CSRS Alternative Annuity Elections FERS i 

Chapter 53
 

Table of Contents
 

Subchapter 53A CSRS ................................................ 1
 

Part 53A1 General Information ....................................... 1
 

Section 53A1.1-1 Overview ..................................... 1
 

A. Introduction ............................................ 1
 

B. Topics Covered ......................................... 1
 

C. Organization of Subchapter .................................. 1
 

D. Statement of Authority ..................................... 2
 

Section 53A1.1-2 Eligibility Requirements ........................... 3
 

A. General ............................................... 3
 

B. Disability Retirees ........................................ 3
 

C. Court Order Bars AFA Election ............................... 3
 

D. Spousal Consent Requirement ................................ 3
 

E. Waiver of Spousal Consent Requirement ......................... 3
 

F. AFA versus Voluntary Separation Incentive Payment (VSIP) ............ 4
 

Section 53A2.1-1 The Lump-Sum Payment .......................... 5
 

A. Amounts Included in the Lump-Sum Payment ...................... 5
 

Section 53A2.1-2 Computation of the Reduced Annuity .................. 6
 

A. General ............................................... 6
 

B. Definition of Lump-Sum Credit ............................... 6
 

C. Present Value Factor ...................................... 6
 

D. AFA Computation Method .................................. 6
 

E. Deemed Deposits and Redeposits .............................. 7
 

Part 53A3 Miscellaneous ............................................ 8
 

Section 53A3.1-1 Taxation of Alternative Annuity Lump Sums ............. 8
 

A. Tax Status of the AFA ..................................... 8
 

B. Estimating the Tax Free Amount of the Lump Sum .................. 8
 

C. Tax Liability When AFA Lump Sum Returned to OPM ................ 9
 

Section 53A3.1-2 Dual Eligibility for Retirement and OWCP Compensation .... 10
 

A. How Election of the AFA May Affect OWCP Benefits ................ 10
 

B. Effect of Reinstatement of a Regular Retirement Annuity ............... 10
 

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Chapter 53
 

Part 53A4 AFA Election > for Annuitants Who Are Reemployed < .............. 11
 

Section 53A4.1-1 Status of Previous AFA Election Upon Reemployment ....... 11
 

A.	 General Rule ........................................... 11
 

Section 53A4.1-2 The Lump-Sum Credit ............................ 12
 

A.	 Definition ............................................. 12
 

Section 53A4.1-3 Eligibility Requirements ........................... 13
 

A.	 General Requirements ..................................... 13
 

Section 53A4.1-4 Computation of the AFA > After Reemployment Ends < .... 14
 

B.	 Individuals Who Elected the AFA After the First Retirement And Who Are
 

Eligible to Elect Another AFA Benefit When Their Reemployment Ends ..... 15
 

Section 53A4.1-4 Computation of the AFA After Reemployment Ends ....... 16
 

C.	 Individuals Who Did Not Elect the AFA After the First Retirement ........ 16
 

Part 53A5 Procedures ............................................. 17
 

Section 53A5.1-1 Election Requirements ............................ 17
 

A.	 Expedited AFA Process .................................... 17
 

B.	 AFA Election Letter ...................................... 17
 

C.	 Death of Annuitant ....................................... 18
 

Section 53A5.1-2 Advice to Employee .............................. 19
 

A.	 AFA Estimates .......................................... 19
 

B.	 Factors to Consider in Election of the AFA ........................ 19
 

C.	 Survivor Benefits ........................................ 20
 

Subchapter 53B FERS ................................................ 21
 

Part 53B1 General Information ....................................... 21
 

Section 53B1.1-1 Overview ..................................... 21
 

A.	 Introduction ............................................ 21
 

B.	 Organization of Subchapter .................................. 21
 

C.	 Applicable CSRS Provisions ................................. 21
 

D.	 Statement of Authority ..................................... 21
 

Part 53B2 Computation of the AFA for FERS Transferees With CSRS Component .... 22
 

Section 53B2.1-1 Computation of the Reduced Annuity .................. 22
 

A.	 General Rule ........................................... 22
 

B.	 AFA Computation Method .................................. 22
 

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Chapter 53
 

Section 53B2.1-2 Effect of Refund of CSRS Contributions on Computation of
 

AFA ................................................ 25
 

A. Effect of Refund of CSRS Contributions ......................... 25
 

Subchapter 53C Job Aids and Examples .................................... 26
 

Part 53C1 Job Aids ............................................... 26
 

Section 53C1.1-3 FERS Present Value Factors for Law Enforcement Officers,
 

Firefighters, Air Traffice Controllers, Military Reserve Technicians Who retire
 

Section 53C1.1-3 FERS Present Value Factors for Law Enforcement Officers,
 

Firefighters, Air Traffic Controllers, Military Reserve Technicians Who Retire
 

Section 53C1.1-4 Life Threatening Affliction or Other Critical Medical
 

Conditon .............................................. 32
 

Section 53C1.1-7 Sample Form for AFA Computation for FERS Transferee
 

With a CSRS Component ................................... 35
 

Section 53C2.1-3 FERS Transferee With a CSRS Annuity Component
 

Section 53C1.1-1 CSRS Present Value Factors ......................... 26
 

Section 53C1.1-1 CSRS Present Value Factors ......................... 27
 

Section 53C1.1-2 FERS Present Value Factors for Regular Employees ......... 28
 

Section 53C1.1-2 FERS Present Value Factors for Regular Employees ......... 29
 

Under 5 U.S.C. 841(c) by Reason of Disability ..................... 30
 

Under 5 U.S.C. 8414(c) by Reason of Disability .................... 31
 

Section 53C1.1-5 Sample Form for CSRS AFA Computation ................ 33
 

Section 53C1.1-6 Sample Form for FERS AFA Computation ................ 34
 

Part 53C2 Examples .............................................. 37
 

Section 53C2.1-1 CSRS Alternative Annuity Election .................... 37
 

Section 53C2.1-2 FERS Alternative Annuity Election .................... 39
 

Alternative Annuity Election ................................. 41
 

Subchapter 53A CSRS 

Part 53A1 General Information ....................................... 1
 

Section 53A1.1-1 Overview ..................................... 1
 

A. Introduction ............................................ 1
 

B. Topics Covered ......................................... 1
 

C. Organization of Subchapter .................................. 1
 

D. Statement of Authority ..................................... 2
 

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Chapter 53
 

Section 53A1.1-2 Eligibility Requirements ........................... 3
 

A. General ............................................... 3
 

B. Disability Retirees ........................................ 3
 

C. Court Order Bars AFA Election ............................... 3
 

D. Spousal Consent Requirement ................................ 3
 

E. Waiver of Spousal Consent Requirement ......................... 3
 

F. AFA versus Voluntary Separation Incentive Payment (VSIP). . . . . . . . . . . . . . . 4
 

Part 53A2 Computation of the AFA .................................... 5
 

Section 53A2.1-1 The Lump-Sum Payment .......................... 5
 

A. Amounts Included in the Lump-Sum Payment ...................... 5
 

Section 53A2.1-2 Computation of the Reduced Annuity .................. 6
 

A. General ............................................... 6
 

B. Definition of Lump-Sum Credit ............................... 6
 

C. Present Value Factor ...................................... 6
 

D. AFA Computation Method .................................. 6
 

E. Deemed Deposits and Redeposits .............................. 7
 

Part 53A3 Miscellaneous ............................................ 8
 

Section 53A3.1-1 Taxation of Alternative Annuity Lump Sums ............. 8
 

A. Tax Status of the AFA ..................................... 8
 

B. Estimating the Tax Free Amount of the Lump Sum .................. 8
 

C. Tax Liability When AFA Lump Sum Returned to OPM ................ 9
 

Section 53A3.1-2 Dual Eligibility for Retirement and OWCP Compensation .... 10
 

A. How Election of the AFA May Affect OWCP Benefits ................ 10
 

B. Effect of Reinstatement of a Regular Retirement Annuity ............... 10
 

Part 53A4 AFA Election > for Annuitants Who Are Reemployed < .............. 11
 

Section 53A4.1-1 Status of Previous AFA Election Upon Reemployment ....... 11
 

A. General Rule ........................................... 11
 

Section 53A4.1-2 The Lump-Sum Credit ............................ 12
 

A. Definition ............................................. 12
 

Section 53A4.1-3 Eligibility Requirements ........................... 13
 

A. General Requirements ..................................... 13
 

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Chapter 53
 

Section 53A4.1-4 Computation of the AFA > After Reemployment Ends < .... 15
 

A.	 Individuals Who Elected the AFA At Their First Retirement And Who Are Not
 

Eligible to Elect Another AFA Benefit When Their Reemployment Ends ..... 14
 

B.	 Individuals Who Elected the AFA After the First Retirement And Who Are
 

Eligible to Elect Another AFA Benefit When Their Reemployment Ends ..... 15
 

C.	 Individuals Who Did Not Elect the AFA After the First Retirement ........ 16
 

Part 53A5 Procedures ............................................. 19
 

Section 53A5.1-1 Election Requirements ............................ 19
 

A.	 Expedited AFA Process .................................... 19
 

B.	 AFA Election Letter ...................................... 19
 

C.	 Death of Annuitant ....................................... 20
 

Section 53A5.1-2 Advice to Employee .............................. 21
 

A.	 AFA Estimates .......................................... 21
 

B.	 Factors to Consider in Election of the AFA ........................ 21
 

C.	 Survivor Benefits ........................................ 22
 

Subchapter 53B FERS ................................................ 23
 

Part 53B1 General Information ....................................... 23
 

Section 53B1.1-1 Overview ..................................... 23
 

A.	 Introduction ............................................ 23
 

B.	 Organization of Subchapter .................................. 23
 

C.	 Applicable CSRS Provisions ................................. 23
 

D.	 Statement of Authority ..................................... 23
 

Part 53B2 Computation of the AFA for FERS Transferees With CSRS Component .... 24
 

Section 53B2.1-1 Computation of the Reduced Annuity .................. 24
 

A.	 General Rule ........................................... 24
 

B.	 AFA Computation Method .................................. 24
 

Section 53B2.1-2 Effect of Refund of CSRS Contributions on 

Computation of AFA ..................................... 27
 

A.	 Effect of Refund of CSRS Contributions ......................... 27
 

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Chapter 53
 

Subchapter 53C Job Aids and Examples .................................... 29
 

Part 53C1 Job Aids ............................................... 29
 

Section 53C1.1-1 CSRS Present Value Factors ........................ 29
 

Section 53C1.1-1 CSRS Present Value Factors ........................ 30
 

Section 53C1.1-2 FERS Present Value Factors for Regular Employees ........ 31
 

Section 53C1.1-2 FERS Present Value Factors for Regular Employees ........ 32
 

Section 53C1.1-3 FERS Present Value Factors for Law Enforcement Officers,
 

Firefighters, Air Traffic Controllers, Military Reserve Technicians Who
 

Retire Under 5 U.S.C. 8414(c) by Reason of Disability ............... 33
 

Section 53C1.1-3 FERS Present Value Factors for Law Enforcement Officers,
 

Firefighters, Air Traffic Controllers, Military Reserve Technicians Who
 

Retire Under 5 U.S.C. 8414(c) by Reason of Disability .............. 34
 

Section 53C1.1-4 Life Threatening Affliction or Other Critical Medical
 

Condition ............................................. 35
 

Section 53C1.1-7 Sample Form for AFA Computation for FERS Transferee
 

Part 53C2 Examples
 

Section 53C1.1-5 Sample Form for CSRS AFA Computation .............. 36
 

Section 53C1.1-6 Sample Form for FERS AFA Computation .............. 38
 

With a CSRS Component .................................. 40
 

Section 53C2.1-1 Example 1: CSRS Alternative Annuity Election .......... 37
 

Section 53C2.1-2 Example 2: FERS Alternative Annuity Election ........... 39
 

Section 53C2.1-3 Example 3: FERS Transferee With a CSRS Annuity
 

Component Alternative Annuity Election ........................ 41
 

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Chapter 53
 

 Part 53C3 Forms
 

Section 53C3.1-1 Special Tax Notice Regarding Rollovers (RI 37-22) ........ 45
 

Section 53C3.1-2 Alternative Annuity and Rollover Election 

Form (RI 38-122) ........................................ 51
 

Section 53C3.1-3 Alternative Annuity Election Information
 

For Employees (RI 38-123) ................................. 55
 

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Chapter 53
 

Subchapter 53A CSRS 

Part 53A1 General Information 

Section 53A1.1-1 Overview 

A.	 Introduction This subchapter covers the CSRS "Alternative Form of Annuity" (AFA) 

provisions that apply to employees whose annuities commence on or after 

October 1, 1994. Employees who elect the AFA when they retire receive, 

instead of the annuity otherwise payable, a reduced annuity including a 

survivor annuity option, plus a lump-sum payment equal to all of their 

retirement contributions. 

