Office of Personnel Management

Retirement and Insurance Service

1920 1954 1959 1986 

 

Benefits Administration Letter

Number: 96-107 Date: August 20, 1996

SUBJECT Retirement Election Opportunity for Certain Employees

Appointed to Civil Service Positions on or After August 10, 1996,

Following Service in a Nonappropriated Fund Instrumentality of

the Department of Defense or Coast Guard

A. Introduction

On August 9, 1996, the Office of Personnel Management published Civil Service Retirement

System (CSRS) and Federal Employees Retirement System (FERS) regulations to implement

section 1043 of Public Law 104-106, the National Defense Authorization Act for Fiscal Year

1996. The regulations took effect on August 10, 1996. Benefits Administration Letter 96-

105, dated August 9, 1996, announced the publication of the regulations and provided

information on how they may be obtained.

This Benefits Administration Letter (BAL) provides general information about section 1043

and the implementing regulations. It also provides specific instructions for election

opportunities under section 1043 for certain employees who, on or after August 10, 1996,

enter a retirement-covered position following service with a nonappropriated fund

instrumentality (NAFI) of the Department of Defense (DoD) or Coast Guard. Section 1043

also provides other election opportunities for employees who entered a retirement-covered

position before August 10, 1996. We will issue a BAL with detailed information about the

latter election opportunities soon.

IMPORTANT: An election opportunity is available for employees entering any

agency with past service in a NAFI if they qualify under the

conditions in this BAL. See procedure in paragraph L.

B. Background: Provisions in Effect Before August 10, 1996

CSRS credit is allowed under limited circumstances for certain NAFI service performed

between June 18, 1952, and January 1, 1966. See Chapter 20, Part 20A2 of The CSRS and

FERS Handbook for Personnel and Payroll Offices. The new law has no effect on those

provisions.

The Portability of Benefits for Nonappropriated Fund Employees Act of 1990, Public Law
BAL 96-107

August 20, 1996 Page 2

101-508, allowed certain Department of Defense (DoD) and Coast Guard employees who

moved from a NAFI position to a CSRS- or FERS-covered position, and vice versa, the

opportunity to elect to remain in the retirement plan they had in their previous employment

system. Eligible employees in the nonappropriated fund system of DoD or Coast Guard who

moved into the civil service could continue NAFI retirement plan coverage. Eligible

employees who moved from the civil service to the nonappropriated fund employment system

could elect to retain their previous retirement coverage, that is, CSRS or FERS. These

provisions applied to qualifying employment moves that occurred after December 31, 1986. 

The election opportunity was limited to 30 days after appointment in the gaining organization.

To qualify under the 1990 Act, the employee had to meet the following requirements:

-- Vested in prior organization's plan. The employee making the

employment move had to be vested in the plan applicable to the losing

organization. For CSRS and FERS, vesting means the employee, upon leaving

service under the plan, has enough civilian service to qualify for a deferred

annuity, that is, 5 years of civilian service. Vesting under the NAFI plans must be

determined by each of the several plans.

-- Employment move within DoD or Coast Guard. The employment move

that qualified the employee to make the election had to occur within DOD or

Coast Guard, but once made, the employee continued under the elected plan in

future service, even outside DoD or Coast Guard.

-- Break-in-service of 3 days or less. If employment in the gaining

organization followed a break of 4 days or more, the employee was disqualified

from making the election.

-- No prior opportunity. For employment moves occurring after initial

implementation of the 1990 Act, an employee who had already had a qualifying

employment move and, as a result, the opportunity to make an election under the

1990 Act, was disqualified from making an election based on a second qualifying

move in the same direction. That is, an employee who had an opportunity to elect

to continue NAFI plan coverage upon a move to the civil service employment

system, but elected not to do so, could not elect to continue NAFI retirement plan

coverage based on a second move. Such an employee could, however, elect to

continue CSRS or FERS coverage based on a subsequent qualifying move back to

a NAFI.

See Chapter 12, Part 12A5 of The CSRS and FERS Handbook for Personnel and Payroll

Offices, for more information about elections under the 1990 Act.
BAL 96-107

August 20, 1996 Page 3

C. Overview of Section 1043 of Public Law 104-106

The general purpose of section 1043 is to allow more employees to combine, for retirement

purposes, regular civil service employment with their employment in a NAFI. It does this in

two ways. First, section 1043 loosens the 1990 Act's definition of a qualifying move for the

purposes of remaining in the employee's prior retirement plan following a move to or from a

NAFI. These changes are explained and additional information is provided in paragraphs D

through O.

