The Civil Service Retirement System (CSRS) is one of the two major retirement systems which cover eligible NASA employees. CSRS pre-dates the newer Federal Employees Retirement System (FERS). This chapter provides a brief summary of the CSRS retirement system.

First, are You Covered by CSRS?

To be covered under CSRS you must have been employed in the Federal civil service and have been covered under the CSRS system prior to 1984. If you first came to work after January 1, 1984, or you elected to transfer to FERS during an open season, you are covered under FERS. FERS is covered in chapter 19. If you had a break in service and did not elect to transfer to FERS upon your return, you may be covered by the CSRS Offset retirement plan. CSRS Offset is described at the end of this chapter.

What is the Civil Service Retirement System (CSRS)?

CSRS is a contributory retirement plan - meaning that you and the Government each contribute to the Civil Service Retirement and Disability Fund. Your contribution is currently set at 7% of your salary. The NASA contribution is also an amount equivalent to 8.51% of your salary.

From the Fund, you may receive payments for retirement or disability. The United States Treasury invests the fund’s money in interest-bearing Government securities. The interest also becomes a part of the Fund. You receive a return of a guaranteed amount which is at least equal to your contributions. This return may be in the form of annuity payments or under some conditions a cash refund for you or your survivors.

Credit for Service

Under CSRS you receive service credit for:

Civilian Service All periods of service as a civil service employee of the Federal Government are creditable toward CSRS retirement eligibility.
Military Service Periods of active and honorable service with the U.S. Armed Forces are creditable toward CSRS retirement if performed before retirement. Military service may not be creditable if you draw military retired pay, or if military duty was after December 1956 and you are eligible for Social Security benefits at age 62.

Two General Requirements for CSRS Retirement

There are two general requirements which you must meet in order to retire:

Types of CSRS Retirement

Immediate Retirement If you meet the general requirements and any combination of minimum age and service, as well as the special requirements (if any) shown in the following table, you may retire and receive an immediate annuity.

Deferred Retirement If you meet the general requirements upon separation from the Federal Service before you are eligible for immediate retirement, you may receive an annuity when you reach age 62. You give up your right to this annuity by applying for a refund of your retirement deductions. Also, you are not eligible for health benefits and life insurance.

When Can You Retire?

*There is an annuity reduction for age if you are under age 55.

How Much is a CSRS Retirement Annuity?

The amount of your basic annuity will depend primarily upon your length of service and your "high 3" average pay. The "high-3" is the highest pay obtainable by averaging your rates of basic pay in effect during any 3 consecutive years of civilian service. Each rate is weighted by the length of time it was in effect. Normally, this will be the last 3 years of service.

Days of unused sick leave add to your length of service for annuity computation purposes - if you retire on an immediate annuity; however, unused sick leave is not used in computing "high-3" average pay or for meeting the minimum length of service required for eligibility.

Limitation on Basic Annuity
Your basic annuity cannot exceed 80% of your "high 3" average pay except with sick leave credit.

Basic Annuity Formula
The basic annuity formula is as follows:

Take: 1.5% of the "high 3" average pay and multiply the result by years of service up to 5;
Add: 1.75% of the "high 3" average pay multiplied by years of service between 5 and 10;
Add: 2% of the "high 3" average pay multiplied by years of service over 10 years.

Your have a basic annuity reduction if you retire before age 55 except for disability.

Minimum Disability Annuity
If you retire for disability, your benefit will equal your projected benefit at age 60 or 40 percent of your "high 3"average salary, whichever is less. If you have more than 22 years of service, you will receive your accrued benefit - which is more than 40 percent of "high-3." If you receive military retired or retainer pay or compensation from the Veterans Administration instead of retired or retainer pay then you will receive your accrued benefit only.

Reduction for Retirement Before Age 55
If you retire before age 55, except for disability, your annuity reduces by 1/6 of 1% for each full month (2% per year) you are under age 55.

Deduction for Survivor Annuity
If you elect a maximum survivor annuity, your own annuity reduces by 2.5 percent of the first $3600 ($90) of your annuity (the base) and 10 percent of all of your annuity in excess of $3600. You may elect a less than maximum survivor annuity by designating only a portion of your annuity instead of your whole annuity as the base to which this reduction formula is applied. Your surviving spouse will receive 55 percent of the amount you elect as the base.

Non-Deduction and Refunded Service
If you have civilian service not under CSRS, civilian service under CSRS but refunded, or military service after 1956, then you may be receiving less annuity. Refer to the charts at the end of this chapter for more detailed information.

