o Retirement Coverage
o Credit for Service
o Age and Service Requirements for Retirement Eligibility
o Computation of Retirement Annuity
o Alternative Form of Annuity
o Survivor Benefits
o Divorce/Former Spouse Benefits
o Taxation of Benefits
o Selecting a Retirement Date
o Reemployment
o COLA's After Retirement
Retirement Coverage
Foreign Service Retirement and Disability System (FSRDS). This is the so-called "old" retirement plan. In general, participation in this plan is limited to Career Foreign Service employees who entered federal service prior to 1/1/84 and (1) have been continuously employed by the United States Government (USG) since 12/31/83 or before, or (2) have had a break in federal service of one year or less since 1984. Employees who are enrolled in this plan contribute 7.25% of their basic pay to the FSRDS.
FSRDS Offset. This plan was developed during the period 1984 through 1986 when Congress was devising a plan to put new FS employees under social security (FICA) coverage. Participants in this plan are covered by both FSRDS and social security. In general, participation in this plan is limited to career Foreign Service employees who had at least five years of creditable civilian Federal service prior to 1/1/87, and who rejoined the Federal service since 1/1/84 after a break of CSRS/FSRDS coverage of more than one year. In addition, Assistant Secretaries and above, who are career FS employees and meet the criteria above participate in FSRDS Offset, if they do not elect FSPS. Employees who are enrolled in FSRDS Offset contribute 1.05% of basic pay up to $106,800 (in 2009) to FSRDS and 6.2% of this basic pay to social security. On all annual income in excess of $106,800, they contribute 7.25% of basic pay to FSRDS. (All references that address FSRDS also apply to FSRDS Offset.)
Credit for Service
A basic factor in determining whether an employee is eligible for retirement and in computing the annuity benefit is the total of the years and months of the employee's creditable service. In general, employees will receive retirement credit for all types of Federal civilian and military service subject to the following general rules. An employee cannot receive retirement credit for service credit under another Federal retirement system, unless the employee waives credit under that system and transfers retirement deductions to the new system.
If a career FS employee voluntarily switches to FSPS and has five years of civilian service before FSRDS Offset/CSRS offset coverage AND five years before FSPS/FERS coverage, then the service before FSRDS Offset/CSRS Offset is credited under FSRDS rules and service under FSRDS Offset/FSPS is credited under FSPS rules.
Credit for Civilian Service. Virtually all types of Federal civilian appointments qualify for credit, subject to the conditions on deposit or redeposit described below. Service which qualifies for credit, for example, includes all Federal employment in which the individual was appointed to a position in the USG, temporary Christmas appointments at the Post Office, service as a Peace Corps or VISTA volunteer (if necessary deposits paid), service in the D.C. Government (if first hired before 1987), etc. Periods of service under a personal service contract or personal services agreement do not qualify for retirement credit, unless the employee applied for and received approval for credit under P.L. 100-238 in 1991. Employees also receive up to 6 months credit in any calendar year for periods of Leave Without Pay (LWOP) from a Federal job and full credit for any periods during which workers' compensation benefits were paid from the Department of Labor. Employees receive no credit for periods of Intermittent No Work Scheduled (INWS) status under the Family Member Appointment (FMA).
Civilian Service Deposits. If an FSRDS employee performed civilian service during which no retirement deductions were withheld, and the service was performed prior to 11/1/83, the service time will be counted in the annuity, subject to a small reduction. If a FSRDS employee had service on or after 10/30/83, which was not subject to FSRDS withholding, the employee must pay the deposit due or the service will not be counted in the annuity computation.
In general, the rate of deposit due for most FSRDS service is 7% of basic pay, plus interest. If the deposit period occurred before 11/1/83, interest on the deposit accrues at 3.0% per year. For a deposit period occurring on or after 11/1/83, annual interest on the deposit accrues at a variable rate.
