[Federal Register Volume 61, Number 155 (Friday, August 9, 1996)]
[Rules and Regulations]
[Pages 41714-41728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20333]



[[Page 41713]]


_______________________________________________________________________

Part V





Office of Personnel Management





_______________________________________________________________________



5 CFR Part 831, et al.



Election of Retirement Coverage by Current and Former Nonappropriated 
Fund Employees; Interim Final Rule

  Federal Register / Vol. 61, No. 155 / Friday, August 9, 1996 / Rules 
and Regulations  

[[Page 41714]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 831, 837, 841, 842, 843, 844, and 847

RIN 3206-AH57


Elections of Retirement Coverage by Current and Former 
Nonappropriated Fund Employees

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is issuing interim 
regulations to implement the civilian-retirement provisions of the 
National Defense Authorization Act for Fiscal Year 1996 and to 
consolidate existing regulations concerning employees affected by these 
provisions. That statute provides certain employees with an opportunity 
to elect to continue vested retirement coverage after a qualifying 
employment move between a civil service position and a nonappropriated 
fund instrumentality (NAFI), and vice versa, and under limited 
circumstances to receive credit for past NAFI service under the Civil 
Service Retirement System or the Federal Employees Retirement System. 
These regulations establish election procedures and the methodology for 
computing the employee costs as required by the statute.

DATES: Interim rules effective August 10, 1996; comments must be 
received on or before October 8, 1996.

ADDRESSES: Send comments to John E. Landers, Chief, Retirement Policy 
Division; Retirement and Insurance Service; Office of Personnel 
Management; P.O. Box 57; Washington, DC 20044; or deliver to OPM, Room 
4351, 1900 E Street, NW., Washington DC.

FOR FURTHER INFORMATION CONTACT:
Cynthia Reinhold, (202) 606-0299.

SUPPLEMENTARY INFORMATION:

1. Overview

    Section 1043 of the National Defense Authorization Act for Fiscal 
Year 1996, Public Law 104-106 approved February 10, 1996, amends the 
existing provisions of law under which certain employees who are vested 
in the Civil Service Retirement System (CSRS), the Federal Employees 
Retirement System (FERS), or a retirement plan established for 
employees of nonappropriated fund instrumentalities (NAFI) described in 
section 2105(c) of title 5, United States Code, may elect to continue 
coverage in a vested retirement system upon a move between appropriated 
and nonappropriated fund employment. Additionally, section 1043 
provides a 1-year period for certain employees who would have been 
eligible to elect to continue vested retirement benefits had the new 
requirements been in effect at the time of the change in employment, to 
retroactively elect to continue the retirement coverage they had before 
a qualifying employment move that occurred after December 31, 1965, and 
before the effective date of implementing regulations. During the 
retroactive election period, certain employees now covered by a NAFI 
retirement system who have prior service under CSRS or FERS may elect 
to return to CSRS or FERS coverage or to receive credit under the NAFI 
retirement system for FERS service. [Note: The following sentence and 
Sec. 847.415 may be amended depending on the response to our inquiry to 
the IRS.] NAFI employees who elect to return retroactively to CSRS 
coverage will receive full CSRS coverage for the retroactive period and 
will be prospectively covered by the CSRS Offset provisions, which are 
applicable to CSRS employees who are mandatorily covered by Social 
Security, because the Social Security coverage in effect during their 
NAFI service will continue. Certain employees who have been 
continuously covered by FERS and have prior service with a NAFI may be 
eligible to elect to return to coverage under the NAFI retirement 
system, or to receive credit under FERS for the NAFI service.

2. Qualifying Moves

    The Portability of Benefits for Nonappropriated Fund Employees Act 
of 1990 (sections 8347(q) and 8461(n) of title 5, United States Code), 
Public Law 100-508 provided that certain NAFI employees within the 
Department of Defense (DoD) and the U.S. Coast Guard may elect to 
continue vested coverage under a retirement system for NAFI employees 
upon a move to a DoD or Coast Guard appropriated fund position. 
Likewise, certain DoD or Coast Guard appropriated fund employees could 
elect to continue vested retirement coverage under CSRS or FERS upon a 
move to a DoD or Coast Guard NAFI position.
    The right to make an election under the 1990 Portability Act is 
linked to conditions surrounding the employment move. Only those 
employees whose move between civil service and NAFI employment, or vice 
versa, met certain criteria set out in the law were granted the 
opportunity to elect to continue retirement coverage; the law did not 
make NAFI service creditable under CSRS or FERS.
    Section 1043 of Public Law 104-106 expands the opportunities for 
employees to elect to continue retirement coverage upon a change in 
employment status. Except in limited circumstances explained below, the 
changes made by section 1043 have not made service with a NAFI 
creditable for CSRS or FERS purposes.

3. Qualifying Moves for Prospective Elections

    An employment move triggers an opportunity to elect to continue 
retirement coverage under the provisions of the 1996 Act if it meets 
all of the following four criteria:
     The employee must not have had a prior opportunity to 
elect to continue the same retirement coverage under the 1990 
Portability provisions, and
     The employee must have been vested in a retirement plan 
prior to the change in employment, and
     The employee must have moved from a NAFI within the DoD or 
the Coast Guard to any civil service position, or have moved from a 
civil service position to a NAFI within the DoD or the Coast Guard, and
     The break in employment qualifying for retirement coverage 
was not more than 1 year.
    These provisions apply to any move occurring on or after August 10, 
1996. A move is considered to have been made at the time the individual 
enters into the new position, not at the time of separation from the 
prior position. For example, an individual may have separated from an 
appropriated fund position subject to FERS on December 31, 1995. The 
same individual received an appointment with a NAFI subject to the NAFI 
retirement plan on September 29, 1996. Assuming all other criteria are 
met, the individual has completed a qualifying employment move and is 
eligible to elect to continue FERS coverage instead of accepting NAFI 
plan coverage.

4. Qualifying Moves for Retroactive Elections

    For certain employees who moved from a civil service position 
subject to CSRS or FERS to a position in a NAFI covered by a NAFI 
retirement system, and vice versa, at any time after December 31, 1965, 
and before August 10, 1996, section 1043 of Public Law 104-106 provides 
a limited opportunity to elect to continue retirement coverage 
retroactive to the date of the qualifying employment move. To be 
eligible to retroactively elect retirement coverage,

[[Page 41715]]

the move to or from civil service and NAFI employment must meet the new 
definition of ``qualifying move'' in section 847.402 of these 
regulations. However, the law specifically excludes three classes of 
individuals from making a retroactive election.

Previous Retirement Coverage Election Opportunity

    Employees who had an opportunity to elect to continue retirement 
coverage under the provisions of the 1990 Portability Act before 
February 10, 1996, or who elected to continue retirement coverage 
before August 10, 1996, are not eligible to elect retirement coverage 
based on an earlier qualifying move.
    Employees with a qualifying move occurring after February 10, 1996, 
(the date Public Law 104-106 was enacted) and before August 10, 1996, 
may elect to continue retirement coverage based on a qualifying move 
under these regulations only if they have not already exercised an 
election right under the provisions of the 1990 Portability Act. The 
DoD issued a blanket waiver of the 30-day time limit for elections 
under the 1990 Portability Act on March 4, 1996. Employees who delayed 
their election right under the waiver may now elect to continue 
coverage under either the 1990 Portability rules or the retroactive 
provisions established by these regulations. DoD will allow until 
December 31, 1996, for employees in this category--all of whom are DoD 
employees who have made a qualifying employment move under the 1990 
Portability Act on or after February 10, 1996--to make their retirement 
coverage elections under the new regulations.

Continuous Retirement Coverage Requirement

    Current NAFI employees who moved under conditions which would allow 
an opportunity to elect to continue retirement coverage may make a 
retroactive election only if they have remained continuously subject to 
a retirement system established for NAFI employees since the qualifying 
move. A break in service of 3 days or less is not considered a break in 
retirement coverage for retroactive election eligibility purposes. 
Likewise, a current FERS employee who would be eligible to 
retroactively elect to continue NAFI retirement system coverage is 
eligible to make that election only if he or she has remained 
continuously subject to FERS since the qualifying move. (The statute 
contains an inconsistent reference to continuous CSRS coverage 
following the employment move (section 1043(c)(2)(B)(II)), which cannot 
be given effect in conjunction with the plain and unambiguous statement 
in section 1043(c)(2)(B)(III), as explained in the next paragraph.)

Moves to the CSRS

    If the employment move on which an election would be based was from 
a NAFI to the CSRS, the employee is not eligible to make a retroactive 
election. Subclause (III) of section 1043(c)(2)(B) bars any individual 
from making a retroactive election--

    if such election would be based on a move to the Civil Service 
Retirement System from a retirement system established for employees 
[of a NAFI].

Therefore, an employee who is currently subject to CSRS has no new 
opportunity under these regulations to elect to continue retirement 
coverage based on a move from a NAFI retirement system to CSRS.
    The bar on retroactive elections based on moves to the CSRS also 
applies to employees now covered by FERS who elected FERS during the 
1987 open season or later. If an employee moved from a NAFI retirement 
system to CSRS (including the CSRS Interim provisions in effect from 
January 1, 1984 through December 31, 1986, and the CSRS Offset 
provisions in effect on and after January 1, 1987), and later elected 
FERS coverage, he or she is not eligible to make a retroactive election 
of NAFI retirement system coverage. Moves from a NAFI retirement system 
to CSRS Interim coverage, followed by automatic, as opposed to 
elective, FERS coverage, with all the CSRS Interim service being 
retroactively converted to FERS service, will be considered a move to 
FERS.