The second major thrust of section 1043 is to allow certain FERS and NAFI employees who

had a qualifying move after December 31, 1965, and before the effective date of the new

regulations (August 10, 1996), to combine all their service--both NAFI and regular civil

service--toward a single retirement benefit. These elections will be the subject of an

upcoming BAL.

D. Elections Available Based on Employment Moves on or After August 10,

1996

Effective August 10, 1996, the requirements for eligibility to retain prior

retirement coverage following an employment move have been changed as follows:

-- Qualifying employment moves into any agency. The requirement that

the employment move on which the election is based be a move within DoD or

Coast Guard has been eliminated.

-- 1-year break rather than 3-day break.

The vesting and no-prior-opportunity rules list in paragraph B are unchanged for these

elections.

E. Who Is Eligible?

A qualifying move that triggers a retirement coverage election opportunity under section 1043

of Public Law 104-106 must meet all of the following four criteria. These criteria apply to

any move occurring on or after August 10, 1996, the effective date of the implementing

regulations.

1. The employee did not have a prior opportunity to elect to continue the same

retirement coverage based on a prior qualifying move.

As under the provisions of the 1990 Portability Act, an employee has only one opportunity to

elect to retain NAFI or civil service retirement coverage. An employee who, upon a
BAL 96-107

August 20, 1996 Page 4

qualifying move, has an opportunity to elect to continue NAFI retirement plan coverage will

not have a future opportunity to continue NAFI plan coverage upon a subsequent employment

move. Similarly, an employee who has had an opportunity to continue CSRS or FERS will

not be given a second opportunity to elect CSRS or FERS upon a subsequent employment

move. An opportunity to elect to continue CSRS or FERS does not disqualify an employee,

however, from a future single opportunity to elect to continue NAFI coverage at the time of a

subsequent qualifying move.

2. The employee was a vested participant in his or her retirement plan prior to the

change in employment.

The amendments made by Public Law 104-106 provide only for a continuation of vested

retirement coverage upon a change in employment. As stated above, the CSRS and FERS

requirement for vesting is 5 years of creditable civilian service.

The retirement systems that cover NAFI employees have various vesting requirements. 

Before providing any employee the opportunity to elect to continue retirement coverage,

agency personnel must first verify that the employee was vested in his or her prior NAFI

retirement plan. Attachment 1 contains the names and addresses of the NAFI retirement plans

which agency personnel may use to verify prior service under that plan and to obtain a

certification that an employee was vested. Attachment 2 provides model language to use

when contacting the previous retirement plan.

3. The employee moved from NAFI service in DoD or Coast Guard to a retirementcovered appointment in the civil service employment system, or vice versa.

4. The break in retirement-covered employment did not exceed 1 year.

A move is considered to have been made at the time the individual enters into the new

position, not at the time of separation from the prior position. For example, an individual may

have separated from a NAFI position with retirement coverage on December 31, 1995. The

same individual received an appointment subject to FERS on September 29, 1996. If all other

criteria are met, the individual has completed a qualifying employment move on September

29, 1996, and is eligible to elect to continue his or her NAFI retirement coverage instead of

becoming covered by FERS.

An appointment during the 1-year break which is not subject to retirement coverage does not

invalidate an otherwise qualifying move. The same individual in our example may have

received a temporary appointment with no retirement coverage on May 12, 1996, and then

converted to an appointment that allowed retirement coverage on September 29, 1996. Since

the separation from a retirement-covered position occurred on December 31, 1995, the

employee had 1 year and 1 day from the effective date of the separation, or January 1, 1997,

to be appointed in a retirement-covered position in order to complete a qualifying move. (The

employee's period of separation -- January 1 through December 31, 1996 -- is exactly 1 year.)
BAL 96-107

August 20, 1996 Page 5

F. Election Form

Attachment 3 contains the election form that must be used by agency personnel and

employees to document an election of NAFI retirement coverage based on a qualifying move

occurring on or after August 10, 1996. Instructions for completing the election form are also

located in Attachment 3.

DoD and Coast Guard will issue guidance to NAFI employers concerning opportunities to

elect CSRS or FERS upon a move to NAFI employment, consistent with OPM regulations

and forms.

G. Effect of Election

A retirement coverage election is irrevocable. Once an employee has elected coverage under

a retirement system, he or she continues to be covered by that retirement system for all future

periods of service not otherwise excluded from retirement coverage (such as a temporary

appointment), whether employed in a civil service position or with a NAFI. The elected

retirement coverage will also apply to any service the individual may perform as a

reemployed annuitant.