Redeposits: If an FSRDS employee received a refund for retirement deductions withheld for a period of past civilian service, the employee must repay the refund, plus interest (which together constitute the redeposit due) in order to receive credit in the annuity calculation. Under a new retirement provision the retiring employee is entitled to have the annuity computed with credit for the service and reduced by the actuarial value of the refund, provided that the redeposit is based on a period of service ending on or before 9/30/90.
For example, assume an employee had 30 years of service, but 15 of those 30 years were service for which a refund of retirement deductions was paid and not re-deposited. Under the old law, the annuity would have been reduced by almost 50%. Under the new law, assuming the refund period ended on or before 9/30/90, the employee does not have to repay the refund, and still receives credit for the service, but the annuity is reduced by about 5% rather than 50%.
Credit for Military Service. In general, military service is creditable when the individual served on active duty and received an honorable discharge. If the individual was awarded military retired pay (based on a 20 year military retirement), the military service is not creditable unless the recipient waives the military retired pay. However, an individual who is awarded military retired pay under the provisions of Chapter 67 of Title 10 U.S.C. (at age 60 based on service in the reserves), can keep the military retired pay and still receive credit for the periods of active duty.
Military Service Deposits. Military personnel began paying social security benefits on January 1, 1957. To offset the double credit for military service in both social security and Federal retirement benefits, the law requires payment of a military deposit, which is 7% of military earnings for service credited under FSRDS and 3% of military earnings for service credited under FSPS. If the employee joined the Foreign Service prior to October 17, 1983, the military deposit is required for periods of military service performed on or after January 1, 1977. If the employee joined the Foreign Service on or after October 17, 1983, the military deposit is required for periods of military service performed on or after January 1, 1957. A summary of details on deposits for military service credit is provided below. Employees who wish to make the military deposit should contact HR/RET.
Employees should complete and send the Estimated Earnings During Military Service (form RI 20-97) along with a copy of the DD 214 to the pay office for each branch of service. The pay center addresses are on the reverse side of form RI 20-97. Forms may be obtained by visiting the OPM website: http://opm.gov/Forms/html/opm.asp or by contacting HR/RET. Once in receipt of your earnings, submit them to HR/RET.
Payment of Deposits/Redeposits. A civilian service deposit or redeposit can be made after retirement while RET is computing the annuity, but a deposit for military service must be paid to the employing agency before the employee retires. Otherwise, the military service cannot be credited, as explained above.
Extra Service Credit at Unhealthful Post. Any American Foreign Service employee who received either a new assignment or an extension of a new assignment, either of which was effective on or after February 16, 1990 is not eligible to elect extra service credit in lieu of post differential. Any valid extra service credit election made prior to that date will continue to apply for the duration of the current assignment. Likewise, any valid election made for a prior assignment will continue to be honored in the annuity computation (extra 50% credit for service for which a valid election was in effect). Employees under the FSRDS who made valid extra service credit elections will need to ensure that the post properly certifies and promptly submits OF-140, Election to Receive Extra Service Credit in Lieu of Post Differential, to HR/RET. No extra service credit can be allowed until this form has been received. Employees under the FSPS were never eligible to elect extra service credit at an unhealthful post, but those who transferred from FSRDS to FSPS will receive credit for any valid extra service credit elections made under FSRDS.
Deposits for Military Service Credit
Foreign Service Retirement and Disability System (FSRDS) &
Foreign Service Pension System (FSPS)
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Military Service Credited in FSRDS Benefits
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Date First Employed Under FSRDS
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Date First Employed in USG in Civilian Capacity
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7% Deposit Due for Military Service
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Interest Begins to Accrue
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Before 10/17/83
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N/A
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After 12/31/76*
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10/17/85
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After 10/16/83
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Before 10/1/82
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After 12/31/56*
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2 Years after the later of 10/17/83 or date first under CSRS/FSRDS
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After 10/16/83
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After 9/30/82
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After 12/31/56**
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(same as above)
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Military Service Credited in FSPS Benefits***
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3% Deposit Due for Military Service
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Interest Begins to Accrue
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After 12/31/56**
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1/1/89, or 2 years after date first employed under FERS/FSPS, whichever is later.