5. Alternative Election of Service Credit

    Section 1043 of Public Law 104-106 also provides for an alternative 
election for employees currently covered by FERS or a NAFI retirement 
system. To be eligible to alternatively elect service credit, the FERS 
or NAFI employee must meet all the eligibility criteria for a 
retroactive election of retirement coverage. However, the requirement 
that the employee not have had a previous opportunity to elect to 
continue retirement coverage under the 1990 Portability Act provisions 
does not apply. That is, an employee currently covered by FERS or 
participating in a NAFI retirement system who previously elected his or 
her current retirement coverage based on a past qualifying move, or who 
had the opportunity to elect to continue retirement coverage, is 
eligible to make an alternative election provided he or she meets all 
other criteria.
    Under the alternative election opportunity, an eligible employee 
covered by FERS may elect to receive credit in his or her FERS 
retirement benefit for any prior civilian service which would be 
creditable for NAFI retirement system purposes and to continue coverage 
under FERS for all future periods of Federal service. Similarly, a NAFI 
employee who is participating in a NAFI retirement system may elect to 
receive credit toward eligibility for a NAFI retirement benefit for any 
prior civilian service which would be creditable for FERS purposes, 
without regard to redeposit, and to continue coverage under the NAFI 
retirement system for all future periods of Federal service. By making 
this election in lieu of a retroactive election of retirement coverage, 
an employee with multiple periods of service subject to another 
retirement system could combine credit for the service under his or her 
current retirement system. In contrast, by making a retroactive 
election of retirement coverage, only service performed since the date 
of the qualifying move becomes creditable under the new retirement 
system.
    For example, an individual was employed in a NAFI from 1981 through 
1988 and subject to the NAFI's retirement system. Five months after her 
separation from the NAFI, the same individual was employed in a civil 
service position subject to FERS. She remained subject to FERS until 
early 1995, and then after a 5-month break in service she became 
employed by a NAFI covered by the NAFI retirement system and has 
remained so employed to date. This employee now may choose among the 
following elections:
    A. Elect to be covered by FERS retroactive to the effective date of 
her 1995 NAFI appointment. The employee would not receive FERS credit 
for the NAFI service from 1981 through 1988 since her qualifying move 
is the 1995 move from FERS to a NAFI (the move in 1988 from a NAFI to 
the FERS is not qualifying since she did not remain continuously 
covered by FERS); or
    B. Elect to remain in the NAFI retirement system with retirement 
eligibility credit for her FERS service. Should the employee move to a 
FERS position in the future, she would remain covered by her NAFI 
retirement system. Her FERS service would cease to be creditable for 
any purpose under FERS.
    C. Make no election. The employee would remain subject to a NAFI 
retirement plan with service from 1988 to 1995 subject to FERS. Should 
the employee move to FERS in the future, she may have an opportunity to

[[Page 41716]]

continue the NAFI retirement coverage if her move is qualifying.
    To be eligible for the alternative election opportunity, the FERS 
or NAFI employee must be otherwise eligible to elect to continue 
retirement coverage retroactive to the date of a qualifying move. 
Therefore, FERS employees who are unable to elect to retroactively 
continue retirement coverage because they moved from a NAFI to CSRS are 
also unable to elect to credit previous NAFI service under FERS. A FERS 
or NAFI retirement system annuitant is also ineligible to elect to 
credit previous service toward his or her annuity benefit.

6. Service Which Is Creditable Under the Alternative Election

    Under the alternative election (to remain in the current retirement 
system and receive credit for service performed under a previous 
retirement system), section 1043 provides that any service which would 
be qualifying for FERS or NAFI retirement purposes may be credited 
toward the current retirement system. In many cases, employees opted to 
withdraw their contributions to a retirement system upon employment in 
a position that was subject to another retirement system with no 
opportunity to combine the service. While a refund would generally 
terminate an individual's service credit under FERS or a NAFI 
retirement system, section 1043 provides for the transfer of service 
credit regardless of refund status. In the case of a FERS employee who 
has previously received a refund of his or her NAFI retirement 
contributions and elects FERS service credit for the NAFI service, the 
DoD or Coast Guard will transfer the employer contributions which were 
deposited on the employee's behalf during the NAFI employment. In the 
case of a NAFI employee who elects NAFI credit for previous FERS 
service, OPM will certify the periods of FERS service as qualifying to 
the DoD or Coast Guard if the employee has withdrawn his or her 
contributions for the FERS service. For service subject to FERS, 
transferable service would include non-contributory service performed 
prior to January 1, 1989. Non-contributory service performed after 
December 31, 1988, is not creditable FERS service and credit for such 
service would therefore not transfer to a NAFI retirement system. 
Military service is creditable under the general CSRS and FERS rules 
and is not affected by these regulations.

7. Effective Dates

    Prospective and retroactive elections of retirement coverage made 
on or after August 10, 1996, are effective on the date of appointment 
to a retirement-covered position which completed the qualifying move. 
Under no circumstances can an election take effect earlier than the 
first appointment subject to retirement coverage.
    An alternative election to remain covered under the current FERS or 
NAFI retirement system, and to obtain service credit for time under the 
other system, is effective on the date of receipt of the election in 
the employing agency. The service performed subject to another 
retirement system becomes creditable under the current retirement 
system at the time the election is made.

8. Transfer of Contributions

    Section 1043 of Public Law 104-106 requires that for certain 
elections, the current retirement system transfer to the elected 
retirement system all retirement deductions withheld from the 
employee's salary, interest on the employee's deductions, and 
retirement contributions contributed by the employing agency on the 
employee's behalf.
    For elections of CSRS and FERS coverage, including elections of 
FERS service credit, the DoD or the Coast Guard will transfer to the 
Civil Service Retirement and Disability Fund the NAFI employee and 
employer retirement contributions credited to the employee.
    Employee retirement contributions transfer with interest because 
this is specifically provided by section 1043(c)(2)(C)(i). No interest 
is includable in a transfer of employer contributions.
    Any employee deductions plus interest which are transferred to the 
Civil Service Retirement and Disability Fund will become part of the 
employee's credit which is payable to the employee or survivors in the 
case of separation or death. The government share of the NAFI 
contributions, if any, is not payable to the employee or the employee's 
survivors under any circumstances. NAFI contributions transferred to 
the Fund will thereafter accrue interest under current procedures.
    For retroactive elections of NAFI retirement plan coverage, the 
Office of Personnel Management will transfer to either the DoD or the 
Coast Guard the total amount withheld from the employee's salary for 
FERS retirement, any deposits made by the employee for civilian 
service, interest accrued on the employee's deductions and 
contributions, and amounts contributed by the employing agency without 
interest. For elections by NAFI employees of NAFI retirement credit for 
previous periods of FERS service, section 1043 does not allow OPM to 
transfer any contributions associated with the FERS service to the DoD 
or Coast Guard.

9. Employee Costs Associated With Retroactive Elections

    Section 1043 of Public Law 104-106 provides that if the total 
amount of the contributions transferred to the elected retirement 
system do not cover the increase in the ``actuarial present value'' of 
the employee's future retirement benefit attributable to the service 
covered by the election, the employee must fund the difference. The 
actuarial present value of a retirement benefit is the amount of money 
that would have to be set aside to finance all of the retirement 
benefits an employee would receive during his or her expected lifetime. 
Therefore, section 1043 requires employees to fully finance the 
increase in their retirement benefit attributable to the retroactive 
election which is not otherwise funded by the transfer of 
contributions.
    The regulations require that the calculation of the actuarial 
present value of NAFI service made creditable under CSRS or FERS be 
delayed until the time a retirement or survivor benefit based on the 
NAFI service actually becomes payable. By delaying the calculation, the 
exact annuity benefit based on the employees' age, service, salary and 
survivor election can be determined. This method is preferable to 
calculating a future retirement benefit based on a set of assumed 
conditions which may not reflect the employee's actual circumstances. 
In the event the additional NAFI service does not increase the 
retirement benefit payable to the employee or survivor, as in some 
disability retirements, the employee will not be required to fund the 
NAFI service.
    The regulations do not require that the employee fund the increase 
in the actuarial present value by making a deposit. Rather, the section 
1043 funding requirement will be satisfied by a permanent reduction in 
the monthly retirement benefit. The monthly reduction will be based on 
actuarial factors which effectively collect the increase in the 
actuarial present value over the remaining life expectancy of the 
retiree or survivor. If the NAFI service does not create an annuity 
entitlement or increase the payable benefit to the employee or 
survivor, then the monthly reduction would be zero. If the NAFI service 
does increase the CSRS or FERS benefit, the employee or survivor 
annuity will reflect credit for

[[Page 41717]]

all the NAFI service attributable to the retroactive election and a 
permanent actuarial reduction based on the amount required to fund the 
annuity increase.

10. Calculation of Annuity Benefit Which Includes NAFI Service

    At the time that a CSRS or FERS benefit payable to an employee or 
survivor includes NAFI service made creditable by a retroactive 
election, OPM will determine the actuarial present value of the NAFI 
service, if any, and the monthly reduction in the annuity benefit. In 
most cases the calculation will be made effective with the commencing 
date of the retirement or survivor benefit. However, for FERS 
disability annuitants and survivor annuitants, the calculation will not 
be made until a benefit based on the employee's years of service and 
salary becomes payable, usually at age 62. OPM will compare two annuity 
benefit computations:
    (A) The actuarial present value of a CSRS or FERS annuity that 
includes credit for all NAFI service.
    (B) The actuarial present value of a CSRS or FERS annuity without 
credit for the NAFI service attributed to the election.
    The actuarial present value is computed by multiplying the monthly 
rate of annuity by a factor calculated by OPM's actuary using generally 
accepted actuarial standards and on the basis of assumptions used by 
the Board of Actuaries of the Civil Service Retirement System.
    At the time OPM computes the actuarial present value of crediting 
the NAFI service, we will increase the amount of contributions 
transferred to the Fund by interest after the date of the transfer. The 
difference between the actuarial present value of the benefits computed 
under (A) and (B), above, is the actuarial present value of crediting 
the NAFI service. The difference between the actuarial present value of 
the NAFI service and the amount of contributions which were 
transferred, plus interest, is the amount which will be funded by a 
monthly annuity reduction. The regulations refer to this amount as the 
``deficiency.''
    If the additional NAFI service does not increase the annuity 
otherwise payable to an individual, then there will be no reduction in 
the annuity for the retroactive election. This could occur in cases 
where the benefit payable is based on factors other than years of 
service and salary. A disability benefit or a CSRS survivor annuity, 
for example, may be based on a straight percentage of average salary 
and additional NAFI service would not increase the benefit.
    The deficiency is divided by the actuarial present value factor 
corresponding to the employee or survivor's age at the time of the 
calculation to determine the amount of the monthly annuity reduction. 
After the annuity is reduced in this way, any further reductions for 
survivor, CSRS-Offset, or the alternative form of annuity still apply. 
Future cost-of-living adjustments are applied to the monthly annuity 
payable after these reductions. If a survivor benefit becomes payable 
after the death of a retired employee, the monthly survivor benefit is 
not additionally reduced due to a deficiency. For example:
    Employee retires at age 62 under FERS with 18 years of FERS service 
and an additional 5 years of NAFI service made creditable under FERS. 
High-three average salary is $40,000. The contributions transferred 
from the NAFI retirement system, plus interest, equal $5,000.


Present value factor for age 62...........  161.3                       
Single life FERS annuity with credit for    $843/month                  
 NAFI service.                                                          
Actuarial present value...................  $135,976 (161.3  x  843)    
Single life FERS annuity without credit     $600/month                  
 for NAFI service.                                                      
Actuarial present value...................  $96,780 (161.3  x  600)     
Actuarial present value of NAFI service...  $39,196 (135,976 - 96,780)  
Unfunded amount (deficiency)..............  $34,196 (39,196 - 5,000 in  
                                             contributions)             
Monthly reduction.........................  $212 (34,196  161.3)
Single life FERS annuity..................  $631/month (843 - 212)      
FERS annuity with survivor benefit........  $567 (0.9  x  631)          
Rate of survivor annuity..................  $315 (50% of $631)          
                                                                        


    In the above example, the employee did not retire earlier than he 
would have otherwise been eligible to retire without the NAFI service. 
Since annuity eligibility was not affected, the increase in the single 
life annuity due to the NAFI service election is equal to the amount 
transferred to the Fund divided by the appropriate present value 
factor. (In the above example: $5,000  161.3 = $31. Annuity 
without NAFI service increases $31 by the NAFI service election.)
    When the NAFI service allows an employee to retire earlier than he 
or she could have without the NAFI service, an additional step is added 
to the computation of the funding deficiency. Because no annuity would 
be immediately payable if NAFI service was not combined with civil 
service, the present value of the immediate annuity that includes NAFI 
service must be compared to the present value of the deferred annuity 
that would have been the only benefit payable without crediting the 
NAFI service. To determine the deficiency at the time the actual 
annuity payments begin, we must therefore discount the present value of 
the deferred annuity benefit at the time it would commence. In other 
words, we begin by computing the present value of the deferred annuity 
on its commencing date (without credit for the NAFI service). This is 
computed by multiplying the deferred annuity rate by the actuarial 
factor for the employee's age at the time the deferred annuity would 
begin. By definition, the present value of the deferred annuity on its 
commencing date (without credit for the NAFI service) is the amount 
that would be required to fund such an annuity on that date. However, 
the present value of the future deferred annuity on the date when 
payments would begin, that is, the amount that would have to be set 
aside on the actual annuity commencing date to fund the future deferred 
annuity, is lower because the amount set aside would earn interest from 
the actual immediate commencing date to the deferred annuity commencing 
date. The method used to adjust the present value of the deferred 
annuity is set out in section 847.607.