An employee who declines his or her right to retain retirement coverage may again be

covered by the "declined" retirement system. For example, a NAFI employee moves (under

conditions which are qualifying) to a FERS-covered position. At the time of the move, the

employee is given the opportunity to elect to be covered by the NAFI plan for all future

service, including service that would normally be subject to FERS coverage. If the employee

chooses not to retain his or her NAFI retirement coverage, he or she is covered by FERS for

the duration of his or her current appointment. Should the employee move back to the NAFI

position, he or she would be covered by the NAFI retirement plan unless the employee is

eligible to continue vested FERS coverage following the move back to NAFI employment

and elects to continue FERS. 

H. Effective Date of Election

Elections of retirement coverage are effective on the date of appointment to a retirementcovered position which completed the qualifying move. If an employee's election to continue

NAFI retirement coverage while employed in the civil service is received after CSRS or

FERS deductions have already begun, the personnel and payroll records must be corrected,

retroactive to the date of the appointment, to reflect coverage under the NAFI retirement plan.

For example, an employee with the following service history elects to continue NAFI

retirement coverage following a qualifying move:
BAL 96-107

August 20, 1996 Page 6

FROM TO EMPLOYMENT AND COVERAGE

May 21, 1987 August 28, 1996 NAFI with vested coverage in a NAFI

retirement plan

September 14, 1996 December 6, 1996 Temporary Appointment with FICA only

December 7, 1996 Present Civil service with FERS coverage

Effective December 7, 1996, the employee completed a qualifying move from a retirementcovered NAFI position to a FERS-covered position. If this employee chooses to keep his

NAFI retirement coverage rather than FERS, the effective date of the election of NAFI

retirement coverage is December 7, 1996. Retirement deductions for the elected NAFI

retirement plan coverage are required effective December 7, 1996.

I. Time Limit for Elections

At the time of employment in a position which completed a qualifying move, the employing

agency must give eligible employees 30 days in which to make their election. This time limit

may be extended if the agency fails to provide a timely opportunity for the employee to make

the election (5 CFR § 847.206). However, since the election is effective on the date of the

qualifying move, agency personnel should inform eligible employees of their election

opportunity as soon as possible.

J. Collection of Retirement Contributions

OPM will issue additional guidance directly to NAFI payroll offices with information on

withholding CSRS and FERS contributions from NAFI employees. OPM will also issue a

Payroll Office Letter to payroll offices that will provide the names and addresses of each of

the NAFI retirement plans as well as a contact person at each plan for questions concerning

withholding and submitting NAFI retirement plan contributions. 

K. Thrift Savings Plan

Employees moving into civil service positions who elect to retain coverage under a NAFI

retirement plan are not eligible to participate in the Thrift Savings Plan. The Federal

Retirement Thrift Investment Board's regulations are at 61 Fed. Reg. 41,485 (August 9, 1996)

(to be codified at 5 C.F.R. part 1620, subpart G).
BAL 96-107

August 20, 1996 Page 7

L. Procedures

Elections of Retirement Coverage Based on Moves Occurring on or

After August 10, 1996

ACTION PROCEDURE

1. Determine if See Paragraph E, Who Is Eligible. Review prior employment history

employee is to determine if employee has separated from a NAFI position within 1

eligible to elect to year of appointment to the new position. Determine if employee had

retain coverage. prior opportunity to elect to retain retirement coverage. Verify that

employee was vested in the prior retirement system (sample request

for verification in Attachment 2).

2. If employee is See Instructions for Completing Election Form in Attachment 3. 

eligible, provide After agency completes Part 1 of Election Form, obtain employee's

election signature in Part 2 and retain one copy as acknowledgment of receipt

opportunity. by employee. If employee elects NAFI retirement coverage, correct

personnel and payroll records to show that employee is covered by a

NAFI retirement plan, and subject to that plan's deductions, effective

with the date of his or her appointment.

M. Notice Requirement

Public Law 104-106 requires that all employees affected by the new provisions be notified of

their election opportunity under the law and to receive any necessary assistance and

counselling. The purpose of this Benefits Administration Letter (BAL) is to provide the

information Benefits Officers will need to inform CSRS and FERS employees hired on or

after August 10, 1996, of the change in the law, counsel eligible employees about the

elections they may consider, and process any employee elections. If additional information is

needed, headquarters level Benefits Officers should contact their liaison officer in the Agency

Services Division. Agencies should not refer employees directly to the Agency Services

Division.

