Key Interest Rate Set

The interest rate the government uses for various purposes related to federal retirement programs—including the rate of return on “voluntary contribution” accounts available to CSRS employees—will be 4.875 percent in 2007, up from 4.125 percent in 2006. In addition to serving as the rate of return for voluntary contributions accounts, the figure is used as the rate of interest charged to employees who need to make payments to capture credit for service for which either no retirement deductions were made or for which deductions were withdrawn at a break in service. That includes payment to capture military service credit time in order to avoid the “catch-62” penalty that otherwise can reduce certain annuity payments.