your retirement coverage corrected to CSRS Offset, you will be able to

elect to transfer to FERS during the current FERS Open Season. However, this may not be a

wise choice because all of your CSRS Offset service will be credited under FERS rules. That

means you would be trading the more generous CSRS annuity formula for the FERS formula, but

you would not get a Government match on your Thrift account for that service. If you want

FERS coverage, then you should choose deemed FERS coverage effective April 1, 1990, the date

you were erroneously placed in FERS.
Attachment 2

15

Sample Letter to Employee

 (Who Was Erroneously Placed in FERS Rather Than Social Security Only)

This letter is only a sample and will have to be modified to fit each employee’s

particular situation. In this sample, the erroneous FERS coverage began on

April 1, 1994, with the employee’s term appointment; the term appointment has

not ended; the employee is married; he has nondeduction service both before and

after October 1, 1982; he has no military service; and he contributed 5 percent of

his pay to his Thrift Savings Plan account. The decision tables in Attachments 4,

5, and 7 will help you determine which issues to cover and how to modify your

letter for each affected employee.

Thank you for bringing your case to our attention.

We asked all employees who had been automatically placed in the Federal Employees Retirement

System (FERS) and who had completed 5 years of creditable civilian service as of

December 31, 1986, to contact us. After a careful review of your employment history, we found 

that you are in the wrong retirement system. You must now decide whether you want to remain

where you are or have your retirement coverage corrected to Social Security only.

You have 60 days from the date of this notice to decide whether you want to remain in FERS or

have your coverage retroactively corrected to Social Security only. If you make no election, you

will be deemed to have elected FERS. The following information may help you decide.

Your term appointment is excluded from coverage under the old Civil Service Retirement System,

or CSRS. If you choose to have your records corrected, you will only have Social Security

coverage. But, if you later get a permanent appointment, you will be covered by both CSRS and

Social Security as a CSRS Offset employee. When a CSRS Offset employee retires, his annuity is

computed under the same rules that apply to other CSRS retirees. However, when he becomes

eligible for Social Security benefits, his annuity will be reduced, or offset, by the value of the

Social Security benefit he earned during his CSRS Offset service.

So, your choice isn’t just between FERS coverage and no retirement coverage, other than Social

Security. You must also look at your future career expectations. You must decide whether to

keep the FERS coverage you currently have or give it up with the expectation you will receive a

permanent appointment in the future that would give you CSRS Offset coverage. Most people

would probably choose to remain in FERS because of the unknown career future.

If you believe that, in the future, you will have a permanent appointment that would provide

CSRS Offset coverage, then you need to compare the relative benefits of CSRS Offset and FERS. 

Your decision deserves careful thought, but remember no matter what you decide your Social

Security coverage continues.
Attachment 2

16

The enclosed FERS Transfer Handbook may help you choose. It contains an overview of both

retirement systems, discusses the differences between FERS and CSRS, and provides examples. 

Please read it carefully before making your decision.

Although the FERS Transfer Handbook provides a good comparison of CSRS and FERS, it was

written for employees who are in the proper retirement system. There are a few things we want

to point out before you make your decision. The enclosure, “Considerations In Choosing

Between FERS and Social Security-Only Coverage,” explains how the coverage error occurred. 

It also discusses how your decision will affect your benefits and provides additional information

that should help you choose. All of the information in the enclosure applies to you, so consider

the information carefully before making a choice.

We can help, too. We can provide a projection of your retirement benefit under FERS. We can

also project your Social Security and TSP benefits, so you can compare your total benefits under

FERS with Social Security alone.

Your Official Personnel Folder has been forwarded to your local Human Resources Office for

their temporary use. [Joan Smith], your Benefits Officer, will be able to counsel you regarding

Social Security, FERS and CSRS Offset benefits, do benefits projections, and explain your

potential benefits.

We included a copy of Standard Form 3109, Election of Coverage, with the FERS Transfer

Handbook. Please sign Part 1 of the election form.* Your signature verifies that you received the

election form and the FERS Transfer Handbook. It is not an election of retirement coverage. If

you decide that you want to remain in FERS, complete Part 2 of the election form and return it to

your Human Resources Office. Remember that if you choose to remain in FERS, you can’t

change your mind later; so you want to choose carefully.

We realize this error may cause you some concern, and we regret that. We want to make this as

easy for you as we can. [Joan Smith] of your local Human Resources Office, extension 1234, is

available to provide counseling and information to you about CSRS Offset and FERS, Social

Security, and the Thrift Savings Plan and to answer any questions you may have.