NOTE:	 Subchapter 53C, part 53C2 contains examples of the computation 

of the Alternative Form of Annuity. 

B. Topics Covered	 This subchapter covers: 

• The eligibility and election requirements to receive the alternative 

annuity; 

• The computation of the alternative annuity; 

• How dual eligibility for optional retirement and workers' compensation is 

affected by an alternative annuity election; and 

• Advice the agency should provide the employee about the effect of 

electing a reduced annuity and lump-sum payment. 

C.	 Organization of This subchapter has five parts. 

Subchapter 

Part Name of Part Page 

53A1 General Information 1 

53A2 Computation of the 

AFA

 5 

53A3 Miscellaneous 8 

53A4 AFA Computation for 

Reemployed Annuitants 11 

53A5 Procedures 15 

NOTE: Subchapter 53B about the Alternative Form of Annuity (AFA) 

under FERS begins on page 19. 

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Chapter 53
 

Section 53A1.1-1 Overview (Cont.) 

D.	 Statement of This subchapter is based on the laws and regulations cited below. 

Authority 

• United States Code: 5 U.S.C. 8343a 

• Public Law 103-66 section 11002 

• Code of Federal Regulations: 5 CFR Part 831, Subpart V 

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Chapter 53 

Section 53A1.1-2 Eligibility Requirements 

A.	 General As of October 1, 1994, the only employees who may elect the AFA are 

those who are eligible for a nondisability annuity and who have a lifethreatening affliction or other critical medical condition. See section 

53C1.1-4 for a listing of qualifying conditions. Employees who qualify for 

the AFA under this rule will receive only a single (100 percent) lump sum 

payment. 

B.	 Disability 

Retirees 

Employees who retire under the disability provisions are not eligible to 

elect AFA. 

NOTE:	 Nondisability retirees who elect the AFA may not apply for 

disability retirement after final adjudication of their annuity, that 

is, 30 days after the date they receive their first regular monthly 

payment. 

C. Court Order Bars	 An employee who is otherwise eligible to elect AFA may not do so if he or 

AFA Election	 she has a former spouse who is entitled by court order to a survivor annuity 

or a portion of the employee's annuity. The law prohibits election of the 

AFA even if the former spouse consents to the election. 

NOTE:	 A court-ordered former spouse benefit, issued in conjunction with 

a divorce decree that terminates a marriage after the retirement of 

an employee, but before the employee's claim is finally 

adjudicated, will not bar an AFA election. However, spousal 

consent to the election is still required. See paragraph F below. 

D.	 Spousal Consent The law requires that an employee married at the time of retirement may 

Requirement not elect the AFA unless the employee's spouse consents to the election. 

E.	 Waiver of OPM may waive the spousal consent requirement if the employee can 

Spousal Consent present: 

Requirement 

• A judicial determination that the whereabouts of the current spouse are 

unknown; or 

• Affidavits from the employee and two other persons acquainted with the 

spouse, at least one of whom is not related to the employee, stating that 

the current spouse's whereabouts cannot be determined and detailing all 

efforts to locate the spouse (Secondary evidence such as copies of the 

employee's separately filed tax returns should also be submitted.); or 

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Chapter 53 

Section 53A1.1-2 Eligibility Requirements (Cont.) 

E.	 Waiver of 

Spousal Consent 

Requirement 

(Cont.) 

F.	 AFA versus 

Voluntary 

Separation 

Incentive 

Payment (VSIP) 

• A judicial determination that spousal consent is not required based on 

exceptional circumstances. 

If a court determines that the spousal consent requirement should be waived 

based on exceptional circumstances, the court order must specify that: 

• The case before the court involves an employee who is retiring from 

Federal service; 

• The employee's spouse has been notified of an opportunity to be heard 

concerning the judicial determination; 

• The court has considered sections 8339(j)(1) or 8416(a)(2) of title 5, 

United States Code, and sections 831.608 or 842.607 of title 5, Code of 

Federal Regulations, as those sections relate to waiver of the spousal 

consent requirement; and 

• The court finds that exceptional circumstances do justify waiver of the 

spouse's consent. 

An employee may apply for the AFA based on a life-threatening affliction 

or other critical medical condition and also apply for the VSIP. In order to 

be eligible for the VSIP, an individual must resign or retire voluntarily, be 

an employee as defined by 5 U.S.C. section 2105, be serving under an 

appointment without time limitation, and have been currently employed for 

a continuous period of at least 12 months. The following are specifically 

excluded from eligibility for the VSIP: reemployed annuitants who are 

retired under CSRS, FERS, or another retirement system for employees of 

the Government, and employees having a disability on the basis of which 

the employee is or would be eligible for disability retirement under those 

retirement systems. The employing agency should determine if the 

employee's medical condition leading to the AFA eligibility also leads to 

eligibility for a disability annuity. This would be determined by clear 

evidence of a qualifying service deficiency (no longer able to provide useful 

and efficient service in his/her current grade). The evidence would include 

a less-than-fully-successful performance rating, unsatisfactory conduct 

and/or attendance. If there is no clear evidence of a qualifying service 

deficiency, the employee would be eligible for a VSIP even though he/she 

qualified for the AFA based on a life-threatening affliction or other critical 

medical condition. If there is clear evidence of a service deficiency, and the 

employee would be eligible for a disability annuity, then the employee is 

not eligible for the VSIP. 

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Chapter 53 

Part 53A2 Computation of the AFA 

Section 53A2.1-1 The Lump-Sum Payment 

A.	 Amounts An employee who elects the AFA will receive a lump-sum payment 

Included in the consisting of: 

Lump-Sum 

Payment • Unrefunded retirement deductions; 

• Civilian service credit deposits; 

• Military service credit deposits; and 

• Interest on any unrefunded deductions and deposits made before 1957. 

NOTE:	 The lump-sum payment does not include deductions made after the 

employee reaches the maximum annuity. See Chapter 50, 

Computation of Annuity Under the General Formula, section 

50A3.1-2. 

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Chapter 53 

Section 53A2.1-2 Computation of the Reduced Annuity 

A.	 General The computation of the reduction for election of the AFA is based on the 

employee's age at the time of retirement, and the amount of the employee's 

"lump-sum credit" (see paragraph B, below). The reduction is designed so 

that the amount of the AFA -- reduced annuity plus lump-sum payment -- is 

actuarially equivalent to the regular annuity that otherwise would be payable 

over the employee's lifetime. 

B.	 Definition of The lump-sum credit is the total of the amounts included in the lump-sum 

Lump-Sum payment (see section 53A2.1-1A) plus the amounts of any deposits and 

Credit redeposits that are deemed paid (see paragraph E, below). 

C. Present Value	 Present value factors are used to determine the reduction that is applied to 

Factor	 the regular annuity of retirees who elect the AFA. The factors are unisex 

and are obtained by averaging sex-distinct present value factors, weighted 

by the total dollar value of annuities typically paid to new retirees at each 

age. 

NOTE:	 See subchapter 53C, section 53C1.1-1 for the present value factors 

for CSRS employees. 

D.	 AFA To compute the alternative form of annuity, follow these instructions. 

Computation 

Method 1. Compute the annual annuity otherwise payable. Include any applicable 

reductions for age and survivor benefits, but compute the annuity as if 

any unpaid redeposits or deposits for civilian service have been paid. 

2.	 Determine the monthly annuity otherwise payable by dividing the 

annual annuity determined in step 1 by 12 and rounding down. 

3.	 Compute the monthly AFA reduction by dividing the retiree's 

lump-sum credit by the present value factor for the retiree's attained 

age in full years at the time of retirement. 

NOTE 1:	 "Attained age" is the retiree's age on the date the annuity 

commences. 

NOTE 2:	 Unless the product obtained in step 3 is an exact dollar 

amount, round up to the next higher dollar to obtain the 

monthly AFA reduction. 

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Chapter 53
 

Section 53A2.1-2 Computation of the Reduced Annuity (Cont.)
 

D.	 AFA 

Computation 

Method (Cont.) 

E. Deemed Deposits 

and Redeposits 

4.	 Subtract the monthly AFA reduction computed in step 3 from the 

monthly annuity computed in step 2 to obtain the monthly annuity 

reduced for AFA. 

NOTE 1:	 All COLA's subsequent to retirement are applied to the 

AFA-reduced annuity rate. 

NOTE 2:	 See section 53C2.1-1, for an example of a CSRS 

computation of the alternative form of annuity. 

NOTE 3:	 The reduction in the employee's annuity does not affect 

any survivor benefit elected. The survivor benefit will 

be based on the unreduced annuity. 

If an employee owes any redeposits or deposits for civilian service and 

elects the AFA, the redeposits and deposits are deemed to have been paid in 

computing the employee's annuity. The total of all deemed deposits and 

redeposits are included in the employee's lump-sum credit for purposes of 

computing the amount of the AFA annuity reduction. 

NOTE 1:	 If the employee is covered by CSRS or by FERS with a CSRS 

component, and the employee received a refund of CSRS 

contributions for a period of service that ended before 

October 1, 1990, he or she will be allowed credit for that 

service, subject to an actuarial reduction in the annuity, without 

paying a redeposit. If the employee elects an alternative 

annuity under those circumstances, the amount of the redeposit 

is not considered a "deemed" redeposit, and is not included in 

the amount of the lump-sum payment reported to IRS. 

NOTE 2:	 Post-1956 military service credit deposits are not deemed made 

under the AFA provisions. They must be paid to the 

employing agency before separation. 

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Chapter 53 

Part 53A3 Miscellaneous 

Section 53A3.1-1 Taxation of Alternative Annuity Lump Sums 

A. Tax Status of the 

AFA 

Annuities and lump-sum payments are taxable under the "General Rule" 

outlined in IRS Publication 721, "Comprehensive Tax Guide to U.S. Civil 

Service Retirement Benefits." The General Rule must be followed to 

calculate the taxable portion of the lump-sum payment of the AFA. Most 

of the lump-sum credit received is taxable income under Federal tax law. 

However, a portion is excludable income. For tax purposes, the lump-sum 

credit includes deemed deposits and redeposits. However, see section 

53A2.1-2E, Note 1, concerning refunded service that ended before 

October 1, 1990. 

The taxable portion of the AFA lump sum is eligible to be rolled over into 

an IRA under provisions of Public Law 102-318. If the benefits are not 

rolled over by OPM into an IRA, 20 percent is withheld for Federal income 

tax. The withholding rate for these benefits cannot be changed. (See 

Special Tax Notice Regarding Rollovers (RI 37-22), Section 

53C3.1-1, for information about rollovers.) 

B.	 Estimating the To estimate the tax-free amount: 

Tax Free Amount 

of the Lump Sum 1. Divide the amount of the AFA reduction in the annual annuity by the 

annual annuity without the AFA reduction; and 

2.	 Multiply the amount obtained in step 1 by the lump-sum credit. 

EXAMPLE: Bill Brackin was 55 years old when he retired in 1998. His 

monthly annuity before reduction for AFA is $2,300. His total lump-sum 

credit is $34,000. He owes a redeposit of $1,700. Estimate the tax-free 

amount of lump-sum payment as follows. 

