United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency 

Benefits Administration Letter 

Number: 05-101 Date: January 12, 2005

Subject: Annual Changes 

Background 

Each year, we publish a Benefits Administration Letter (BAL) with updated information 

that changes annually, such as interest rates and cost-of-living adjustments. This BAL 

contains the figures for 2005. 

Cost-of-Living Adjustments 

Many people who receive monthly annuity payments from the Civil Service Retirement 

System (CSRS) or the Federal Employees Retirement System (FERS) will receive a costof-living adjustment (COLA) effective December 1, 2004. They will receive the increase 

in their January 3, 2005, annuity payments. The maximum increase is 2.7% for CSRS and 

2.0% for FERS annuitants. 

Annuitants who have been retired at least 1 year will receive the full COLA, or maximum

increase. To get the full COLA, a retiree's annuity had to begin no later than 

December 31, 2003. 

Retirees whose annuities began between January 1, 2004, and November 30, 2004, will 

receive a prorated COLA. They will receive one-twelfth of the applicable increase for 

each month they received any annuity. The following tables show the prorated percentage 

increases according to the month in which the annuity began. 
CSRS COLA Proration Table 

Month Annuity Began Amount of Percentage Increase 

December 2003 or earlier 2.7% 

January 2004 2.5% 

February 2004 2.3% 

March 2004 2.0% 

April 2004 1.8% 

May 2004 1.6% 

June 2004 1.4% 

July 2004 1.1% 

August 2004 0.9% 

September 2004 0.7% 

October 2004 0.5% 

November 2004 0.2% 

FERS COLA Proration Table 

Month Annuity Began Amount of Percentage Increase 

December 2003 or earlier 2.0% 

January 2004 1.8% 

February 2004 1.7% 

March 2004 1.5% 

April 2004 1.3% 

May 2004 1.2% 

June 2004 1.0% 

July 2004 0.8% 

August 2004 0.7% 

September 2004 0.5% 

October 2004 0.3% 

November 2004 0.2% 

Resource for Additional Information on COLA's 

Chapter 2 of the CSRS and FERS Handbook for Personnel and Payroll Offices contains a 

complete explanation of how COLA's are computed and who is eligible to receive them. 
Increase in Children's Benefits 

CSRS COLA rates apply to children's benefits, regardless of whether the child's parent 

was under CSRS or FERS. The following rates apply from December 1, 2004, through 

November 30, 2005. 

 

When the child has a living parent who was married to the employee or retiree, the 

benefit payable to that child is the lesser of: 

$403 per month per child; or 

$1,210 per month divided by the number of eligible children. 

When the child has no living parent who was married to the employee or retiree, the 

benefit payable to that child is the lesser of: 

$484 per month per child; or 

$1,453 per month divided by the number of eligible children. 

FERS Basic Employee Death Benefit 

When a FERS employee dies, a surviving spouse (or former spouse) may be eligible for a 

death benefit called the Basic Employee Death Benefit. This 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. For deaths that occur on or after December 1, 

2004, and before December 1, 2005, the $15,000 plus COLA's amount is now 

$25,537.58. Chapter 70 of the CSRS and FERS Handbook has detailed information on 

the Basic Employee Death Benefit. 

Reminder Regarding Reemployed Annuitants 

If your agency employs any retirees whose salaries are reduced by the amount of their 

annuity, remember to increase the reduction by the amount of the COLA that the retiree 

received. To compute the new monthly reduction in the reemployed annuitant's salary, 

multiply the old monthly rate by the appropriate percentage and round to the next lowest 

dollar. An adjustment must be at least one dollar. 

For annuitants who transferred to FERS and have a portion of their benefits computed 

under CSRS rules, remember to apply CSRS rules to the CSRS portion of the annuity and 

FERS rules to the FERS portion of the annuity. 

Chapter 100 of the CSRS and FERS Handbook contains instructions on how to prorate 

the old and new COLA's during the pay period in which the COLA becomes payable. 
If you can't determine the retiree's new rate, you may obtain it by calling the Retirement 

Information Office at 1 (888) 767-6738 (or for callers within the Washington, DC local 

calling area, (202) 606-0500). The TDD number for the hearing impaired is 1 (800) 578-

5707. 