Please acknowledge receipt of this notice by returning a signed and dated copy of this letter.*

Enclosure

 

Signature Date
Attachment 2

17

* Note to agency representatives: You need to be able to document that you notified the

employee of the coverage error and his or her options. Having the employee sign the receipt

copy of the letter and SF 3109 is one way to accomplish this. However, you may use any method

that accomplishes the purpose. See Section 11A6.1-1D in Chapter 11 of the CSRS and FERS

Handbook for Personnel and Payroll Offices for more information about the documentation

requirement.
Attachment 2

18

Considerations In Choosing Between FERS and Social Security Only Coverage

How the Coverage Error Occurred

This coverage error is the result of a recent decision of the United States Court of Appeals for the

Federal Circuit in the case of Conner v. OPM. The court ruled that the U.S. Office of Personnel

Management’s regulations that tell agencies how to apply the 5-year test were incorrect. The

5-year test is used to determine whether an employee who is subject to Social Security is

automatically covered by FERS. If an employee satisfies the 5-year test, he or she is not

automatically covered by FERS, even though the employee may elect FERS coverage.

Because of the ruling in Conner, a new rule now applies. It states that an employee who

performed 5 years of creditable civilian service before January 1, 1987, is excluded from

automatic FERS coverage. This new rule revises the 5-year test. The revised 5-year test applies

to all retirement coverage determinations made on or after January 1, 1987. It affects you

because you had more than 5 years of civilian service before 1987.

Below is a summary of your employment history.

Dept. of Interior Temporary Appointment June 27, 1976, to June 26, 1977

Dept. of Army Term Appointment March 1, 1980, to February 29, 1984

OPM Temporary Appointment September 14, 1985, to September 13, 1986

XYZ Agency Term Appointment April 1, 1994, to present

On April 1, 1994, when you received a term appointment with us, we placed you in FERS. Based

on the revised 5-year test, that retirement coverage is now wrong. You should have been placed

under Social Security alone with the right to elect FERS.

Personalized Earnings and Benefit Estimate Statement

If you have a record of your Social Security earnings or an estimate of your Social Security

benefits from the Social Security Administration, we can provide more realistic projections of

your benefits. If you don't already have that information, you can request a Personalized Earnings

and Benefit Estimate Statement from the Social Security Administration. [Joan Smith] can help

you request one. You can also do it yourself by accessing the Social Security web site at

www.ssa.gov.

Correction of Your Records

If you elect to have your records corrected to only Social Security coverage, it will be made

retroactive to April 1, 1994. If you remain in FERS, the effective date of your FERS coverage

will not change, but your Standard Form 50 showing your term appointment will be corrected to
Attachment 2

19

show that you elected FERS coverage effective April 1, 1994, rather than being automatically

placed in FERS on that date. This changes how your service performed before April 1, 1994, is

treated.

If you choose to have your records corrected to Social Security only, the retirement money

withheld from your pay and deposited into your account in the Civil Service Retirement and

Disability Fund will be removed from your FERS account and returned to you. Since you have

no retirement coverage, your FERS account will be closed out. The payroll office would take

care of that. Your civilian service will not count toward a Federal retirement benefit, unless you

are later covered by CSRS Offset or FERS.

In addition, your TSP account will be closed. If you choose to be covered by Social Security

only, you are not, and should not have been, eligible to participate in the TSP. Consequently, we

will ask the TSP to remove all contributions from your TSP account. We will refund your

employee contributions to you along with your pay, and these contributions are taxable as

ordinary income for the year in which they are refunded. The earnings on your employee

contributions will also be paid to you by the TSP. These earnings are also taxable as ordinary

income for the year in which they are paid. You are not entitled to receive the agency

contributions or attributable earnings in your account.

Health and Life Insurance Coverage

You will keep your Federal health benefits and life insurance coverage if you are currently

enrolled.

Service Credited Under CSRS Rules Even If You Remain Under FERS

If you remain in FERS, your civilian service before April 1, 1994, is credited under CSRS rules. 

That’s because as a FERS Transferee, rather than someone automatically placed in FERS, your

FERS annuity will have a CSRS component. The “Service Credit Deposits and Refunds” section

in the FERS Transfer Handbook explains how civilian service is credited under CSRS when no

retirement deductions were withheld from your salary. Your service before October 1, 1982, is

treated differently from your service on and after October 1, 1982. All of the service counts in

deciding whether you have enough service to be eligible to retire, but the service on and after

October 1, 1982, can be used to compute your retirement benefit only if you pay a deposit for the

service. The service before October 1, 1982, is used to compute your retirement benefit even if a

deposit is not paid for the service, but your annuity is reduced if the deposit is not paid.

The deposit under CSRS is 7 percent of your earnings during the period when no deductions were

withheld, plus interest. That's different from a FERS deposit which is 1.3 percent of your

earnings. If you already paid a FERS deposit for the service, let us know. You will owe

additional money. We will contact the U.S. Office of Personnel Management, so they can

compute a CSRS deposit and give you credit for the deposit amount already paid. You also can

choose to have the money you already paid returned to you.
Attachment 2

20

Social Security Benefits Are Not Affected by Your Decision

The FERS Transfer Handbook discusses the Government Pension Offset and Windfall Elimination

Formula. Both can affect the amount of Social Security benefits payable to certain Federal

employees. The Government Pension Offset affects a spouse's share of a worker's Social Security

benefit while the worker is living and the survivor benefit after the worker dies. If you expect to

be eligible for spouse and survivor benefits from Social Security, we want you to know that you

do not need to consider the Government Pension Offset when making your decision. Because

you are automatically covered by Social Security, neither the Social Security spouse benefit nor

the survivor benefit will be subject to the Government Pension Offset under either CSRS Offset or

FERS coverage.

