Expert's View

OPM has had problems in billing employees for the right amount if they were either 1) making deposits to get credit for certain periods of service for which retirement deductions weren’t taken from their salaries or 2) making redeposits when they had taken a refund of their retirement contributions on leaving the government and later returned to federal service.

ADVERTISEMENT

Regardless of whether you have or hadn’t paid attention to this, you should understand what happened. In my next article, I’ll tell you about the mechanics of making deposits and redeposits.

By way of background, interest on pre-October 1, 1982 CSRS deposits and redeposits is fixed at an annual rate of 3 percent and accrues daily. On the other hand, interest on post-October 1, 1982 deposits and redeposits under both CSRS and FERS is variable and accrues annually. In July 2008 OPM discovered that the computer software they were using wasn’t correctly calculating the amount of interest employees had to pay. In some cases interest was applied at the variable rate and in others the reverse. There were even cases where no interest was charged at all. The end result was that some employees were being overcharged and some undercharged.

At that point OPM shut down the system and began reconciling all the affected accounts and, in their own words "turning back the clock and reapplying payments and recomputing the interest correctly, to bring the accounts current."

The system is now up and running again. And those employees who have been making (or have made) deposits and redeposit will be receiving statements. However, because it has taken so long to straighten the mess out, OPM is "providing those account holders with a one-time six-month grace period in which to pay off their current balance without accruing additional interest. Because of the grace period, additional interest will not be assessed on active accounts from January 1, 2011 through June 30, 2011. If the account is not paid off during the grace period, interest will be charged on the balance that is effective on July 1, 2011."