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.