If you have always had Social Security deducted from your pay during your employment both

inside and outside of the government, your Social Security benefit will not be subject to the

Windfall Elimination Formula. This is true under both CSRS Offset and FERS coverage.

Effect on Your Thrift Account

You have been contributing 5 percent of your pay to your Thrift Savings Plan account and

receiving the agency automatic (1%) and agency matching contributions. You became eligible to

participate in the TSP on [insert date]. However, as a FERS Transfer employee, you would have

become eligible to participate in the TSP on [insert effective date of deemed FERS election]. 

Consequently, if you elect to remain in FERS, you are entitled to retroactive agency automatic

(1%) contributions for the period [insert effective date of deemed FERS election] to [insert date

employee became eligible to participate in the TSP]. You will also have the opportunity to make

up employee contributions missed during this period. If you make up employee contributions,

you will receive associated retroactive agency matching contributions. In addition, you are

entitled to lost earnings on the retroactive agency contributions that are made to your account. 

Please contact [Joan Smith] for additional information and assistance.

FERS Open Season

We are currently in a FERS Open Season. If you want FERS coverage, you must decide whether

you want the coverage to be retroactive to April 1, 1994, as a deemed FERS election or in the

future, as a FERS Open Season election. Weigh your options carefully: Which one you choose

will make a difference in your benefits. If you elect FERS as part of the open season, your

current TSP account will be closed, but all of your service before the open season election

becomes effective will be credited under the more generous CSRS rules. If you want your FERS

coverage to become effective on the later date, then choose to have your retirement coverage

corrected to Social Security only, and you will be able to elect to transfer to FERS during the

FERS Open Season that began July 1, 1998, and ends December 31, 1998. Unless you have a

break in service of 4 days or more, you will not have another opportunity to elect FERS coverage.
Attachment 3

FERS versus CSRS Offset Coverage

1

 For special employee groups like law enforcement officers and firefighters, the rate increases from 1.3% to 7.5%. For

Members of Congress, the rate increases from 1.8% to 8%. (See Section 30A2.1-2 in Chapter 30 of the CSRS and FERS Handbook

for Personnel and Payroll Offices for the CSRS Offset rates for regular and special employee groups before 1990.)

21

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

Standard Form 50

Adjustments

Correct SF 50 (or equivalent personnel form) to

show employee elected FERS on effective date of

appointment or conversion of appointment,

following the instructions in the Guide to

Processing Personnel Actions. (If erroneous

FERS coverage occurred before July 1, 1987, see

Chapter 11, Part 11A6, in the CSRS and FERS

Handbook for Personnel and Payroll Offices.)

Correct SF 50's (or equivalent personnel forms) to

show CSRS Offset coverage on effective date of

appointment or conversion of appointment, following

the instructions in the Guide to Processing Personnel

Actions.

Employee Retirement

and Social Security

Withholding

Adjustments

Money withheld from salary for retirement and

Social Security is correct. (If erroneous FERS

coverage occurred before July 1, 1987, see

Chapter 11, Part 11A6, in the CSRS and FERS

Handbook for Personnel and Payroll Offices.)

XIII. Money withheld from salary for Social

Security is correct.

XIV. Money withheld for retirement will be correct

unless the employee exceeded the Social

Security maximum wage base in any calendar

year. (Under CSRS Offset, the retirement

deductions withheld from an employee's pay

increases from 0.8% to 7%1 when the

employee’s basic pay for retirement reaches

the Social Security maximum taxable wage

base and Social Security deductions stop.)
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

22

Agency Contributions

Adjustments

Agency contributions for retirement (not TSP) are

correct. (If erroneous FERS coverage occurred

before July 1, 1987, see Chapter 11, Part 11A6, in

the CSRS and FERS Handbook for Personnel

and Payroll Offices.)

Agency contributions have been overpaid. Until

October 1, 1997, the agency contribution for most

CSRS Offset employees was 7%. The rate is

temporarily increased to 8.51%. See Payroll Office

Letter P-98-11 for further instructions on how to

correct agency contribution.

Individual Retirement

Record Adjustments

Individual retirement record is correct. (If

erroneous FERS coverage occurred before July 1,

1987, see Chapter 11, Part 11A6, in the CSRS

and FERS Handbook for Personnel and Payroll

Offices.)

XV. Agency payroll office corrects individual

retirement record, redistributing the

retirement deductions withheld from

employee's salary so that the proper amount

is credited under CSRS Offset. If employee

exceeded Social Security maximum earnings

limitation, adjust retroactive employee

contributions amount.