11. Effect of FERS Refunds

    These regulations allow individuals who received a refund of their 
FERS retirement contributions upon a move to a NAFI and elect to 
continue coverage under FERS an opportunity to receive credit for the 
FERS service represented by the refund. Employees under CSRS may repay 
previous refunds at any time they are subject to CSRS. A refund of FERS 
contributions generally cannot be repaid and the service represented by 
the refund is not creditable toward FERS annuity eligibility or FERS 
annuity computation. However, in the case of a NAFI employee who 
retroactively elects FERS coverage, but received a refund of his or her 
FERS contributions, the employee will receive credit for any periods of 
refunded FERS service in the computation of the FERS benefit. The 
amount of the FERS refund will accrue interest through the date of 
separation. The refund amount plus interest will be added to the amount 
of the funding deficiency, and therefore included in the actuarial 
reduction in the annuity.

[[Page 41718]]

12. Present Value Factors

    The following three charts contain the present value factors that 
will apply to a CSRS or FERS annuity which includes NAFI service made 
creditable by an election under section 1043 of Public Law 104-106 
under the current economic assumptions of interest at 7 percent and 
inflation at 4.5 percent together with the demographic assumptions 
adopted by the Board of Actuaries. See 58 FR 49066, September 21, 1993.

 CSRS Present Value Factors Applicable to an Annuity Payable Following an Election Under Section  1043 of Public
                                                   Law 104-106                                                  
----------------------------------------------------------------------------------------------------------------
                                     Present                           Present                          Present 
                                   value of a                        value of a                         value of
        Age at calculation           monthly    Age at calculation     monthly    Age at calculation   a monthly
                                     annuity                           annuity                          annuity 
----------------------------------------------------------------------------------------------------------------
17...............................      377.9   42..................      285.5   67..................      150.7
18...............................      375.0   43..................      280.8   68..................      145.4
19...............................      372.0   44..................      276.2   69..................      140.2
20...............................      368.9   45..................      270.4   70..................      134.7
21...............................      365.8   46..................      264.7   71..................      129.4
22...............................      362.6   47..................      259.2   72..................      124.0
23...............................      359.3   48..................      253.5   73..................      118.8
24...............................      356.0   49..................      247.2   74..................      113.6
25...............................      352.6   50..................      240.4   75..................      108.5
26...............................      349.2   51..................      235.0   76..................      103.5
27...............................      345.7   52..................      229.8   77..................       98.7
28...............................      342.1   53..................      224.4   78..................       93.9
29...............................      338.4   54..................      218.6   79..................       89.4
30...............................      334.7   55..................      212.6   80..................       84.9
31...............................      331.0   56..................      207.5   81..................       80.5
32...............................      327.1   57..................      202.4   82..................       76.3
33...............................      323.3   58..................      197.0   83..................       72.3
34...............................      319.3   59..................      192.3   84..................       68.4
35...............................      315.3   60..................      188.3   85..................       64.7
36...............................      311.2   61..................      182.9   86..................       61.2
37...............................      307.1   62..................      177.0   87..................       57.9
38...............................      302.8   63..................      171.9   88..................       54.7
39...............................      298.6   64..................      166.5   89..................       51.8
40...............................      294.4   65..................      161.1   90..................       48.9
41...............................      290.0   66..................      156.0                                  
----------------------------------------------------------------------------------------------------------------


 FERS Present Value Factors Applicable to an Annuity Payable Following an Election Under Section 1043 of Public 
                                 Law 104-106 When Annuity Is Increased by COLAS                                 
----------------------------------------------------------------------------------------------------------------
                                     Present                           Present                          Present 
                                   value of a                        value of a                         value of
        Age at calculation           monthly    Age at calculation     monthly    Age at calculation   a monthly
                                     annuity                           annuity                          annuity 
----------------------------------------------------------------------------------------------------------------
17...............................      301.7   42..................      238.5   67..................      139.1
18...............................      299.8   43..................      235.0   68..................      134.6
19...............................      297.9   44..................      231.5   69..................      130.1
20...............................      296.0   45..................      227.9   70..................      125.4
21...............................      294.0   46..................      224.2   71..................      120.7
22...............................      291.9   47..................      220.3   72..................      116.0
23...............................      289.8   48..................      216.5   73..................      111.4
24...............................      287.7   49..................      212.6   74..................      106.8
25...............................      285.4   50..................      208.6   75..................      102.2
26...............................      283.2   51..................      204.5   76..................       97.8
27...............................      280.8   52..................      200.3   77..................       93.5
28...............................      278.4   53..................      196.1   78..................       89.2
29...............................      276.0   54..................      191.8   79..................       85.0
30...............................      273.5   55..................      187.4   80..................       80.9
31...............................      270.9   56..................      183.1   81..................       77.0
32...............................      268.2   57..................      178.6   82..................       73.1
33...............................      265.5   58..................      174.2   83..................       69.4
34...............................      262.8   59..................      169.7   84..................       65.8
35...............................      260.0   60..................      165.1   85..................       62.4
36...............................      257.1   61..................      160.4   86..................       59.1
37...............................      254.1   62..................      161.3   87..................       56.0
38...............................      251.1   63..................      157.1   88..................       53.0
39...............................      248.1   64..................      152.5   89..................       50.2
40...............................      245.2   65..................      148.0   90..................       47.5
41...............................      241.9   66..................      143.6                                  
----------------------------------------------------------------------------------------------------------------


[[Page 41719]]



 FERS Present Value Factors Applicable to an Annuity Payable Following an Election Under Section 1043 of Public 
                               Law 104-106 When Annuity is Not Increased by COLAS                               
----------------------------------------------------------------------------------------------------------------
                                                Present value                                      Present value
              Age at calculation                 of a monthly          Age at calculation          of a monthly 
                                                   annuity                                            annuity   
----------------------------------------------------------------------------------------------------------------
40...........................................           169.2   51..............................           161.9
41...........................................           168.8   52..............................           161.6
42...........................................           168.4   53..............................           161.2
43...........................................           168.1   54..............................           160.6
44...........................................           167.7   55..............................           160.0
45...........................................           166.9   56..............................           160.0
46...........................................           166.1   57..............................           160.2
47...........................................           165.4   58..............................           160.4
48...........................................           164.7   59..............................           161.2
49...........................................           163.7   60..............................           162.7
50...........................................           162.4   61..............................           163.5
----------------------------------------------------------------------------------------------------------------

13. Effects of an Election

    Any prospective or retroactive election made under these 
regulations is irrevocable. By electing to continue retirement 
coverage, the employee also consents to a permanent reduction in the 
future monthly annuity benefit if the benefit becomes payable at an 
earlier date or is increased by the NAFI service. Once an employee has 
elected coverage under a specific retirement system, he or she 
continues to be covered by that retirement system for all future 
periods of Federal service not otherwise excluded from retirement 
coverage, whether employed in a civil service position or with a NAFI. 
The elected retirement coverage will also apply to any service the 
individual may perform as a reemployed annuitant.
    A retroactive election of retirement coverage will have the same 
effect as if it had been timely made at the time of the move. For 
employees who elect to continue CSRS or FERS coverage, the NAFI service 
performed since the move on which the election is based is fully 
creditable in the future CSRS or FERS annuity for title and 
computation, including average salary purposes. FERS employees who 
elect FERS service credit for previous periods of NAFI service will 
also receive full credit toward title and computation for any previous 
period of creditable NAFI service.
    NAFI employees who elect to remain covered by the NAFI retirement 
system and receive credit for previous periods of FERS civilian service 
may also elect whether the FERS service will be creditable for title 
only, or for title and computation of the NAFI retirement benefit. If 
the employee elects to receive credit for the FERS service in the 
computation of the NAFI retirement benefit, he or she is required to 
pay the actuarial present value of the FERS service made creditable by 
the election. An election to credit FERS civilian service for any 
purpose toward a NAFI retirement system will terminate an employee's 
eligibility for a FERS annuity based on the same service. Although the 
employee's contributions for the FERS service may remain to his credit, 
an election to credit FERS service in a NAFI retirement benefit will 
prevent the FERS service from remaining creditable for any purpose 
under FERS.

14. Time Limit for Elections

    Section 1043 of Public Law 104-106 amended the definition of a 
qualifying move to allow retirement coverage elections when employees 
move to or from a NAFI and any other Federal agency and also increased 
the allowable break in service between retirement-covered civil service 
and NAFI positions from not more than 3 days to 1 year. At the time of 
employment, agencies will give qualifying employees 30 days in which to 
make their election. This time limit may be extended if the agency 
fails to provide a timely opportunity for the employee to make the 
election.
    The retroactive election opportunity expires 1 year after the 
effective date of the regulations. Since that day (August 10, 1997) is 
a Sunday, the deadline stated in the regulation is the following 
Monday, August 11, 1997. Because section 1043 requires that eligible 
employees receive timely notice of the opportunity to make the 
retroactive election, and that employees be counselled concerning the 
election opportunity, the employing agency will have authority to waive 
the time limit in the event that an employee did not receive such 
notice or counselling.

Waiver of Notice of Proposed Rulemaking

    Under section 553(b)(3)(B) and (d)(3) of title 5, United States 
Code, I find that good cause exists for waiving the general notice of 
proposed rulemaking and to make these rules effective in less than 30 
days. The regulations are effective August 10, 1996, 6 months after 
enactment of the statutory change. The statute requires OPM to 
establish by regulation the procedure for electing retirement coverage 
retroactive to a qualifying move and for computing the costs associated 
with the election and to prescribe the implementing regulations within 
6 months of enactment. Elections under the new law cannot be made until 
the implementing regulations take effect. Therefore, delaying 
implementation of these regulations would unnecessarily delay the 
availability of the benefits of the new law.

List of Subjects

5 CFR Parts 831, 837, 841, 842, 843, and 844

    Administrative practice and procedure, Air traffic controllers, 
Alimony, Claims, Disability benefits, Firefighters, Government 
employees, Income taxes, Intergovernmental relations, Law enforcement 
officers, Pensions, Reporting and recordkeeping requirements, 
Retirement.

