PAYROLL OFFICE LETTER

U. S. Office of Personnel Management

Number: P-97-10 Date: August 14, 1997 

SUBJECT: REVISED CSRS AND FERS CONTRIBUTION RATES

On August 5, 1997, President Clinton signed Public Law 105-33, "The Balanced Budget

Act of 1997". The legislation contains provisions that will temporarily change the

agency contribution rate for the Civil Service Retirement System (CSRS) and the

employee withholding rate for both the CSRS and the Federal Employees Retirement

System (FERS). Please be aware that the change to the CSRS employer contribution

rate is effective October 1997! 

CSRS AGENCY CONTRIBUTIONS 

All agencies, with the exception of the U.S. Postal Service and the Metropolitan

Washington Airports Authority, must contribute an increased percentage of the basic

pay of CSRS-covered employees, effective with the first pay period beginning on or after

October 1, 1997. The agency contribution rate for most (or "regular") CSRS-covered

employees will increase to 8.51 percent of basic pay. The agency contribution rate will

revert to 7.5 percent in October 2002, and to the current rate in January 2003. 

The new agency contribution rates for each category of CSRS employee, effective with

the first pay period beginning on or after October 1, 1997, are: 

Classification Basic Pay

Percentage of

(%)

"Regular" employees 8.51

Congressional employees

Law enforcement officers

Firefighters

9.01

Members of Congress

Court of Federal Claims judges

U.S. magistrates

U.S. Court of Appeals for Armed Forces judges

Bankruptcy judges

9.51
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CSRS AND FERS EMPLOYEE WITHHOLDINGS 

The rate of withholdings for all CSRS and FERS-covered employees will increase in three

steps. The first increase will be implemented with the first pay period beginning on or

after January 1, 1999. All-in-all, the CSRS and FERS withholding rate will increase 0.5

percent. In January 1, 2003, the rates will revert back to the current rate. 

The increase in the employee withholding rate, for all categories of CSRS and FERS

coverage, will be implemented as follows:

Effective Date 

of Increase Increase 

(first pay period beginning on or after) (%)

January 1, 1999 +0.25

January 1, 2000 +0.15

January 1, 2001 +0.10

Thus, for most CSRS-covered employees, the withholdings rate will increase to 7.25

percent of basic pay in 1999, 7.40 percent in 2000, and 7.50 percent in 2001. Most

FERS-covered employees will be subject to withholdings of 1.05 percent of basic pay in

1999, 1.20 percent in 2000, and 1.30 percent in 2001.

FERS AGENCY CONTRIBUTIONS 

There will be NO change to the agency contribution rate for FERS as a consequence of

the enactment of P.L. 105-33. The reduction in the FERS agency contribution rate,

announced in Payroll Office Letter 97-07, resulting from the change in the FERS normal

cost, is unaffected -- it must be implemented on the first day of the first pay period

beginning on or after October 1, 1997. Therefore, for the first pay period beginning on

or after October 1, 1997, you must implement both the change to the CSRS agency

contribution rate, described above, as well as the change to the FERS agency

contribution rate announced in 97-07. 

If you have any questions on this matter, please call us on (202) 606-0666 or via email,

finance@opm.gov.

Robert A. Yuran

Chief, Financial Policy Staff 

Retirement and Insurance Service