[Federal Register Volume 68, Number 11 (Thursday, January 16, 2003)]
[Rules and Regulations]
[Pages 2175-2182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-819]



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  Federal Register / Vol. 68, No. 11 / Thursday, January 16, 2003 / 
Rules and Regulations  

[[Page 2175]]



OFFICE OF PERSONNEL MANAGEMENT

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

RIN 3206-AJ72


Retirement Coverage and Service Credit Elections Available to 
Current and Former Nonappropriated Fund Employees

AGENCY: Office of Personnel Management.

ACTION: Interim rule.

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

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 2002. These 
regulations establish procedures whereby Federal employees may elect to 
use service they performed for a Nonappropriated Fund Instrumentality 
(NAFI) of the Department of Defense or Coast Guard to qualify for an 
immediate retirement under the Civil Service Retirement System (CSRS) 
or the Federal Employees Retirement System (FERS). These regulations 
also establish the methodology for computing the CSRS or FERS annuity 
when employees elect to use NAFI service to qualify for immediate CSRS 
or FERS retirement.

DATES: Interim rules effective December 28, 2001, comments must be 
received on or before March 17, 2003.

ADDRESSES: Send or deliver comments to Mary Ellen Wilson, Chief, 
Retirement Policy Center; Retirement and Insurance Service; Office of 
Personnel Management; 1900 E Street NW., Washington DC 20415-3200, FAX 
(202) 606-0990, or e-mail them to [email protected].

FOR FURTHER INFORMATION CONTACT: Jim Giuseppe, (202) 606-0299.

SUPPLEMENTARY INFORMATION: 

1. Overview

    The President signed into law the National Defense Authorization 
Act for Fiscal Year 2002, Public Law 107-107, on December 28, 2001. 
Sections 1131 and 1132 of that law amend existing provisions of the 
Civil Service Retirement System (CSRS) and the Federal Employees 
Retirement System (FERS) relating to service with a Department of 
Defense (DoD) or Coast Guard Nonappropriated Fund Instrumentality 
(NAFI). Section 1131 amends rules relating to portability of retirement 
coverage when employees move from NAFI positions to civil service 
positions and vice versa. Section 1132 amends rules relating to service 
credit for NAFI service under CSRS and FERS.
    These interim regulations amend current regulations that define a 
qualifying move from DoD or Coast Guard NAFI positions to civil service 
positions and vice versa. In addition, these interim regulations add 
two subparts to 5 CFR part 847. Subpart H describes how employees may 
elect to credit NAFI service to qualify for immediate CSRS or FERS 
retirement. Subpart I describes how such an election will affect the 
computation of the CSRS or FERS annuity benefit.
    A qualifying move from a DoD or Coast Guard NAFI position to a 
civil service position allows an employee to elect to continue NAFI 
retirement coverage in the civil service position. Similarly, a 
qualifying move from a civil service position to a DoD or Coast Guard 
NAFI position allows an employee to elect to continue civil service 
retirement coverage in the NAFI position. As originally defined, for a 
move to be considered qualifying, among other requirements, employees 
had to be vested in the retirement plan of the position they were 
leaving. Section 1131 of Public Law 107-107 eliminates that vesting 
requirement for moves that occur on or after December 28, 2001.
    Section 1132 of Public Law 107-107 allows CSRS and FERS employees 
to use NAFI service to qualify for immediate retirement. However, 
crediting NAFI service under Public Law 107-107 will not result in 
higher annuity benefits. The annuities of employees electing to use 
NAFI service to qualify for immediate retirement must be reduced to 
ensure that there will be no long-term cost to the Retirement Fund. The 
annuities payable after this reduction will be actuarially equivalent 
to the present value of the deferred annuities employees would receive 
if they simply left Government service and didn't use the NAFI time to 
qualify for an immediate retirement.
    Section 1132 has no effect on previous laws that allow credit for 
certain NAFI service. Public Law 104-106, approved February 10, 1996, 
allowed certain FERS employees to elect retirement credit for their 
NAFI service. Public Law 99-638, enacted on November 10, 1986, allowed 
CSRS employees to credit certain NAFI service performed between June 
19, 1952, and December 31, 1965. NAFI service creditable under either 
of those laws remains creditable under the provisions of those laws.

