Office of 

Personnel Management

The Federal Government’s Human Resources Agency 

Retirement and Insurance Service 

Benefits Administration Letter 

Number: 04-101 Date: January 20, 2004 

United States 

Subject: Annual Changes 

Background 

Each year, we publish a Benefits Administration Letter with updated information, such as 

interest rates and cost-of-living adjustments. This letter contains the figures for 2004. 

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 

 cost-of-living adjustment (COLA) effective December 1, 2003. They will receive the increase in 

their January 2, 2004, annuity payments. The maximum increase is 2.1% 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, 2002. 

Retirees whose annuities began between January 1, 2003, and November 30, 2003, 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. 

Civil Service Federal Employees’ Federal Employees Federal Employees Long Term 

Retirement Group Life Health Benefits Retirement Care Insurance 

System Insurance Program Program System Program 
CSRS COLA Proration Table 

Month Annuity Began 

December 2002 or earlier 

January 2003 

February 2003 

March 2003 

April 2003 

May 2003 

June 2003 

July 2003 

August 2003 

September 2003 

October 2003 

November 2003 

FERS COLA Proration Table 

Monthly Annuity Began 

December 2002 or earlier 

January 2003 

February 2003 

March 2003 

April 2003 

May 2003 

June 2003 

July 2003 

August 2003 

September 2003 

October 2003 

November 2003 

Amount of Percentage Increase 

2.1% 

1.9% 

1.8% 

1.6% 

1.4% 

1.2% 

1.1% 

0.9% 

0.7% 

0.5% 

0.4% 

0.2% 

Amount of Percentage Increase 

2.0% 

1.8% 

1.7% 

1.5% 

1.3% 

1.2% 

1.0% 

0.8% 

0.7% 

0.5% 

0.3% 

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, 2003, through November 30, 

2004. 

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: 

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$ 392 per month per child; or 

$1,176 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: 

$ 470 per month per child; or 

$1,410 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, 2003, and before December 1, 

2004, the $15,000 plus COLA's amount is now $24,866.19. 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 

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

The interest rate that applies to both CSRS and FERS is 3.875% in 2004. 

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 2004 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% 

FERS 3.25% 3.40% 3% 

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 

P. O. Box 7130 

 London, KY 40742-7130 

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

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

Significant Social Security Figures for 2004 

On October 16, 2003, the Social Security Administration published a Fact Sheet that listed 2004 

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/factsheets/colafacts2004.htm. We have included the figures here for 

your convenience. 

Social Security Maximum Wage Base 

The Social Security maximum taxable wage base for 2004 is $87,900. 

Hospital Insurance Contribution Base 

The limitation on the amount of earnings subject to the Hospital Insurance contribution was 

repealed (Public Law 103-66, section 13207). The Hospital Insurance tax is due on the total 

remuneration paid during the year. 

Average Total Wages 

The amount of average total wages for 2002 is $33,252.09 

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 2004, 

are $612 and $3,689. 

FERS Retiree Annuity Supplement Earnings Limit 

The Social Security earnings limitation for 2004 is $11,640. 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 2004. 

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 

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gradually increase from 65 to 67. 

The first increase took effect in January 2001. It affects workers born in 1938. They must be age 

65 and 2 months to be eligible to receive full Social Security benefits. More information on this 

change is available on SSA's web site. 

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 $13,000 for tax year 2004. 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 also can find the elective 

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

Raymond J. Kirk 

Manager, Benefits Officers Training and 

 Development Group 

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