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*If military deposit is not paid, post 1956/76 military service is not available for credit if employee is 62 and eligible for social security.
**If military deposit is not paid, post 1956 military service is not available for credit at anytime.
***If an employee voluntarily switched to FSPS after performing at least 5 years of civilian service under the old retirement system (FSRDS or CSRS), and the military service was performed before the change to FSPS (or FERS), the military service is credited under the rule "Military Service Credited in FSRDS Benefits".
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Age and Service Requirements for Retirement Eligibility
Eligibility for FSRDS and FSPS Retirement
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Type of Retirement:
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Voluntary:
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FSRDS:
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Age 50/20 years service*
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FSPS:
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Age 50/20 years service*
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FSPS (only):
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Age 55-57/10 years service****
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Deferred:
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FSRDS
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Age 60/5 years service**
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FSPS:
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Age 62/5 years service***
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FSPS (only):
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Age 55-57/10 years service****
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Involuntary:
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(Sections 607, 608, 611 and 8l3 of FS Act):
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F0-1 and Above: FSRDS & FSPS are eligible for immediate annuity regardless of age and service.
F0-2 and Below: FSRDS & FSPS are eligible for immediate annuity provided the age and service requirements for voluntary retirement are met at the time of the involuntary retirement.
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FSPS (only):
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Any age/25 years service*
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Mandatory:
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FSRDS & FSPS (Section 8l2, FS Act):
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age 65/5 years service
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FSRDS & FSPS (Section 812, FS ACT):
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age 57/20 years Law Enforcement service, if covered by PL 105-382/AID LE retirement.
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Disability:
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FSRDS:
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any age/5 years civilian service
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FSPS:
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any age/l8 months civilian service
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* Requires at least five years of service in the Foreign Service.
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**An employee covered by FSRDS with five years of service is entitled to an annuity upon separation from service if then 60 or older.
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***An employee covered by FSPS with five years of service is entitled to an annuity upon separation from service if then 62 or older.
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****Minimum Retirement Age (MRA) eligibility provisions The FSPS annuity payable at age 55-57 (MRA) with a minimum of ten years of service is subject to an age-based reduction. The reduction is calculated as five percent for each year the annuitant is under age 62.
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Computation of Retirement Annuity
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BASIC ANNUITY (Voluntary/Involuntary Retirement)
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FSRDS:
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2% of High 3 Average Salary for Each Year Service, including sick leave. (2.5% of High 3 Average Salary for each year of law enforcement service, up to 20, if covered by PL 105-382, or AID LE retirement.)
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High-Three Average Salary. The salary figure in the "high-three average salary" refers to basic pay, including Law Enforcement availability pay. It also includes locality pay for anyone assigned to the US who receives it. Also, it includes locality pay, effective 12/29/02, if under FSRDS/FSPS and assigned overseas but not actually receiving locality pay. It excludes allowances and differentials, awards, bonuses, and information technology incentive pay. It includes a certain percentage of the Physicians Comparability Allowance (PCA), $30,000, for certain government physicians retiring after 12/28/02 with at least 15 years as a government physician.
The High-3 Average Salary is not computed separately for FSRDS and FSPS service. The same High-3 Average Salary, usually the last 3 years, is used in calculating both the FSRDS and FSPS components to the annuity.
FSRDS Offset. If you retire under the FSRDS Offset plan, your annuity will be reduced, at age 62 (if eligible for social security), by the amount of your social security benefit attributable to your FSRDS Offset service. This reduction applies even if you do not actually receive social security because you are under 65 and still working. The reduction also applies to the surviving spouse of an FSRDS Offset employee or annuitant, who, if and when, is eligible for social security survivor benefits based on the service of the employee.
FSRDS Disability Retirement: If you retire on disability under FSRDS, you will receive an annuity which is guaranteed to be at least the lower of (a) 40% of your high three average, or (b) your annuity computed under the regular formula, but projecting your service to age 60. If you have over 20 years of service, you receive the regular FSRDS annuity computation.