5 CFR Part 847

    Administrative practice and procedure, Disability benefits, 
Government employees, Pensions, Reporting and recordkeeping 
requirements, Retirement.
James B. King,
Director.
    Accordingly, OPM is amending Title 5, Code of Federal Regulations, 
parts 831, 837, 841, 842, 843, 844, and adding 847 as follows:

PART 831--RETIREMENT

    1. The authority citation for part 831 is revised to read as 
follows:


[[Page 41720]]


    Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5 
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; 
Sec. 831.108 also issued under 5 U.S.C. 8336(d)(2); 
Sec. 831.201(b)(6) also issued under 5 U.S.C. 7701(b)(2); 
Sec. 831.303 also issued under 5 U.S.C. 8334(d)(2); Sec. 381.502 
also issued under 5 U.S.C. 8337; Sec. 831.502 also issued under 
section 1(3), E.O. 11228, 3 CFR 1964-1965 Comp.; Sec. 831.663 also 
issued under 5 U.S.C.8339 (j) and (k)(2); Secs. 831.663 and 831.664 
also issued under section 11004(c)(2) of the Omnibus Budget 
Reconciliation Act of 1993, Pub. L. 103-66; Sec. 831.682 also issued 
under section 201(d) of the Federal Employees Benefits Improvement 
Act of 1986, Pub. L. 99-251, 100 Stat. 23; subpart S also issued 
under 5 U.S.C. 8345(k); subpart V also issued under 5 U.S.C. 8343a 
and section 6001 of the Omnibus Budget Reconciliation Act of 1987, 
Pub. L. 100-203, 101 Stat. 1330-275; Sec. 831.2203 also issued under 
section 7001(a)(4) of the Omnibus Budget Reconciliation Act of 1990, 
Pub. L. 101-508; 104 Stat. 1388-328.

Subpart B--Coverage

    2. In section 831.201(h), the reference ``Sec. 831.204'' is removed 
and ``part 847 of this chapter'' is added in its place.


Sec. 831.204  [Removed]

    3. Section 831.204 is removed.

Subpart G--Computation of Annuities

    4. Section 831.704 is added to read as follows:


Sec. 831.704  Annuities including credit for service with a 
nonappropriated fund instrumentality.

    An annuity that includes credit for service with a nonappropriated 
fund instrumentality performed after December 31, 1965, based on an 
election under subpart D of part 847 of this chapter is computed under 
part 847 of this chapter.

Subpart T--Payment of Lump Sums

    5. Section 831.2009 is added to read as follows:


Sec. 831.2009  Lump sum payments which include contributions made to a 
retirement system for employees of a nonappropriated fund 
instrumentality.

    A lump sum payment will include employee contributions and interest 
as provided under subpart G of part 847 of this chapter.

PART 837--REEMPLOYMENT OF ANNUITANTS

    6. The authority citation for part 837 continues to read as 
follows:

    Authority: 5 U.S.C. 8337, 8344, 8347, 8455, 8456, 8461, and 8468 
and section 302 of Pub. L. 99-335, June 6, 1986, as amended.

Subpart A--General Provisions

    7. Section 837.104 is added to read as follows:


Sec. 837.104  Reemployment of former employees of nonappropriated fund 
instrumentalities.

    A former employee of a nonappropriated fund instrumentality who has 
made an election of retirement coverage under part 847 of this chapter 
will continue to be covered under the elected retirement system for all 
periods of service as a reemployed annuitant.
    8. Section 837.506 is added to read as follows:


Sec. 837.506  Computation of redetermined annuity for former employees 
of nonappropriated fund instrumentalities.

    The redetermined annuity of a former employee of a nonappropriated 
fund instrumentality who elected CSRS or FERS coverage under subpart D 
of part 847 of this chapter is recomputed under part 847 of this 
chapter.

PART 841--FEDERAL EMPLOYEES RETIREMENT SYSTEM--GENERAL 
ADMINISTRATION

    9. The authority citation for part 841 continues to read as 
follows:

    Authority: 5 U.S.C. 8461; Sec. 841.108 also issued under 5 
U.S.C. 552a; subpart D also issued under 5 U.S.C. 8423; Sec. 841.504 
also issued under 5 U.S.C. 8422; Sec. 841.506 also issued under 5 
U.S.C. 7701(b)(2); Sec. 841.507 also issued under section 505 of 
Pub. L. 99-335; Sec. 841.508 also issued under section 505 of Pub. 
L. 99-335; Subpart J also issued under 5 U.S.C. 8469.

Subpart A--General Provisions

    10. In section 841.102, paragraphs (b) through (f) are redesignated 
as paragraphs (b)(1) through (b)(5), and paragraph (c) is added to read 
as follows:


Sec. 841.102  Regulatory structure for the Federal Employees Retirement 
System.

* * * * *
    (c)(1) Part 831 of this chapter contains information about the 
Civil Service Retirement System.
    (2) Part 835 of this chapter contains information about debt 
collection from FERS benefits.
    (3) Part 837 of this chapter contains information about 
reemployment of FERS annuitants.
    (4) Part 838 of this chapter contains information about court 
orders affecting FERS benefits.
    (5) Part 847 of this chapter contains information about elections 
under the Civil Service Retirement System or FERS relating to periods 
of service with a nonappropriated fund instrumentality under the 
jurisdiction of the armed forces.
    (6) Parts 294 and 297 of this chapter and Sec. Sec. 831.106 and 
841.108 of this chapter contain information about disclosure of 
information from OPM records.
    (7) Part 581 of this chapter contains information about garnishment 
of Government payments including salary and CSRS and FERS retirement 
benefits.
    (8) Parts 870, 871, 872, and 873 of this chapter contain 
information about the Federal Employees Group Life Insurance Program.
    (9) Part 890 of this chapter contains information about coverage 
under the Federal Employees Health Benefits Program.
    (10) Chapter II (parts 1200 through 1299) of this title contains 
information about appeals to the Merit Systems Protection Board.
    (11) Chapter VI (parts 1600 through 1699) of this title contains 
information about the Federal Employees Thrift Savings Plan.

PART 842--FEDERAL EMPLOYEES RETIREMENT SYSTEM--BASIC ANNUITY

    11. The authority citation for part 842 is revised to read as 
follows:

    Authority: 5 U.S.C. 8461(g); Sec. Sec. 842.104 and 842.106 also 
issued under 5 U.S.C. 8461(n); Sec. 842.105 also issued under 5 
U.S.C. 8402(c)(1) and 7701(b)(2); Sec. Sec. 842.604 and 842.611 also 
issued under 5 U.S.C. 8417; Sec. 842.607 also issued under 5 U.S.C 
8416 and 8417; Sec. 842.614 also issued under 5 U.S.C. 8419; 
Sec. 842.615 also issued under 5 U.S.C. 8418; Sec. 842.703 also 
issued under section 7001(a)(4) of the Omnibus Budget Reconciliation 
Act of 1990, Pub. L. 101-508; Sec. 842.707 also issued under section 
6001 of the Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-
203; Sec. 842.708 also issued under section 4005 of the Omnibus 
Budget Reconciliation Act of 1989, Pub. L. 101-239 and section 7001 
of the Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508; 
subpart H also issued under 5 U.S.C 1104.

Subpart A--Coverage

    12. In section 842.104(f), the reference ``Sec. 842.106'' is 
removed and ``part 847 of this chapter'' is added in its place.


Sec. 842.106  [Removed]

    13. Section 842.106 is removed.

Subpart C--Credit for Service

    14. In section 842.304, paragraph (d) is added to read as follows:


Sec. 842.304  Civilian Service.

* * * * *
    (d) Credit for service performed as an employee of a 
nonappropriated fund

[[Page 41721]]

instrumentality. (1) Credit for service with a nonappropriated fund 
instrumentality is allowed in accordance with an election under part 
847 of this chapter.
    (2) Service under FERS for which the employee withdrew all 
deductions is creditable in accordance with an election made under part 
847 of this chapter.
    (3) An annuity that includes credit for service with a 
nonappropriated fund instrumentality or refunded service under 
paragraph (d)(2) of this section is computed under part 847 of this 
chapter.
    15. Section 842.310 is added to read as follows.


Sec. 842.310  Service not creditable because of an election under part 
847 of this chapter.

    Any FERS service which becomes creditable under a retirement system 
established for nonappropriated fund employees due to an election made 
under part 847 of this chapter is not creditable for any purpose under 
FERS.

PART 843--FEDERAL EMPLOYEES RETIREMENT SYSTEM--DEATH BENEFITS AND 
EMPLOYEE REFUNDS

    16. The authority citation for part 843 continues to read as 
follows:

    Authority: 5 U.S.C. 8461; Secs. 843.205, 843.208, and 843.209 
also issued under 5 U.S.C. 8424; Sec. 843.309 also issued under 5 
U.S.C. 8442; Sec. 843.406 also issued under 5 U.S.C. 8441.

Subpart B--One-Time Payments

    17. Section 843.212 is added to read as follows:


Sec. 843.212  Lump-sum payments which include contributions made to a 
retirement system for employees of a nonappropriated fund 
instrumentality.

    A lump-sum payment will include employee contributions and interest 
as provided under subpart G of part 847 of this chapter.

Subpart C--Current and Former Spouse Benefits

    18. Section 843.314 is added to read as follows:


Sec. 843.314  Amount of survivor annuity where service includes credit 
for service with a nonappropriated fund instrumentality.

    The survivor annuity in the case of an employee or survivor whose 
service includes service with a nonappropriated fund instrumentality 
made creditable by an election under subpart D of part 847 of this 
chapter is computed under part 847 of this chapter.

PART 844--FEDERAL EMPLOYEES RETIREMENT SYSTEM--DISABILITY 
RETIREMENT

    19. The authority citation for part 844 continues to read as 
follows:

    Authority: 5 U.S.C. 8461.

Subpart A--General Provisions

    20. Section 844.106 is added to read as follows:


Sec. 844.106  Disability annuities which include credit for service 
with a nonappropriated fund instrumentality.

    A disability annuity that includes credit for service with a 
nonappropriated fund instrumentality performed after December 31, 1965, 
based on an election under subpart D of part 847 of this chapter is 
computed under part 847 of this chapter.
    21. Part 847 is added to read as follows:

PART 847--ELECTIONS OF RETIREMENT COVERAGE BY CURRENT AND FORMER 
EMPLOYEES OF NONAPPROPRIATED FUND INSTRUMENTALITIES

Subpart A--General Provisions

Sec.
847.101  Purpose and scope.
847.102  Regulatory structure.
847.103  Definitions.
847.104  OPM responsibilities.
847.105  Agency responsibilities.
847.106  Agency decision concerning eligibility.
847.107  Appeals to MSPB.
847.108  Computation of time.

