United States 

Office of 

Personnel Management

The Federal Government’s Human Resources Agency 

Retirement and Insurance Service 

Benefits Administration Letter 

Number: 03-305 Date: March 26, 2003 

Subject: 2003 Retroactive Pay Raise – Effect on CSRS/FERS and FEGLI 

On March 21, 2003, President Bush signed an Executive Order that provides Federal employees 

a 4.1 percent pay raise. Most employees will have already received a 3.1 percent pay raise, 

which was effective on the first day of the first pay period that began on or after January 1, 2003. 

The Executive Order adds 1.0 percent earmarked as locality pay, to the 3.1 percent pay raise, and 

makes it retroactive to the first day of the first pay period that began on or after January 1, 2003. 

For both CSRS/FERS and Federal Employees’ Group Life Insurance Program (FEGLI) 

purposes, the 1.0 percent retroactive pay increase is basic pay. As a consequence, it will require 

the following actions on the parts of agency payroll offices (APOs): 

Retirement 

APOs must remit CSRS/FERS withholdings and contributions to OPM on the 1.0 percent 

retroactive pay increase on the date it is actually paid to employees. For employees, who 

separated after the first day of the first pay period of calendar year 2003, APOs must submit a 

supplemental Individual Retirement Record (IRR), documenting the revised salary rate and 

additional employee withholdings. The IRR must be submitted to OPM with a SF 2807/3103, 

Register of Separations and Transfer. 

FEGLI 

The 1.0 percent retroactive pay increase will affect withholdings and contributions for Basic 

life insurance and withholdings for Additional optional coverage [Option B]. For both Basic 

life insurance and Option B coverage, withholdings (and contributions for Basic) will increase 

if the employee moves into a different $1,000 bracket. 

Civil Service 

Retirement 

System 

Federal Employees’ 

Group Life 

Insurance Program 

Federal Employees 

Health Benefits 

Program 

Federal Employees 

Retirement 

System 

Long Term 

Care Insurance

Program 
APOs need to calculate the amount of FEGLI withholdings (and contributions for Basic) that 

should have been made, based on the new basic pay and compare that with what actually was 

withheld for all pay periods beginning on or after January 1, 2003. The following illustration 

will help clarify this: 

Daniel Meloy is 43 years-old and works in Washington DC. He has Basic life insurance and 

three multiples of Option B and in 2002 had basic pay of $78,265, which he receives 

biweekly. Therefore, Daniel’s Basic life insurance amount (BIA) was $81,000 and his Option 

B coverage was three times $79,000 or $237,000. 

On the effective date of the 3.1 percent pay raise, Daniel’s basic pay became $80,690, 

increasing his BIA to $83,000 and his Option B coverage to three times $81,000 or $243,000. 

Effective with the first pay period that began on or after January 1, 2003, Daniel’s FEGLI 

withholdings and his employing agency’s contributions were: 

Biweekly Withholdings and Contributions 

[effective with the first pay period that began on or after January 1, 2003]

 Withholdings Contributions 

Basic [$83,000] $12.45 6.23 

Option B [$243,000] $14.58 0 

Daniel’s APO paid him the retroactive 1.0 percent pay raise on the pay date associated with 

the sixth pay period that began on or after January 1, 2003. Thus, five pay periods have ended 

since the 3.1 percent pay raise was effective. Through the first five full pay periods in 

calendar year 2003, Daniel’s actual withholdings and his employing agency’s actual 

contributions were: 

Actual Withholdings and Contributions 

[through the first five full pay periods in 2003]

 Withholdings Contributions 

Basic [$83,000] $62.25 $31.15 

Option B [$243,000] $72.90 0 

With the additional 1.0 percent pay raise, Daniel’s basic pay increased to $81,602, increasing 

his BIA to $84,000 and his Option B coverage to three times $82,000 or $246,000. Since the 

additional 1.0 percent pay raise is retroactive to the first pay period that began on or after 

January 1, 2003, Daniel’s withholdings and his employing agency’s contributions through the 

first five full pay periods in calendar year 2003 should have been: 

Withholdings and Contributions Should Have Been 

[through the first five full pay periods in 2003]

 Withholdings Contributions 

Basic [$84,000] $63.00 $31.50 

2 
 

Option B [$246,000] $73.80 0 

Thus, on the pay date associated with the sixth pay period that began on or after January 1, 

2003, in addition to the normal biweekly withholdings and contributions, Daniel’s APO must 

remit for him: 

Additional Withholdings and Contributions 

[for sixth full pay period in 2003]

 Withholdings Contributions 

Basic [$84,000] $0.75 $0.35 

Option B [$246,000] $0.90 0 

The revised salary tables are located at www.opm.gov/flsa/oca/payrates/index.asp. 

If you have any questions regarding this information, we would prefer that you email us at 

finance@opm.gov, so that we have a record of our communication. You may also contact us on 

(202) 606-0606. 

Robert A. Yuran, Chief 

Financial Policy Group 

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