Rules for annuitants under CSRS and CSRS-offset who return to federal service after retiring.
Edward A. Zurndorfer
A federal employee who retired under CSRS or CSRS-Offset may be reemployed in any appointive or elective position for which he or she is qualified. In general, the treatment of a CSRS or CSRS-Offset annuitant’s CSRS annuity and pay upon reemployment in the federal government depends upon whether he or she retired or the basis of a regular, involuntary or disability retirement. Potential benefits that may be earned as a result of the reemployment service depend primarily on the length of such service.
This column presents the reemployment of CSRS or CSRS-Offset annuitants who are not either ‘special provision” annuitants (retired as a law enforcement officer, firefighter, or an air-traffic controller) or CSRS disability annuitants who retire under the CSRS disability retirement rules. Among the topics to be presented:
An employee who retired under CSRS or CSRS-Offset may be reemployed in any appointive or elective position for which he or she is qualified.
When a CSRS or CSRS-Offset annuitant is reemployed, his or her CSRS annuity continues, and the amount of the annuity that applies to the period of reemployment is offset from the reemployed annuitant’s salary.
A reemployed CSRS or CSRS-Offset annuitant’s CSRS annuity is terminated upon reemployment in federal service when:
When a CSRS annuity stops for either the first or second reason as stated above, the annuitant has the same status as any other CSRS or CSRS Offset employee currently employed in an equivalent position with a similar service history. However, the CSRS annuity will be reinstated after the retiree again leaves federal employment unless his or her right to receive that annuity has been terminated by another provision of law, or he or she is entitled to either a newly computed immediate or deferred CSRS or FERS annuity based on this new separation.
In general, a reemployed CSRS annuitant’s status has no effect on an employee’s right to elect FERS coverage. A CSRS or CSRS-Offset reemployed annuitant may transfer to FERS if he or she: (1) Is reemployed after a break in service of more than 3 days, and (2) is reemployed under an appointment not excluded from FERS coverage.
The salary of a reemployed CSRS or CSRS-Offset annuitant is subject to: (1) offset by the allocable amount of annuity during the period of reemployment; and (2) CSRS retirement deductions if elected. This assumes that the reemployed annuitant is under a temporary or permanent appointment (provided the appointment is not “intermittent”) and the reemployed annuitant is not covered by another retirement system covering federal employees such as FERS.
The following general rules apply to a CSRS (not a CSRS Offset) annuitant whose annuity continues upon reemployment:
As pointed out above, a reemployed CSRS or CSRS-Offset annuitant with a full-time or part-time job may elect to have retirement deductions withheld from their salary during the period of reemployment. He or she must file a dated and signed letter or memorandum allowing retirement deduction withholding from his or her pay/salary.
Why would a reemployed CSRS or CSRS-Offset annuitant want to have CSRS retirement deductions withheld from his or her pay/salary? Answer: in order to be eligible for an additional (supplemental) CSRS annuity or a recomputed CSRS annuity that is recomputed based on additional years of service and a larger high-three average salary. Both the supplemental and recomputed CSRS annuity are discussed below.
CSRS retirement deductions are prospective only meaning that the deductions are withheld starting with the first pay period of reemployed annuitant’s service following receipt by the employing office of the notice of request to have CSRS retirement deduction withheld.
In exceptional circumstances, upon reemployment in federal service, a retiree’s CSRS annuity may continue, and he or she may receive full salary without offset when the retiree has been approved the waiver of offset under the Federal Employees Pay Comparability Act. If the reemployment service is performed with no offset, then the additional reemployment service is not creditable for retirement purposes.
The gross amount of the CSRS annuity that is allocable to the period of reemployment must be offset from a reemployed annuitant’s salary. The amount offset from salary is paid into the Civil Service Retirement and Disability Fund.
The formula for computing the amount of the offset is as follows:
Gross Monthly Annuity x 12/ 2087 (number of hours per work year) = Hourly rate of annuity
Hourly rate of annuity x Hours of basic pay = Amount of Per Pay Period Offset for the Pay Period
The following example illustrates: Gross monthly annuity = $6,000 and Hours of basic pay = 80 hours
$6,000 x 12/2087 = $72,000/2087 = $34.50 (Hourly rate of annuity)
$34.50 x 80 = $2,760 (Amount of offset for pay period)
Note the following:
A supplemental CSRS annuity is payable to a reemployed CSRS or CSRS Offset annuitant’s annuity only If the final period of reemployment contains at least one year of actual continuous (not intermittent) full-time and/or part-time (equivalent to at least a year of full-time employment) service.