Ceiling on FSRDS Annuity Benefits. Under the law, an annuity under FSRDS cannot exceed 35 years credit (which, for most employees is 70% of the employee's "high-three average salary"), except for the benefit attributable to unused sick leave. (A law enforcement officer eligible for annuity under PL 105-382 has the annuity capped at 80% of high three average salary, plus unused sick leave.) An employee reaches the maximum annuity benefit of 70% of salary after 35 years of service. When that maximum benefit ceiling is reached, the employee's annuity benefit is frozen in terms of years of service credit, although the annuity can still be increased by the higher average salary and additional sick leave. Also the employee becomes entitled to a refund of all retirement deductions, plus interest, after 35 years of service.
When an employee switches to FSPS after serving 35 years under FSRDS, the FSRDS benefit is capped at 70% (plus sick leave), and the refund of excess deductions is payable, as described above. The employee again starts earning additional service credit when the FSPS coverage begins.
Unused sick leave, FSRDS. Unused sick leave is creditable in an FSRDS annuity. If an employee retiring under FSPS, has an FSRDS component to the annuity, the amount of unused sick leave at the time of conversion to FSPS is creditable, provided the retiree has at least that much sick leave at retirement. Unused sick leave cannot be used to establish annuity eligibility or used in the average salary computation.
Alternative Form of Annuity (AFA)
The AFA provides an eligible employee with an option of electing a lump sum payment equal to the employee's unrefunded retirement deductions and a reduced monthly annuity, in lieu of a regular unreduced annuity. (There is no reduction for the AFA in the rate of annuity payable to surviving spouse.) In general, the annuity of one who is eligible to elect the AFA is reduced by about 10-15%.
Only Foreign Service and Civil Service employees who are suffering from a life threatening illness or disease (who do not retire on disability) may elect the alternative form of annuity in one installment. All other employees are INELIGIBLE.
Survivor Benefits
An FSRDS participant may elect, at retirement, any level of survivor benefits for a spouse or previous spouse subject to certain limits. A former spouse or previous spouse may have intervening rights to a survivor annuity, as explained Section 814 or 820 of the Foreign Service Act.
Survivor Reduction. Under FSRDS, the maximum survivor benefit is 55% of the unreduced annuity. The employee and spouse at retirement can jointly elect, or waive altogether, any level of survivor annuity up to the 55% limit. If the maximum survivor annuity is elected, the annuity is reduced 2.5% of the first $3600.00, used as a base for the survivor benefit, and 10% of any base amount in excess of $3600.00. Former spouses may have intervening rights to a survivor annuity by statute or court order (see f Former Spouse Benefits).
Increase in Survivor Election. In general, an employee and spouse can jointly elect a survivor annuity (if waived at retirement) or (if a smaller amount was elected at retirement) they can increase the level of survivor annuity up to the maximum rate during the first 18 months of retirement. A deposit must be paid before the end of the 18 month period. (The deposit can be as high as $20,000 - $30,000 to make this election.)
Death in Service of an Employee Covered by FSRDS. If an employee enrolled in FSRDS dies in service, with at least 18 months of service, the surviving spouse (or former spouse, if eligible by the Foreign Service Act or court order) receives a survivor annuity in the amount of 55% of the disability benefit described. For example, if an employee with an average salary of $50,000.00 dies in service with 10 years of service at age 30, the surviving spouse, if married at least 9 months (or accidental death), receives an annuity of 55% of 40% of $50,000, or $11,000.
Death of an FSRDS Annuitant. If an FSRDS annuitant dies, the surviving spouse or surviving former spouse entitled to benefits, receives the rate of survivor annuity set at retirement, or later, plus whatever COLA's are applicable. The maximum survivor annuity payable to the surviving spouse of a FSRDS annuitant is 55% of the retiring employee's unreduced annuity.
