Reg Jones Expert's View

Employees covered by the Civil Service Retirement System are a vanishing breed. However, those hardy souls who are left have mighty long service records. No small number of them have reached or exceeded the earned annuity limit set in law.

In short, most CSRS employees who have 41 years and 11 months of creditable service are entitled to an earned annuity that equals 80 percent of their high-3. (Note: Because of the more generous annuity computation formulas, CSRS-covered law enforcement officers, firefighters, and Congressional employees can reach that limit even earlier.)

Being eligible for an 80 percent annuity is something that causes FERS employees to eat their hearts out with envy. No matter how long they work, they’ll never get close to that percentage in their own annuities. However, they get matching contributions when they invest in the Thrift Savings Plan (which CSRS employees don’t) and coverage under Social Security (which CSRS employees don’t).

But I digress. My whole purpose in writing this article was to answer two questions that come up on a regular basis. “Will retirement contributions still be taken out of my salary after I reach 41 years and 11 months of service?” The answer is “Yes.” The next question is, “What happens to those excess contributions when I retire?” Here’s the answer. You’ll have a choice. You can either accept a tax-free refund – because that money was already taxed as a part of your earned income – or you can purchase additional annuity, which isn’t subject to the 80 percent limit.

So how much annuity can you buy with your excess contributions? The amount varies according to your age and is based on tables established for the Voluntary Contributions Program. Under that 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 over 55 at retirement.

Since it’s unlikely that anyone who has 41 years and 11 months of service would be younger than age 60, I’ll start my examples at that age. 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, again, the choice is yours. You can either buy additional annuity or pocket the tax-free refund.

One more thing to keep in mind: If you have any unused sick leave to your credit when you retire—which after such a long career you almost certainly will, potentially a substantial amount—it won’t be subject to the 80 percent limit. The more you have, the greater the increase in your annuity will be. Every 174 hours of sick leave would bump it up by one-sixth of one percent. If you had a full year’s worth (2,087 hours), your annuity would be increased by 2 percent. And so on.