XVI. If employee was under the wrong retirement

system at a previous agency, that agency’s

payroll office must correct the employee's

retirement record for that period. Notify any

former agency so it can correct employee's

records.
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

2

 For nondeduction law enforcement or firefighter service after December 31, 1974, the applicable deduction from basic pay is

7.5 percent. Different deduction percentages also may apply to nondeduction service performed by Congressional employees, Members

of Congress, bankruptcy judges, U.S. Magistrates, and judges of the Court of Military Appeals. Nondeduction service performed

before 1970 will have a different deduction rate.

3

 See Footnote 2 above.

23

Effect on Annuity Advise employee that all service performed before

effective date of deemed FERS election is subject

to CSRS rules; it will make up a CSRS

component of any future FERS benefit.

Advise employee that when s/he becomes eligible for

Social Security benefits after retirement, the

employee’s annuity will be reduced, or offset, by the

value of the Social Security benefit s/he earned during

her or his CSRS Offset service. Service performed

before effective date of CSRS Offset coverage will

not be used in determining the amount of the offset.

Effect on Civilian

Deposit for

Nondeduction Service

Deposit for nondeduction service performed prior

to the effective date of the deemed FERS election

is computed under CSRS rules at 7% of earnings

rather than 1.3%.2

XVII. Ask employee if deposit was already paid

in full or in part under FERS rules.

XVIII. Estimate CSRS deposit for employee,

using guidance below.

Deposit for nondeduction service performed prior to

the effective date of CSRS Offset coverage is

computed under CSRS rules at 7% of earnings rather

than 1.3%.3

XIX. Estimate CSRS deposit for employee. 

Interest will accrue on the entire deposit under

current rules (see Chapter 21 of the CSRS and

FERS Handbook).
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

24

Effect on Civilian

Deposit for

Nondeduction Service

(continued)

XX. If deposit was fully paid under FERS

rules, employee owes only the additional

5.7% of earnings. No additional interest

will be charged, but the payment must be

completed before retirement.

XXI. If deposit was partially paid, interest on

the additional 5.7% of earnings will accrue

prospectively.

XXII. If no payments have been made, interest

will accrue on the entire deposit under

current rules (see Chapter 21 of the CSRS

and FERS Handbook).

Caution: These interest rules apply only in

cases where the FERS coverage is wrong as a

result of the Conner decision where the Court

ruled that OPM’s regulations implementing

the 5-year test were incorrect. They do not

apply to other deemed FERS elections where

an employee can elect to remain in FERS

because his or her agency erred in placing the

employee under FERS.

See next page for guidance on return of civilian

deposit payments to employee.

XXIII. If deposit for nondeduction service was

partially or fully paid, inform employee that

payments already made will be returned upon

request.

XXIV. If employee chooses to have money

returned, send employee’s written

request to OPM’s Retirement

Operations Center and identify it as an

election made under the Conner

decision.
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

25

Effect on Civilian

Deposit for

Nondeduction Service

(continued)

XXV. If deposit for nondeduction service was

partially or fully paid, inform employee

that payments already made will be

returned upon request.

XXVI. If employee chooses to have

money returned, send employee’s

written request to OPM’s

Retirement Operations Center and

identify it as an election made

under the Conner decision.

Effect on Military

Deposit

Military service will count toward retirement only

if a military deposit is paid for the service. 

Military service performed before the erroneous

coverage is part of a CSRS component and is

credited under CSRS rules. If employee paid a

FERS military deposit for that military service,

s/he owes the difference between a CSRS military

deposit at 7% and a FERS military deposit at 3%.

Military service will count toward retirement only if a

military deposit is paid for the service. If employee

paid a FERS military deposit for the military service,

s/he owes the difference between a CSRS military

deposit at 7% and a FERS military deposit at 3%.

XXVII. Compute the additional military

deposit the employee owes and advise

the employee of the amount.
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

26

Effect on Military

Deposit (continued)

Compute the additional military deposit the

employee owes as follows:

XXVIII. If the post-1956 military deposit

has been paid in full, do not

compute interest on the additional

4% of military basic pay now

needed to complete the deposit. 

Notify the employee of the

additional principal due and of the

need to make the payment in order

to pay the deposit in full. The

payment must be completed before

retirement.

XXIX. If the employee has made no post1956 military deposit payments,

recompute the deposit amount and

interest. Interest accrues on the

entire amount of the employee's

post-1956 deposit beginning with

the employee’s initial Interest

Accrual Date (IAD).

XXX. If the post-56 military deposit is partially

paid, then interest on the additional

deposit amount accrues prospectively

beginning with the employee’s next IAD

anniversary. Do not recompute the

XXXI. Give the employee credit for each

FERS deposit payment made during

an interest accrual period before

adding interest to the unpaid balance. 

XXXII. If deposit for military service was

partially or fully paid, inform employee

that payments already made will be

returned upon request: The election to

make the military deposit will be

considered invalid.

If employee chooses to have money returned, 

XXXIII. Agency payroll office pulls back from

the Civil Service Retirement &

Disability Fund the amount of the

FERS military deposit previously

remitted.

