Civil Service Federal Employees Federal Employees Federal Employees

Retirement Group Life Health Benefits Retirement

System Insurance Program System

United States

Office of

Personnel Management

The Federal Government’s Human Resources Agency

Retirement and Insurance Service

 Benefits Administration Letter

 

Number: 00-108 Date: June 2, 2000

Subject: Change in Procedures for Retirement Coverage Errors Resulting

from the Conner v. Office of Personnel Management Decision

Background: Benefits Administration Letter (BAL) 98-114, dated November 3,

1998, provided agency personnel offices with guidance in notifying

employees affected by the change in the 5-year test mandated by

the Conner v. Office of Personnel Management decision. 

 As stated in BAL 98-114, the Office of Personnel Management

(OPM) will waive a portion of the interest that normally accrues on

service credit deposits because the error was directly caused by an

erroneous OPM regulation. Our policy regarding the interest

accrual on service credit deposits was as follows:

$ For employees who have fully completed payment of a

service credit deposit and elect to remain in the Federal

Employees Retirement System (FERS), no interest will be

assessed on the additional principal now owed.

$ If the employee has made partial payment of a service credit

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 Civil

Service Retirement System (CSRS) Offset coverage.
2

New Policy: Because the above policy led to some inequitable situations, we

have determined that interest accrual on service credit deposits for

Conner employees will be as follows:

$ The additional principal owed due to Conner will not accrue

interest, regardless of whether the employee elects CSRS

Offset, Social Security, or FERS.

$ For nondeduction service performed after December 31,

1988, interest began to accrue on January 1, 1999.

Under this amended policy, an employee who has fully paid a preConner FERS deposit will continue to owe only the additional

principal owed because the deposit is now computed under CSRS

rules. However, employees who were in the process of paying a

pre-Conner FERS deposit will continue to accrue interest on the

original pre-Conner FERS deposit, but not on the additional

principal that became due with the Conner decision. Likewise, an

employee who has made no service credit deposit payments will

continue to accrue interest on the pre-Conner FERS deposit, but

not on the additional principal. Deposits for nondeduction service

performed after December 31, 1988, will first begin accruing

interest on January 1, 1999.

Similarly, interest will be waived on the additional principal amount

due for deposits for military service performed after December 31,

1956.

Deposit

Calculations: Calculate the amount of the service credit deposit for employees

affected by the Conner decision in a 2-step process:

1. Calculate the amount of the pre-Conner FERS deposit. 

From this calculation you need only the interest portion.

1. Calculate the amount of the CSRS deposit for the same

period of service used in step 1. From this calculation you

need only the principal amount of the deposit without

interest.

The total service credit deposit the employee owes for

nondeduction service performed before January 1, 1989, is the

sum of the interest portion calculated in step 1 and the principal

calculated in step 2.
3

Counseling

Employees: Agency personnel are responsible for the following:

$ Notifying employees affected by the Conner decision of the

change in interest accrual for service credit deposits.

$ Providing employees with estimates of the deposits owed for

nondeduction service and military service that was

performed prior to the erroneous FERS coverage.

Regardless of whether the employee elects CSRS Offset or FERS,

the amount of the deposit for Conner employees will now be the

same. Therefore, employees who wish to change their prior

retirement coverage election in light of the new procedures for

interest accrual must be given an opportunity to make a new

election.

Making

Payments: Because of the unique nature of these service credit deposits, we

ask that agency personnel annotate the Application To Make a

Deposit or Redeposit (Standard Form 2803) with the phrase

“Conner v. OPM Deposit Calculation”. This will enable OPM to

quickly identify service credit deposit applications that require an

alternative computation.

Additional

Assistance: As always, we are available to assist headquarters levels benefits

officers in the handling of these cases. Questions should be

directed to your agency liaison in the Benefits Officers Resource

Center.

Mary Ellen Wilson, Director

Retirement Policy Center

Retirement and Insurance