Subpart B--Elections to continue retirement coverage after a qualifying 
move

847.201  Purpose and scope.
847.202  Definition of qualifying move.
847.203  Elections of CSRS coverage.
847.204  Elections of FERS coverage.
847.205  Elections of NAFI retirement system coverage.
847.206  Time limit for making an election.
847.207  Effective dates of elections.
847.208  Changes of election.
847.209  Collection of CSRS and FERS retirement contributions from 
NAFI employers.
847.210  Collection of NAFI retirement contributions from Federal 
agencies.
847.211  Death of employee during election opportunity period.

Subpart C--Procedures for Elections Under the Retroactive Provisions

847.301  Purpose and scope.
847.302  Notice of election rights.
847.303  Election forms.
847.304  Time limit.
847.305  Basic records.

Subpart D--Elections of Coverage Under the Retroactive Provisions

General Provisions

847.401  Purpose and scope.
847.402  Definition of qualifying move.

Elections of CSRS or FERS Coverage Based on a Move from CSRS or FERS to 
NAFI

847.411  Election requirements.
847.412  Elections of FERS instead of CSRS.
847.413  Effective date of an election.
847.414  Crediting future NAFI service.
847.415  OASDI coverage.
847.416  Credit for refunded FERS service.

Elections to Remain in FERS Coverage with Credit for NAFI Service Based 
on a Move from NAFI to FERS

847.421  Election requirements.
847.422  Crediting future NAFI service.
847.423  Credit for refunded FERS service.

Elections to Remain in NAFI Coverage with Credit for FERS Service Based 
on a Move from FERS to NAFI

847.431  Election requirements.
847.432  Effect of a refund of FERS deductions.
847.433  Exclusion from FERS for future service.

Elections of NAFI Coverage Based on a Move from NAFI to FERS

847.441  Election requirements.
847.442  Effective date.
847.443  Exclusion from FERS for future service.

Subpart E--Transfers of Contributions Under the Retroactive Provisions

847.501  Purpose and scope.
847.502  Transfers to the CSR Fund.
847.503  Transfers from the CSR Fund.
847.504  Amount of transfer.
847.505  When transfer occurs.
847.506  Procedures for transfer.
847.507  Earnings after transfer.

Subpart F--Additional Employee Costs Under the Retroactive Provisions

847.601  Purpose and scope.
847.602  Present value factors.
847.603  Date of present value and deficiency determinations.
847.604  Methodology for determining deficiency.
847.605  Methodology for determining the present value of annuity 
with service credit.
847.606  Methodology for determining the present value of annuity 
without service credit--credit not needed for title.
847.607  Methodology for determining the present value of annuity 
without service credit--credit needed for title.
847.608  Reduction in annuity due to deficiency.

Appendix A to Subpart F of Part 847--List of Events for Which Inclusion 
of NAFI Service May Affect the Rate of Annuity Payable

Subpart G--Computation of Benefits Under the Retroactive Provisions

847.701  Purpose and scope.
847.702  Lump-sum payments and refunds.
847.703  Reductions in annuity.

[[Page 41722]]

847.704  Maximum survivor annuity election.
847.705  Cost-of-living adjustments.

    Authority: 5 U.S.C. 8347(a) and 8461(g) and section 1043(b) of 
Pub. L. 104-106, Div. A, Title X, Feb. 10, 1996, 110 Stat. 434. 
Subpart B also issued under 5 U.S.C. 8347(q) and 8461(n).

Subpart A--General Provisions


 Sec. 847.101  Purpose and scope.

    (a) This part contains the regulations issued by the Office of 
Personnel Management (OPM) to implement the statutory election rights 
under the Portability of Benefits for Nonappropriated Fund Employees 
Act of 1990 and section 1043 of the National Defense Authorization Act 
for Fiscal Year 1996 of certain current and former NAFI employees.
    (b) This part establishes--
    (1) The eligibility requirements for making an election;
    (2) The procedures for making elections;
    (3) The methodologies to determine the employee costs associated 
with the elections; and
    (4) The methodologies to calculate benefits that include credit for 
NAFI service based on such elections.
    (c)(1) The regulations in this part apply to individuals covered by 
CSRS or FERS (and their survivors) and the employers of such 
individuals. The Department of Defense and the U.S. Coast Guard will 
issue any necessary regulations to implement these election rights to 
the extent they affect NAFI retirement systems under their 
jurisdiction.
    (2) The regulations in this part apply only to CSRS benefits and 
FERS basic benefits. They do not apply to benefits under the Thrift 
Savings Plan described in subchapter III of chapter 84, of title 5, 
United States Code.


Sec. 847.102  Regulatory structure.

    (a)(1) Subpart A of this part contains information applicable to 
all elections under this part.
    (2) Subpart B of this part contains information about prospective 
retirement coverage elections under sections 8347(q) and 8461(n) of 
title 5, United States Code.
    (3) Subpart C of this part contains information about the 
procedures applicable to retroactive retirement coverage and 
alternative credit elections under section 1043(c)(2) of the National 
Defense Authorization Act for Fiscal Year 1996.
    (4) Subpart D of this part contains information about the types of 
retroactive elections available, the eligibility requirements for each 
type of election, the effects of an election on CSRS and FERS coverage 
during future employment, and the effective dates of CSRS and FERS 
coverage applicable to elections under section 1043(c)(2) of the 
National Defense Authorization Act for Fiscal Year 1996.
    (5) Subpart E of this part contains information about transferring 
retirement contributions in connection with elections under section 
1043(c)(2) of the National Defense Authorization Act for Fiscal Year 
1996.
    (6) Subpart F of this part contains information about determining 
the employee costs associated with elections under section 1043(c)(2) 
of the National Defense Authorization Act for Fiscal Year 1996.
    (7) Subpart G of this part contains information about benefits 
indirectly affected by elections under section 1043(c)(2) of the 
National Defense Authorization Act for Fiscal Year 1996.
    (b) Section 831.305 of this chapter contains information about CSRS 
credit for NAFI service performed after June 18, 1952, but before 
January 1, 1966.
    (c)(1) Part 831 of this chapter contains information about the 
Civil Service Retirement System.
    (2) Parts 841 through 844 of this chapter contain information about 
FERS basic benefits.
    (3) Part 837 of this chapter contains information about 
reemployment of annuitants.
    (4) Parts 870, 871, 872, and 873 of this chapter contain 
information about the Federal Employees Group Life Insurance Program.
    (5) Part 890 of this chapter contains information about coverage 
under the Federal Employees Health Benefits Program.
    (6) Chapter II (parts 1200 through 1299) of this title contains 
information about appeals to the Merit Systems Protection Board.
    (7) Chapter VI (parts 1600 through 1699) of this title contains 
information about the Federal Employees Thrift Savings Plan.


Sec. 847.103  Definitions.

    (a) Except as provided in paragraph (b) of this section, the 
definitions in sections 8331 and 8401 of title 5, United States Code, 
apply throughout this part.
    (b) In this part--
    Actuarial present value means the amount of money (earning interest 
at an assumed rate) required at the time of retirement to finance an 
annuity that is payable in monthly installments for the annuitant's 
lifetime based on mortality rates for annuitants under CSRS and FERS; 
and increases each year at an assumed rate of inflation. Interest, 
mortality, and inflation rates used in computing the present value are 
those used by the Board of Actuaries of the Civil Service Retirement 
System for valuation of CSRS and FERS, based on dynamic assumptions.
    Age means the number of years an individual has been alive as of 
his or her last birthday.
    Agency means an executive agency as defined in section 105 of title 
5, United States Code; a legislative branch agency; a judicial agency; 
and the U.S. Postal Service and Postal Rate Commission.
    Annuitant means a retiree or a survivor.
    CSRS or FERS means the Civil Service Retirement System or the 
Federal Employees Retirement System as described in chapters 83 and 84 
of title 5, United States Code.
    Deferred annuity date means the earliest date on which a retiree 
would be eligible, without credit for the NAFI service, to receive a 
deferred annuity based on his or her actual date of separation.
    Deficiency means the remainder of the actuarial present value or 
crediting NAFI service, after subtracting the amount credited to the 
employee from a transfer to the Fund under subpart E of this part, and 
earnings under Sec. 847.507 on the transferred amount.
    Employee contributions with interest means the dollar amount 
deducted from an employee's pay for retirement system participation, 
plus any amounts the employee deposited for civilian service credit 
under the retirement system, and interest, if any, payable under 
Sec. 841.605 of this chapter (for FERS) or under applicable NAFI 
retirement system rules.
    Fund means the Civil Service Retirement and Disability Fund 
established in section 8348 of title 5, United States Code.
    Government contributions means the dollar amount which was 
contributed on behalf of an employee by his or her employer for 
retirement system participation.
    Monthly annuity rate means the amount of the monthly single life 
annuity under CSRS or FERS (computed without regard to any survivor 
benefit reductions computed under sections 8339 (j) or (k), and 8418 
through 8420 of title 5, United States Code), before any offset 
relating to benefits under the Social Security Act under section 8349 
of title 5, United States Code, but after including any reduction for 
age (5 U.S.C. 8339(h) or 8415(f)) or for crediting nondeduction 
civilian service performed before October 1, 1982 (5 U.S.C.A. 8339(i), 
note).

[[Page 41723]]

    NAFI means a nonappropriated fund instrumentality described in 
section 2105(c) of title 5, United States Code.
    Retiree means a former employee who, on the basis of his or her 
service meets all the requirements for title to a CSRS or FERS annuity 
and files claim therefor.
    Survivor means a widow, widower, or former spouse entitled to a 
CSRS or FERS annuity based on the service of a deceased employee, 
separated employee, or retiree.


Sec. 847.104  OPM responsibilities.

    (a) OPM will issue guidance to employing agencies to use when 
notifying their employees about the opportunity to make an election 
under this part and for counselling employees in connection with the 
election.
    (b) OPM will issue instructions to agencies concerning the transfer 
of funds and recordkeeping in connection with these elections.


Sec. 847.105  Agency responsibilities.

    (a) Each agency is responsible for notifying its employees of the 
opportunity to make an election under this part and for determining if 
an employee who wishes to make an election is qualified to do so, and 
for counselling employees in accordance with guidance issued by OPM.
    (b) If an agency determines that an employee is not eligible to 
make an election under this part, the agency shall issue a final 
decision to the employee that meets the requirements of Sec. 847.106, 
including notice of the right to appeal under Sec. 847.107.


Sec. 847.106  Agency decision concerning eligibility.

    (a) If the agency determines that the employee is not eligible to 
make an election under this part, it must issue a final decision to the 
employee.
    (b) A final decision shall be in writing, shall fully set forth the 
findings and conclusions of the agency, and shall contain notice of the 
right to request an appeal provided in Sec. 847.107.


Sec. 847.107  Appeals to MSPB.

    (a) An individual whose rights or interests under the CSRS or FERS 
are affected by a final decision of the employing agency may request 
the Merit Systems Protection Board to review such decision in 
accordance with procedures prescribed by the Board.
    (b) Paragraph (a) of this section is the exclusive remedy for 
review of agency decisions concerning eligibility to make an election 
under this part. An agency decision must not allow review under any 
employee grievance procedures, including those established by chapter 
71 of title 5, United States Code, and part 771 of title 5, Code of 
Federal Regulations.