XXXIV. Payroll office voids and destroys any

SF 3100 documenting the FERS

military deposit.

XXXV. Payroll office refunds the erroneous

military deposit to the employee.

XXXVI. If military deposit was paid when the

employee was at a prior agency,

contact OPM. OPM, not the current

agency, refunds the military deposit to
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

27

Effect on Military

Deposit (continued)

Caution: These interest rules apply only in

cases where the FERS coverage is wrong as a

result of the Conner decision where the Court

ruled that OPM’s regulations implementing

the 5-year test were incorrect. They do not

apply to other deemed FERS elections where

an employee can elect to remain in FERS

because his or her agency erred in placing the

employee under FERS.

If deposit for military service was partially or fully

paid, inform employee that payments already

made will be returned upon request: The election

to make the military deposit will be considered

invalid.

 If employee chooses to have money returned, 

XXXVII. Agency payroll office pulls back

from the Civil Service Retirement

& Disability Fund the amount of

the FERS military deposit

previously remitted.

XXXVIII. Payroll office voids and destroys

any SF 3100 documenting the

FERS military deposit.

XXXIX. Payroll office refunds the
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

28

Effect on Military

Deposit (continued)

XL. If military deposit was paid when the

employee was at a prior agency, contact

OPM. OPM, not the current agency,

returns the military deposit to the

employee.

Effect on Credit for

Service Under Another

Retirement System for

Federal Employees

Service under another retirement system for

Federal employees, e.g., TVA, Federal Reserve

Board, Foreign Service, etc., performed before

the effective date of the deemed FERS election is

potentially creditable under a CSRS component,

provided the employee can waive entitlement to

all benefits under the other system. This is true

even if the service was performed after 1988. 

Generally, an employee must take a refund of any

retirement deductions under the other retirement

system and deposit the amount of the refund in

the Retirement Fund, with interest. The actuarial

reduction is available for pre-10-1-90 refunded

service. See sections 20A2.2-7 & 8 and 21A3.1-3

in the CSRS and FERS Handbook for Personnel

and Payroll Offices. The service does not move

over to the FERS component, even if Social

Security deductions were withheld from the

employee’s salary along with retirement

deductions, such as for TVA employees.

Service under another retirement system for Federal

employees, e.g., TVA, Federal Reserve Board,

Foreign Service, etc, is potentially creditable service,

provided the employee can waive entitlement to all

benefits under the system. Generally, an employee

must take a refund of any retirement deductions under

the other retirement system and deposit the amount of

the refund in the Retirement Fund, with interest. The

actuarial reduction is available for pre-10-1-90

refunded service. See sections 20A2.2-7 & 8 and

21A3.1-3 in the CSRS and FERS Handbook for

Personnel and Payroll Offices. The service is not

used in determining the amount of the CSRS

Offset annuity reduction, or offset, when the

individual becomes eligible for Social Security

benefits even if the employee was covered by

Social Security while under the other retirement

system, such as TVA service.
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

4

 If the break in service was longer than 3 years and the employee returned to Federal employment before December 2, 1994,

sick leave was not normally recredited on reemployment. If the return to Federal employment was on or after December 2, 1994, all

unused sick leave may be recredited regardless of the length of the break, unless it was forfeited upon earlier reemployment.

29

Unused Sick Leave

Documentation

Document employee's unused sick leave balance

on date of deemed FERS election. For most

employees, it would be the amount of recredited

leave.4 (All Conner cases will have a CSRS

component so agencies must post the unused sick

leave balance as a remark on the corrected SF 50

and individual retirement record.) Follow the

same procedures you currently follow for

documenting sick leave of employees who

transfer to FERS from FICA-only positions.

Not Applicable

Effect on Designation

of Beneficiary for

Retirement

FERS designation of beneficiary is still valid. No

action is necessary.

If there is a FERS designation (Standard Form 3102)

in the employee’s OPF, ask employee to complete a

CSRS designation of beneficiary (Standard Form

2808) and have the employee send it directly to OPM. 

(Do not file CSRS designation in OPF.) The FERS

designation is no longer valid. Temporarily retain the

FERS designation in case something happens to

employee before a new designation is completed and

filed with OPM.
Attachment 3

FERS versus CSRS Offset Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to CSRS Offset,

30

Effect on Government

Pension Offset and

Windfall Elimination

Formula under Social

Security

XLI. Employee is not subject to the Government Pension Offset under Social Security because s/he is

automatically covered by Social Security. (The Government Pension Offset affects the spouse and

survivor benefits payable under Social Security based on the Social Security earnings of a Federal

employee’s spouse.)

XLII. Employee’s Social Security benefit based on his or her own earnings will not be subject to the

Windfall Elimination Formula, if the employee has always had Social Security deducted from pay

during employment both inside and outside the government.