Note: Under a regulation that went into effect in May 1990, the FEHB enrollment for a survivor annuitant may continue even if the survivor annuity is not large enough to cover the cost of the premium. All that is required is that the surviving spouse be eligible for a survivor annuity of at least $1.00 a month; this will allow the surviving spouse to pay the FEHB premium directly to the government.
Benefits to Children When an Employee or Annuitant Dies. Children of employees who die in service while covered under FSRDS or FSPS, and who had at least 18 months of Federal civilian service, are automatically entitled to a survivor annuity. Each child receives approximately $480 per month, per child (maximum 3 children) if single orphan, and $576 per month, per child (maximum 3 children) if double orphan.
The monthly annuity is payable provided the child is unmarried and (a) under age 18, or (b) under age 22 and a full-time student. Children of deceased annuitants or employees as described above, who are incapable of self-support due to a disability incurred before age 18, are also entitled to the monthly survivor annuity. The benefits are payable by operation of law and do not require an election or contribution by the employee. If a FSPS employee or annuitant dies, any benefits that are payable to the children are reduced by the survivor social security benefits payable to all children, including those not receiving survivor annuity.
Divorce/Former Spouse Benefits
If a participant in FSRDS becomes divorced on or after 2/15/81, the former spouse may be qualified for benefits, provided that (a) the former spouse was married to the participant for at least l0 years during the participant's federal creditable service, of which 5 of the l0 years occurred while the participant was a member of the Foreign Service), and (b) the former spouse has not remarried prior to age 55, and (c) the former spouse has not expressly waived the benefits described herein. The former spouse is entitled to:
-- A pro rata share of 50% of the gross annuity benefit of the participant, AND
-- A pro rata share of the maximum survivor benefit (55% of the unreduced benefit under FSRDS), AND
-- Health insurance coverage as a former spouse under the FEHB Program, if the former spouse will be entitled to any share of the participant's annuity or survivor annuity, and applies for coverage within 60 days of the divorce. The former spouse can remain enrolled in the FEHB coverage for the rest of his or her lives, provided premiums are paid and the former spouse does not remarry before 55. If the former spouse does not qualify for any of the participant's annuity or survivor annuity, the former spouse can still qualify for coverage under the FEHB program under P.L. 100-654, for a period not exceeding 3 years.
Pro Rata Share means a share representing the amount which accrued during the duration of the marriage. The formula for determining a pro rata share is:
Years of Marriage During Federal Service
Divided by
Years of Federal Service
Valid Court Order. A divorced spouse who does not qualify for statutory benefits may still be entitled to a share of the participant's annuity, or to a survivor annuity if a valid court order so provides.
The valid court order/notarized spousal agreement needs to be submitted to HR/RET as soon as possible after the divorce so that an official determination of benefits may be made. Please see “Divorce/Former Spouse Benefits” on the first screen of RNET for greater detail on benefits to former spouses.
Taxation of Benefits
Under the law, employees who joined the Foreign Service prior to 9/25/75 and who retire on disability under FSRDS/FSPS are not subject to Federal income tax. The annuity of all other employees who retire is fully taxable by the Federal government, but each employee is entitled to a tax deduction equal to the amount of the employee's retirement contributions. This tax deduction is distributed over the lifetime of the annuity, so only a portion of the total contributions can be deducted from the taxable income each year.
For example, if a single employee had a life expectancy of 20 years at retirement, 5% of the retirement contributions could be deducted from the taxable portion of the annuity each year.
State Income Tax. The 50 states tax annuity benefits differently, as described below:
States with no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
States exempting total amount of Federal annuity benefits: Alabama, Hawaii, Illinois, Kansas, Kentucky, Massachusetts, Michigan, New York, and Pennsylvania.
States allowing partial exemption of Federal annuity benefits: Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Indiana, Iowa, Louisiana, Maryland, Mississippi, Missouri, Montana, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Puerto Rico, South Carolina, Utah, Virginia, West Virginia and Wisconsin.
Taxation of Lump Sum Payments. A lump sum payment for unused annual leave is treated as a salary payment. It is taxable as wages in the tax year during which you receive it. Withholdings will be deducted from your lump sum payment.
