Office of Personnel Management

Retirement and Insurance Group

1920 1954 1959 

 

1986 

Benefits Administration Letter

Number: 95-105 Date: October 20, 1995 

SUBJECT: FERS and CSRS Offset Coverage During a Transfer to an International

Organization

PURPOSE

This letter provides information about changes made by the Social Security Independence and

Program Improvements Act of 1994, Public Law 103-296. Because of these changes, FERS and

CSRS Offset employees may now continue retirement coverage during a transfer to an

international organization under 5 U.S.C. § 3582. The Act uniformly extends Federal Insurance

Contributions Act (FICA) coverage to Federal employees transferred to international

organizations. Public Law 103-296 is effective for service with an international organization on

and after January 1, 1995. Also, this letter announces that FERS employees who performed

international organization service abroad before January 1, 1995, may receive credit under FERS

for that service.

BACKGROUND

As explained in Chapter 12 of the CSRS and FERS Handbook for Personnel and Payroll Offices,

employees under CSRS who transfer to an international organization under authority of 5 U.S.C.

§ 3582 have for many years been allowed to continue their retirement coverage (as well as health

and life insurance) by electing continued coverage at the time of the transfer and by making

current CSRS (and health and life insurance) contributions. 

However, beginning in 1984, some CSRS-covered employees came under a plan that

incorporated Social Security coverage (that is, CSRS Interim and, later, CSRS Offset); also, all

FERS employees are covered by Social Security. When transferred to an international

organization abroad, these employees could not continue Social Security coverage because, under

the Internal Revenue Code, service with an international organization outside the United States

was excluded from Social Security coverage. CSRS Interim and CSRS Offset employees could

revert to CSRS (without Social Security) during a transfer abroad. FERS employees who

transferred to international organizations were not allowed to retain FERS coverage during

employment outside the United States, and had no Federal retirement coverage during the

transfer. For CSRS Interim, CSRS Offset, and FERS employees who transferred to a public

international organization within the United States, the Internal Revenue Code treated them as
-2-

covered by Social Security tax under the self-employment provision, and they were therefore

allowed to continue their coverage during the transfer.

AMENDMENTS MADE BY PUBLIC LAW 103-296

Section 319 of Public Law 103-296 amends the Internal Revenue Code and the Social Security

Act. The law requires that any service performed by a Federal employee during a transfer to a

recognized international organization under 5 U.S.C. § 3582 is defined as employment for FICA

purposes, including the Old-Age, Survivors, and Disability Insurance (OASDI) tax and Medicare,

if both of the following conditions are met:

(1) the employee was employed at a Federal agency and subject to FICA immediately

prior to the transfer, and

(2) the employee has Federal reemployment rights under section 3582. 

Under these conditions, FICA coverage applies, regardless of where the service with the

international organization is actually performed. Therefore, CSRS Offset or FERS employees

who continue their FICA coverage during a transfer to an international organization may now

continue their coverage (but see below concerning the Thrift Savings Plan). The requirement of

an election and current payment of contributions must be met as under existing procedures.

The Internal Revenue Service has informed us that under the Internal Revenue Code, as amended

by Public Law 103-296, FICA tax is required for these transferred employees even if they do not

continue their CSRS Offset or FERS coverage during the transfer. While employed by an

international organization, an employee's FICA tax, retirement and insurance contributions are

based on the amount of pay the employee would have received had he or she remained at the

transferring agency. Effective January 1, 1995, the salary of an employee who performs service

with an international organization within the United States is no longer considered as selfemployment income for Social Security purposes.

For international organization service both within and outside the United States, the Federal

agency from which the employee transfers is responsible for computing and billing owed FICA

tax, both employee and employer shares, and for the payment of collected FICA tax. An agency

must submit the employer share of FICA tax even when an employee fails to submit payment of

the employee portion of FICA tax. 
-3-

RETIREMENT COVERAGE

The regulations of subpart C of part 352 of title 5, Code of Federal Regulations, apply to

employees transferring to international organizations under section 3582. As long as the

employee continues to make current employee contributions for retirement, health benefits, and

life insurance, coverage for each benefit continues. If the employee fails to complete a deposit

within the time limit, the retirement coverage terminates on the last day of the pay period for

which the required contributions were deposited. Failure to pay retirement contributions

currently, however, does not exempt an employee from FICA tax liability.

Employees transferring to an international organization must be given the opportunity to elect to

continue retirement (other than the Thrift Savings Plan), health benefits, and group life insurance

under section 352.309 of title 5, Code of Federal Regulations. In addition, any employee who is

now employed under a transfer to an international agency abroad and who has not been given the

right to elect continuation of FERS should be given the opportunity to elect FERS. In the case of

a CSRS Offset employee who continued CSRS coverage, the employee must revert to CSRS

Offset coverage effective January 1, 1995. FERS employees who elect coverage will be

responsible for retirement contribution payments retroactive to the transfer to the international

organization. CSRS employees reverting to CSRS Offset should have their payroll records

adjusted effective January 1, 1995, to reflect CSRS Offset contributions.

Under the conditions stated above, FICA tax is mandatory for all CSRS Offset and FERS

employees on a section 3582 transfer to an international organization, effective January 1, 1995. 

Whether or not the employee elects retirement coverage, the employee is no longer exempt from

FICA tax during international organization service. Since FICA tax is mandatory, employees

eligible to retroactively continue FERS or CSRS Offset coverage (regardless of their election

decisions) are subject to FICA tax retroactive to January 1, 1995.

FERS EMPLOYEES WHO HAVE PRE-1995 SERVICE WITH AN INTERNATIONAL

ORGANIZATION ABROAD

As stated above, FERS employees who transferred to international organizations abroad were not

allowed to continue retirement coverage due to the lack of FICA tax during such a transfer. We

have reviewed the applicable provisions, and have determined that FERS employees who

transferred under section 3582 to an international organization abroad, and who were not allowed

to continue their FERS coverage during the transfer, may receive FERS basic benefits coverage

for the period.

To obtain this coverage, the employee must make the statutorily-required deposit equal to the

amount of the FERS basic benefits deductions that would have been withheld from pay had he or

she remained employed in the Federal agency. The deposit is paid to the employing agency and
-4-

recorded on Standard Form 3100, the FERS Individual Retirement Record. The appropriate

employer share must be submitted to OPM by the employing agency under existing procedures.

THRIFT SAVINGS PLAN

The Federal Retirement Thrift Investment Board has determined that employees who transfer to

international organizations are not eligible to participate in the Thrift Savings Plan. The Federal

Retirement Thrift Investment Board has also determined that the amendments of Public Law 103-

296 do not change the status of these employees for the purpose of contributing to the Thrift

Savings Plan. Any inquiries concerning the Thrift Savings Plan should be directed to the Federal

Retirement Thrift Investment Board.

CONTACT PERSON

Please direct any questions about this Letter (other than Thrift Savings Plan matters) to Patrick

Jennings, 202-606-0299.

John E. Landers, Chief

Retirement Policy Division