N. Appeals

OPM regulations delegate to agencies the authority to issue final decisions to employees who

claim an election right, but do not meet the eligibility criteria. Requirements for agency

decisions may be found in 5 CFR §§ 847.106 and 847.107.
BAL 96-107

August 20, 1996 Page 8

O. Insurance coverage not affected

The amendments made by Public Law 104-106 do not apply to eligibility for health and life

insurance coverage. A NAFI employee's participation in CSRS or FERS does not allow him

or her to participate in the Federal Employees Health Benefits Program or the Federal

Employees Group Life Insurance Program. Likewise, a civil service employee who is

participating in a NAFI plan is not eligible for a health or life insurance program established

for NAFI employees.

John E. Landers, Chief

Retirement Policy Division

Attachments:

1. Names and Addresses of Retirement Plans

2. Model Language for Use in Verifying that an Employee was Vested in the Previous

Retirement System

3. Election Form
Attachment 1

BAL 96-107 August 20, 1996

Page 9

ATTACHMENT 1

Names and Addresses of NAFI Retirement Plans
Attachment 1

BAL 96-107 August 20, 1996

Page 10

To verify service subject to a NAFI retirement plan and/or that an individual

is vested in the NAFI retirement plan, contact the appropriate NAFI

Component:

Name of Retirement Plan Address

Department of the Army Assistant Secretary of the Army for

 Manpower and Reserve Affairs

Civilian Personnel Policy

Attn: SFCP-NF, Room 1N39

200 Stovall Street

Alexandria, VA 22332-0300

Department of the Air Force HQ Air Force Services Agency

HQ AFSVA/SVXBR

10100 Reunion Place, Suite 502

San Antonio, TX 78216-4318

U.S. Marine Corps Headquarters, U.S. Marine Corps

Morale, Welfare, and Recreation Support Activity

(MWP-B)

3044 Catlin Avenue

Quantico, VA 22134-5099

Department of the Navy,

Bureau of Naval Personnel

(BUPERS)

Bureau of Naval Personnel Detachment Memphis

MWR Division (PERS-653)

Naval Support Activity Memphis

7800 3rd Avenue, Bldg 457

Millington, TN 38054

Naval Exchange Service

Command (NEXCOM)

Navy Exchange Service Command

Attn: Ms. Willette Brown, Employee Entitlement and

Services

3280 Virginia Beach Boulevard

Virginia Beach, VA 23452

Army and Air Force

Exchange Service (AAFES)

Headquarters, Army and Air Force Exchange Service

FA-T (Benefits)

P.O. Box 660202

Dallas, TX 75266-0202

U.S. Coast Guard Commandant (G-WPC-2)

U.S. Coast Guard Headquarters

2400 2nd Street SW

Washington, DC 20593
Attachment 2

BAL 96-107 August 20, 1996

ATTACHMENT 2

Model Request for Verification that Employee Was Vested in a NAFI Retirement Plan
Attachment 2

BAL 96-107 August 20, 1996

[Insert name and address of previous retirement system.]

Dear Retirement Plan Administrator:

The following individual was employed by this agency on [Insert date of employment subject to retirement

coverage]. So that we may determine if this individual is eligible to elect to retain NAFI retirement coverage

based on a qualifying move occurring on or after August 10, 1996, please provide the effective date of the

individual's separation from a retirement-covered position and verify whether the employee was vested in a

retirement system on the date of separation. The employee's identifying information is as follows:

Employee's Name (Last, First, MI) Other names used

Date of Birth Social Security Number

Agency or component which employed Location of Employment

Beginning Date Ending Date

Please provide the following information:

Employee was a vested participant in the retirement system.

Dates of participation: .

Employee was not a vested participant in the retirement system and is therefore not eligible to continue

retirement coverage under this system.

Signature of certifying official Date

Title

Address and telephone number

Please return response to:

[Insert name, address, and telephone number.]
Attachment 3 

BAL 96-107 August 20, 1996

Attachment 3

Election Form for Moves Ocurring on or After August 10, 1996
Attachment 3 

BAL 96-107 August 20, 1996

Instructions for Completing Election Form

Elections of NAFI Retirement Coverage Based on a Move on or After August 10, 1996

1. The personnel office completes Part 1 of the form if the employee was vested in the prior retirement plan

and makes a copy of the form.