TSP Adjustments See Attachment 5: Thrift Savings Plan Account

(If employee elects deemed FERS coverage)

See Attachment 6: Thrift Savings Plan Account (If

employee elects to have retirement coverage

corrected to CSRS Offset)
Attachment 4

FERS versus Social Security Only Coverage

31

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

Standard Form 50

Adjustments

Correct SF 50 (or equivalent personnel form) to

show employee elected FERS on effective date of

appointment or conversion of appointment,

following the instructions in the Guide to

Processing Personnel Actions. (If erroneous

FERS coverage occurred before July 1, 1987, see

Chapter 11, Part 11A6, in the CSRS and FERS

Handbook for Personnel and Payroll Offices. 

Deemed FERS coverage cannot begin until the

pay period after June 30, 1987.)

Correct SF 50's (or equivalent personnel forms) to

show Social Security only (FICA) coverage on

effective date of appointment or conversion of

appointment, following the instructions in the Guide

to Processing Personnel Actions.

Employee Retirement

and Social Security

Withholding

Adjustments

Money withheld from salary for retirement and

Social Security is correct. (If erroneous FERS

coverage occurred before July 1, 1987, see

Chapter 11, Part 11A6, in the CSRS and FERS

Handbook for Personnel and Payroll Offices. 

Deemed FERS coverage cannot begin until the

pay period after June 30, 1987.)

XLIII. Money withheld from salary for Social

Security is correct.

XLIV. No money should have been withheld for

retirement. Back out FERS retirement

deductions from employee’s retirement

account and refund deductions to employee. 

Employee’s salary was underpaid due to the

erroneous FERS deductions.

XLV. Notify former employing agency if retirement

coverage error occurred during earlier

employment, since that agency needs to

correct its payroll records for the period the

employee was on the agency’s rolls.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

32

Agency Contributions

Adjustments

Agency contributions for retirement (not TSP) are

correct. (If erroneous FERS coverage occurred

before July 1, 1987, see Chapter 11, Part 11A6, in

the CSRS and FERS Handbook for Personnel

and Payroll Offices. Deemed FERS coverage

cannot begin until the pay period after June 30,

1987.)

Agency contributions have been overpaid. Back out

agency contributions from the Civil Service

Retirement & Disability Fund. See Payroll Office

Letter P-98-11 for further instructions on how to

correct.

Individual Retirement

Record Adjustments

Individual retirement record is correct. (If

erroneous FERS coverage occurred before July 1,

1987, see Chapter 11, Part 11A6, in the CSRS

and FERS Handbook for Personnel and Payroll

Offices. Deemed FERS coverage cannot begin

until the pay period after June 30, 1987.)

XLVI. Agency payroll office voids and destroys

SF 3100, individual retirement record,

maintained on the employee.

XLVII. If employee was under the wrong

retirement system at a previous

agency, that agency’s payroll office

must correct the employee's retirement

record for that period. Notify any

former agency so it can correct

employee's records.

Effect on Annuity Advise employee that all service performed before

effective date of deemed FERS election is subject

to CSRS rules; it will make up a CSRS

component of any future FERS benefit.

XLVIII. Employee is entitled to Social Security

benefits only.

XLIX. Employee has no annuity right based on

Social Security-only service.

L. Employee must gain CSRS Offset or FERS

coverage in the future to be eligible for an annuity.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

5

 Deposit for qualifying service under a special employee group like that for law enforcement officers, firefighters, congressional

employees, or Members of Congress may be 7 1⁄2 or 8 percent, rather than 7 percent.

33

Effect on Civilian

Deposit for

Nondeduction Service

Deposit for nondeduction service performed prior

to the effective date of the deemed FERS election

is computed under CSRS rules at 7% of earnings

rather than 1.3%.5

LI. Ask employee if deposit was already paid

in full or in part under FERS rules.

LII. Estimate CSRS deposit for employee,

using guidance below.

LIII. If deposit was fully paid under

FERS rules, employee owes only

the additional 5.7% of earnings. 

No additional interest will be

charged, but the payment must be

completed before retirement.

LIV. If deposit was partially paid,

interest on the additional 5.7% of

earnings will accrue prospectively.

LV. If no payments have been made,

interest will accrue on the entire

deposit under current rules (see

Chapter 21 of the CSRS and FERS

Handbook).

Deposit for nondeduction service was erroneous. If

employee has not gained retirement coverage under a

subsequent appointment or conversion to

appointment, the deposit amount must be returned to

the employee.

LVI. Ask employee if s/he made a deposit for

her/his nondeduction service, or applied to

make service credit payment.

LVII. Contact OPM’s Retirement Operations Center

if FERS deposit was paid in part or in full, or

if employee applied to make a service credit

payment. Identify payment as erroneous as a

result of the Conner decision and employee’s

election of only Social Security coverage.

LVIII. Provide employee’s current address.

LIX. OPM will close out the employee’s service

credit account and refund any service credit

payment directly to the employee.