When you call, please provide the annuitant's full name, date of birth, and retirement 

claim (CSA) number or Social Security number. You may also write to us by email at 

retire@opm.gov or regular mail at: 

U.S. Office of Personnel Management 

Retirement Operations Center 

P.O. Box 45 

Boyers, PA 16017-0045 

Interest Rate for Service Credit Payments, Refunds, and Voluntary Contributions 

The interest rate that applies to both CSRS and FERS is 4.375% in 2005. 

 

Salary Cap 

Sometimes officials in certain Executive level positions do not receive the full official 

salary of their positions because of a cap on the amount that can be paid to them. These 

officials pay retirement deductions on the capped amount, rather than the full amount, 

and we compute retirement benefits using the capped amount. Once the President signs 

the Executive order for 2004, the caps will be available on OPM's Web site at 

www.opm.gov/oca. In addition, we will add this information to Chapter 30 of the CSRS 

and FERS Handbook. 

Reminder Regarding Military Deposits 

Deposits for military service performed during 1999 and 2000 are subject to the same 

temporary increase that applied to employee retirement deductions for that year. Use the 

table below to compute military deposits for service during these years and for the new 

2005 rates. Chapter 23 of the CSRS and FERS Handbook has detailed information on 

Service Credit Payments for Post- 56 Military Deposits. 

Employees who want to pay deposits for military service they performed during any of 

these years need to request that the military pay center provide year-by-year earnings so 

that you can compute deposits correctly. 

Military Deposits

1999 2000 Other Years 

CSRS 7.25% 7.40% 7.00% 

FERS 3.25% 3.40% 3.00% 
Reminder Regarding Waiver of Military Retired Pay 

Employees requesting to waive military retired pay should submit their request directly to 

the Defense Finance and Accounting Service at the following address 30 days before 

their planned retirement date to avoid delay in the finalization of their retirement. A copy 

of this request must be attached to the retirement application: 

Defense Finance and Accounting Service 

U.S. Military Retirement Pay 

London, KY 40742-7130 

Phone: 1-800-469-6559 

Chapter 22 of the CSRS and FERS Handbook (Chapter 22, Section 22 A4.1-2) contains 

information that must be provided and sample wording that can be used. 

Significant Social Security Figures for 2005 

On October 19, 2004, the Social Security Administration published a Fact Sheet that 

listed 2005 figures that are significant for retirement matters. You can find that Fact 

Sheet on the Social Security Administration's Internet site, Social Security Online at 

www.ssa.gov/pressoffice/colafacts2003.htm . We have included the figures here for your 

convenience. 

Social Security Maximum Wage Base

The Social Security maximum taxable wage base for 2005 is $90,000. 

Average Total Wages

The amount of average total wages for 2003 is $34,064.95. 

Bend Points

The dollar amounts, or bend points, used in the benefit formula for workers who become 

eligible for benefits in 2004, and in the formula for computing maximum individual 

benefits for 2005, are $627 and $3,779. 

 

FERS Retiree Annuity Supplement Earnings Limit

The Social Security earnings limitation for 2005 is $12,000. 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 2005 by $1.00 for every $2.00 over this 

amount earned in 2005. 
 

Note: Public Law 106-182, signed on April 7, 2000 does away with the earnings 

limitation for Social Security recipients ages 65-69. It does not, however, affect the 

earnings limitation for recipients ages 62- 64 nor have any impact on the rules governing 

the FERS retiree annuity supplement. 

Increase in Age for Full Social Security Benefits

Legislation passed in 1983 provided that the age for receiving full Social Security 

benefits will gradually increase from 65 to 67. The first increase took effect in January 

2001. It affects workers born in 1938 or later. More information on this change is 

available on Social Security's web site at www.ssa.gov. 

Note: This change does not affect the entitlement of any person who is age 62 to receive 

reduced benefits if he or she has sufficient Social Security credits to receive a benefit. 

TSP Deferral Limit 

The Internal Revenue Service annual limit on elective deferrals is $14,000 for tax year 

2005. For purposes of the Thrift Savings Plan (TSP), the term "elective deferrals" means 

the maximum amount that employees can contribute to their thrift accounts. You can find 

additional information on the elective deferral limit on the TSP web site at www.tsp.gov 

Raymond J. Kirk, Manager 

Benefits Officers Training & Development Group 

Human Capital Leadership & Merit Systems Accountability