Employees who are covered by the Civil Service Retirement System (CSRS) and who

have performed some part time service sometime after April 6, 1986 received a

boost to their CSRS annuities as a result of the recent passage of the Defense

Authorization Act (DAA).

As will be explained and illustrated below, CSRS employees with part time

service and who retire after October 27, 2009 will receive a somewhat higher

CSRS annuity under DAA's passage compared to what they would have received

before DAA's passage.

It is important to first review the general rules for CSRS employees who have

worked on a part time schedule on or after April 7, 1986. Upon retirement, these

employees will receive a CSRS annuity consisting of:

• A pre-April 7, 1986 CSRS annuity component, using the employee's total

  service time through April 6, 1986. The employee's unused sick leave balance at

  the time of the employee's retirement is also included in the annuity

  calculation.

• A post-April 6, 1986 CSRS annuity component, using the employee's service

  from April 7, 1986 through the date of retirement plus any unused sick leave

  days leftover for the computation of pre-April 7, 1986 basic annuity. The result

  of this annuity computation is prorated using a "proration percentage" in order

  to take into account the employee's part time service.

Note that prior to DAA's passage, those CSRS employees with part time

service after April 6, 1986 had both the pre-April 7 and post-April 6, 1986

annuity components subject to the "proration percentage". With DAA's passage,

only the post-April 6, 1986 component is subject to the

"proration percentage".

Only whole years and months of service (which includes the retiring

employee's sick leave at the time of retirement) are used in the computation of

the pre-April 7, 1986 basic annuity. Any "leftover" days (days totaling less

than a month or 30 days) will be added to the length of service used to compute

the post-April 6, 1986 basic annuity.

The following example illustrates:

Charles will be retiring from federal service under CSRS on Dec. 31,

2009. Charles started federal service June 19, 1977 and worked full time until

converting to part time - 64 hours a pay period or 80 percent of full time -

starting May 1, 1995. He has continued to work part time until his retirement

date of December 31, 2009. At the time of his retirement, Charles will have 1680

hours of unused sick leave. Using OPM's sick leave conversion table (href="http://www.myfederalretirement.com/public/Unused_Sick_Leave_2087_Hours_Chart.pdf"

target=_blank>available here [PDF]), the 1680 hours of unused sick

leave adds nine months and 20 days of service to Charles' service time for the

purpose of calculating his CSRS annuity.

Step 1.

Compute length of service for the pre-April 7, 1986 CSRS annuity:

    Service history:  6 - 19 - 1977 to   5 - 01

-1995 full-time (80 hours each pay period)
   

5 - 02 - 1995 to 12 - 31 -2009 part-time (64 hours each pay period)

    Unused sick leave at the time of retirement: 1,680

hours  = 9 months and 20 days

Note: The Office of Personnel Management (OPM) operates on a 30 days per

month, 12 months per year calendar year.

Add: Unused sick leave

9 years and 7 months = total creditable service for computation

purposes for the period
June 19. 1977 to April 6, 1986.

Step 2.

Determine the employee's length of service from April 7, 1986 to the day of

retirement:

Add the leftover days from pre-April 7, 1986 length of service computation

(Step 1)

23 years and 9 months = total creditable service for  CSRS

computation purposes for the period April 7, 1986 to December 31,

2009.

Step 3.

Compute the high-three average pay for the pre-April 7, 1986 basic annuity by

using any period of three consecutive years of the employee's service, including

service performed after April 6, 1986 that will produce the highest average pay.

Under the pre-DAA passage, the CSRS annuity is prorated according to the

employee's  part-time service after April 6, 1986.

Returning to the example with Charles:

• 9 years and 7 months = full-time service before April 7, 1986

• 9 years and 1 month  = full-time service between April 7, 1986 and May

  1, 1995

• 14 years and 8 months = part-time (64 hours per pay period) service after

  May 1, 1995   through  December 31, 2009 (date of

  retirement)

The "proration percentage"  is calculated by computing the ratio of

the number of hours actually worked between April 7, 1986 and the retirement

date to the full-time equivalent number of hours. In this example, the number of

hours actually worked between April 7, 1986 and Dec. 31, 2009  (23 years

and 9 months) is equal to:

Total hours worked from April 7, 1986  through Dec. 31, 2009 = (2087

hours/year x 9 years) + (174 hours/month x 1 month) + (1,668 hours/year x 14

years) + (139 hours/month x 8 months) = 43,421 hours actually worked between

April 7, 1986 and Dec. 31, 2009.

Full-time equivalent hours = (23 years x 2,087 hours/year) + (9 months x 174

hours/month)
= 49,567 hours

43,421 hrs worked/49,567 full time equivalent hrs=.8760 or 87.60% =

"proration percentage"
Assume Charles's high-three average salary is

$100,000

Step 4. Calculate the total CSRS annuity that includes both part-time and

full-time service. In doing this calculation, the CSRS computation chart,

available for download at (href="http://www.opm.gov/retire/pubs/handbook/C050.pdf">www.opm.gov/retire/pubs/handbook/C050.pdf,

page 54) will be utilized.

Note the following from the above table:

1. The difference between the total CSRS annuity of pre-DAA ($55,589) and

   post-DAA ($57,514) passage is $1,925 per year, or $160.42 per month.

2. If the individual in the example (Charles) had not converted to part time

   service during his federal service, his CSRS annuity would have been 0.629167

   (from OPM's CSRS annuity table in the CSRS and FERS Handbook, Chapter 50 -CSRS

   annuity percentage that applies to 33 years and 4 months of  total service)

   times $100,000, or $62,917. This is a difference equal to $62,917 minus $57,514

   (under the new rules) or $5,403 per year or $450 per month. Under the old rules,

   the difference would have been equal to $62, 917 less $55,589  or $7,325

   per year, or $610 per month.

In short, converting to part time service during federal service - whether a

CSRS or a FERS-covered employee - will result in a reduced CSRS or FERS annuity.

The rules for part-time FERS employees have not changed. FERS employees with

part-time service will compute their FERS annuities by multiplying their

high-three average salary times 1.0 or 1.1 percent times their total service

time (in months and years) times the "proration percentage" (the ratio of total

hours worked divided by the full time equivalent hours).

Nevertheless, DAA's passage has resulted in somewhat higher annuities for

those CSRS employees with part time service after April 6, 1986 and who retire

from federal service after October 27, 2009.

About the Author

Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in

Silver Spring, MD. He is a seminar speaker at federal employee retirement

seminars throughout the country for the National Institute of Transition

Planning, Inc. , and an author of numerous publications on federal employee

benefits.