Sec. 847.108  Computation of time.

    In computing a period of time for filing documents, the day of the 
action or event after which the designated period of time begins to run 
is not included. The last day of the period is included unless it is a 
Saturday, a Sunday, or a legal holiday; in this event, the period runs 
until the end of the next day which is not a Saturday, a Sunday, or a 
legal holiday.

Subpart B--Elections to continue retirement coverage after a 
qualifying move


Sec. 847.201  Purpose and scope.

    This subpart contains OPM's regulations on the procedures, 
eligibility requirements, time limits and effects of elections under 
sections 8347(q) and 8461(n) of title 5, United States Code.


Sec. 847.202  Definition of qualifying move.

    (a) A qualifying move occurring on or after August 10, 1996, which 
would allow an opportunity to elect to continue retirement coverage 
under CSRS and FERS must meet all the following criteria:
    (1) The employee must not have had a prior opportunity to elect to 
continue CSRS or FERS retirement coverage;
    (2) The employee must have been vested in CSRS or FERS prior to the 
move to a NAFI;
    (3) The employee must have moved from a position covered by CSRS or 
FERS to a retirement-covered position in a NAFI; and
    (4) The employee must begin employment in a retirement-covered 
position in a NAFI no later than 1 year after separation from CSRS- or 
FERS-covered employment.
    (b) A qualifying move occurring on or after August 10, 1996, which 
would allow an opportunity to elect to continue retirement coverage 
under a NAFI retirement system must meet all the following criteria:
    (1) The employee must not have had a prior opportunity to elect to 
continue NAFI retirement system coverage;
    (2) The employee must have been a vested participant in the NAFI 
retirement system (as the term ``vested participant'' is defined by 
that retirement system) prior to the move to a CSRS- or FERS-covered 
position;
    (3) The employee must have moved from a NAFI to a civil service 
position subject to CSRS or FERS coverage; and
    (4) The employee must be appointed to a CSRS- or FERS-covered 
position no later than 1 year after separation from retirement-covered 
NAFI employment.
    (c) A qualifying move occurring between January 1, 1987, and August 
9, 1996, which would allow an opportunity to elect to continue 
retirement coverage under CSRS or FERS must meet all the following 
criteria:
    (1) The employee must not have had a prior opportunity to elect to 
continue CSRS or FERS retirement coverage;
    (2) The employee must have been vested in CSRS or FERS prior to the 
move to a NAFI;
    (3) The employee must have moved from a CSRS- or FERS-covered 
position within the Department of Defense or the U.S. Coast Guard to a 
retirement covered position with a NAFI; and
    (4) The employee must begin employment in a retirement-covered 
position in a NAFI no later than 4 days after separation from CSRS- or 
FERS-covered employment.
    (d) A qualifying move occurring between January 1, 1987, and August 
9, 1996, which would allow an opportunity to elect to continue 
retirement coverage under a NAFI retirement system must meet all the 
following criteria:
    (1) The employee must not have had a prior opportunity to elect to 
continue NAFI retirement system coverage;
    (2) The employee must have been a vested participant in the NAFI 
retirement system (as the term ``vested participant'' is defined by 
that retirement system) prior to the move to the civil service;
    (3) The employee must have moved from a NAFI to a CSRS- or FERS- 
covered position within the Department of Defense or the U.S. Coast 
Guard; and
    (4) The employee must be appointed to a CSRS- or FERS-covered 
position no later than 4 days after separation from retirement-covered 
NAFI employment.
    (e) A qualifying move under paragraphs (a) and (b) of this section 
is considered to occur on the date the individual enters into the new 
position, not at the time of separation from the prior position.
    (f) A retroactive election opportunity under subpart D of this part 
(pertaining to elections of CSRS, FERS, or NAFI retirement coverage) is 
not considered a prior opportunity to elect retirement coverage under 
this section.


Sec. 847.203  Elections of CSRS coverage.

    (a) An employee who completes a qualifying move (under 
Sec. 847.202(a) or (c)) from a CSRS-covered position to a NAFI may 
elect to continue CSRS coverage.
    (b) An employee who elects CSRS coverage under this section will be

[[Page 41724]]

covered by CSRS (or FERS, if the employee subsequently transfers to 
FERS under part 846 of this chapter) during all periods of future 
service not excluded from coverage by CSRS, including any periods of 
service with a NAFI.
    (c) An employee who makes an election under paragraph (a) of this 
section and who has had a break in service exceeding 3 days is eligible 
to elect FERS under part 846 of this chapter.


Sec. 847.204  Elections of FERS coverage.

    (a) An employee who completes a qualifying move under 
Sec. 847.202(a) and (c) from a FERS-covered position to a NAFI may 
elect to continue FERS coverage.
    (b) An employee who elects FERS coverage under this section will be 
covered by FERS during all periods of future service not excluded from 
coverage by FERS, including any periods of service with a NAFI.


Sec. 847.205  Elections of NAFI retirement system coverage.

    (a) An employee who completes a qualifying move under 
Sec. 847.202(b) and (d) from a NAFI position to a CSRS- or FERS-covered 
position may elect to continue coverage under the NAFI retirement 
system.
    (b) An employee who elects NAFI retirement system coverage under 
this section is excluded from coverage under CSRS or FERS during that 
and all subsequent periods of employment, including any periods of 
service as a reemployed annuitant.


Sec. 847.206  Time limit for making an election.

    (a) Except as provided in paragraph (b) of this section, the time 
limit for making the election is 30 days after the qualifying move.
    (b) Agencies may waive the time limit if it finds that the employee 
was not timely given the opportunity to make the election, or, despite 
due diligence, was prevented by circumstances beyond his or her control 
from making an election within the time limit.
    (c) An agency decision to waive the time limit must comply with the 
provisions of Sec. 847.106, including notification of the right of 
appeal under Sec. 847.107.


Sec. 847.207  Effective dates of elections.

    Elections under this subpart are effective on the date of the 
qualifying move.


Sec. 847.208  Changes of election.

    An election under this subpart is irrevocable when received by the 
employing agency.


Sec. 847.209  Collection of CSRS and FERS retirement contributions from 
NAFI employers.

    CSRS and FERS salary deductions and contributions for NAFI 
employees who have elected CSRS or FERS coverage under this subpart 
must be made and submitted to OPM in the manner currently prescribed 
for the transmission of withholdings and contributions.


Sec. 847.210  Collection of NAFI retirement contributions from Federal 
agencies.

    The Department of Defense and the U.S. Coast Guard will establish 
procedures for agencies to withhold and submit retirement contributions 
to the retirement systems for employees who elect to be covered by a 
retirement system for NAFI employees under this subpart.


Sec. 847.211  Death of employee during election opportunity period.

    (a) When an employee eligible to make an election under this 
subpart dies before expiration of the time limit under Sec. 847.206, 
the employee is deemed to have made the election and to be covered, at 
time of death, by the retirement system that covered the employee 
before the qualifying move.
    (b) The deemed election under paragraph (a) of this section does 
not apply if the eligible survivor elects to have it not apply.
    (c) An election by the survivor to decline the deemed election must 
be in writing and filed no later than 30 days after the employing 
agency notifies the survivor of the right to decline the deemed 
election.

Subpart C--Procedures for Elections Under the Retroactive Provisions


Sec. 847.301  Purpose and scope.

    This subpart establishes the procedures applicable to elections 
section 1043(c)(2) of the National Defense Authorization Act for Fiscal 
Year 1996.


Sec. 847.302  Notice of election rights.

    The employing agency must provide notice to all eligible employees 
of the opportunity to elect to continue retirement coverage under 
subpart D of this part. Failure to provide notice to the employee is 
justification for waiving the time limit under Sec. 847.304.


Sec. 847.303  Election forms.

    (a) Eligible employees may make an election under subpart D of this 
part on a form prescribed by OPM and filed with the employing agency.
    (b) For elections of retirement coverage under subpart D of this 
part, the election form will require that the employee obtain a 
certification from his or her previous retirement system showing dates 
of service, amounts transferable from the previous retirement system to 
the elected retirement system under subpart E of this part, and that 
the employee became vested in the retirement system. If an employee was 
covered by more than one retirement system, he or she must obtain 
certification from each retirement system.


Sec. 847.304  Time limit.

    (a) Except as provided in paragraph (b) of this section, the time 
limit for making an election under subpart D of this part is August 11, 
1997.
    (b) Because Public Law 104-106 requires that eligible employees 
receive timely notice of the opportunity to make the election under 
subpart D of this part, and that employees must be counselled 
concerning the election opportunity, the employing agency must waive 
the time limit in paragraph (a) of this section in the event that an 
employee did not receive such notice or counselling.


Sec. 847.305  Basic records.

    (a) Agencies must establish and maintain retirement accounts for 
employees subject to CSRS or FERS in the manner prescribed by OPM.
    (b) The individual retirement record (Standard Form 2806 for CSRS, 
or Standard Form 3100 for FERS) is the basic record for action on all 
claims for annuity or refund, and those pertaining to deceased 
employees and annuitants.

Subpart D--Elections of Coverage Under the Retroactive Provisions

General Provisions


Sec. 847.401  Purpose and scope.

    This subpart contains OPM's regulations concerning the types of 
elections available, the eligibility requirements for each type of 
election, the effects of an election on CSRS and FERS coverage during 
future employment, and the effective dates of CSRS and FERS coverage 
applicable to retroactive retirement coverage and credit elections 
under section 1043(c)(2) of the National Defense Authorization Act for 
Fiscal Year 1996.


Sec. 847.402  Definition of qualifying move.

    (a) A qualifying move occurring after December 31, 1965, and before 
August 10, 1996, which would allow an employee the opportunity to elect 
to

[[Page 41725]]

continue retirement coverage under CSRS or FERS retroactive to the date 
of the move must meet all the following criteria:
    (1)(i) For moves occurring before February 10, 1996, the employee 
must not have had a prior opportunity to elect to continue CSRS, FERS, 
or NAFI retirement coverage under Sec. 847.202 (c) or (d);
    (ii) For moves occurring on or after February 10, 1996, the 
employee must not have made an election under Sec. 847.202 (c) or (d);
    (2) The employee must have been vested in CSRS or FERS prior to the 
move to a NAFI;
    (3) The employee must have moved from a position covered by CSRS or 
FERS to a retirement-covered position in a NAFI;
    (4) The employee must have begun employment in a retirement-covered 
position in a NAFI no later than 1 year after separation from CSRS- or 
FERS-covered employment; and
    (5) The employee must, since moving to the NAFI position, have 
continuously participated in a retirement system established for NAFI 
employees, disregarding any break in service of not more than 3 days.
    (b) A qualifying move occurring after December 31, 1965, and before 
August 10, 1996, which would allow an employee the opportunity to elect 
to continue retirement coverage under a NAFI retirement system 
retroactive to the date of the qualifying move must meet all the 
following criteria:
    (1)(i) For moves occurring before February 10, 1996, the employee 
must not have had a prior opportunity to elect to continue CSRS, FERS, 
or NAFI retirement coverage under Sec. 847.202(c) or (d);
    (ii) For moves occurring on or after February 10, 1996, the 
employee must not have made an election under Sec. 847.202(c) or (d);
    (2) The employee must have been a vested participant in the NAFI 
retirement system (as the term ``vested participant'' is defined by 
that retirement system) prior to the move to a FERS-covered position;
    (3) The employee must have moved from a NAFI to a civil service 
position subject to FERS coverage or CSRS/SS coverage, as defined in 
Sec. 846.102 of this chapter, followed by the employee's automatic 
conversion to FERS coverage;
    (4) The employee must have been appointed to a FERS-covered 
position no later than 1 year after separation from retirement-covered 
NAFI employment; and
    (5) The employee must, since moving to the FERS position, have been 
continuously covered by FERS, disregarding any break in service of not 
more than 3 days.
    (c) A move from a NAFI to CSRS, including CSRS/SS as defined under 
Sec. 846.102 of this chapter followed by an election of FERS coverage 
under Sec. 846.201 of this chapter, is not a qualifying move for an 
election of retirement coverage under Sec. 847.431 (pertaining to 
elections of NAFI service credit for FERS service) and Sec. 847.441 
(pertaining to elections of NAFI retirement coverage).
    (d) A qualifying move under paragraphs (a) and (b) of this section 
is considered to occur on the date the individual entered into the new 
position, not at the time of separation from the prior position.
ELECTIONS OF CSRS OR FERS COVERAGE BASED ON A MOVE FROM CSRS OR FERS TO 
NAFI


Sec. 847.411  Election requirements.