(a)	 Multiply the unreduced monthly rate of annuity by 12 to obtain the 

annual unreduced annuity ($2,300 x 12 = $27,600). 

(b)	 Divide the lump-sum credit, including the deemed redeposit, by the 

Present Value Factor (see section 53C1.1-1) ($35,700 ÷ 208.5 = 

$171.22, rounded to $172) and multiply by 12 ($172 x 12 = $2,064) 

to obtain the annual amount of AFA annuity reduction. 

NOTE: The Present Value Factor for age 55 in 1998 was 208.5. 

(c)	 Divide the annual amount of the AFA annuity reduction ($2,064 in 

this case) by the annual unreduced annuity to obtain the percentage of 

the lump-sum credit that is tax free ($2,064 ÷ $27,600 = 0.07). 

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Chapter 53
 

Section 53A3.1-1 Taxation of Alternative Annuity Lump Sums (Cont.) 

(d)	 Multiply the lump-sum credit, including the deemed redeposit, by 

0.07. The result is the estimated tax-free amount of the lump sum 

($35,700 x 0.07 = $2,499). 

C.	 Tax Liability 

When AFA Lump 

Sum Returned to 

OPM 

The Internal Revenue Service has ruled on the Federal income tax 

implications if the lump-sum portion of the AFA has been paid to a retiree, 

and the retiree subsequently repays that amount to OPM. Once a retiree 

has elected the AFA, and the lump sum is paid, the individual has incurred 

a tax liability for the payment, and that tax liability is not altered by 

subsequent repayment to OPM. A circumstance likely to require such a 

repayment is an award of compensation benefits by the Department of 

Labor, Office of Workers' Compensation Programs (OWCP). See section 

53A3.1-2 for more information about the effect of OWCP eligibility on the 

AFA. 

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Chapter 53 

Section 53A3.1-2 Dual Eligibility for Retirement and OWCP Compensation 

A.	 How Election of Election of the AFA affects eligibility for non-scheduled OWCP 

the AFA May compensation. If a retiree is receiving OWCP compensation or has an 

Affect OWCP OWCP claim pending, he or she must be aware of the following 

Benefits information provided by the Office of Workers' Compensation Programs. 

1.	 The Federal Employees' Compensation Act (FECA) prohibits 

"concurrent payments of compensation benefits and other remuneration 

from the Federal Government." The alternative form of annuity 

lump-sum payment, as part of the retirement benefit, constitutes such 

remuneration. 

2.	 If an individual is entitled to non-scheduled compensation for a 

job-related injury or illness under the FECA, he or she cannot receive 

both the lump-sum payment portion of the AFA and the non-scheduled 

compensation. 

3.	 If an individual receives the AFA lump-sum payment, and then elects 

OWCP non-scheduled compensation, all monies received from the 

Civil Service Retirement System (that is, the sum of all regular annuity 

payments plus the lump-sum payment) must be repaid to OPM before 

the individual can receive the non-scheduled compensation payments. 

B.	 Effect of 

Reinstatement of 

a Regular 

Retirement 

Annuity 

An individual who has applied for a retirement annuity may elect to receive 

non-scheduled OWCP compensation benefits in lieu of the annuity. If, at a 

later date, that individual chooses to reinstate the Civil Service retirement 

benefits (if compensation benefits are reduced or terminated), he or she is 

eligible to receive only the regular annuity benefit. He or she does not have 

a new opportunity to elect the AFA. The AFA, with the lump-sum 

payment is, by law, available only at the time of retirement. 

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Chapter 53 

Part 53A4 AFA Election > for Annuitants Who Are Reemployed < 

Section 53A4.1-1 Status of Previous AFA Election Upon Reemployment 

A.	 General Rule The AFA lump sum does not have to be repaid upon reemployment. When 

a retiring employee elects to take the alternative form of annuity, he agrees 

to a lifetime reduction in his annuity. If an annuitant is reemployed and has 

a new annuity right upon separation, the new annuity will be subject to a 

reduction based on the old AFA election. 

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12 CSRS Alternative Annuity Elections 

Chapter 53 

Section 53A4.1-2 The Lump-Sum Credit 

A.	 Definition For the purposes of part 53A4, lump-sum credit is defined as follows. 

1.	 For > an individual < who elected the AFA at his or her first 

retirement, the lump-sum credit is equal to any amount paid to the 

Fund during reemployment. 

2.	 For > an individual < who did not elect the AFA at his or her first 

retirement, the lump-sum credit is equal to: 

• Any amount paid to the Fund during reemployment; plus 

• The lump-sum credit attributable to service performed before the 

individual's first retirement reduced by any annuity payments received 

between the first retirement and reemployment. The lump-sum credit 

is not diminished by annuity payments made during reemployment, 

except during periods when the Fund is not reimbursed by the 

employing agency (for example, a period of nonduty under an 

intermittent appointment). 

3.	 The lump-sum credit does not include retirement deductions made after 

an individual reaches the maximum annuity (see Chapter 50, section 

50A3.1-2). 

April, 1998	 CSRS and FERS Handbook 
 CSRS Alternative Annuity Elections
 13 

Chapter 53
 

Section 53A4.1-3 Eligibility Requirements 

A. General 

Requirements 

An > individual < who meets all the requirements for > a new or 

redetermined annuity is eligible to elect the Alternative Form of Annuity if 

he or she meets the requirements in section 53A1.1-2. (For new or 

redetermined annuities that commence on or after October 1, 1994, the 

individual must have a life-threatening illness or other critical medical 

condition to qualify.) < A reemployed annuitant who is entitled only to a 

supplemental annuity after reemployment ends may not elect an AFA, and 

will not receive payment of deductions paid during the reemployment. 

NOTE:	 See Handbook Chapter 100, Reemployed Annuitants, for 

eligibility requirements for a redetermined annuity. 

CSRS and FERS Handbook	 April, 1998 
 

14 CSRS Alternative Annuity Elections 

Chapter 53 

Section 53A4.1-4 Computation of the AFA > After Reemployment Ends < 

A.	 Individuals Who 

Elected the AFA 

At Their First 

Retirement And 

Who Are Not 

Eligible to Elect 

Another AFA 

Benefit When 

Their 

Reemployment 

Ends 

To compute the reduction in the > new or redetermined < annuity for an 

individual who elected the AFA at his or her first retirement, and who is 

not eligible to elect another AFA benefit when reemployment ends, increase 

the reduction that was made at the time of the individual's first retirement 

by all COLA's the individual received or would have received if the annuity 

had continued during reemployment, since the original retirement. 

> EXAMPLE: On September 1, 1992, Paul Hanson began receiving an 

annuity based on an involuntary separation. He elected the AFA and his 

annuity was reduced by $100 per month. He was reemployed in 1996 in a 

position covered by retirement deductions and his annuity stopped. Paul 

retired again in May of 1998 when he turned age 60, and was not eligible to 

elect another AFA benefit. Paul's new monthly annuity rate equalled 

$1,000 before the reduction based on his prior AFA election. The COLA's 

that Paul received, or would have received if his annuity had continued 

during reemployment, were as follows: 

December 1, 1992: 0.8% (The full COLA paid in December 1992 

was 3%. However, Paul's COLA was prorated since he was only on the 

annuity rolls for 3 months prior to that COLA. 

3/12 x 3% = 0.8%) 

December 1, 1993: 2.6% (Delayed until March 1, 1994) 

December 1, 1994: 2.8% (Delayed until March 1, 1995) 

December 1, 1995: 2.6% (Delayed until March 1, 1996) 

December 1, 1996: 2.9% 

December 1, 1997: 2.1% 

The reduction to his new annuity as the result of his prior AFA election 

(which reduced his original annuity by $100) is computed as follows: 

December 1, 1992: $100 x 0.8% = $0.80 - round up to $1.00 

December 1, 1993: $101 x 2.6% = $2.63 - round up to $3.00 

December 1, 1994: $104 x 2.8% = $2.91 - round up to $3.00 

December 1, 1995: $107 x 2.6% = $2.78 - round up to $3.00 

December 1, 1996: $110 x 2.9% = $3.19 - round up to $4.00 

December 1, 1997: $114 x 2.1% = $2.39 - round up to $3.00 

The monthly reduction in this example ($100) increased by Civil Service 

COLA's since September 1992 equals $117.00. Paul Hanson's new 

monthly annuity after the adjustment for his prior AFA election equals 

$883.00. ($1,000 - $117 = $883) < 

April, 1998	 CSRS and FERS Handbook 
 CSRS Alternative Annuity Elections
 15 

Chapter 53
 

Section 53A4.1-4 Computation of the AFA After Reemployment Ends (Cont) 

B.	 Individuals Who 

Elected the AFA 

After the First 

Retirement And 

Who Are Eligible 

to Elect Another 

AFA Benefit 

When Their 

Reemployment 

Ends 

To compute the reduction in the > new or redetermined < annuity for an 

individual who elected the AFA at his or her first retirement, and who is 

eligible to elect the AFA when reemployment ends, add 1 and 2 below. 

1.	 The reduction that was made at the time of the > individual's < first 

retirement, increased by all COLA's the > individual received, or 

would have received if the annuity had continued during 

reemployment, since the original < retirement; plus 

2.	 A reduction based on the additional lump-sum credit accumulated 

during the reemployment, using the appropriate present value factor for 

the individual's age when the > new or redetermined < annuity 

begins. 

> EXAMPLE: On September 1, 1992, Jack Johnson began receiving an 

annuity based on an involuntary separation. He elected the AFA and his 

annuity was reduced by $100 per month. His annuity stopped in 1993 

when he was reemployed in a career position. He retired again in May 

1998, at the age of 60 when he found out he had a life threatening medical 

condition. He again elected the AFA. His lump sum credit based on his 

reemployment equalled $10,000. Jack's new monthly annuity rate before 

the AFA adjustment equalled $1,000. 

(a)	 The reduction that was made at the time of Jack's first retirement 

($100) increased by all the COLA's he received, or would have 

received had his annuity continued during reemployment, equals 

$117.00. (See example in section A above.) 

(b)	 The reduction based on the additional lump-sum credit accumulated 

during his reemployment ($10,000) equals $54. 

$10,000 ÷ 186.1 = $54 ($53.74 rounded to the higher dollar)
 

(c)	 The total reduction based on the previous and current AFA elections 

equals $171 ($117 + $54). Subtract this amount from the annuity 

otherwise payable ($1,000) to obtain the new monthly annuity reduced 

for the AFA ($829). 

$1,000 - $171 = $829 < 

CSRS and FERS Handbook	 April, 1998 
16 CSRS Alternative Annuity Elections 

Chapter 53 

Section 53A4.1-4 Computation of the AFA After Reemployment Ends (Cont) 

C.	 Individuals Who 

Did Not Elect the 

AFA After the 

First Retirement 

If the individual elects the AFA after separation from reemployment, but 

did not elect the AFA at the time of his or her first retirement, the new 

annuity is reduced in the same manner as for a new retiree. However, as 

noted in section 53A4.1-2, any lump-sum credit derived from service 

performed before the annuitant's first retirement is reduced by any annuity 

payments received between that retirement and the reemployment. 

April, 1998	 CSRS and FERS Handbook 
 CSRS Alternative Annuity Elections 17 

Chapter 53 

Part 53A5 Procedures 

Section 53A5.1-1 Election Requirements 

A. Expedited AFA 

Process 

To expedite the AFA process for those employees in a position to make 

AFA and rollover decisions at the time they apply for retirement, the 

elections may be made before retirement based on the information provided 

by the employing agency. This permits OPM to authorize payment of the 

lump sum sooner. Eligible employees who complete the Alternative 

Annuity and Rollover Election Form, RI 38-122, at this time will receive 

their lump sums at least 30 days earlier than those who choose the current 

process described in paragraph B, below. 

Employees should read both Alternative Annuity Election Information for 

Employees (Form RI 38-123) and Special Tax Information for Employees 

(Form RI 37-22) before completing the election form. 

