Civil Service

Retirement

System

Federal Employees’

Group Life

Insurance Program

Federal Employees

Health Benefits

Program

Federal Employees

Retirement

System

Long Term

Care Insurance

Program

United States

Office of

Personnel Management

The Federal Government’s Human Resources Agency

Retirement and Insurance Service

Benefits Administration Letter 

Number: 02-101 Date: January 14, 2002

Subject: Annual Changes

Background

Each year, we publish a Benefits Administration Letter with information that changes annually,

such as interest rates and cost-of-living adjustments. This letter contains the figures for 2002.

Cost-of-Living Adjustments

Many people who receive monthly annuity payments from the Civil Service Retirement System

(CSRS) or the Federal Employees Retirement System (FERS) will receive a cost-of-living

adjustment (COLA) effective December 1, 2001. They will receive the increase in their January

2, 2002, annuity payments. For CSRS annuitants, the maximum increase is 2.6 percent. For

FERS annuitants who are eligible to receive a COLA, the maximum increase is 2.0 percent.

Annuitants who have been retired at least 1 year will receive the full COLA, or maximum

increase. To get the full COLA, a retiree's annuity had to begin no later than December 31, 2000.

Retirees whose annuities began between January 1, 2001, and November 30, 2001, will receive a

prorated COLA. They will receive one-twelfth of the applicable increase for each month they

receive any annuity. The following tables show the prorated percentage increases according to

the month in which the annuity began.
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CSRS COLA Proration Table

Annuity Began Amount of Increase

December 2000 or earlier 2.6%

January 2001 2.4%

February 2001 2.2%

March 2001 2.0%

April 2001 1.7%

May 2001 1.5%

June 2001 1.3%

July 2001 1.1%

August 2001 .9%

September 2001 0.7%

October 2001 0.4%

November 2001 0.2%

FERS COLA Proration Table

Annuity Began Amount of Increase

December 2000 or

Earlier -

2.0%

January 2001 1.8%

February 2001 1.7%

March 2001 1.5%

April 2001 1.3%

May 2001 1.2%

June 2001 1.0%

July 2001 0.8%

August 2001 0.7%

September 2001 0.5%

October 2001 0.3%

November 2001 0.2%
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Resource for Additional Information on COLA's

Chapter 2 of the CSRS and FERS Handbook for Personnel and Payroll Offices contains a

complete explanation of how COLA's are computed and who is eligible to receive them.

Increase in Children's Benefits

CSRS COLA rates apply to children's benefits, regardless of whether the child's parent was under

CSRS or FERS. The following rates apply from December 1, 2001, through November 30, 2002.

When the child has a living parent who was married to the employee or retiree, the benefit

payable to that child is the lesser of:

{$378} per month per child; or

{$1134} per month divided by the number of eligible children.

When the child has no living parent who was married to the employee or retiree, the benefit

payable to that child is the lesser of:

{$453} per month per child; or

{$1359} per month divided by the number of eligible children.

FERS Basic Employee Death Benefit

When a FERS employee dies, a surviving spouse (or former spouse) may be eligible for a death

benefit called the Basic Employee Death Benefit. This benefit is an amount equal to 50 percent

of the employee's final annual pay (or average pay if higher), plus $15,000, adjusted for COLA's

under CSRS rules. For deaths that occur on or after December 1, 2001, and before December 1,

2002, the $15,000 plus COLA's amount is now $24,018.48. Chapter 70 of the CSRS and FERS

Handbook has detailed information on the Basic Employee Death Benefit.

Reminder Regarding Reemployed Annuitants

If your agency employs any retirees whose salaries are reduced by the amount of their annuity,

remember to increase the reduction by the amount of the COLA that the retiree received. To

compute the new monthly reduction in the reemployed annuitant's salary, multiply the old

monthly rate by the appropriate percentage and round to the next lowest dollar. An adjustment

must be at least one dollar. For annuitants who transferred to FERS and have a portion of their

benefits computed under CSRS rules, remember to apply CSRS rules to the CSRS portion of the

annuity and FERS rules to the FERS portion of the annuity.

Chapter 100 of the CSRS and FERS Handbook contains instructions on how to pro-rate the old

and new COLA's during the pay period in which the COLA becomes payable.

