Voluntary Contributions Under CSRS/CSRS Offset
CSRS and CSRS Offset employees may make voluntary contributions to the retirement fund and earn market interest rates (of around 2 percent in recent years) tax-deferred. However, voluntary contributions may only be made if you do not owe a deposit or redeposit to the retirement fund.
Voluntary contributions may be made at any time and in any amount, as long as they are at least $25 (or multiples of $25). Total contributions may not exceed 10 percent of the total basic pay you received during your entire federal career. Since that number increases with every pay period, you have a moving target of opportunity.
To open an account, use SF 2804, Application to Make Voluntary Contributions, available at www.opm.gov/forms.
On retirement, the funds can be used to purchase additional annuity. Each $100 will buy you $7 a year plus an additional 20 cents for each year you are over age 55 when you retire.
Annuities purchased through the VC program are not increased by cost-of-living-adjustments (COLAs). However, you can make a survivor election. And, unlike a survivor election under CSRS, you can name anyone to be your beneficiary. That’s because your election doesn’t require spousal consent, nor is it subject to garnishment.
The 80 percent dollar limitation on your retirement annuity does not apply to any additional annuity purchased through the voluntary contributions program.
As an alternative to buying additional annuity, the money can be withdrawn at any time (not just after retirement) and for any reason. Withdrawals can be rolled over into an IRA, including a Roth IRA, although you will have to make sure that the IRA you put it in can discriminate between the already taxed portion—your contributions—and the interest. Consult a tax adviser on this issue.
If you make a withdrawal, it must be for the entire amount in your account. No partial withdrawals are allowed. And, as a rule, if you receive a refund of your contributions, you may not open another account at a later time.
Voluntary Contributions not Allowed Under FERS
Voluntary contributions are not allowed for FERS employees. They may keep open any accounts they opened during prior CSRS service but may not make additional contributions to them.