The employee should attach a doctor's certification of his or her medical 

condition to the alternative annuity election. OPM will determine eligibility 

for the alternative annuity benefit. OPM does not make eligibility 

determinations before the employee separates or applies for immediate 

retirement. 

After the employee makes the election and returns Form RI 38-122 to the 

personnel office, the form is to be stapled to the back of the retirement 

application. The application will then be processed as usual. 

B. AFA Election 

Letter 

If the employee does not make a pre-retirement election, but requests the 

AFA, OPM sends an election letter to the employee after it receives the 

individual's retirement records from the employing agency. The AFA 

election letter presents three options. 

Option 1: The regular annuity rates that the retiree and spouse are entitled 

to. 

Option 2: The amount the retiree is entitled to if he or she has ever 

received a refund of Civil Service retirement deductions, or has 

performed nondeduction service on or after October 1, 1982, 

and elects to pay the amount owed to get credit for those 

periods. The amount owed, including interest, is also shown 

on the form. 

Option 3: The amount the retiree is entitled to if he or she chooses a 

reduced alternative annuity rate. If the retiree chooses this 

option, he or she will receive the monthly rate shown on the 

CSRS and FERS Handbook April, 1998 
18 CSRS Alternative Annuity Elections 

Chapter 53 

Section 53A5.1-1 Election Requirements (Cont.) 

B.	 AFA Election form plus a refund equal to all Civil Service retirement 

Letter (Cont.) contributions. 

A retiree has 30 days to make an election. Unless the election is received, 

OPM will take no action until the 30-day time limit has expired. If the 

election is not returned to OPM within 30 days, the individual's retirement 

will be processed under Option 1. 

If the retiree elects the AFA, OPM will send rollover information with his 

or her annuity estimate for the retiree to make the rollover election and 

return the RI 38-22 to OPM. 

NOTE:	 If the retiree elects Option 1 or does not return the form within 30 

days, and OPM has begun processing under Option 1, the retiree 

can still elect the AFA so long as he or she notifies OPM of the 

election on or before the date of final adjudication (that is, 30 days 

after the date of the first regular monthly payment). 

C. Death of 

Annuitant 

1. Except as provided in paragraph 2 below, if an annuitant is eligible to 

elect the AFA and dies before the date of final adjudication (that is, 30 

days after the date of the first regular monthly payment), regardless of 

whether or not the annuitant had elected the AFA and/or survivor 

benefits: 

• An affirmative election of the alternative annuity is deemed made; 

• The lump-sum credit will be paid in accordance with the order of 

precedence; and 

• An election of a fully reduced annuity to provide a current spouse 

annuity is deemed made, even if the annuitant had elected a lesser 

benefit. 

2. If an annuitant described in paragraph 1 above had made an election to 

provide a survivor annuity for a former spouse, that election will be 

honored and the lump-sum credit will be paid in accordance with the 

order of precedence. 

April, 1998	 CSRS and FERS Handbook 
 CSRS Alternative Annuity Elections
 19 

Chapter 53
 

Section 53A5.1-2 Advice to Employee 

A.	 AFA Estimates Agencies should anticipate that employees who have life-threatening 

medical conditions and who are eligible to retire under a nondisability 

provision will want estimates of the amount to expect if they elect the AFA. 

The following information applies to the AFA estimates. 

1.	 If an employee's entire civilian service (without breaks) has been with 

the current employing agency, that agency has a complete record of 

retirement deductions for use in estimating the AFA benefit. OPM 

does not provide pre-retirement annuity estimates. 

2.	 If an employee has made service credit deposits or has retirement 

deductions for service prior to that at the current employing agency, he 

or she must furnish the approximate amounts of those deposits or 

deductions from personal records for use in estimating the AFA rate. 

3.	 If the amount of deposits and deductions are not available from 

personal records, the employee may request this information from 

OPM at the address given below. The employee should provide his or 

her full name, date of birth, Social Security number, and service credit 

deposit account number (CSD), if any. 

Office of Personnel Management 

Retirement Operations Center 

Boyers, PA 16017 

NOTE: Employees should allow at least 30 days for processing. 

B.	 Factors to It is important that an employee consider the following factors before 

Consider in electing the AFA. 

Election of the

AFA 1. The amount by which the monthly annuity will be reduced. 

2.	 The effect of receiving the lump-sum payment on Federal and State 

taxes. 

CSRS and FERS Handbook	 April, 1998 
20 CSRS Alternative Annuity Elections 

Chapter 53 

Section 53A5.1-2 Advice to Employee (Cont.) 

B. Factors to 

Consider in 

Election of the 

AFA (Cont.) 

3. The effect on deposits and redeposits owed for civilian service: 

• Principal and interest of deposits and redeposits owed will be 

deemed paid if the AFA is elected (except for redeposits based on 

refunded service that ended before October 1, 1990, as explained in 

section 53A2.1-2E, NOTE 1, and military service deposits); 

• Deposit and redeposit service will be fully credited for eligibility and 

computation purposes; and 

• The deemed deposits and redeposits will not be paid to the employee 

in the lump-sum payment but will be considered in the reduction of 

the annuity and for Federal and State tax purposes (see section 

53A3.1-1). 

4. The AFA election does not affect survivor elections or amount of 

survivor benefits. See paragraph D below. 

C.	 Survivor Benefits The amount of the survivor annuity elected at time of retirement is not 

affected by the election of the AFA. The amount of the survivor annuity 

(and reduction in annuity for electing survivor annuity) is based on the 

retiree's annuity before reduction for the AFA. 

Children's survivor benefits are not affected by the election of the AFA. 

April, 1998	 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 21 

Chapter 53 

Subchapter 53B FERS 

Part 53B1 General Information 

Section 53B1.1-1 Overview 

A.	 Introduction Subchapter 53B covers the benefits available to employees who elect the 

alternative form of annuity (AFA) under FERS. 

This subchapter explains how FERS differs from CSRS. It refers readers to 

the established parallel procedure or gives the FERS rule if it is different. 

B.	 Organization of This subchapter has two parts. 

Subchapter 

Part Name of Part Page 

53B1 General Information 19 

53B2 Computation of the AFA for FERS 

Transferees With a CSRS Component 20 

C.	 Applicable CSRS 

Provisions 

D.	 Statement of 

Authority 

Except as noted below, subchapter 53A under CSRS applies to AFA 

elections for FERS employees. See part 53B2 for information about FERS 

transferees. 

EXCEPTION: The present value factors for employees under FERS and 

FERS transferees are different from the CSRS present 

value factors. 

NOTE 1:	 See sections 53C2.1-2 and 53C2.1-3 for examples of FERS 

computations of the alternative form of annuity. 

NOTE 2:	 See subchapter 53C, section 53C1.1-2 for the present value 

factors for regular FERS employees and section 53C1.1-3 for 

law enforcement officers, firefighters, air traffic controllers and 

military reserve technicians. 

This subchapter is based on the laws and regulations cited below. 

• United States Code: 5 U.S.C. 8420a 

• Public Law 103-66, section 11002 

• Code of Federal Regulations: 5 CFR Part 842, Subpart G 

CSRS and FERS Handbook	 April, 1998 
22 Alternative Annuity Elections	 FERS 

Chapter 53 

Part 53B2 Computation of the AFA for FERS Transferees With CSRS Component 

Section 53B2.1-1 Computation of the Reduced Annuity 

A.	 General Rule The computation method for determining the reduced annuity for election of 

the AFA for FERS transferees with a CSRS component is very similar to 

the computation method for CSRS and FERS employees. However, a 

separate CSRS or FERS AFA reduction factor is applied to each component 

of the annuity to obtain the combined monthly annuity reduced for electing 

the AFA. 

B. AFA 

Computation 

Method 

To compute the alternative form of annuity for FERS transferees with a 

CSRS component, use the following method. 

Step 1: Compute the combined monthly annuity otherwise payable. 

a. Compute the combined annual annuity, including any applicable 

reduction for age. However, compute the annuity as if any unpaid 

redeposits and deposits for civilian service have been paid. 

b. If applicable, multiply the combined annual annuity determined in 

step 1a by the reduction factor for election of survivor benefits. The 

reduction factor is .90 if the full annuity is used as the base or .95 if 

one-half of the annuity is used as the base. 

c. Determine the combined monthly annuity otherwise payable by 

dividing the combined annual annuity reduced for survivor benefits 

by 12 and round down. 

Step 2: Compute the CSRS portion of the monthly annuity. 

a. Compute the CSRS portion of the annual annuity otherwise payable. 

b. If applicable, multiply the CSRS portion of the annual annuity by the 

reduction factor for election of survivor benefits to obtain the CSRS 

portion of the annual annuity reduced for survivor benefits. The 

reduction factor is .90 if the full annuity is used as the base or .95 if 

one-half of the annuity is used as the base. 

c. Determine the CSRS portion of the monthly annuity reduced for 

survivor benefits by dividing the CSRS portion of the annual annuity 

reduced for survivor benefits by 12, and round down. 

April, 1998	 CSRS and FERS Handbook 
Alternative Annuity Elections	 FERS 23 

Chapter 53 

Section 53B2.1-1 Computation of the Reduced Annuity (Cont.) 

B.	 AFA Step 3: Compute the FERS portion of the monthly annuity reduced for 

Computation survivor benefits. 

Method (Cont.) 

a.	 Subtract the CSRS portion of the monthly annuity reduced for 

survivor benefits determined in step 2c from the combined monthly 

annuity reduced for survivor benefits determined in step 1c to obtain 

the FERS portion of the monthly annuity reduced for survivor 

benefits. 

Step 4: Compute the combined monthly annuity reduced for AFA. 

a.	 Compute the CSRS monthly AFA reduction by dividing the retiree's 

CSRS lump-sum credit (including any deemed deposits and 

redeposits) by the CSRS present value factor for the retiree's 

attained age (in full years) at the time of retirement. 

NOTE:	 Unless the product obtained is an exact dollar amount, 

round up to the next higher dollar to obtain the monthly 

reduction in annuity. 

EXAMPLE: $192.00 would not be rounded. 

$192.10 would be rounded to $193.00. 

b.	 Subtract the CSRS monthly AFA reduction computed in step 4a 

from the CSRS portion of the monthly annuity reduced for survivor 

benefits computed in step 2c to obtain the CSRS portion of the 

monthly annuity reduced for AFA. 

c.	 Compute the FERS monthly AFA reduction by dividing the retiree's 

FERS lump-sum credit including any deemed deposits and 

redeposits by the FERS present value factor for the retiree's attained 

age in full years at the time of retirement. Round up to the next 

higher dollar as illustrated in step 4a. 

d.	 Subtract the FERS monthly AFA reduction computed in step 4c 

from the FERS portion of the monthly annuity reduced for survivor 

benefits computed in step 3a to obtain the FERS portion of the 

monthly annuity reduced for AFA. 

CSRS and FERS Handbook	 April, 1998 
24 Alternative Annuity Elections FERS 

Chapter 53
 

Section 53B2.1-1 Computation of the Reduced Annuity (Cont.)
 

B. AFA 

Computation 

Method (Cont.) 

e. Add the FERS portion of the monthly annuity reduced for AFA 

determined in step 4d and the CSRS portion of the monthly annuity 

reduced for AFA determined in step 4b to obtain the combined 

monthly annuity reduced for AFA. 

NOTE 1: All applicable COLA's subsequent to retirement are applied to 

the AFA-reduced rate. Each component of a FERS transfer 

case is updated separately for COLA's. See Chapter 2, Cost of 

Living Adjustments, section 2B4.1-1, regarding COLA's for 

FERS transferees with a CSRS component. 

NOTE 2: See section 53C2.1-3 for an example of the computation of the 

AFA for a FERS transferee with a CSRS annuity component. 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 25 

Chapter 53 

Section 53B2.1-2 Effect of Refund of CSRS Contributions on Computation of AFA 

A.	 Effect of Refund 

of CSRS 

Contributions 

An employee who transfers to FERS and later separates from service before 

becoming eligible for an immediate annuity may, if the employee has title 

to a CSRS annuity component, choose to take a refund of his or her CSRS 

contributions only, leaving FERS contributions in the retirement fund. 