The following service is excluded from supplemental annuity credit:
The final period of reemployment is the period immediately prior to the separation on which the title to the supplemental annuity is based. A separation for title purposes, exists when:
The supplemental CSRS annuity is computed using one or more parts of the general formula that is used in the computation of the CSRS annuity under the general formula. The general formula depends on the retired CSRS or CSRS-Offset employee’s total length of service.
To compute the supplemental CSRS annuity, one needs to know two factors, namely: (1) average salary; and (2) creditable service. Both factors are now discussed.
• Average salary. The average salary is the average of the full rates basic pay in effect during all periods of reemployment credited in the computation with each rate weighted by the time it was in effect. Note the following: (1) the high-three average salary used in the computation of the original CSRS annuity, when the CSRS annuitant originally retired, does not apply even if the annuitant works three or more years; (2) full rates of basic pay are used in the computation even though the annuitant was not receiving the full rate because of the amount of offset of the annuity; (3) full credit is used in the computation for the time spent in part-time employment from the date of appointment to the date of separation. But the salary is prorated between the part-time tour of duty and a full-time tour of duty as the following example illustrates.
Robert, a reemployed CSRS annuitant is reemployed for 10 months at a salary of $100,000. After that time, he continues working half-time for five months. His part-time salary is one-half of $100,000 or $50,000. His average salary for his supplement CSRS annuity is computed as follows:
$100,000 for 10 months = $100,000 x 10/12 = $83,333.33
$50,000 for 4 months = $50,000 x 4/12 = $16,666.67
Total Salary = $100,000.00
Divided by service factor (15 months) 1.50
Average Salary = $100,000/1.50 = $66,666.67
• Creditable service for computational purposes. The service includes all periods of actual, full-time, part-time (not intermittent) service performed subsequently to retirement, plus the length of service represented by any unused sick leave to the reemployed annuitant’s credit earned during reemployment.
The supplemental annuity is calculated by using the general formula, which for CSRS is:
The following examples illustrate:
Example 1. Catherine had 9 years of service when she retired at age 62 in 1992. She had 3 years of reemployed service from 1995 to 1997, including six months of unused sick leave. Her average salary during her reemployment was $100,000.
Since Catherine’s length of service during her initial was more than 5 years but less than 10 years, the formula to calculate Catherine’s supplement CSRS annuity is:
1.75% x $100,000 for one year of service
+ 2.00% x $100,000 for two years of service
= $1,750 + $2,000 = $3,750
The $3,750 is the amount of Catherine’s supplemental CSRS annuity (in addition to her CSRS annuity, which was computed when Catherine originally retired in 1992, and which has received cost-of-living adjustments).
Example 2. William had 30 years of service when he retired at age 55 in 2011. William had 6 years of reemployed service including six months of unused sick leave. His average salary during his reemployment was $150,000. William’s supplemental annuity is:
2.00% x $150,000 for 6 years of service = $18,000
This is the amount of William’s supplemental CSRS annuity.
A reemployed annuitant must have elected a reduced CSRS annuity to provide survivor benefits in order to elect an additional survivor annuity.
A reemployed CSRS or CSRS-Offset annuitant who completes at least 5 years of actual continuous full-time service and/or part-time service that is equivalent to at least 5 years full-time service may elect to have his or her existing CSRS annuity redetermined under the law in effect at the time of separation from reemployment in lieu of a supplemental annuity.
Note that in addition to having performed the required five years of actual continuous full-time service, the reemployed CSRS annuitant must also meet the minimum requirements for a new retirement right. The following example illustrates.
Howard retired under a Voluntary Early Retirement Authority (VERA) at age 47 with 25 years of federal service. He was reemployed a year later and works full-time for five years until he is age 52. He is not eligible for a redetermined annuity because he does not meet the requirement of age 55 with 30 years of service (he is age 53). Therefore, he is only eligible for a supplemental annuity.
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