    (a) An employee who completed a qualifying move under 
Sec. 847.402(a) may elect to be covered by CSRS, if the qualifying move 
was from a CSRS-covered position, or FERS, if the qualifying move was 
from a FERS-covered position, for all Federal service following the 
qualifying move. Employees who elect to be covered by CSRS will be 
prospectively covered by the CSRS Offset provisions set out in subpart 
J of part 831 of this chapter.
    (b) A survivor eligible for benefits under the NAFI retirement 
system which covered an employee at the time of death may make an 
election under this section if the employee was otherwise eligible to 
make an election, but died before expiration of the time limit under 
Sec. 847.304.


Sec. 847.412  Elections of FERS instead of CSRS.

    (a) An employee who elects CSRS coverage under Sec. 847.411(a) may, 
during the 6-month period beginning on the date the election under 
Sec. 847.411(a) is filed with the employing agency, elect to become 
subject to FERS.
    (b) An election of FERS under this section is subject to the 
provisions of part 846 of this subchapter and takes effect on the first 
day of the first pay period after the employing agency receives the 
election.


Sec. 847.413  Effective date of an election.

    (a) An election under Sec. 847.411 is effective on the first day of 
NAFI employment subject to retirement coverage following CSRS- or FERS-
covered employment.
    (b) Deductions and contributions for CSRS or FERS coverage under 
Sec. 831.111 or Sec. 841.501 of this chapter begin effective on the 
first day of the next pay period after the agency receives the 
employee's election under Sec. 847.411(a).
    (c) An election under Sec. 847.411 is irrevocable when received by 
the employing agency.
    (d) NAFI service performed on and after the effective date of an 
election under Sec. 847.411 becomes fully creditable for retirement 
eligibility and computation of the annuity benefit, including 
computation of average pay.


847.414  Crediting future NAFI service.

    An employee who elects CSRS or FERS coverage under Sec. 847.411 
will be covered by CSRS or FERS during all periods of future service 
not excluded from coverage by CSRS or FERS, including any periods of 
service with a NAFI and service as a reemployed annuitant.


Sec. 847.415  OASDI coverage.

    An employee who elects CSRS coverage under Sec. 847.411 is 
prospectively subject to both the Old Age, Survivors, and Disability 
Insurance (OASDI) tax and CSRS as described in subpart J of part 831 of 
this chapter, known as CSRS Offset, effective from the first day of the 
next pay period after the employing agency receives the employee's 
election under Sec. 847.411(a).


Sec. 847.416  Credit for refunded FERS service.

    (a) An employee or survivor who elects FERS coverage under 
Sec. 847.411 will receive credit in the FERS annuity for the service 
represented by any refund of the unexpended balance under Sec. 843.202 
of this chapter.
    (b) The amount of the refund, increased by interest as computed 
under Sec. 842.305(e) of this chapter, will be added to the deficiency 
computed under Sec. 847.604 and collected in accordance with the 
provisions of Sec. 847.609 (pertaining to a monthly reduction in the 
annuity benefit).
ELECTIONS TO REMAIN IN FERS COVERAGE WITH CREDIT FOR NAFI SERVICE BASED 
ON A MOVE FROM NAFI TO FERS


Sec. 847.421  Election requirements.

    (a)(1)(i) A FERS employee who completed a qualifying move under 
Sec. 847.402(b) may, instead of the election provided by Sec. 847.441 
(pertaining to elections of NAFI retirement coverage), elect to remain 
subject to FERS for all subsequent periods of service.
    (ii) Prior service under a NAFI retirement system becomes 
creditable under FERS rules without regard to whether a refund of 
contributions for

[[Page 41726]]

such period has been paid by the NAFI retirement system.
    (2) A FERS employee who has had a previous opportunity to elect 
retirement coverage under Sec. 847.202(c) and (d) is not excluded from 
making this election.
    (b) A survivor may make an election under paragraph (a) of this 
section if the employee was otherwise eligible to elect FERS coverage 
and FERS service credit, but died before expiration of the time limit 
under Sec. 847.304.
    (c) NAFI service made creditable under FERS by an election under 
this section become creditable for FERS retirement eligibility and FERS 
annuity computation, including average pay, upon receipt of the 
election by the employing agency.
    (d) A election under this section is irrevocable when received by 
the employing agency.


Sec. 847.422  Crediting future NAFI service.

    An employee who elects to remain in FERS coverage with credit for 
NAFI service under Sec. 847.421(a) will be covered by FERS during all 
periods of future service not excluded from coverage by FERS, including 
any periods of service with a NAFI and service as a reemployed 
annuitant.


Sec. 847.423  Credit for refunded FERS service.

    (a) An employee or survivor who elects FERS coverage with credit 
for NAFI service under Sec. 847.421 will receive credit in the FERS 
annuity for the service represented by any refund of the unexpended 
balance under Sec. 843.202 of this chapter.
    (b) The amount of the refund, increased by interest as computed 
under Sec. 842.305(e) of this chapter, will be added to the deficiency 
computed under Sec. 847.604 and collected in accordance with the 
provisions of Sec. 847.609 (pertaining to a monthly reduction in the 
annuity benefit).
ELECTIONS TO REMAIN IN NAFI COVERAGE WITH CREDIT FOR FERS SERVICE BASED 
ON A MOVE FROM FERS TO NAFI


Sec. 847.431  Election requirements.

    (a)(1)(i) A NAFI employee who completed a qualifying move from FERS 
under Sec. 847.402(a) may, instead of the election provided by 
Sec. 847.411 (pertaining to elections of CSRS and FERS coverage), elect 
to remain subject to the current NAFI retirement system for all 
subsequent periods of service.
    (ii) Prior service under FERS becomes credible under the NAFI 
retirement system rules.
    (2) A NAFI employee who has had a previous opportunity to elect 
retirement coverage under Sec. 847.202(c) and (d) is not excluded from 
making this election.
    (b) A survivor may make an election under paragraph (a) of this 
section if the employee was otherwise eligible, but died before 
expiration of the time limit under Sec. 847.304.
    (c) An election under this section is irrevocable when received by 
the employing agency.


Sec. 847.432  Effect of a refund of FERS deductions.

    OPM will inform the NAFI retirement system of the amount of service 
performed under FERS, without regard to whether a refund of 
contributions for such period has been paid under FERS.


Sec. 847.433  Exclusion from FERS for future service.

    (a) An employee who elects NAFI retirement system coverage with 
credit for FERS service under Sec. 847.431(a) is excluded from coverage 
under FERS during that and all subsequent periods of employment, 
including any periods of service as a reemployed annuitant.
    (b) FERS service which becomes creditable in a NAFI retirement 
benefit based on an election under Sec. 847.431 is not creditable for 
any purpose under FERS.
ELECTIONS OF NAFI COVERAGE BASED ON A MOVE FROM NAFI TO FERS


Sec. 847.441  Election requirements.

    (a) An employee who completed a qualifying move under 
Sec. 847.402(b) may elect to be covered by a NAFI retirement system for 
all Federal service following the qualifying move.
    (b) A survivor eligible for benefits under FERS may make an 
election under this section if the employee was otherwise eligible to 
make an election, but died before expiration of the time limit under 
Sec. 847.304.


Sec. 847.442  Effective date.

    (a) An election under Sec. 847.441 is effective on the first day of 
FERS-covered employment following NAFI employment subject to retirement 
coverage.
    (b) Deductions and contributions for NAFI retirement system 
coverage begin effective on the first day of the next pay period after 
the agency receives the employee's election under Sec. 847.441(a).
    (c) An election under Sec. 847.441 is irrevocable when received by 
the employing agency.


Sec. 847.443  Exclusion from FERS for future service.

    An employee who elects NAFI retirement system coverage with credit 
for FERS service under Sec. 847.441(a) is excluded from coverage under 
FERS during that and all subsequent periods of employment, including 
any periods of service as a reemployed annuitant.

Subpart E--Transfers of Contributions Under the Retroactive 
Provisions


Sec. 847.501  Purpose and scope.

    This subpart regulates transferring retirement contributions and 
crediting those contributions to offset the employee costs in 
connection with elections section 1043(c)(2) of the National Defense 
Authorization Act for Fiscal Year 1996.


Sec. 847.502  Transfers to the CSR Fund.

    For elections of CSRS or FERS coverage under Sec. 847.411 or FERS 
coverage and service credit under Sec. 847.421, the amount under 
Sec. 847.504 will be transferred to the Fund using the procedures 
established under Sec. 847.506.


Sec. 847.503  Transfers from the CSR Fund.

    For elections of NAFI retirement system coverage under 
Sec. 847.441, the amount under Sec. 847.504 will be transferred from 
the Fund using the procedures established under Sec. 847.506.


Sec. 847.504  Amount of transfer.

    (a) All transfers must include employee contributions with 
interest, if not previously refunded, and Government contributions for 
civilian service which becomes creditable under the elected retirement 
system due to an election under Secs. 847.411, 847.421, and 846.441.
    (b) If the employee has withdrawn his or her contributions to the 
retirement system, the amount required by paragraph (a) of this 
section, less the amount refunded, will be transferred.


Sec. 847.505  When transfer occurs.

    (a) OPM, the Department of Defense, and the U.S. Coast Guard will 
transfer the amount specified in Sec. 847.504 as soon as practicable 
after receipt of an election of retirement coverage under subpart D of 
this part.
    (b) The transfer of contributions may not be delayed until the 
employee retires or separates from service.


Sec. 847.506  Procedures for transfer.

    OPM, the Department of Defense, and the U.S. Coast Guard will 
jointly determine the procedure for transfer of contributions.


