Many CSRS-covered employees have reached or are about to reach a point in their careers when their basic annuities are capped by the 80 percent limit. You’ll hit that ceiling when you have 41 years and 11 months of creditable service if you are under standard CSRS coverage (earlier if some of your service was in a special category of employment allowing for faster accumulation of benefits, such as being employed by Congress).

Using the standard CSRS formula for someone whose high-3 is $60,000:

0.015 x $60,000 x 5 years = $4,500, plus

0.0175 x $60,000 x 5 years = $5,250, plus

0.02 x $60,000 x 31.917 (31 year 11 months) = $38,364

Total: $48,114

The $114 will be dropped, leaving you with an annuity of $48,000, which is exactly 80 percent of your high-3.

The government continues to take retirement deductions out of your pay when you reach 41 years and 11 months of service, but you’ll get it back one way or the other.

When you retire, OPM will offer you a choice. You can either receive a refund of your excess deductions, with interest, or you can use the money to purchase additional annuity. The mechanism is the same one used in the voluntary contributions program.

If you decide to take the money, the return of your retirement contributions will be tax free. Only the interest earned will be taxable. However, you could postpone that by rolling all of it into a tax deferred account.

If you decide to purchase additional annuity, here’s how it works. If a retiree is age 55 or younger, every $100 will buy $7 a year of additional annuity. That amount increases by 20 cents for each full year you are older than 55. For example, if you retired at age 62, you’d get $8.40 for every $100. And you’d continue to get it for the rest of your life.

There’s one more wrinkle in the law that will allow you to get an annuity that is greater than 80 percent of your high-3 –sick leave. When you meet the age and service requirements to retire, unused sick leave will be added to your actual service and included when OPM calculates your annuity. If you have accrued 2,087 hours (one year) when you retire, your annuity would be increased by 2 percent of your high-3. To figure out how many additional months you might have, divide your latest sick leave balance by 174.

That’s because a month, for retirement purposes, is roughly that long. To assure that there are 12 equal annuity payments in a year, OPM uses 12 30-day months (360 days). Divide 2,087, the number of hours in a work year by 360 and you get a day that is 5.797+ hours long. Multiply that number by 30 and you get a month that is 173.9+ hours long. Rounding up or rounding down from month to month assures that the year is exactly 2,087 hours long.