If employee has coverage under a subsequent

appointment, see FERS versus CSRS Offset

Coverage Table.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

34

Effect on Civilian

Deposit for

Nondeduction Service

(continued)

Caution: These interest rules apply only in

cases where the FERS coverage is wrong as a

result of th Conner decision where the Court

ruled that OPM’s regulations implementing

the 5-year test were incorrect. They do not

apply to other deemed FERS elections where

an employee can elect to remain in FERS

because his or her agency erred in placing the

employee under FERS.

LX. If deposit for nondeduction service was

partially or fully paid, inform employee

that payments already made will be

returned upon request.

LXI. If employee chooses to have money

returned, send employee’s written request

to OPM’s Retirement Operations Center

and identify it as an election made under

the Conner decision.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

35

Effect on Military

Deposit

Military service will count toward retirement only

if a military deposit is paid for the service. 

Military service performed before the erroneous

coverage is part of a CSRS component and is

credited under CSRS rules. If employee paid a

FERS military deposit for that military service,

s/he owes the difference between a CSRS military

deposit at 7% and a FERS military deposit at 3%.

Compute the additional military deposit the

employee owes as follows:

LXII. If the post-1956 military deposit has been

paid in full, do not compute interest on the

additional 4% of military basic pay now

needed to complete the deposit. Notify

the employee of the additional principal

due and of the need to make the payment

in order to pay the deposit in full. The

payment must be completed before

retirement.

Any deposit for military service was erroneous. If the

employee has not gained retirement coverage under a

subsequent appointment or conversion to

appointment, the deposit amount must be refunded to

the employee.

LXIII. Agency payroll office pulls back from the

Civil Service Retirement & Disability Fund the

amount of the FERS military deposit

previously remitted.

LXIV. Payroll office voids and destroys any SF 3100

documenting the FERS military deposit.

LXV. Payroll office refunds the erroneous military

deposit to the employee.

LXVI. If military deposit was paid when the

employee was at a prior agency, contact

OPM. OPM, not the current agency, refunds

the military deposit to the employee.

If the employee has coverage under a subsequent

appointment, see the FERS versus CSRS Offset

Coverage Table.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

36

Effect on Military

Deposit (continued)

LXVII. If the employee has made no post1956 military deposit payments,

recompute the deposit amount and

interest. Interest accrues on the

entire amount of the employee's

post-1956 deposit beginning with

the employee’s initial Interest

Accrual Date (IAD).

LXVIII. If the post-56 military deposit is

partially paid, then interest on the

additional deposit amount accrues

prospectively beginning with the

employee’s next IAD anniversary. 

Do not recompute the deposit to

include interest accrued from the

employee’s initial IAD.

Caution: These interest rules apply only in

cases where the FERS coverage is wrong as a

result of the Conner decision where the Court

ruled that OPM’s regulations implementing

the 5-year test were incorrect. They do not

apply to other deemed FERS elections where

an employee can elect to remain in FERS

because his or her agency erred in placing the

employee under FERS.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

37

Effect on Military

Deposit (continued)

If deposit for military service was partially or fully

paid, inform employee that payments already

made will be returned upon request: The election

to make the military deposit will be considered

invalid.

 If employee chooses to have money returned, 

LXIX. Agency payroll office pulls back from the

Civil Service Retirement & Disability Fund

the amount of the FERS military deposit

previously remitted.

LXX. Payroll office voids and destroys any SF

3100 documenting the FERS military

deposit.

LXXI. Payroll office refunds the erroneous

military deposit to the employee.

LXXII. If military deposit was paid when

the employee was at a prior

agency, contact OPM. OPM, not

the current agency, returns the

military deposit to the employee.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

38

Effect on Credit for

Service Under Another

Retirement System for

Federal Employees

Service under another retirement system for

Federal employees, e.g., TVA, Federal Reserve

Board, Foreign Service, etc., performed before

the effective date of the deemed FERS election is

potentially creditable under a CSRS component,

provided the employee can waive entitlement to

all benefits under the other system. This is true

even if the service was performed after 1988. See

sections 20A2.2-7 & 8 and 21A3.1-3 in the CSRS

and FERS Handbook for Personnel and Payroll

Offices. The service does not move over to the

FERS component, even when Social Security

deductions were withheld from the employee’s

salary along with retirement deductions, such as

for TVA employees.

Not applicable because employee has no retirement

coverage. 
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

6

 If the break in service was longer than 3 years and the employee returned to Federal employment before December 2, 1994,

sick leave was not normally recredited on reemployment. If the return to Federal employment was on or after December 2, 1994, all

unused sick leave may be recredited regardless of the length of the break, unless it was forfeited upon earlier reemployment.

39

Unused Sick Leave

Documentation

Document employee's unused sick leave balance

on date of deemed FERS election. For most

employees, it would be the amount of recredited

leave.6 (All Conner cases will have a CSRS

component so agencies must post unused sick

leave balance as a remark on the corrected SF 50

and individual retirement record.) Follow the

same procedures you currently follow for

documenting sick leave of employees who

transfer to FERS from FICA-only positions.