Taxation of the Lump Sum Payment under the AFA. The lump sum payment under the AFA is fully taxable (unless as explained below, it is "rolled over" to an IRA). In general, 85-90% of the lump sum payment is taxed. (To obtain the exact percentage of the AFA that is taxable, the rate of annuity with the AFA is divided by the rate of annuity without the AFA.) If an employee retires before the year in which he or she reaches age 55, and elects the AFA, and declines to make a "roll over", there is a tax penalty of 10% of the taxable portion of the lump sum payment.
Interest on Refunds of Excess Deductions. Under the law, employees who have more than 35 years of service under FSRDS have their annuity "capped" at 70% (plus sick leave) of high three average salary. They also receive a refund of the retirement deductions, plus interest, withheld thereafter. The retirement deductions that were withheld after 35 years are not taxed (it was part of salary that had been taxed), but the interest on those contributions is taxable, unless rolled over to an IRA.
Marriage to non-U.S. Citizen: Under a 1988 change to the inheritance law, the actuarial value of a survivor annuity benefit payable to a non-U.S. citizen is added to the value of the decedent's estate for tax purposes. The law may only adversely impact those with estates with a projected value that exceeds $675,000.00 (including the value of the survivor annuity), because of estate credits.
Voluntary Contributions: Unlike participants of the Civil Service Retirement System (who are eligible to make voluntary contributions to the CSRS), Foreign Service participants are ineligible (Public Law 94-350, July 12, 1976) to make voluntary contributions to the FSRDS or the FSPS. Participation in the TSP is the only government-sponsored investment option available to Foreign Service employees.
Selecting a Retirement Date - FSRDS
The selection of an employee's actual date of retirement is a decision that should be based on careful research and planning. It makes a difference which month of the year and day of the month a person chooses to retire. Among the factors to consider are the following:
If you are under FSRDS or FSRDS Offset, and you voluntarily retire during the first three days of the month, or the last day of the month, your annuity will begin the next day. Voluntarily retiring on any other day of the month will delay the start of your annuity until the first day of the following month. If you retire involuntarily, or you retire on a disability retirement, your annuity will begin the next day.
--If you retire at the end of the pay period, you will be paid for the annual leave accrued for that pay period. If you retire by the end of the leave year, you will be paid for all leave.
--If you are under FSRDS or FSRDS Offset, and you retire involuntarily, or you retire on a disability retirement, your annuity will begin the next day.
Reemployment of Annuitants-FSRDS
Federal retirees have the right to apply for a government job and return to full or part-time status, subject to restrictions. When a retiree is reemployed by the Government, it may have an effect on his/her annuity. The annuitant should tell the employing agency that he or she is an annuitant. The agency must, in appropriate cases, notify the Department of State when the annuitant is reemployed and when the annuitant resigns or re-retires. As a general rule employment outside the government has no effect on the amount of an FSRDS annuity or the annuitant’s right to receive it.
Effect on Annuity Payments of Reemployment in the Federal Government. When a retiree is reemployed by the Government, the effect on annuity payments depends on the basis for the original retirement and, in some cases, the type of appointment in which the individual is reemployed.
Reemployment on Part-Time, Intermittent or Temporary Basis. If an FSRDS annuitant is reemployed on a part-time, intermittent or temporary basis, payment of the annuity continues subject to a cap on total compensation. The sum of the salary plus the annuity cannot exceed the higher of the salary at the time of retirement or the full-time salary of the position in which he or she is employed. If an FSRDS annuitant is reemployed in a full-time career civil service position, payment of the annuity is suspended. In this case, the FSRDS annuitant would be covered by the CSRS retirement system. (If there was a break in service of more than one year, the coverage is CSRS Offset. In either case the employee could elect FERS). When the period of reemployment ends, the FSRDS annuity would be reinstated, together with the cost-of-living adjustments occurring during reemployment.