2. Qualifying Moves

    We have amended 5 CFR 847.202 to reflect the new definition of a 
qualifying move. An employment move on or after December 28, 2001, from 
a covered NAFI position to a covered civil service position is a 
qualifying move allowing the employee to elect to continue the NAFI 
retirement coverage if:
    [sbull] The employee has not had a prior opportunity to elect to 
continue NAFI retirement coverage;
    [sbull] The employee has moved from a covered NAFI position within 
DoD or the Coast Guard to any covered civil service position; and
    [sbull] The employee has moved to the covered civil service 
position not more than 1 year after separating from the covered NAFI 
position.
    Likewise, an employment move on or after December 28, 2001, from a 
covered civil service position to a covered NAFI position is a 
qualifying move allowing the employee to elect to continue CSRS, CSRS 
Offset, or FERS retirement coverage if:
    [sbull] The employee has not had a prior opportunity to elect to 
continue CSRS, CSRS Offset, or FERS retirement;
    [sbull] The employee has moved from any covered civil service 
position to a covered NAFI position within DoD or the Coast Guard; and
    [sbull] The employee has moved to the covered NAFI position not 
more than 1 year after separating from the covered civil service 
position.

[[Page 2176]]

3. Electing NAFI Credit for Retirement Eligibility

    A new subpart H in 5 CFR part 847 outlines the rules relating to 
electing NAFI credit to qualify for immediate CSRS or FERS retirement.
    CSRS or FERS employees leaving Federal service on or after December 
28, 2001, who have DoD or Coast Guard NAFI service not otherwise 
creditable under CSRS or FERS, may use that service to qualify for 
immediate retirement. To be able to use their NAFI service in this way, 
employees must already be eligible for CSRS or FERS deferred retirement 
benefits based on their non-NAFI service. Employees already eligible 
for immediate retirement benefits based on their non-NAFI service 
cannot make an election under 5 CFR part 847, subpart H, to credit 
their NAFI service for CSRS or FERS retirement purposes.
    Employees may elect to credit any service they performed as an 
employee paid from nonappropriated funds of an instrumentality of DoD 
or Coast Guard. This includes NAFI service that was covered by an NAFI 
retirement plan as well as NAFI service that was not covered by an NAFI 
plan. FERS employees may even elect to credit NAFI service performed 
after 1988. Employees cannot pay CSRS or FERS deposits to cover the 
NAFI service, and NAFI retirement deductions withheld for any of the 
NAFI service cannot be transferred to the CSRS or FERS retirement fund.
    There is one limitation affecting elections to credit NAFI service 
to qualify for immediate CSRS or FERS retirement. NAFI service used to 
qualify for CSRS or FERS immediate retirement cannot also be used under 
an NAFI retirement system for any purpose.
    Employees must elect complete periods of service with an NAFI 
employer. For example, a CSRS employee who worked 6 years under a 
covered appointment for a DoD NAFI must elect to credit the entire 6 
years even if the employee only needs 2 years of service to qualify for 
an immediate CSRS retirement.
    A complete period of service with an NAFI employer is the period 
from the date of appointment to the date of separation. If an employee 
moves directly from an NAFI appointment excluded from NAFI retirement 
coverage to an appointment subject to NAFI retirement coverage with the 
same NAFI employer, the move from non-covered employment to covered 
employment is considered to be a separation. For example, a CSRS 
employee needs 2 years of service to qualify for an immediate CSRS 
retirement. The employee has 6 consecutive years of NAFI service--2 
years under an appointment excluded from NAFI retirement coverage and 4 
years under an appointment covered by an NAFI retirement plan. The 2 
years of NAFI service not subject to NAFI retirement coverage is 
considered a complete period of service, and the employee may elect to 
credit only that 2 years of NAFI service for CSRS retirement purposes.
    Employees wanting to elect to credit NAFI service to qualify for 
immediate CSRS or FERS retirement must do so when they retire. They 
need to submit their election, on a form specified by OPM, to their 
employing agency before their actual retirement date. They must also 
notify the appropriate NAFI retirement plan of their election and 
obtain verification of their NAFI employment from the NAFI retirement 
system.

