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Public Law 112-96, Section 5001 of the "Middle Class Tax Relief and Job Creation Act of 2012, makes two significant changes to the Federal Employee's Retirement System (FERS).  First, beginning in 2013, new employees (as designated in the statute) will have to pay higher employee contributions.  These employees must pay 3.1% of their salary as FERS retirement contributions.  This is an increase of 2.3%.   Second, new Members of Congress and Congressional employees, in addition to paying higher retirement contributions, will accrue retirement benefits at the same rate as regular employees. 

The higher FERS-RAE coverage percentage will generally apply to any individual who receives an appointment not excluded from FERS coverage on or after January 1, 2013, who would normally be placed into FERS. 

There are three exceptions to this general rule, however, and the date December 31, 2012, is a key date for each of those exceptions.  An individual will be excluded from FERS-RAE coverage if any of these exceptions apply.

Exception 1:  the individual on December 31,2012, was covered under FERS;

Or

Exception 2:  the individual on December 31,2012, was performing civilian service which is creditable or potentially creditable service under FERS (for example the individual may have been covered under another retirement system from which service credit may be transferred to FERS, such as CSRS, CSRS-Offset, Foreign Service, Federal Reserve, or CIARDS)

Or

Exception 3:  the individual on December 31, 2012, was not covered under FERS and was not performing civilian service which is creditable or potentially creditable service under FERS, but as of December 31, 2012 had performed at least five years of civilian service creditable or potentially creditable under FERS, including service subject to CSRS or CSRS-Offset.

Employees that fall under the higher FERS-RAE coverage percentage will not see a change in the calculation of their future retirement benefits.

The Members and Congressional employees who do not qualify for the exclusion from paying the higher FERS-RAE coverage percentage are subject to a significant change in their future benefits. First they are subject to the increased higher FERS-RAE coverage percentage.  Second, their retirement benefits will be computed under the regular employee formula and no longer under the enhance formula used for FERS Members and Congressional employees.

Benefits Administration Letter 12-104,Federal Employees Retirement System-Revised Annuity Employees (RAE), provides additional information and can be found here on our website.  


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