Cost-of-Living Adjustments
You are eligible for cost-of-living adjustments (COLAs) in the year after you retire, and every following year. Your first COLA is prorated and the percentage you receive depends on the month in which you retire. Thereafter, the increases you receive each year actually match the rate of inflation. Any benefits that become payable to your survivors will also receive annual COLAs.

What is the Alternative Form of Annuity (Lump-Sum Withdrawal)?

If you retire with a certain life threatening illness and you are expected to live less than 2 years, you may elect a lump-sum credit with an actuarially reduced annuity. The lump-sum credit is equivalent to your retirement contributions into CSRS. If you elect this option, you will still be subject to all provisions of CSRS.

Survivor Elections

When you Retire

When you retire you may elect what type of annuity, if any, you want to provide for your survivors. There are 3 types of annuities:

What is Meant by "Insurable Interest" ?

A person with an insurable interest is one who derives a financial benefit from the continued life of the employee. An insurable interest relationship is presumed to exist with:

Can You Make Voluntary Contributions to CSRS?

You may make optional payments to the retirement fund in addition to your regular CSRS deductions. Voluntary contributions earn interest…but are not pre-tax. These payments may purchase additional annuity for your retirement. This additional annuity adds to your regular retirement annuity. The amount of additional annuity you buy with your voluntary contributions and interest depends upon your age at the time you retire. Annuity purchased with voluntary contributions does not receive COLAs. If you retire at age 55 or younger, each $100 to your credit purchases $7 a year of additional annuity. This additional annuity increases by 20 cents for each full year you are over 55 when you retire.

Before you make voluntary payments, you must pay any deposits or redeposits you owe to the fund.

You may apply for and receive money for a refund of all (not just a part) of your voluntary contributions plus earned interest at any time before you retire. If you do receive this refund, you cannot make voluntary contributions again except upon reemployment after a minimum separation of 3 calendar days. Your reemployment must be under the CSRS.

You may get an Application to make Voluntary Contributions, Standard Form 2804, from your Benefits Services Representative. The Office of Personnel Management receives the payments, rather than NASA. Payments may be in multiples of $25 (that is, $25, $50, $75, etc.). The SF 2804 explains the procedures.

• Voluntary contributions are an investment. You need to compare it to other investments. Some of these investments, however, may involve greater risk than voluntary contributions.
• The return of voluntary contributions plus added interest guarantees a return of your investment. This return may be a refund, additional retirement and survivor annuity, or a lump sum death benefit.
• Your voluntary contributions are not tax deferred; however, the interest is tax deferred until you withdraw your voluntary contributions.
• Voluntary contributions provide an increased retirement income in a set amount. For example, if you wish an annuity income of $300 a month, but your regular annuity will be only $250, you can make voluntary contributions in an amount which is sufficient to provide additional annuity of $50 a month.
• Voluntary contributions may be made at your convenience. You may make them in varying amounts which can be as small as $25. You must make your deposits with the Office of Personnel Management - not through payroll deductions.
• The advantage of voluntary contributions depends on the number of years over which the additional annuity purchased by the contributions will be paid. Thus, it depends on how long after retirement you (and your survivor if the additional annuity is shared) will live and draw the additional annuity.
• If you die as an employee, all of your voluntary contribution account is payable immediately as a cash benefit. The account may not increase any annuity due a widow, widower, or children; however, you may elect a survivor annuity at retirement.
• Voluntary contributions do not earn cost-of-living adjustments.
• Interest on voluntary contributions is a variable rate, compounded annually, determined by the Secretary of Treasury.
• It takes a few weeks for the Office of Personnel Management to process your request for a refund of your voluntary contributions. This is not like a bank’s savings account that you can withdraw in a very short period.
• In addition, if you receive the refund before you attain age 59½, the interest portion of the refund is subject to an additional 10 percent early distribution tax. However, the following situations are exceptions to this 10 percent tax:

  • payments on account of disability;
  • monthly additional annuity payments elected at the time of retirement (rather than a lump sum payment of the voluntary contribution account);
  • payments after separation from service during or after the year in which you attain age 55.
    

  To determine whether the 10 percent tax applies, you should obtain Form 5329 (and instructions) from your local Internal Revenue Service office.

Lump-Sum Death Benefits Under CSRS

If your death occurs before retirement and you leave no survivors who can qualify for survivor annuities, your retirement contributions (but not the agency’s money) are payable as a lump-sum death benefit (cash benefit). If you have survivors who qualify for annuities, lump-sum death benefits are not payable. Lump-sum death benefits may be payable if, when survivors’ annuities end, they have received in annuities amounts which are less than your contributions to the retirement fund. The amount payable will be the difference between your contributions and the total paid out in survivor annuities.