4. Computing the Annuity When NAFI Service Is Used for Retirement 
Eligibility

    A new subpart I in 5 CFR part 847 outlines the rules OPM will use 
to compute the annuity of employees who elect to use NAFI service to 
qualify for immediate CSRS or FERS retirement.
    Electing to credit NAFI service to qualify for immediate CSRS or 
FERS retirement will not increase the amount of the annuity. The amount 
of annuity including NAFI service must be reduced by the amount 
necessary to ensure that the present value of the annuity payable to 
the employee is actuarially equivalent to the present value of the 
deferred annuity that would be payable to the employee assuming the 
employee:
    [sbull] Separated from service on the actual date of retirement; 
and
    [sbull] Elected not to credit the NAFI service to qualify for 
immediate retirement.
    Present value is a financial term. As used in retirement, present 
value is the sum of money required at the present time to fund a future 
stream of payments. It is computed using an actuarial model that 
incorporates appropriate assumptions as to inflation and interest 
rates.
    To ensure that the present value of the immediate annuity with 
credit for NAFI service equals the present value of the deferred 
annuity without credit for NAFI service, the gross monthly rate of the 
immediate annuity must be reduced by an amount derived using the 
following formula:

(the present value of the immediate annuity minus the present value 
of the deferred annuity) divided by the present value factor 
corresponding to the employee's age at retirement.

    The present value of an immediate annuity is the sum of money 
required at the commencing date of the annuity to fund the annuity. It 
is calculated by multiplying the monthly rate of annuity by the present 
value factor corresponding to the employee's age as of the commencing 
date of the annuity. A present value factor is 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.
    The present value of a deferred annuity is the sum of money 
required at the commencing date of the immediate annuity to fund the 
future deferred annuity. It is calculated by multiplying the monthly 
rate of the deferred annuity by the present value factor corresponding 
to the employee's age as of the commencing date of the deferred 
annuity, and then multiplying the result by a discount factor. The 
discount factor is a factor derived from the assumed rate of investment 
return earned by the Civil Service Retirement and Disability Fund, and 
the amount of time between the commencing dates of the immediate and 
deferred annuities.
    (Currently, the rate of investment return on the Civil Service 
Retirement and Disability Fund is 7 percent. However, on May 9, 2002, 
OPM published a notice in the Federal Register announcing a change in 
the FERS normal cost percentages. In that notice, OPM also announced 
that the rate of investment return on the Civil Service Retirement and 
Disability Fund will change to 6.75 percent beginning October 1, 2002.)
    The gross monthly rates of annuity used in the present value 
calculations are computed under the appropriate annuity formula 
applying the proper reductions for age, survivor elections, unpaid 
deposits and redeposits, and alternative annuity elections. In 
computing the gross monthly rate of the deferred annuity, interest on 
any deposit or redeposit balances does not accrue beyond the commencing 
date of the immediate annuity. In addition, the present value factors 
used in the reductions for unpaid redeposit and alternative annuity 
election correspond to the employee's age as of the commencing date of 
the deferred annuity.
    If a FERS employee has at least 10 years of creditable (non-NAFI) 
service, the gross monthly rate of the deferred annuity is computed as 
of the first day of the month after the employee reaches

[[Page 2177]]

the minimum retirement age. Using that commencing date for the deferred 
annuity maximizes the present value of the deferred annuity.

5. FERS Annuity Supplement

    An FERS annuity supplement is not payable to FERS employees who 
elect to use NAFI service to qualify for an immediate FERS retirement.