Recall into the Foreign Service. If an FSRDS annuitant is recalled to Foreign Service, they are covered by the FSRDS retirement plan and the annuity would be suspended during the period of reemployment. (If there was a break in service of more than one year, the coverage is FSRDS Offset.) If the period of reemployment lasts at least one year, the FSRDS annuitant would be entitled to a supplemental annuity. If the period of reemployment lasts five years or more, or the FSRDS annuitant is reappointed to the Foreign Service, the FSRDS annuitant would be entitled to have the annuity recomputed with the new high-three average salary.
Provisions Governing the Reemployment of FS Annuitants. There are two basic provisions for adjusting benefits when a FS annuitant receiving retirement benefits under FSRDS or FSPS is reemployed. The first provision, suspension of annuity during reemployment, applies when the annuitant is hired in a full-time, career (type) appointment. The second provision, continuation of benefits subject to the salary/annuity limitation, applies when the annuitant has been continuously reemployed in a part-time, temporary or intermittent (WAE) basis.
An appointment is considered part-time when the regular tour of duty is less than a full-time appointment of 40 hours per week. An intermittent, or WAE (When Actually Employed) appointment is an appointment without a regularly scheduled tour of duty. A temporary appointment is an appointment which (1) is less than permanent or career in nature (a Presidential appointment is not considered a temporary appointment for this purpose) and which (2)(a) imposes a time limitation or (b) excludes the individual from retirement coverage under a Federal retirement system. In general, the appointment must be limited to one year or less, but some temporary appointments may exceed one year and still qualify as temporary for this purpose.
Types of Earnings Considered in Salary/Annuity Limitation. With regard to payment of annuity, any annuity that is received or scheduled for receipt, within a particular calendar year is considered income for purposes of the salary annuity limitation. However, the lump-sum payment under the alternative form of annuity (AFA) is not considered income for purposes of the salary/annuity limitation.
With regard to salary, any post-retirement income which is part of basic pay, and which is received or scheduled for receipt within a given calendar year, is considered income for purposes of the salary annuity/limitation. Lump sum payments of annual leave, salary differentials, etc. are not considered income for this purpose. Payments which are normally payable on a given date are considered income even if the check was lost or otherwise not negotiated during the particular calendar year.
It is also useful to note that the determining factor is whether the income was received during a particular period.
Payments to former spouses, either by statute or court order, constitute the retired annuitant's income. Any payment or deduction that reduces the amount of annuity payable to the retired annuitant, or reduces the gross amount of annuity (former spouse benefits, alimony, child support, etc.) is considered income of the annuitant.
Reductions in the basic annuity, which are factored in computing the gross annuity payable to a retired employee, are not considered income of the annuitant. For example, if the annuity were reduced by a factor of 10% to provide a survivor benefit, the amount of the reduction would not be considered in the annuitant's income. Likewise, if the annuity is reduced for an unpaid deposit, the rate of annuity after reduction for the unpaid deposit is the amount used in determining post-retirement income.
Application of salary/annuity limitation . The salary/annuity limitation begins to take effect when the employee retires; therefore, income received prior to the commencing date of the annuity is not considered in the salary/annuity limitation. The law provides that the salary/annuity limitation is determined on a calendar year basis; the salary annuity/limitation is not prorated during the first calendar year of retirement.
Service under a personal service contract. For the purposes of Section 824 of the FSA, as amended, individuals who are hired after retirement under a personal services contract are not considered Federal employees; therefore, the annuity of such an annuitant is not adjusted. If an appointment is effected through the contract and the individual is considered a (Federal) employee by the employing agency, the person is treated as an employee for purposes of Section 824 of the FSA.
COLA's After Retirement-FSRDS
Cost-of-Living adjustments for benefits under FSRDS are determined in accordance with the provisions of Section 826 of the Foreign Service Act. Under those provisions, the COLA is payable December 1, based on the preceding rise in the Consumer Price Index through the preceding September 30. The first COLA after an annuity begins is prorated based on the number of months in which annuity was payable prior to December 1. All survivor annuity benefits to children are based on the FSRDS COLA rules.
