Children’s Benefits and Interest Rates

Over the last three weeks, I’ve filled you in about 2015 pay increases and TSP contribution limits for employees, cost-of-living adjustments (COLAs) for retirees, changes in Social Security benefits, an increase in the special retirement supplement (SRS) Medicare and employee death benefits. This time, Ill wrap things up with an examination of children’s benefits, military deposits and interest rates.

Children’s Benefits
If you die while in active federal employment, your child or children may be entitled to annuity benefits. To be eligible, that child must be unmarried, under age 18 (or age 22 if attending school full-time) or be any age if disabled under age 18, incapable of self support, and unmarried. The term “children” includes both a legitimate child and an adopted child. It also includes a stepchild, if living in a normal parent-child relationship, and a child born out of wedlock, if living in a normal parent-child relationship, or if a judicial determination of child support has been made.

In 2015, when one parent is still alive, the children’s monthly survivor annuity rate is $511 per child or $1,532, divided by the number of children. If there is no surviving parent, the monthly rate is $613 per child or $1,838, divided by the number of children.

Note: By law the benefit payable to the children of FERS and CSRS Offset employees is reduced by the amount of any Social Security benefit payable to them. That reduction doesn’t apply to the children of CSRS employees.

Military deposits
If you served on active duty in the armed forces of the United States and want to get credit for that time in your civilian annuity, in most cases you’ll have to make a deposit to the civilian retirement system. With a few exceptions, the amount you’d have to pay would be 7 percent for CSRS and 3 percent for FERS. Here are the exceptions. If you were on active duty in 1999, the CSRS rate is 7.25 percent and for FERS 3.25 percent. For 2000 it’s 7.40 percent and 3.40 percent. Interest may also be charged. See below.

Keep in mind that the rules for getting credit are different for CSRS and FERS employees. If you are a CSRS employee who was first hired on or after October 1, 1982, you’ll have to make a deposit to get credit for that time. If you were hired before that date, you have a choice. You can either make the deposit or decline to do so. If you don’t make the deposit and are eligible for a Social Security benefit at age 62 (if retired) or when you retire (if age 62 or later), those years will be deducted and your annuity recomputed without them, If you are a FERS employee, you don’t have a choice. You’ll only get credit if you make a deposit.

Note: If you are retired from active duty – not the reserves – you can make a deposit to get credit for your active duty service. However, as a rule, you’ll have to waive your military retired pay when you retire from your civilian job.

Interest rates
If you want to make a deposit to get credit for a period of active duty service, for civilian service where retirement deductions weren’t taken for your pay, or civilian service where you left government and took a refund of your retirement contributions, in most cases you’ll have to pay interest on that deposit. The amount of that interest varies. From 1948 through 1984, it was 3 percent. However, beginning in 1985, interest rates have fluctuated, from a high of 11.25 percent in that first year to a low in calendar years 2013 and 2014 of 1.625 percent. This year the rate is 2.0 percent. The longer you wait to make that deposit, the more you’ll have to pay.