Expert's View

The 80 percent limit. I’ve written about it before, and I’ve started asking myself how long it will be before there’s no one left to whom it will apply. You’re scratching your head wondering what I’m talking about. Well, 80 percent of a CSRS employee’s high-3 is the maximum earned annuity that he can get when he retires. For most CSRS folk, that ceiling is reached when you have 41 years and 11 months of service. However, CSRS-covered law enforcement officers, firefighters, and Congressional employees can reach that limit a lot faster because their annuities are based on more generous formulas.

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One question that routinely comes up from those of you who have (or are about to) hit the 80 percent limit: Will retirement deductions still be taken out of my salary when I reach the limit? The answer is yes. However, when you retire, those excess contributions will be refunded to you and you’ll be offered a choice. You can either accept them tax-free (because they were already taxed as a part of your earned income) or you can purchase additional annuity, which isn’t subject to the 80 percent limit.

Under the rules, which parallel those of the voluntary contributions program, anyone retiring at age 55 or younger can get $7 of additional annuity for every $100 in his account. The amount of annuity that $100 can buy increases by 20 cents for each full year you are over 55 when you retire. So, for example, if you were age 60, you’d get $8.00 more per year in your annuity. At age 62, it would be $8.40 more. At age 65, $9.00. And at age 70, $10.00. The older you are when you retire, the more additional annuity you’ll get. However, the choice is yours. You can either buy additional annuity or pocket the money.

Here’s another piece of news for those of you who have reached the 80 percent limit. Also exempt is any unused sick leave you have to your credit when you retire. For example, if your earned annuity had hit the ceiling but you had a year’s worth of sick leave squirreled away, your annuity would be increased by 2 percent, the limit notwithstanding.

If you’re under FERS, there’s no annuity limit. Of course, the way the FERS formula works, to hit 80 percent you’d have to, depending on the age at which you started a FERS career, work more than 70 years to hit that number in any case.