If you can't determine the retiree's new rate, you may obtain it by calling the Retirement

Information Office at 1 (888) 767-6738 (or for callers within the Washington, DC local calling
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area, (202) 606-0500). The TDD number for the hearing impaired is 1 (800) 578-5707.

When you call, please provide the annuitant's full name, date of birth, and retirement claim

(CSA) number or Social Security number.

You may also write to us by email at retire@opm.gov or regular mail at:

U.S. Office of Personnel Management

Retirement Operations Center

P.O. Box 45

Boyers, PA 16017-0045

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

The interest rate that applies to both CSRS and FERS is 5.5 percent in 2002.

Salary Cap

Sometimes officials in certain Executive level positions do not receive the full official salary of

their positions because of a cap on the amount that can be paid to them. These officials pay

retirement deductions on the capped amount, rather than the full amount, and we compute

retirement benefits using the capped amount. Once the President signs the Executive order for

2002, the caps will be available on OPM's Web site at www.opm.gov/oca. In addition, we will

add this information to Chapter 30 of the CSRS and FERS Handbook.

Reminder Regarding Military Deposits

Deposits for military service performed during 1999 and 2000 are subject to the same temporary

increase that applied to employee retirement deductions for that year. Use the table below to

compute military deposits for service during these years and for the new 2002 rates. Chapter 23

of the CSRS and FERS Handbook has detailed information on Service Credit Payments for Post56 Military Deposits.

Employees who want to pay deposits for military service they performed during any of

these years need to request that the military pay center provide year-by-year earnings so

that you can compute deposits correctly.
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Military Deposits

1999 2000 Other Years

CSRS 7.25% 7.40% 7%

FERS 3.25% 3.40% 3%

Reminder Regarding Waiver of Military Retired Pay

Employees requesting to waive military retired pay should submit their request directly to the

Defense Finance and Accounting Service at the following address 30 days before their planned

retirement date to avoid delay in the finalization of their retirement. A copy of this request must be

attached to the retirement application:

Defense Finance and Accounting Service

Cleveland Center (DFAS-CL/RO)

P. O. Box 99191

Cleveland, OH 44199-1126

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

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

Significant Social Security Figures for 2002

On October 19, 2001, the Social Security Administration published a Fact Sheet that listed 2002

figures that are significant for retirement matters. You can find that Fact Sheet on the Social

Security Administration's Internet site, Social Security Online at www.ssa.gov/pressoffice/

colafacts2001.htm. We have included the figures here for your convenience.

Social Security Maximum Wage Base

The Social Security maximum taxable wage base for 2002 is $84,900.

Hospital Insurance Contribution Base

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

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

remuneration paid during the year. 

Average Total Wages

The amount of average total wages for 2000 is $32,154.82
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Bend Points

The dollar amounts, or bend points, used in the benefit formula for workers who become eligible

for benefits in 2002, and in the formula for computing maximum individual benefits for 2002,

are $592 and $3,567.

FERS Retiree Annuity Supplement Earnings Limit

The Social Security earnings limitation for 2002 is $11,280.00. Any FERS annuitant who is

receiving a FERS annuity supplement (unless he or she is under age 55 and retired under one of

the special provisions for law enforcement officers, firefighters, air traffic controllers, or military

reserve technicians separated for loss of military membership) will have his or her annuity

supplement offset in 2003 by $1.00 for every $2.00 over this amount earned in 2002.

Note: Public Law 106-182, signed on April 7, 2000 does away with the earnings limitation

for Social Security recipients ages 65-69. It does not, however, affect the earnings limitation

for recipients ages 62- 64 nor have any impact on the rules governing the FERS retiree

annuity supplement.

Increase in Age for Full Social Security Benefits

Legislation passed in 1983 provided that the age for receiving full Social Security benefits will

gradually increase from 65 to 67.

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

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

change is available on SSA's web site.

Note: This change does not affect the entitlement of any person who is age 62 to receive

reduced benefits if he or she has sufficient Social Security credits to receive a benefit.

TSP Deferral Limit

The Internal Revenue Service annual limit on elective deferrals is $11,000 for tax year 2002. For

purposes of the Thrift Savings Plan (TSP), the term "elective deferrals" means the maximum

amount that employees can contribute to their thrift accounts. You also can find the elective

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

Raymond J. Kirk, Acting Director

Benefits Officers Resource Center

Retirement and Insurance Services