Not Applicable

Effect on Designation

of Beneficiary for

Retirement

FERS designation of beneficiary is still valid. No

action is necessary.

Employee has no retirement coverage. If there's a

FERS designation (Standard Form 3102) in the

employee’s OPF, it no longer is valid. Mark it

“Void,” and destroy it. If the employee dies before

the employee’s retirement deductions can be returned

to him/her, pay based on the order of precedence for

unpaid compensation. The deductions were

erroneously withheld, and they represent a salary

underpayment.
Attachment 4

FERS versus Social Security Only Coverage (Continued)

If employee chooses to remain in FERS,

If employee chooses to have records corrected

to Social Security Only,

40

Effect on Government

Pension Offset and

Windfall Elimination

Formula under Social

Security

LXXIII. Employee is not subject to the

Government Pension Offset under

Social Security because the

employee is automatically covered

by Social Security. (The

Government Pension Offset affects

the spouse and survivor benefits

payable under Social Security

based on the Social Security

earnings of a Federal employee’s

spouse.)

LXXIV. Employee’s Social Security benefit

based on his or her own earnings

will not be subject to the Windfall

Elimination Formula, if the

employee has always had Social

Security deducted from pay during

employment both inside and

outside the government.

Not Applicable. Employee is not covered by a

Federal retirement system.

TSP Adjustments See Attachment 6: Thrift Savings Plan Account

(If employee elects deemed FERS coverage).

See Attachment 7: Thrift Savings Plan Account (If

employee elects to have retirement coverage

corrected to Social Security Only).
Attachment 5

41

Thrift Savings Plan Account

(If employee elects deemed FERS coverage)

Opportunity to Make

Up Employee

Contributions

An employee who elects deemed FERS coverage should have

become eligible to participate in the TSP with the effective date of

the FERS election. Consequently, the employee should be given the

opportunity to make up employee contributions missed during the

period beginning with the effective date of the deemed FERS

coverage to the date the employee actually became eligible to

participate in the TSP (i.e., the first day of the pay period that the

employee began receiving agency automatic (1%) contributions). 

See 5 CFR 1605.2.

Adjustments to Agency

Automatic (1%)

Contributions

Agency computes and reports to the TSP record keeper the amount

of agency automatic (1%) contributions missed during the period

described above. Agency must also submit lost earnings records for

these retroactive agency contributions. See 5 CFR 1605.2.

Adjustments to Agency

Matching Contributions 

If employee makes up missed contributions, agency must compute

and report to the TSP record keeper the associated matching

contributions. Agency must also submit lost earnings records for

these retroactive agency contributions. See 5 CFR 1605.2.

Notice to Employee Advise employee regarding his/her opportunity to make up missed

employee contributions and of the entitlement to retroactive agency

contributions.

Written Explanation of

Adjustments

Provide employee with written explanations of any adjustments made

in his or her TSP account.
Attachment 6

42

Thrift Savings Plan Account (continued)

(If employee elects to have retirement coverage corrected to CSRS Offset)

Adjustments to

Employee

Contributions

The agency must submit negative adjustment records to the TSP

record keeper to remove excess employee contributions. The agency

must refund these contributions to the employee through the pay

check process, and these contributions are taxable as ordinary

income for the year in which they are refunded. Earnings on the

excess contributions will remain in the employee’s account. See

5 CFR 1605.3.

Adjustments to Agency 

Contributions 

All agency contributions and attributable earnings will be removed

from employee’s account. Agency should submit negative

adjustment records to retrieve those agency contributions that have

been in the account for less than one year. Other agency

contributions and attributable earnings will be forfeited to TSP and

used to offset administrative expenses. See 5 CFR 1605.3.

Notice to Employee Advise employee of ramifications to TSP account.

Written Explanation of

Adjustments

Provide employee with written explanations of the adjustments made

in his or her TSP account.
Attachment 7

43

Thrift Savings Plan Account (continued)

(If employee elects to have retirement coverage corrected to Social Security Only)

Adjustments to

Employee

Contributions

The agency must submit negative adjustment records to the TSP

record keeper to remove all employee contributions. The agency

must refund these contributions to the employee through the pay

check process, and these contributions are taxable as ordinary

income for the year in which they are refunded. See 5 CFR 1605.3.

The TSP will pay the earnings attributable to employee contributions

directly to the employee. These earnings are also taxable as ordinary

income for the year in which they are paid. See 5 CFR 1605.9.

Adjustments to 

Agency Contributions 

All agency contributions and attributable earnings will be removed

from employee’s account. Agency should submit negative

adjustment records to retrieve those agency contributions that have

been in the account for less than one year. Other agency

contributions and attributable earnings will be forfeited to TSP and

used to offset administrative expenses. See 5 CFR 1605.3.

Notice to Employee Advise employee of ramifications to TSP account and tax

consequences (i.e., amounts received from agency and TSP are

taxable as ordinary income).

Written Explanation of

Adjustments

Provide employee with written explanations of the adjustments made

in his or her TSP account.