Sec. 847.507  Earnings after transfer.

    Amounts transferred to the Fund under Sec. 847.502 that are used to 
determine the deficiency under Sec. 847.604 accrue interest at the rate

[[Page 41727]]

prescribed under Sec. 841.603 of this chapter from the date of receipt 
in OPM through the date determined under Sec. 847.603 (pertaining to 
the date of calculation of any deficiency).

Subpart F--Additional Employee Costs Under the Retroactive 
Provisions


Sec. 847.601  Purpose and scope.

    (a) The purpose of this subpart is to establish the methodology 
that OPM will use to determine--
    (1) The cost of an employee's election under Sec. 847.411 or 
Sec. 847.421; and
    (2) The amount by which annuity payments may be affected as a 
result of the election.
    (b) This subpart applies only to CSRS and FERS benefits. The 
Departments of Defense, and the U.S. Coast Guard will issue regulations 
providing methodologies for NAFI's under their jurisdictions.


Sec. 847.602  Present value factors.

    (a) OPM publishes the following tables (available at personnel and 
payroll offices):
    (1) One table of present value factors for all CSRS annuities;
    (2) One table of present value factors for FERS annuities that do 
not receive cost-of-living adjustments before the retiree attains age 
62; and
    (3) One table of present value factors for FERS annuities that 
receives cost-of-living adjustments before the retiree attains age 62.
    (b)(1) Each present value factor will equal the amount of money 
(earning interest at an assumed rate) required at the date of 
computation to fund an annuity that starts out at the rate of $1 a 
month and is payable in monthly installments for the annuitant's 
lifetime based on mortality rates for annuitants paid from the Fund; 
and increases each year, assuming a certain rate of inflation.
    (2) Interest, mortality, and inflation rates used in computing the 
present value are those used by the Board of Actuaries of the Civil 
Service Retirement System for valuation of CSRS and FERS, based on 
dynamic assumptions.
    (3) The present value factors are unisex factors obtained by 
averaging distinct present value factors, which take into account 
mortality for retirees and survivors under CSRS and FERS.
    (c)(1) When OPM publishes in the Federal Register notice of normal 
cost percentages under Sec. 841.407 of this chapter, it will also 
publish the CSRS and FERS tables of present value factors for use for 
this part.
    (2) The present value factors will be based on the assumptions used 
to compute the normal cost percentages.
    (3) Changes in the tables of present value factors will be 
effective on the first day of the month in which the changes in the 
normal cost percentages become effective.


Sec. 847.603  Date of present value and deficiency determinations.

    (a) For determining the deficiency under Sec. 847.604, OPM will 
determine, under Secs. 847.605 through 847.607, the present values of 
future retirement benefits (with and without credit for the NAFI 
service) as of the first date on which inclusion of credit for the NAFI 
service will affect the rate of annuity payable.
    (b) Appendix A to this subpart contains a table in which the left 
column is a list of events for which inclusion of credit for the NAFI 
service will affect the rate of annuity payable and the right column 
indicates the date on which the deficiency will be determined.


Sec. 847.604  Methodology for determining deficiency.

    (a) When an event listed in the left column of the table in 
Appendix A to this subpart occurs, OPM will compute the deficiency, as 
follows:
    (1) As of the date of computation under Sec. 847.603, OPM will 
determine--
    (i) The present value of the annuity including credit for the NAFI 
service under Sec. 847.605;
    (ii) The present value of the annuity without credit for the NAFI 
service under Sec. 847.606 or Sec. 847.607, as applicable; and
    (iii) The amount credited to the employee from a transfer to the 
Fund under subpart E of this part including earnings under 
Sec. 847.507.
    (2) OPM will add the amount determined under paragraphs (a)(1)(ii) 
and (iii) of this section and subtract that sum from the amount 
determined under paragraph (a)(1)(i) of this section.
    (b) If the amount determined under paragraph (a)(2) of this section 
is greater than zero, the deficiency is equal to that amount.
    (c) If no event listed in the left column of the table in Appendix 
A to this subpart occurs--that is, the additional service credit does 
not cause an increase in an employee annuity or a survivor annuity 
actually paid--or, if the amount determined under paragraph (a)(2) of 
this section is less than or equal to zero, the deficiency equals zero.


Sec. 847.605  Methodology for determining the present value of annuity 
with service credit.

    (a) OPM will determine the present value of the annuity including 
service credit for NAFI service under paragraph (b) or (c) of this 
section.
    (b) In cases in which the annuity is payable to a retiree, the 
present value under paragraph (a) of this section equals the monthly 
annuity rate including credit for the NAFI service as of the date of 
computation under Sec. 847.603 times the present value factor for the 
retiree's age on that date.
    (c) In cases in which the annuity is payable to a survivor, the 
present value under paragraph (a) of this section equals the monthly 
annuity rate including credit for the NAFI service as of the date of 
computation under Sec. 847.603 times the present value factor for the 
survivor's age on that date.


Sec. 847.606  Methodology for determining the present value of annuity 
without service credit--credit not needed for title.

    (a) If credit for the NAFI service is not necessary to provide 
title to an annuity payable on the date of computation under 
Sec. 847.603, OPM will determine the present value of the annuity 
without credit for the NAFI service under paragraph (b) or (c) of this 
section.
    (b) In cases in which the annuity is payable to a retiree, the 
present value under paragraph (a) of this section equals the monthly 
annuity rate without credit for the NAFI service as of the date of 
computation under Sec. 847.603 times the present value factor for the 
retiree's age on that date.
    (c) In cases in which the annuity is payable to a survivor, the 
present value under paragraph (a) of this section equals the monthly 
annuity rate including credit for the NAFI service as of the date of 
computation under Sec. 847.603 times the present value factor for the 
survivor's age on that date.


Sec. 847.607  Methodology for determining the present value of annuity 
without service credit--credit needed for title.

    (a) If credit for the NAFI service is necessary to provide title to 
an annuity payable on the date of computation under Sec. 847.603, OPM 
will determine the present value of the annuity without credit for the 
NAFI service under paragraph (b) or (c) of this section.
    (b)(1) In cases in which the annuity is payable to a retiree, the 
present value under paragraph (a) of this section equals the present 
value of the deferred annuity without credit for the NAFI service as of 
the deferred annuity date discounted for interest to that date 
determined under Sec. 847.603.
    (2) The present value of the deferred annuity without credit for 
the NAFI

[[Page 41728]]

service as of the deferred annuity date equals the retiree's monthly 
annuity rate without credit for the NAFI service as of the deferred 
annuity date times the present value factor for the retiree's age on 
that date.
    (3) The present value under paragraph (b)(2) of this section is 
discounted for interest by dividing that amount by a factor equal to 
the value of exponential function in which--
    (i) The base is one plus the assumed interest rate under 
Sec. 841.405 of this chapter on the date determined under Sec. 847.603, 
and
    (ii) The exponent is one-twelfth of the number of months between 
the date determined under Sec. 847.603 and the deferred annuity date.
    (c) In cases in which the annuity is payable to a survivor, the 
present value under paragraph (a) of this section equals zero, that is, 
no survivor annuity would ever become payable without credit for the 
NAFI service.


Sec. 847.608  Reduction in annuity due to deficiency.

    Any annuity payable in the case of an employee who has made an 
election under subpart D of this part will include credit for the NAFI 
service. The monthly annuity rate on the date determined under 
Sec. 847.603 will be permanently reduced by an amount equal to the 
amount of any deficiency divided by the present value factor for the 
annuitant's age on that date.

Appendix A to Subpart F of Part 847--List of Events for Which 
Inclusion of NAFI Service May Affect the Rate of Annuity Payable

                                                                        
------------------------------------------------------------------------
                                               Date deficiency will be  
               Type of event                         determined         
------------------------------------------------------------------------
CSRS or FERS nondisability retirement.....  Commencing date of annuity. 
CSRS disability retirement................  Commencing date of          
                                             annuity.\1\                
FERS disability retirement................  First day of month following
                                             62nd birthday.\2\          
CSRS death in service.....................  Commencing date of survivor 
                                             annuity.\3\                
FERS death in service.....................  Commencing date of survivor 
                                             annuity.                   
FERS death of disability annuitant prior    Commencing date of survivor 
 to age 62.                                  annuity.                   
FERS death of separated employee..........  Commencing date of survivor 
                                             annuity.                   
CSRS or FERS redetermination of annuity...  Commencing date of          
                                             redetermined annuity       
                                             benefit.                   
------------------------------------------------------------------------
\1\ Disability annuity with and without credit for NAFI service must be 
  computed. If annuity payable under each computation is identical due  
  to guaranteed minimum annuity, then deficiency is zero.               
\2\ Generally, the date the deficiency is determined will be the        
  disability retiree's 62nd birthday. However, if an annuity benefit    
  based on the retiree's actual years of service and salary becomes     
  payable prior to age 62, the deficiency is computed at that time.     
\3\ Deficiency amount could be zero if survivor is eligible for the     
  guaranteed minimum annuity amount under both computations.            

Subpart G--Computation of Benefits Under the Retroactive Provisions


Sec. 847.701  Purpose and scope.

    This subpart establishes the methodology that OPM will use to 
determine benefit payable in connection with an election made under 
subpart D of this part.


Sec. 847.702  Lump-sum payments and refunds.

    (a) Employee contributions with interest which are transferred to 
the Fund under subpart E of this part are included in any lump-sum 
credit or unexpended balance payable to the employee or the employee's 
survivors under subpart T of part 831 of this chapter or under part 843 
of this chapter.
    (b) Government contributions which are transferred to the Fund 
under subpart E of this part are not included in any lump-sum credit or 
unexpended balance and are not payable to the employee or the 
employee's survivors.


Sec. 847.703  Reductions in annuity.

    The CSRS or FERS basic annuity of an employee or survivor who has 
elected retirement coverage under subpart D of this part is reduced in 
the following order--
    (a) For age, if applicable, as provided under sections 8339(h) and 
8415(f) of title 5, United States Code.
    (b) For noncontributory service performed before October 1, 1982, 
if applicable, as provided under 5 U.S.C.A. 8339(i), note.
    (c) For deficiency, as determined under subpart F of this part.
    (d) To provide a survivor annuity to a spouse or former spouse, if 
applicable, as provided under sections 8339(j)(4) and 8419(a) of title 
5, United States Code.
    (e) Any other reductions which may apply.


Sec. 847.704  Maximum survivor annuity election.

    The amount of the employee's benefit after reduction for any 
deficiency under Sec. 847.608 is--
    (a) For CSRS, the maximum amount that may be designated as the 
survivor base under section 8339 (j) or (k) to title 5, United States 
Code;
    (b) For FERS, the employee annuity (for survivor benefit purposes) 
under sections 8416 through 8420 of title 5, United States Code.


Sec. 847.705  Cost-of-living adjustments.

    Cost-of-living adjustments are applied to the rate payable to the 
retiree or survivor, including the reduction for any deficiency 
described in Sec. 847.608.

[FR Doc. 96-20333 Filed 8-8-96; 8:45 am]
BILLING CODE 6325-01-M