If You Die Before You Retire

If you die before you retire, under CSRS your spouse and children may qualify for survivor benefits if:

Survivor Annuity to Spouse. To qualify for a survivor annuity:

Your spouse may receive a survivor annuity as long as there is no remarriage before age 55.

Your eligible spouse will receive a survivor annuity equal to 55% of your basic annuity if it is greater than the guaranteed minimum of:

Survivor Annuity to Children

To qualify for a survivor annuity:

Survivor annuity benefits are payable to your eligible children whether or not there is a surviving spouse. However, if there is a surviving spouse, your child receives a slightly smaller annuity than if no spouse survived.

If a wife or husband survives, each eligible child receives the least of these three monthly amounts:

If a wife or husband does not survive, each eligible child receives the least of these three monthly amounts:

A child’s survivor annuity is in addition to the spouse’s survivor annuity.

Civil Service Retirement System
(CSRS) Offset Plan

The CSRS Offset Plan is a retirement plan that is best described as a combination between CSRS and FERS. Very few employees are covered by this plan. The CSRS Offset Plan covers you if:

Under CSRS Offset, you also have Social Security coverage in addition to CSRS.

What is Meant by CSRS Offset?

If you are subject to the CSRS Offset Plan, your deduction is the normal CSRS rate of 7 percent for CSRS. Of this deduction, an amount equal to the Social Security tax (for 2005, the tax is 6.2 percent of the first $90,000 in earnings) is sent to the Social Security Administration. At retirement, your CSRS benefits are the same as for other CSRS retirees; however, the CSRS Offset employees have their benefits reduced or offset by the amount of any Social Security benefits attributable to Federal service that was covered by Social Security as a result of the Social Security Amendments of 1983. All normal CSRS rules apply to the computation of CSRS Offset benefits. All employees (CSRS and FERS) pay a 1.45 percent Medicare tax on their earnings.

How is a CSRS Offset Annuity Computed?

The basic CSRS annuity is reduced by the retiree’s primary Social Security benefit that was earned in Federal Service. In determining the effects of the offset, the following rules apply:

What is the Offset Amount?

The offset is equal to the lesser of two amounts:

Disability Computation Under CSRS Offset

If you are eligible for a disability under CSRS and Social Security, similar rules apply. The Social Security benefits will be determined under disability rules and the offset will apply as soon as benefits are payable from both plans.

If survivor annuities are payable from both plans, similar offset rules apply.

CSRS Offset vs. FERS

As a CSRS Offset employee, you have Social Security coverage and as a result you already have a portable retirement plan. Regular CSRS employees do not have a portable plan. Thus, transferring to FERS to gain more portability is less important for you especially since the Thrift Savings Plan is also available to CSRS employees.

However, FERS employees have government matching up to 5%, and CSRS employees have no government matching. You may want to transfer when given the option to take advantage of higher TSP investment.

Prior Service Credit for Transferring from CSRS to FERS

If you transfer to FERS, you will have your years of offset service after 1983 counted as FERS service, rather than CSRS.

How to Make Deposit or Redeposit for Civilian CSRS Service…

Application (Standard Form 2803) to make a deposit or redeposit, or both must be made to the Office of Personnel Management (OPM) through your Employee Benefits Counselor. The OPM will send you a form to use in making your payments. You may pay in a lump sum or in installments of not less than $25 -- payroll deductions are disallowed.

If you die before retirement, your eligible spouse may make a deposit or complete payment already begun. Contact your Employee Benefits Counselor for more information.

Under CSRS the amount will be 7 percent of your basic military pay received (based on an estimate from your military finance center for the period), plus interest.

How to Make a Deposit for Post-1956 Military Service

If you make a deposit for post-1956 military service, it must be made with NASA prior to retirement. Contact your Employee Benefits Counselor for information and documentation required to make the deposit.

Survivor Benefits Under CSRS

Civil Service Retirement System (CSRS) provides survivor benefits to the eligible current and former spouse and child or children of deceased Federal retirees. When you retire you must decide whether you wish to provide a survivor annuity for your widow or widower and if so, you must pay for this protection. You do not need to elect or pay for a survivor annuity for your eligible children. Your children automatically receive survivor annuities when you die.

Because of the complexity of the survivor benefit provisions, the following charts provide an overview of your different retirement options. For more detailed information and counseling, you will need to contact your Employee Benefits Counselor.