Such former employees retain title to a FERS deferred annuity and may 

redeposit the CSRS contributions without returning to Federal service. The 

redeposit may be made at any time before OPM completes processing the 

individual's application for deferred annuity. The redeposit, however, 

cannot be deemed paid if the individual elects the AFA; a refund of 

CSRS contributions paid after an employee transfers to FERS can be 

redeposited only by actual payment to OPM of the amount due, unless the 

individual is reemployed before applying for a deferred annuity, and later 

qualifies for an immediate annuity. (See Handbook Chapter 45, Deferred 

Retirement, for additional information.) 

NOTE: The exception to the rule stated above is that if the refunded CSRS 

service was based on service ending before October 1, 1990, the 

employee will receive credit for the service without making a 

redeposit. See section 53A2.1-2E, NOTE 1. 

CSRS and FERS Handbook	 April, 1998 
Age at Reduction 

Retirement Factor 

66 156.0 

67 150.7 

68 

69 140.2 

70 134.7 

71 129.4 

72 124.0 

73 118.8 

74 113.6 

75 108.5 

76 103.5 

77 98.7 

78 93.9 

79 89.4 

80 84.9 

81 80.5 

82 76.3 

83 72.3 

84 68.4 

85 64.7 

86 61.2 

87 57.9 

88 54.7 

89 51.8 

90 48.9 

26 CSRS Alternative Annuity Elections 

Chapter 53 

Subchapter 53C Job Aids and Examples 

Part 53C1 Job Aids 

Section 53C1.1-1 

CSRS 

PRESENT VALUE FACTORS 

(Effective 10-1-94 through 9-30-97) 

Age at Reduction 

Retirement Factor 

40 294.4 

41 290.0 

42 285.5 

145.4 

43 280.8 

44 276.2 

45 270.4 

46 264.7 

47 259.2 

48 253.5 

49 247.2 

50 240.4 

51 235.0 

52 229.8 

53 224.4 

54 218.6 

55 212.6 

56 207.5 

57 202.4 

58 197.0 

59 192.3 

60 188.3 

61 182.9 

62 177.0 

63 171.9 

64 166.5 

65 161.1 

April, 1998 CSRS and FERS Handbook 
 Age at Reduction

Retirement Factor 

 40 271.2

 41 267.1 

 42 263.3

 43 259.9

 44 256.5 

 45 252.5

 46 248.4

 47 244.4

 48 240.2

 49 235.8

 50 230.9

 51 226.7

 52 222.6

 53 218.2

 54 213.5

 55 208.5

 56 204.0

 57 199.4

 58 194.7

 59 190.2

 60 186.1

 61 181.2

 62 176.0

 63 171.3

 64 166.4

 65 161.5 

CSRS Alternative Annuity Elections 27 

Chapter 53 

Section 53C1.1-1 

CSRS 

PRESENT VALUE FACTORS 

(Effective 10-1-97)

 Age at Reduction 

Retirement Factor

 66 156.8

67 152.0

 68 147.1

 69 142.3

70 137.1

 71 131.9

 72 126.7

 73 121.5

 74 116.2

 75 111.0

 76 105.9

 77 100.8

 78 95.8

 79 90.9

 80 86.2

 81 81.6

 82 77.1

 83 72.8

 84 68.7

 85 64.7

 86 61.0

 87 57.4

 88 54.1

 89 50.9

 90 47.9

CSRS and FERS Handbook April, 1998 
28 Alternative Annuity Elections 

Chapter 53 

FERS 

Section 53C1.1-2 

FERS 

PRESENT VALUE FACTORS 

FOR REGULAR EMPLOYEES 

(Effective 10-1-94 to 9-30-97)

 Age at Reduction

Retirement Factor 

 40 169.2

 41 168.8 

 42 168.4

 43 168.1

 44 167.7 

 45 166.9

 46 166.1

 47 165.4

 48 164.7

 49 163.4

 50 162.4

 51 161.9

 52 161.6

 53 161.2

 54 160.6

 55 160.0

 56 160.0

 57 160.2

 58 160.4

 59 161.2

 60 162.7

 61 163.5

 62 161.3

 63 157.1

 64 152.5

 65 148.0 

Age at Reduction 

Retirement Factor

66 143.6

 67 139.1

68 134.6

 69 130.1

 70 125.4

 71 120.7

 72 116.0

 73 111.4

 74 106.8

 75 102.2

 76 97.8

 77 93.5

 78 89.2

 79 85.0

 80 80.9

 81 77.0

 82 73.1

 83 69.4

 84 65.8

 85 62.4

 86 59.1

 87 56.0

 88 53.0

 89 50.2

 90 47.5

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 29 

Chapter 53 

Section 53C1.1-2 

FERS 

PRESENT VALUE FACTORS 

FOR REGULAR EMPLOYEES 

(Effective 10-1-97)

 Age at Reduction

Retirement Factor 

 40 167.4

 41 166.7 

 42 166.2

 43 166.0

 44 165.9 

 45 165.5

 46 165.1

 47 164.8

 48 164.6

 49 164.1

 50 163.5

 51 163.4

 52 163.3

 53 163.2

 54 162.9

 55 162.5

 56 162.6

 57 162.8

 58 162.9

 59 163.5

 60 164.5

 61 165.2

 62 160.0

 63 155.6

 64 151.3

 65 147.0 

Age at Reduction 

Retirement Factor

66 142.7

 67 138.4

68 134.0

 69 129.5

 70 125.0

 71 120.4

 72 115.7

 73 111.1

 74 106.4

 75 101.7

 76 97.1

 77 92.6

 78 88.1

 79 83.8

 80 79.5

 81 75.4

 82 71.4

 83 67.6

 84 64.0

 85 60.4

 86 57.1

 87 53.9

 88 50.9

 89 48.0

 90 45.2

CSRS and FERS Handbook April, 1998 
30 Alternative Annuity Elections FERS 

Chapter 53 

Section 53C1.1-3 

FERS
 

PRESENT VALUE FACTORS
 

FOR LAW ENFORCEMENT OFFICERS
 

FIREFIGHTERS
 

AIR TRAFFIC CONTROLLERS
 

MILITARY RESERVE TECHNICIANS WHO RETIRE UNDER
 

5 U.S.C. 8414(c) BY REASON OF DISABILITY
 

(Effective 10-1-94 to 9-30-97)
 

Age at Reduction 

Retirement Factor 

40 245.2 

41 241.9 

42 238.5 

43 235.0 

44 231.5 

45 227.9 

46 224.2 

47 220.3 

48 216.5 

49 212.6 

50 208.6 

51 204.5 

52 200.3 

53 196.1 

54 191.8 

55 187.4 

56 183.1 

57 178.6 

58 174.2 

59 169.7 

60 165.1 

61 160.4 

April, 1998 CSRS and FERS Handbook 
Section 53C1.1-3 

Alternative Annuity Elections FERS 31 

Chapter 53 

FERS
 

PRESENT VALUE FACTORS
 

FOR LAW ENFORCEMENT OFFICERS
 

FIREFIGHTERS
 

AIR TRAFFIC CONTROLLERS
 

MILITARY RESERVE TECHNICIANS WHO RETIRE UNDER
 

5 U.S.C. 8414(c) BY REASON OF DISABILITY
 

(Effective 10-1-97)
 

Age at Reduction 

Retirement Factor 

40 236.4 

41 233.0 

42 230.0 

43 227.4 

44 224.7 

45 221.9 

46 219.0 

47 216.1 

48 213.1 

49 210.0 

50 206.8 

51 203.5 

52 200.1 

53 196.5 

54 192.8 

55 188.9 

56 185.0 

57 181.0 

58 176.9 

59 172.7 

60 168.5 

61 164.3 

CSRS and FERS Handbook April, 1998 
32 CSRS Alternative Annuity Elections FERS 

Chapter 53 

Section 53C1.1-4 

LIFE-THREATENING AFFLICTION OR OTHER CRITICAL MEDICAL CONDITION 

The existence of one of the following medical conditions is prima facie evidence of a life threatening 

affliction or other critical medical condition. 

Metastatic and/or inoperable neoplasms. 

Aortic stenosis (moderate - severe). 

Class IV cardiac disease with congestive heart failure. 

Respiratory failure. 

Cor pulmonale with respiratory failure. 

Emphysema with respiratory failure. 

Ventricular tachycardia. 

Severe cardiomyopathy. 

Aplastic anemia. 

Uncontrolled hypertension with hypertensive encephalopathy. 

Cardiac aneurysm. 

Agranulocytosis. 

Hepatic failure. 

Severe hypoxic brain damage. 

Severe portal hypertension with esophageal varices. 

AIDS (Active - Not AIDS Related Complex or only seropositivity). 

Life threatening infections (encephalitis, meningitis, rabies, etc.). 

Scleroderma with severe esophageal involvement. 

Amyotrophic lateral sclerosis (rapidly progressive). 

Hemiplegia with life threatening complications. 

Quadriplegia with life threatening complications. 

Ventricular flutter. 

Evidence of the existence of a life-threatening affliction or other critical medical condition must be 

certified by a physician and sent to OPM on or before the date the annuitant elects to receive an 

alternative form of annuity. 

If a medical condition other than those listed above is claimed, OPM will review the physician's 

certification to determine whether the cited condition is life-threatening or critical. 

The cost of providing medical documentation of a life-threatening affliction or other critical medical 

condition rests with the employee unless OPM exercises its choice of physician. 

April, 1998 CSRS and FERS Handbook 
 

 

 CSRS Alternative Annuity Elections
 33 

Chapter 53
 

Section 53C1.1-5 Sample Form for CSRS AFA Computation 

AFA COMPUTATION FOR CSRS EMPLOYEES 

Annual Annuity Otherwise Payable (Including reductions for age 

and survivor benefits) $ 

Monthly Annuity Otherwise Payable (Divide by 12, round down) $ 

Subtract Monthly AFA Reduction: (Round to next higher dollar)

 CSRS Contributions = 

= -

CSRS PVF = 

CSRS MONTHLY ANNUITY REDUCED FOR AFA $ 

(May be reproduced locally) 

CSRS and FERS Handbook April, 1998 
 

 

34 Alternative Annuity Elections FERS 

Chapter 53 

Section 53C1.1-6 Sample Form for FERS AFA Computation 

AFA COMPUTATION FOR FERS EMPLOYEES
 

Annual Annuity Otherwise Payable (Including reductions for age 

and survivor benefits) $ 

Monthly Annuity Otherwise Payable (Divide by 12, round down) $ 

Subtract Monthly AFA Reduction: (Round to next higher dollar)

 FERS Contributions = 

= -

FERS PVF = 

FERS MONTHLY ANNUITY REDUCED FOR AFA $ 

(May be reproduced locally) 

April, 1998 CSRS and FERS Handbook 
 

Alternative Annuity Elections FERS 35 

Chapter 53 

Section 53C1.1-7 Sample Form for AFA Computation for FERS Transferee

 With a CSRS Component 

AFA COMPUTATION FOR
 

FERS TRANSFEREE WITH A CSRS COMPONENT
 

1. COMPUTE COMBINED MONTHLY ANNUITY 

REDUCED FOR SURVIVOR BENEFITS 

Combined Annual Annuity Otherwise Payable $ 

Reduction Factor for Survivor Benefits (.90 = Full, .95 = 

Half) X . 

Combined Annual Annuity Reduced for Survivor Benefits $ 

(A) COMBINED MONTHLY ANNUITY REDUCED FOR 

SURVIVOR BENEFITS (Divide by 12, round down) X 

2. COMPUTE CSRS PORTION OF MONTHLY ANNUITY REDUCED 

FOR SURVIVOR BENEFITS 

CSRS Portion of Annual Annuity Otherwise Payable $ 

Reduction Factor for Survivor Benefits (.90 = Full, .95 = Half) . 