2. The personnel office gives both copies of the form to the employee and instructs the employee to read and

acknowledge receipt of the form by signing Part 2 of one copy of the form. The personnel office collects

and retains the copy of the form that the employee signed (both Parts 1 and 2 completed). The employee

keeps the other copy with only Part 1 completed.

3. The personnel office files the signed copy on the left side of the Official Personnel Folder (OPF), or in some

other temporary file, until the employee makes an election or the time limit for making an election expires.

4. When the employee makes an election by signing under either Option 1 or Option 2 in Part 3 of the form

and returns it to the personnel office, the personnel office marks the date of receipt on the form and makes a

copy of the form (with Parts 1 and 3 completed). The personnel office gives the employee the copy of the

form that does not have the original signature in Part 3, files the form with the original signature in Part 3 on

the right side of the OPF, and destroys the copy of the form with Part 2 completed.

5. If the time limit expires before the employee has returned the election form with Part 3 completed, the

personnel office takes the form with Part 2 completed, makes a notation that the employee did not file a

form with Part 3 completed, and files the form on the right side of the OPF. 
Attachment 3 

BAL 96-107 August 20, 1996

ELECTION TO RETAIN NAFI RETIREMENT COVERAGE AS A RESULT OF

A MOVE FROM A NONAPPROPRIATED FUND POSITION TO A CIVIL SERVICE POSITION

ON OR AFTER AUGUST 10, 1996

INSTRUCTIONS: The Personnel Office must verify that the employee was vested in the NAFI retirement plan before

completing Part 1 of this form and giving it to the employee. The employee must indicate his/her election by signing in Part 3

and returning the signed form to the Personnel Office on or before the due date shown in Part 1.

PART 1 (to be completed by agency)

I verify that in accordance with §§ 8347(q) and 8461(n) of title 5, U.S.C., and OPM regulations at 5 CFR 847.205, this

employee is eligible to retain coverage in the NAFI retirement plan because he/she --

(1) Has never previously had an opportunity to elect to retain coverage in a NAFI retirement plan;

 

(2) Has moved, on or after August 10, 1996, from a NAFI position subject to a NAFI retirement plan to a civil service

appointment covered by CSRS or FERS without a break of more than 1 year; and

Employee's name

Date of Birth Social Security Number

Name of NAFI Retirement Plan (3) is vested in the NAFI retirement plan. Date of Move

Authorized Signature Date signed

Due Date: Personnel Office Must Receive

Election On or Before

Title

PART 2: ACKNOWLEDGEMENT OF RECEIPT AND NOTICE OF EFFECT OF FAILURE TO ELECT

I understand that I am eligible to retain retirement coverage in the NAFI retirement plan listed above. I acknowledge that the Personnel

Office has completed Part 1 of this election form and given it to me on this date. I understand that if I fail to complete Part 3 and return the

completed form to the Personnel Office before the close of business on the Due Date (shown in Part 1) I will automatically be considered to

have chosen Option 2 in Part 3. I also understand that the option I choose below (or am automatically considered to have chosen) will

restrict my retirement plan entitlement for the rest of my Government career and that I can never change this election.

Employee's signature Date

PART 3: EMPLOYEE'S ELECTION (Instructions to employee: Sign only the box for the option that you elect.)

OPTION 1: I elect to retain retirement coverage in the NAFI retirement plan. I understand that because of this irrevocable decision, I will

never be able to earn additional credit under the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System

(FERS). I understand that regardless of future moves between NAFI and civil service employment, breaks in service, and changes in

employment or retirement status, my retirement coverage will remain with a NAFI retirement plan in accordance with the rules of that plan.

Employee's signature Date

OPTION 2: I do not elect to retain retirement coverage in the NAFI retirement plan. Because I have made this decision:

1) I will enter FERS (or CSRS Offset if appropriate) coverage without receiving any service credit in FERS (or CSRS Offset) for time spent

under the NAFI plan.

2) I will not be given another opportunity to retain coverage in a NAFI retirement plan, if I ever move from a NAFI position to a civil service

appointment in the future. However, if I move back to a NAFI position, I will subject to the NAFI plan in accordance with its rules.

3) If in the future I move back to NAFI employment, including employment covered by the NAFI retirement plan that I am leaving, I will be

given a one-time opportunity (if I never before have been given the opportunity) and if I have 5 years of creditable service under FERS or

CSRS) to elect to retain coverage in FERS (or CSRS Offset), or to enter the appropriate NAFI plan without transfer of FERS (or CSRS

Offset) service credit.

Employee's signature Date

Reproduce Locally NAF-CS-1