Accidents Happen: CSRS vs. FERS

Friday - 8/13/2010, 4:00am EDT

It's with great anticipation that we look forward to Mike Causey's return to the office this morning. I can't wait to see the look on co-worker Ruben Gomez's face when he finds out what Mike brought back for him. Don't say anything to Ruben though. Mike wasn't sure the gown from "Gone With the Wind" was Ruben's size. In the meantime, here's part two of a two part column we started yesterday. sk

If you were hired or returned to government service in the 1980s there is a chance you may have been put in the wrong retirement plan.

Yesterday, guest columnist Bob Braunstein of the National Institute of Transition Planning, explained the different federal retirement programs and where you, or more likely your HR office, might have gone wrong.

If so, today's column explains what's next?

Retirement Coverage Errors

Over the years, retirement coverage errors have resulted from a combination of misunderstandings of these retirement coverage scenarios and, in some cases, a lack of service history documentation. Typical errors include assigning former Federal employees to FERS when returning to Federal service after 1983 with more than a one year break even though they had 5 or more years of creditable CSRS service before 12/31/86. In other cases, former employees without the required 5 years of CSRS coverage were left in either CSRS or CSRS Offset. And yet in other situations, new employees hired after 1983 were left in either CSRS or CSRS Offset instead of being automatically converted to FERS on January 1, 1987. While most of these errors in coverage were caught quickly, some languished and many persist to this day. Errors considered most severe are those that have persisted for three or more years since December 31, 1986 (the day before FERS was enacted). In order to provide relief in these cases, HR Offices must now use a special set of rules and regulations embodied in the Federal Erroneous Retirement Coverage Corrections Act of 2000.

The Federal Erroneous Retirement Coverage Corrections Act

The Federal Erroneous Retirement Coverage Corrections Act or FERCCA applies to Federal civilian employees and retirees who were 1) placed in the wrong retirement system, and 2) remained in the erroneous retirement plan for three or more years since December 31, 1986. FERCCA generally affords an opportunity to choose between either the Federal Employees Retirement System (FERS) or the offset provisions of the Civil Service Retirement System (CSRS). The law also reimburses out-of-pocket expenses borne by those affected that are associated with the pursuit of correcting the coverage error, and offers more lenient rules for repaying or foregoing deposits owed for uncovered service and redeposits owed for previously refunded retirement contributions.

A FERCCA remedy largely depends on the nature of the retirement coverage error. For example, if you were placed in FERS by mistake, FERCCA will give you an opportunity to elect CSRS Offset (and in rare cases CSRS) as your plan. While electing this alternative coverage might mean a larger annuity benefit under the richer CSRS annuity formula, switching from FERS will cause you to lose government matching contributions to your TSP account together with the interest those funds have earned. Conversely, if you have been in CSRS or CSRS Offset by mistake and should be in FERS, you will have the opportunity to consider switching to FERS. While the annuity benefit under FERS is typically not as large as those received under CSRS, electing FERS would enable you to contribute make-up contributions to the Thrift Savings Plan as well as receive lost earnings on these contributions and the matching contributions you never received. In many of these cases, TSP accounts swell to amounts that more than offset the value of otherwise larger CSRS annuities.

Given the complexities often associated with making a plan election under FERCCA, the law provides affected employees and retirees a period of six months (from the date they are informed of their coverage error) to elect a plan. During this time they receive comparative retirement coverage estimates and retirement counseling to ensure they are able to make informed decisions regarding their ultimate retirement coverage.

If You Think You Are in the Wrong Retirement Plan

So, if you are a Federal employee and believe you are in the wrong retirement plan, contact your agency Human Resources office as soon as possible. Your HR office is empowered to make retirement coverage determinations and, where errors are found, apply appropriate rules and procedures to correct them. If you are already retired and believe your retirement coverage is incorrect, you should contact the Office of Personnel Management's FERCCA Hotline at 888-689-3233. Also refer to information located at OPM's FERCCA home page at http://www.opm.gov/retire/pre/fercca/index.asp Bob Braunstein