CSRS Portion of Annual Annuity Reduced for Survivor Benefits $ 

(B) CSRS PORTION OF MONTHLY ANNUITY REDUCED FOR 

SURVIVOR BENEFITS (Divide by 12, round down) $ 

3. COMPUTE FERS PORTION OF MONTHLY ANNUITY REDUCED 

FOR SURVIVOR BENEFITS 

Combined Monthly Annuity Reduced for Survivor Benefits (A) $ 

CSRS Portion of Monthly Annuity Reduced for Survivor Benefits (B) -

(C) FERS PORTION OF MONTHLY ANNUITY REDUCED FOR 

SURVIVOR BENEFITS $ 

(May be reproduced locally) 

CSRS and FERS Handbook April, 1998 
36 Alternative Annuity Elections FERS 

Chapter 53 

Section 53C1.1-7 Sample Form for AFA Computation for FERS Transferee 

With a CSRS Component (Cont.) 

AFA COMPUTATION FOR
 

FERS TRANSFEREE WITH A CSRS COMPONENT
 

4. COMPUTE COMBINED MONTHLY ANNUITY 

REDUCED FOR AFA 

CSRS Portion of Monthly Annuity Reduced for Survivor 

Benefits (B) $ 

FERS Portion of Monthly Annuity Reduced for Survivor 

Benefits (C) $ 

Subtract Monthly AFA Reduction for Each Component: 

a. CSRS Contributions Divided by CSRS PVF: (Round to next

 higher dollar)

 CSRS Contributions =

 = 

CSRS PVF = 

b. FERS Contributions Divided by FERS PVF: (Round to next

 higher dollar)

 FERS Contributions = 

= 

FERS PVF = 

-

-

CSRS Portion of Monthly Annuity Reduced for AFA $ 

(D) FERS Portion of Monthly Annuity Reduced for AFA $ 

Add FERS Portion of Monthly Annuity Reduced for AFA (D) 

+ 

COMBINED MONTHLY ANNUITY REDUCED FOR AFA $ 

(May be reproduced locally) 

April, 1998 CSRS and FERS Handbook 
 CSRS Alternative Annuity Elections 37 

Chapter 53 

Part 53C2 Examples 

Section 53C2.1-1 CSRS Alternative Annuity Election 

Example 1 

Jackie Taylor is age 57. Her annual annuity otherwise payable is $30,708. Her lump-sum credit at 

date of retirement is $24,590. Take the following steps to compute the reduced monthly annuity for 

election of the Alternative Form of Annuity. 

1. Enter the annual annuity otherwise payable ($30,708). 

2. Divide the annual annuity otherwise payable ($30,708) by 12 and round down to obtain the monthly 

annuity otherwise payable ($2,559). 

3. Compute the monthly AFA reduction by dividing the CSRS lump-sum credit ($24,590) by the 

CSRS Present Value Factor (PVF) for age 57 (199.4) from the CSRS PRESENT VALUE FACTOR 

CHART provided in section 53C1.1-1 to obtain the CSRS monthly AFA reduction ($123.32). 

Round $123.32 to the next higher dollar ($124) and enter this amount. 

4. Subtract the CSRS monthly AFA reduction ($124) from the monthly annuity otherwise payable 

($2,559) to obtain the CSRS monthly annuity reduced for AFA ($2,435). 

CSRS and FERS Handbook April, 1998 
 

 

38 CSRS Alternative Annuity Elections 

Chapter 53 

Example 1 (Cont.) 

AFA COMPUTATION FOR CSRS EMPLOYEES
 

Annual Annuity Otherwise Payable (Including reductions for age 

and survivor benefits) $30,708 

Monthly Annuity Otherwise Payable (Divide by 12, round down) $ 2,559 

Subtract Monthly AFA Reduction: (Round to next higher dollar)

 CSRS Contributions = 24,590 

= - 124

 CSRS PVF = 199.4 

CSRS MONTHLY ANNUITY REDUCED FOR AFA $ 2,435 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 39 

Chapter 53 

Section 53C2.1-2 FERS Alternative Annuity Election 

Example 2 

Daniel Corman is age 59. His annual annuity otherwise payable is $42,568.20. His lump-sum credit 

on the date of retirement is $19,641. Take the following steps to compute the monthly annuity with 

election of the alternative annuity. 

1. Enter the annual annuity otherwise payable ($42,568.20). 

2. Divide the annual annuity ($42,568.20) by 12 and round down to obtain the monthly annuity 

($3,547). 

3. Compute the monthly AFA reduction by dividing the FERS contributions ($19,641) by the FERS 

Present Value Factor (PVF) for age 59 (163.5) from the FERS PRESENT VALUE FACTOR 

CHART provided in section 53C1.1-2 to obtain the FERS monthly AFA reduction ($120.13). 

Round $120.13 to the next higher dollar ($121) and enter this amount. 

4. Subtract the FERS monthly AFA reduction ($121) from the monthly annuity ($3,547) to obtain the 

FERS monthly annuity reduced for AFA ($3,426). 

CSRS and FERS Handbook April, 1998 
 

 

40 Alternative Annuity Elections FERS 

Chapter 53 

Example 2 (Cont.) 

AFA COMPUTATION FOR FERS EMPLOYEES
 

Annual Annuity Otherwise Payable (Including reductions for age 

and survivor benefits) $42,568.20 

Monthly Annuity Otherwise Payable (Divide by 12, round down) $ 3,547 

Subtract Monthly AFA Reduction: (Round to next higher dollar)

 FERS Contributions = 19,641 

= - 121

 FERS PVF = 163.5 

FERS MONTHLY ANNUITY REDUCED FOR AFA $ 3,426 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 41 

Chapter 53 

Section 53C2.1-3 FERS Transferee With a CSRS Annuity Component

 Alternative Annuity Election 

Example 3 

Jim Gray is age 60. His annual annuity otherwise payable is $25,312. The CSRS portion of his 

annual annuity is $20,250. His lump-sum credit on the date of retirement is $30,000, $20,000 in 

CSRS contributions and $10,000 in FERS retirement contributions. Jim has selected a survivor 

annuity based on his full annuity. Take the following steps to compute the monthly annuity with 

election of the alternative annuity. 

Step 1: Compute the combined monthly annuity reduced for survivor benefits. 

1. Enter the combined annual annuity otherwise payable ($25,312). 

2. Enter the factor for reduction for survivor benefits (.90 based on full annuity). 

3. Multiply the reduction factor (.90) by the combined annual annuity otherwise payable ($25,312) to 

obtain the combined annual annuity reduced for survivor benefits ($22,780.80). 

4. To obtain the combined monthly annuity reduced for survivor benefits ($1,898), labeled as "(A)", 

divide the combined annual annuity reduced for survivor benefits by 12 and round down. 

Step 2: Compute the CSRS portion of the monthly annuity reduced for survivor benefits 

1. Enter the CSRS portion of the annual annuity otherwise payable ($20,250). 

2. Enter the factor for reduction for survivor benefits (.90 based on full annuity). 

3. Multiply the reduction factor (.90) by the CSRS portion of the annual annuity otherwise payable 

($20,250) to obtain the CSRS portion of the annual annuity reduced for survivor benefits ($18,225). 

4. To obtain the CSRS portion of the monthly annuity reduced for survivor benefits ($1,518), labeled 

as "(B)", divide the CSRS portion of the annual annuity reduced for survivor benefits by 12 and 

round down. 

Step 3: Compute the FERS portion of the monthly annuity reduced for survivor benefits. 

1. Enter (A), the combined monthly annuity reduced for survivor benefits ($1,898). 

2. Enter (B), the CSRS portion of the monthly annuity reduced for survivor benefits ($1,518). 

3. Subtract (B) from (A) to obtain the FERS portion of the monthly annuity reduced for survivor 

benefits, labeled as "(C)". 

CSRS and FERS Handbook April, 1998 
42 Alternative Annuity Elections FERS 

Chapter 53 

Example 3 (Cont.) 

Step 4: Compute the combined monthly annuity reduced for AFA. 

1. Enter (B), the CSRS portion of the monthly annuity reduced for survivor benefits ($1,518). 

2. Enter (C), the FERS portion of the monthly annuity reduced for survivor benefits ($380). 

3. Compute the monthly AFA reduction for each component: 

a. Divide the CSRS contributions ($20,000) by the CSRS Present Value Factor (PVF) for age 60 

(186.1) from the CSRS PRESENT VALUE FACTOR CHART provided in section 53C1.1-1 to 

obtain the CSRS monthly AFA reduction ($107.47). Round $107.47 to the next higher dollar 

($108) and enter this amount. 

b. Divide the FERS contributions ($10,000) by the Present Value Factor (PVF) for age 60 (164.5) 

from the FERS PRESENT VALUE FACTOR CHART provided in section 53C1.1-2 to obtain 

the FERS monthly AFA reduction ($60.79). Round $60.79 to the next higher dollar ($61) and 

enter this amount. 

4. Subtract the CSRS monthly AFA reduction ($108) from the CSRS portion of the monthly annuity 

reduced for survivor benefits ($1,518) to obtain the CSRS portion of the monthly annuity reduced 

for AFA ($1,410). 

5. Subtract the FERS monthly AFA reduction ($61) from the FERS portion of the monthly annuity 

reduced for survivor benefits ($380) to obtain the FERS portion of the monthly annuity reduced for 

AFA ($319) labeled as "(D)". 

6. Enter (D), the FERS portion of the monthly annuity reduced for AFA. 

7. Add (D), the FERS portion of the monthly annuity reduced for AFA ($319), and the CSRS portion 

of the monthly annuity reduced for AFA ($1,410) to obtain the combined monthly annuity reduced 

for AFA ($1,729). 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 43 

Chapter 53 

Example 3 (Cont.) 

AFA COMPUTATION
 

FOR FERS TRANSFEREE WITH A CSRS COMPONENT
 

1. COMPUTE COMBINED MONTHLY ANNUITY

 REDUCED FOR SURVIVOR BENEFITS 

Combined Annual Annuity Otherwise Payable $ 25,312 

Reduction Factor for Survivor Benefits (.90 = Full, .95 = 

Half) x .90 

Combined Annual Annuity Reduced for Survivor Benefits $ 22,780.80 

(A) COMBINED MONTHLY ANNUITY REDUCED FOR 

SURVIVOR BENEFITS (Divide by 12, round down) $ 1,898 

2. COMPUTE CSRS PORTION OF MONTHLY ANNUITY REDUCED 

FOR SURVIVOR BENEFITS 

CSRS Portion of Annual Annuity Otherwise Payable $ 20,250 

Reduction Factor for Survivor Benefits (.90 = Full, .95 = Half) .90 

CSRS Portion of Annual Annuity Reduced for Survivor Benefits $ 18,225 

(B) CSRS PORTION OF MONTHLY ANNUITY REDUCED FOR 

SURVIVOR BENEFITS (Divide by 12, round down) $ 1,518 

3. COMPUTE FERS PORTION OF MONTHLY ANNUITY REDUCED 

FOR SURVIVOR BENEFITS 

Combined Monthly Annuity Reduced for Survivor Benefits (A) $ 1,898 

CSRS Portion of Monthly Annuity Reduced for Survivor Benefits (B) - 1,518 

(C) FERS PORTION OF MONTHLY ANNUITY REDUCED FOR 

SURVIVOR BENEFITS $ 380 

CSRS and FERS Handbook April, 1998 
44 Alternative Annuity Elections FERS 

Chapter 53 

Example 3 (Cont.) 

AFA COMPUTATION FOR
 

FERS TRANSFEREE WITH A CSRS COMPONENT
 

4. COMPUTE COMBINED MONTHLY ANNUITY

 REDUCED FOR AFA 

CSRS Portion of Monthly Annuity Reduced for Survivor 

Benefits (B) $ 1,518 

FERS Portion of Monthly Annuity Reduced for Survivor 

Benefits (C) $ 380 

Subtract Monthly AFA Reduction for Each Component: 

a. CSRS Contributions Divided by CSRS PVF: (Round to next

 higher dollar)

 CSRS Contributions = 20,000 

= 

CSRS PVF = 186.1 

b. FERS Contributions Divided by FERS PVF: (Round to next

 higher dollar)

 FERS Contributions = 10,000

 = 

FERS PVF = 164.5 

- 108

- 61

CSRS Portion of Monthly Annuity Reduced for AFA $ 1,410 

(D) FERS Portion of Monthly Annuity Reduced for AFA $ 319 

Add FERS Portion of Monthly Annuity Reduced for AFA 

(D) + 319 

COMBINED MONTHLY ANNUITY REDUCED FOR AFA $ 1,729 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 45 

Chapter 53 

Part 53C3 Forms 

Section 53C3.1-1 Special Tax Notice Regarding Rollovers (RI 37-22) 

Special Tax Notice
 

Regarding Rollovers, RI 37-22
 

This notice contains important Federal income tax and other information you will need before you decide how to 

receive your lump-sum payment from the Civil Service Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). To be of service to our customers, the Office of Personnel Management has worked 

with the Internal Revenue Service to present a general explanation of how P.L. 102-318 affects those who 

receive our benefits. However, the IRS remains the authority on tax matters and questions. Requests for 

additional or clarifying information should be directed to them. The official tax publications that govern how 

benefits are taxed are referenced at the end of this notice. OPM does not stock IRS publications. We cannot 

provide official tax information nor can we advise individuals on tax matters. The following discussion applies 

to the taxable portion of your lump-sum payment. 

Summary 

A taxable payment from the Office of Personnel Management (OPM) that is eligible for "rollover" can be paid 

in one of two ways. You can have all or any part of your payment either (1) paid in a "direct rollover" or (2) 

paid to you. A rollover is a payment of the taxable portion of your CSRS or FERS benefit to your individual 

retirement arrangement (IRA) or to another employer retirement plan. This choice will affect the tax you owe. 

If you choose a direct rollover of the taxable portion -­

- Your payment will not be taxable income in the year it is paid, and no income tax will be withheld. 

- Your payment will be made directly to your IRA or, if you choose, to another employer retirement plan 

that accepts your rollover. 

- Your payment will be taxable income later when you take it out of the IRA or the employer retirement 

plan. 

If you choose to have the taxable portion of your benefit paid to you -­

- You will receive only 80 percent of the payment, because OPM is required to withhold 20 percent of 

the payment and send it to the Internal Revenue Service as income tax withholding to be credited 

against your taxes. 

CSRS and FERS Handbook April, 1998 
46 Alternative Annuity Elections FERS 

Chapter 53 

- Your payment will be taxed in the year it is paid unless you roll it over. You may be able to use 

special tax rules that could reduce the tax you owe. However, if you receive the payment before age 

59-1/2, you also may have to pay an additional 10 percent tax. 

- You can roll over the payment by paying it to your IRA or to another employer retirement plan that 

accepts your rollover within 60 days after you receive the payment. The amount rolled over will not be 

taxed until you take it out of the IRA or employer retirement plan. 

- If you want to roll over 100 percent of the payment to an IRA or an employer retirement plan, you must 

find other money to replace the 20 percent that was withheld. We cannot refund the 20 percent once it 

has been withheld. If you roll over only the 80 percent you receive, you will be taxed on the 20 

percent that was withheld and that is not rolled over. 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 47 

Chapter 53 

MORE INFORMATION 

I.	 PAYMENTS THAT CAN AND CANNOT BE 

ROLLED OVER 

Certain payments from the OPM are "eligible 

rollover distributions." This means they can be rolled 

over to an IRA or to another employer retirement 

plan that accepts rollovers. In general, only the 

"taxable portion" of your payment is an eligible 

rollover distribution. Information on the portion of 

your payment that is eligible for rollover is enclosed. 

The following types of payments cannot be rolled 

over: 

Non-taxable Payments. In general, the nontaxable portion of your payment is not an eligible 

rollover distribution. If you have made "after-tax" 

employee contributions, these contributions will be 

non-taxable when they are paid to you, and they 

cannot be rolled over. (After-tax employee 

contributions generally are contributions you made 

from your own pay that was already taxed.) 

Payments Spread Over Long Periods. You 

cannot roll over a payment if it is part of a series of 

equal (or almost equal) payments that are made at 

least once a year and that will last for 

! your lifetime (or your life expectancy), or 

! your lifetime and your beneficiary's lifetime 

(or life expectancies), or 

! a period of ten years or more. 

Required Minimum Payments. Beginning in 

the year you reach age 70-1/2, a certain portion of 

your payment cannot be rolled over because it is a 

"required minimum payment" that must be paid to 

you. You must compute and exclude this amount 

from a direct rollover if you will be age 70-1/2 or 

older when the payment is made. 

II. DIRECT ROLLOVER 

You can choose a direct rollover of all or any 

portion of your payment that is an "eligible rollover 

distribution" as described above. In a direct rollover, 

the eligible rollover distribution is paid directly from 

OPM to an IRA or another employer retirement plan 

that accepts rollovers (or is sent to you in a check 

made payable to the IRA or other retirement plan). 

If you choose a direct rollover, you are not taxed on 

a payment until you later take it out of the IRA or the 

employer retirement plan. OPM will not pay a direct 

rollover or withhold tax on taxable payments under 

$200, but recipients themselves may roll over such 

payments tax free within 60 days after receipt. The 

minimum direct rollover amount is $500 if you 

designate part of your payment as a direct rollover 

with the remainder payable to you. OPM will pay a 

direct rollover to only one IRA or retirement plan at 

any one time. 

Direct Rollover to an IRA. You can open an 

IRA to receive the direct rollover. (the term "IRA," 

as used in this notice, includes individual retirement 

accounts and individual retirement annuities.) If you 

choose to have your payment made directly to an 

IRA, contact an IRA sponsor (usually a financial 

institution) to find out how to have your payment 

made in a direct rollover to an IRA at that institution. 

If you are unsure of how to invest your money, you 

can temporarily establish an IRA to receive the 

payment. However, in choosing an IRA, you may 

wish to consider whether the IRA you choose will 

allow you to move all or part of your payment to 

another IRA at a later date, without penalties or other 

limitations. See IRS Publication 590, Individual 

Retirement Arrangements, for more information on 

IRA's (including limits on how often you can roll 

over between IRA's). 

Direct Rollover to an Employer Retirement 

Plan. If you are employed by a new employer that 

has a retirement plan and you want a direct rollover 

to that plan, ask the administrator of that plan 

whether it will accept your rollover. An employer 

retirement plan is not legally required to accept a 

rollover. If your new employer's retirement plan 

does not accept a rollover, you can choose a direct 

rollover to an IRA. 

CSRS and FERS Handbook	 April, 1998 
48 Alternative Annuity Elections FERS 

Chapter 53 

Direct Rollover of a Series of Payments. If you 

receive eligible rollover distributions that are paid in 

a series of less than 10 years, your choice to make or 

not make a direct rollover for a payment will apply to 

all later payments in the series unless you change 

your election. You are free to change your election 

for any later payment in the series by contacting 

OPM. 

III. PAYMENT PAID TO YOU 

If you have the payment made to you, it is 

subject to 20 percent Federal income tax withholding. 

The payment is taxed in the year you receive it 

unless, within 60 days after receiving it, you roll it 

over to an IRA or another plan that accepts rollovers. 

If you do not roll it over, special tax rules apply. 

Mandatory Federal Income Tax Withholding. 

If any portion of the payment to you is an eligible 

rollover distribution, OPM is required by law to 

withhold 20 percent of that amount. This amount is 

sent to the IRS as income tax withholding. For 

example, if your eligible rollover distribution is 

$10,000, only $8,000 will be paid to you because 

OPM must withhold $2,000 as income tax. However, 

when you prepare your income tax return for the 

year, you will report the full $10,000 as a payment 

from OPM. You will report the $2,000 as tax 

withheld, and it will be credited against any income 

tax you owe for the year. 

Sixty-Day Rollover Option. If you have an 

eligible rollover distribution paid to you, you can still 

decide to roll over all or part of it to an IRA or 

another employer retirement plan that accepts 

rollovers. If you decide to roll it over, you must 

make the rollover within 60 days after you receive 

the payment. The portion of your payment that is 

rolled over will not be taxed until you take it out of 

the IRA or the employer retirement plan. 

You can roll over up to 100 percent of the 

eligible rollover distribution, including an amount 

equal to the 20 percent that was withheld, If you 

choose to roll over 100 percent, you must find other 

money within the 60-day period to contribute to the 

IRA or the employer retirement plan to replace the 20 

percent that was withheld. On the other hand, if you 

roll over only the 80 percent that you received, you 

will be taxed on the 20 percent that was withheld. 

Example: Your eligible rollover distribution is 

$10,000, and you choose to have it paid to you. You 

will receive $8,000, and $2,000 will be sent to the 

IRS as income tax withholding. Within 60 days after 

receiving the $8,000, you may roll over the entire 

$10,000 to an IRA or employer retirement plan. To 

do this, you roll over the $8,000 you received from 

OPM, and you will have to find $2,000 from other 

sources (your savings, a loan, etc.). In this case, the 

entire $10,000, is not taxed until you take it out of the 

IRA or employer retirement plan. If you roll over the 

entire $10,000, when you file your income tax return 

you may get a refund of the $2,000 withheld. 

If, on the other hand, you roll over only $8,000, the 

$2,000 you did not roll over is taxed in the year it 

was withheld. When you file your income tax return, 

you may get a refund of part of the $2,000 withheld. 

(However, any tax refund is likely to be larger if you 

roll over the entire $10,000.) 

Additional 10 Percent Tax If You Are Under 

Age 59-1/2. If you receive a payment before you 

reach age 59-1/2 and you do not roll it over, the, in 

addition to the regular income tax, you may have to 

pay an extra tax equal to 10 percent of the taxable 

portion of the payment. The additional 10 percent tax 

does not apply to your payment if it is (1) paid to you 

because you separate from service with your 

employing agency during or after the year you reach 

age 55, (2) paid because you retire due to disability 

(as determined by IRS), (3) paid to you as equal (or 

almost equal) payments over your life or life 

expectancy (or your and your beneficiary's lives of 

life expectancies), or (4) used to pay certain medical 

expenses. See IRS Form 5329, Return for 

Additional Taxes..., for more information on the 

additional 10 percent tax. 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections	 FERS 49 

Chapter 53 

Special Tax Treatment. If your eligible 

rollover distribution is not rolled over, it will be taxed 

in the year you receive it. However, if it qualifies as 

a "lump-sum distribution," it may be eligible for 

special tax treatment. A lump-sum distribution is a 

payment within 1 year, of your entire balance under 

CSRS or FERS that is payable to you because you 

have separated from service with your agency. For 

a payment to qualify as a lump-sum distribution, you 

must have been a participant under CSRS or FERS 

for at least 5 years. The special tax treatment for 

lump-sum distributions is described below. 

Five-Year Averaging. If you receive a lumpsum distribution after you are age 59-1/2, you 

may be able to make a one-time election to 

figure the tax on the payment by using "5-year 

averaging." Five-year averaging often reduces 

the tax you owe because it treats the payment 

much as if it were paid over 5 years. 

Ten-Year Averaging If You Were Born Before 

January 1, 1936. If you receive a lump-sum 

distribution and you were born before January 1, 

1936, you can make a one-time election to figure 

the tax on the payment by using "10-year 

averaging" (using 1986 tax rates) instead of 5­

year averaging (using current tax rates). Like 

the 5-year averaging rules, 10-year averaging 

often reduces the tax you owe. 

Capital Gain Treatment If You Were Born 

Before January 1, 1936. In addition, if you 

receive a lump-sum distribution and you were 

born before January 1, 1936, you may elect to 

have the part of your payment that is attributable 

to your pre-1974 participation under CSRS or 

FERS (if any) taxed as long-term capital gain at 

a rate of 20 percent. 

There are other limits on the special tax 

treatment for lump-sum distributions. For example, 

you can generally elect this special tax treatment only 

once in your lifetime, and the election applies to all 

lump-sum distributions that you receive in that same 

year. If you have previously rolled over a payment 

from OPM, you cannot use this special tax treatment 

for later payments from OPM. If you roll over your 

payment to an IRA, you will not be able to use this 

special tax treatment for later payments from the 

IRA. Also, if you roll over only a portion of your 

payment to an IRA, this special tax treatment is not 

available for the rest of the payment. Additional 

restrictions are described in IRS Form 4972, which 

has more information on lump-sum distributions and 

how you elect the special tax treatment. 

IV. SURVIVING SPOUSES, ALTERNATE

 PAYEES, AND OTHER BENEFICIARIES 

In general, the rules summarized above that 

apply to payments to employees also apply to 

payments to surviving spouses of employees and to 

spouses or former spouses who are "alternate 

payees." You are an alternate payee if your benefit 

results from an order issued by a court, usually in 

connection with a divorce or legal separation. Some 

of the rules summarized above also apply to a 

deceased employee's beneficiary who is not a spouse. 

However, some exceptions for payments to surviving 

spouses, alternate payees, and other beneficiaries 

should be mentioned. 

If you are a surviving spouse, you may choose to 

have an eligible rollover distribution paid in a direct 

rollover to an IRA or paid to you. If you have the 

payment paid to you. you can keep it or roll it over 

yourself to an IRA, but you cannot roll it over to an 

employer retirement plan. If you are an alternate 

payee, you have the same choices as the employee. 

Thus, you can have the payment paid as a direct 

rollover or paid to you. If you have it paid to you, 

you can keep it or roll it over yourself to an IRA or to 

another employer retirement plan that accepts 

rollovers. If you are a beneficiary other than a 

surviving spouse or alternate payee, you cannot 

choose a direct rollover, and you cannot roll over the 

payment yourself. 

If you are a surviving spouse, an alternate payee, 

or another beneficiary, your payment is not subject to 

the additional 10 percent tax described in section III 

above, even if you are younger than age 59-1/2. 

CSRS and FERS Handbook	 April, 1998 
50 Alternative Annuity Elections FERS 

Chapter 53 

If you are a surviving spouse, an alternate payee, 

or another beneficiary, you may be able to use the 

special tax treatment for lump-sum distributions, as 

described in section III above. If you receive a 

payment because of the employee's death, you may 

be able to treat the payment as a lump-sum 

distribution if the employee met the appropriate age 

requirements, whether or not the employee had 5 

years of service under CSRS or FERS. 

HOW TO OBTAIN ADDITIONAL 

INFORMATION 

This notice summarizes only the Federal (not State or 

local) tax rules that might apply to your payment. 

The rules described above are complex and contain 

many conditions and exceptions that are not included 

in this notice. Therefore, you may want to consult 

with a professional tax advisor before you take a 

payment of your benefits from OPM. Also, you can 

find more specific information on the tax treatment of 

payments from qualified retirement plans in IRS 

Publication 575, Pension and Annuity Income, IRS 

Publication 590, Individual Retirement 

Arrangements, and IRS Publication 721, Tax Guide 

to U.S. Civil Service Retirement Benefits. These 

publications are available from your local IRS office 

or by calling 1-800-TAX-FORMS. 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Elections FERS 51
 

Chapter 53
 

Blank 

CSRS and FERS Handbook April, 1998 
52 Alternative Annuity Elections FERS 

Chapter 53
 

Section 53C3.1-2 Alternative Annuity and Rollover Election Form (RI 38-122)
 

Please see page 53
 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity and Rollover Election 

� Please read all of the information in the Alternative Annuity Election Information For Employees notice before 

completing this form. 

I. Alternative Annuity 

I do not want to make an election at this time. I want OPM to send me the complete alternative annuity 

election package. I understand my application for retirement will not be processed until after I receive and 

return the election forms. Provide your signature below and return this form to your Personnel Office. Do 

not check any of the following blocks. 

Your signature Date

I elect to receive a reduced alternative annuity and a lump-sum payment of my retirement contributions. If I 

am married, the consent of my spouse is shown below in Part II. I do not have a former spouse who is 

entitled by court order to a portion of my annuity or a survivor annuity. I also completed the reverse side 

and provided my signature. 

If you are retiring involuntarily, specify how you want to receive the lump sum: 

I want one installment I want two installments 

II. Spousal Consent 

� Your spouse must sign in the presence of a notary or other person authorized to administer oaths. 

I freely consent to this alternative annuity election. 

Signature of current spouse 

Notarization—To be completed by notary public or other official authorized to administer oaths. 

I certify that the person whose signature appears immediately above presented
 

identification (or was known to me), gave consent to the specific election as (Seal)

executed by the retiree, signed or marked the form, and acknowledged that the
 

consent was given freely in my presence.
 

Signature Expiration date of commission Date 

RI 38-122 This form may be locally reproduced (Continued on reverse) September 1994 
III. Rollover Election 

� Complete one of the following options 

Pay me my lump sum directly. I understand that 20% of the taxable amount of the lump sum will be 

withheld for tax but that I can rollover part or all of the taxable amount to a qualified account to defer 

income tax within 60 days. 

I want (enter “all” or a dollar amount at or above $500) of the taxable amount of my lump sum made 

payable to the account shown below with no tax withholding. I understand that any balance made payable 

to me will be subject to 20% tax withholding, but that I can roll any part of it over to a qualified account to 

defer income tax within 60 days. If you check this block, your financial institution must complete Part IV. 

Send my payment directly to my account. Send the payment to me, made payable to my account. I 

will deliver it to the account within 60 days. 

Provide your certification: By my signature below, I certify that I have read and understood the information in 

the accompanying Alternative Annuity Election Information For Employees notice. I certify that I do not have a 

former spouse entitled by court order to receive a portion of my annuity or a survivor annuity. 

Signature Social Security Number Date 

Warning: Any intentionally false or willfully misleading statement or response you provide in this election 

is a violation of the law punishable by a fine of not more than $10,000 or imprisonment of no more than 5 

years, or both. (18 U.S.C. 1001) 

IV. Certification by Financial Institution or Retirement Plan 

� This part must be completed by your financial institution or retirement plan if all or part of the taxable portion 

of your lump sum is made payable to an IRA. 

Name of institution or retirement plan IRA Account number 

Address of institution or retirement plan 

Certification: As a representative of the financial institution or plan named above, I confirm the account number 

for the individual named above and the address of the institution or retirement plan. I certify that the financial 

institution or plan named above agrees to receive funds from the individual and deposit them in an eligible IRA 

or retirement plan as defined in the Internal Revenue Code. 

Typed or printed name of certifying representative 

Signature of certifying representative 

Daytime phone (area code & number) Date of certification

 Reverse of RI 38-122

 September 1994 
54 Alternative Annuity Elections FERS 

Chapter 53
 

Section 53C3.1-3 Alternative Annuity Election Information For Employees (RI 38-123)
 

Please see page 57
 

April, 1998 CSRS and FERS Handbook 
Alternative Annuity Election Information For Employees 

The following general information is provided to allow you to elect an alternative annuity benefit at this time. If 

you prefer, you can make your election after the Office of Personnel Management (OPM) receives your retirement 

package and sends you more detailed information specific to your case. If you are making an election now, have 

your personnel office provide you with an estimate of your annuity with and without the alternative annuity 

reduction. You should also read the attached Special Tax Notice Regarding Rollovers, before making your election. 

You can elect an alternative annuity if (1) you retire involuntarily (without cause) on or before September 29, 1994, 

or (2) you retire on a nondisability annuity and have a life-threatening affliction or other critical medical condition. 

If you are married, your spouse must consent to your election. Please note that you cannot elect an alternative 

annuity if you have a former spouse who is entitled by court order to a portion of your annuity or a survivor 

annuity. (Certain senior officials and Schedule C employees are not eligible for the alternative annuity. Your 

agency will inform you.) 

If you believe you are eligible for an alternative annuity because you have a life-threatening affliction or other 

critical medical condition, please attach your physician’s certification of your illness to your election. OPM will 

determine if you are eligible for this benefit. 

If you elect an alternative annuity benefit: 

�	 Your annuity will be permanently reduced and you will receive a lump-sum payment of your 

retirement contributions. The reduction is determined by dividing your lump-sum credit by an 

actuarial factor for your age. See your agency for an estimate of the reduction. 

�	 The amount of any survivor benefit you provide will not be affected. 

�	 You cannot change to a disability retirement after OPM processes your retirement application. 

�	 If you receive non-scheduled compensation from the Office of Workers’ Compensation Programs 

(OWCP), all annuity paid AND the lump sum payment must be repaid before OWCP will pay 

benefits to you. 

�	 If you retire involuntarily, you can choose to receive the lump sum in two installments. The second 

installment (50%, plus interest) will be paid one year after the month we paid the first installment . 

�	 If you receive the lump-sum payment, you have incurred tax liability for that payment. That
 

liability does not change even if you repay the lump-sum to OPM.
 

Generally, 80% to 95% of the lump sum is taxable in the year in which it is received unless you choose to defer the 

income tax by rolling over all or part of the taxable portion to an Individual Retirement Account (IRA) or another 

retirement plan that accepts rollovers. (For purposes of this notice, the term “IRA” includes retirement plans that 

accept rollovers.) The non-taxable portion of the lump sum will be paid to you and cannot be rolled over. If you 

want the taxable portion paid directly to an IRA, contact an IRA sponsor (usually a financial institution) for 

assistance. 

Your alternative annuity will include credit for any unpaid deposits and redeposits for creditable civilian service. 

These amounts are “deemed” paid. Any deemed amount in excess of the non-taxable portion of the lump sum 

credit is taxable in the year the lump sum is paid unless it is rolled over. However, OPM cannot roll over these 

amounts. You can roll over taxable deemed amounts with your own funds within 60 days after you receive the 

lump sum. 

RI 38-123 

This form may be locally reproduced September 1994 
If all or part of the taxable portion of the lump sum is paid directly to an IRA: 

�	 No income tax will be withheld from the payment sent to the IRA; the payment will not be taxable 

until you take it out. 

�	 OPM will send the payment directly to the IRA, or to you in a check made payable to the IRA. 

If all or part of the taxable portion of the lump sum is paid directly to you: 

�	 You will receive 80% of the payment. OPM must withhold 20% for tax (including 20% of any 

taxable deemed amount), which will be sent to the Internal Revenue Service (IRS) to be credited 

against your taxes. You may be able to use special tax rules to reduce the taxes you owe. However, 

an additional 10% tax may apply if you receive the lump sum before age 59 1/2. 

�	 You can defer the income tax by rolling over all or part of the taxable portion of the lump sum 

within 60 days after you receive it. If you want to roll over 100%, you must find other money to 

replace the 20% that was withheld. If you roll over the 80% you receive, you will be taxed on the 

20% that was not rolled over. 

OPM will provide you with additional information on the amounts that can be rolled over when they send you 

the lump-sum payment. 

The following IRS publications will provide you with more specific information on the tax treatment of payments 

from qualified retirement plans: IRS Publication 575, Pension and Annuity Income, IRS Publication 590, 

Individual Retirement Arrangements, and IRS Publication 721, Tax Guide to U.S. Civil Service Retirement 

Benefits. These forms are available from your local IRS office. You may also wish to consult with a professional tax 

advisor. OPM cannot provide you with tax publications or tax advice. 

Privacy Act Statement 

Solicitation of this information is authorized by Chapters 83 and 84, title 5, U.S. Code. The information you furnish will be used 

to obtain additional information, if necessary, and to determine and allow present or future benefits. The information may 

be shared and is subject to verification via paper, electronic media, or through the use of computer matching programs, 

with national, state, local, or other charitable or social security administrative agencies in order to determine benefits under 

their programs, to obtain information necessary for determination of benefits under this program, or to report income for 

tax purposes. It may also be shared or verified, as noted above, with law enforcement agencies when they are investigating 

a violation or potential violation of the civil or criminal law. 

Please keep a copy of this notice for your records Reverse of RI 38-123

 September 1994