6. Reemployment

    If a retiree who elected to credit NAFI service to qualify for an 
immediate retirement returns to work for the Government, the following 
rules will apply to any benefit earned as the result of the 
reemployment.
    [sbull] If the retiree qualifies for a supplemental annuity under 5 
CFR part 837, the supplemental annuity will not be subject to the 
reduction outlined in 5 CFR part 847, subpart I.
    [sbull] If the retiree qualifies for a redetermined annuity under 5 
CFR part 837, the redetermined annuity will be computed with the 
reduction outlined in 5 CFR part 847, subpart I, if the retiree needs 
to credit NAFI service to qualify for the redetermined annuity. The 
reduction under 5 CFR part 847, subpart I, will be recomputed based on 
the retiree's age as of the commencing date of the redetermined 
annuity. The retiree does not need to make a new election to credit 
NAFI service under 5 CFR part 847, subpart H. The original election 
will remain in effect.
    [sbull] If the retiree qualifies for a redetermined annuity under 5 
CFR part 837, the redetermined annuity will not be subject to the 
reduction outlined in 5 CFR part 847, subpart I, if the retiree 
qualifies for the redetermined annuity without crediting the NAFI 
service. If the retiree elects the redetermined annuity, the election 
the retiree made to credit the NAFI service under 5 CFR part 847, 
subpart H, when the retiree originally retired will not remain in 
effect.
    [sbull] If the retiree's annuity terminated upon reemployment, and 
if the retiree qualifies for a new immediate annuity when the 
reemployment ends, the new annuity will be computed with the reduction 
outlined in 5 CFR part 847, subpart I, if the retiree needs to credit 
NAFI service to qualify for the new annuity. The retiree must submit a 
new election to credit the NAFI service in accordance with 5 CFR part 
847, subpart H.
    [sbull] If the retiree's annuity terminated upon reemployment, and 
if the retiree qualifies for a new immediate annuity when the 
reemployment ends, the new annuity will not be subject to the reduction 
outlined in 5 CFR part 847, subpart I, if the retiree qualifies for the 
new annuity without crediting the NAFI service. The election the 
retiree made to credit the NAFI service under 5 CFR part 847, subpart 
H, when the retiree originally retired will not remain in effect.
    [sbull] If the retiree's annuity terminated upon reemployment, and 
if the retiree qualifies for a deferred annuity, but not a new 
immediate annuity when the reemployment ends, the deferred annuity will 
not be subject to the reduction outlined in 5 CFR part 847, subpart I. 
The election the retiree made to credit the NAFI service under 5 CFR 
part 847, subpart H, when the retiree originally retired, will not 
remain in effect.
    [sbull] If the retiree's annuity terminated upon reemployment, and 
if the retiree does not qualify for either a new immediate annuity or a 
deferred annuity when the reemployment ends, the old annuity will be 
reinstated. The retiree does not need to make a new election to credit 
NAFI service under 5 CFR part 847, subpart H. The original election 
will remain in effect.

7. Survivor Annuity Rate

    The amount of the survivor annuity provided by a retiring employee 
who elects to credit NAFI service under 5 CFR part 847, subpart H, to 
qualify for immediate CSRS or FERS retirement is also subject to 
reduction. The reduction is computed in the same way that the reduction 
to the employee's annuity rate is computed. The present value of the 
initial survivor rate generated by the immediate annuity computation 
(with credit for NAFI service) equals the initial survivor rate 
multiplied by the present value factor corresponding to the employee's 
age as of the commencing date of the immediate annuity. The present 
value of the initial survivor rate generated by the deferred annuity 
computation (without credit for NAFI service) equals the initial 
survivor rate multiplied by the present value factor corresponding to 
the employee's age as of the deferred annuity date, multiplied by the 
discount factor corresponding to the amount of time between the 
immediate annuity commencing date and the deferred annuity date. The 
difference between the two present values is then divided by the 
present value factor corresponding to the employee's age as of the 
immediate annuity commencing date. The result, rounded up to the higher 
dollar, equals the reduction that applies to the initial survivor rate 
generated by the immediate annuity computation.

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 December 28, 2001, the date the 
President signed the statute. The statute requires OPM to establish by 
regulation the procedure for computing an annuity when NAFI service is 
used to qualify for an immediate retirement. Delaying implementation of 
these regulations would unnecessarily delay the availability of the 
benefits of the new law.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because it affects 
only certain Federal employees.

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Lists of Subjects in 5 CFR Parts 831, 837, 842, 843, 844, and 847

    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.

Office of Personnel Management.
Kay Coles James,
Director.

    Accordingly, OPM is amending 5 CFR parts 831, 837, 842, 843, 844 
and 847 as follows:

PART 831--RETIREMENT

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

    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. 831.114 also 
issued under 5 U.S.C. 8336(d)(2) and section 7001 of Pub. L. 105-
174, 112 Stat. 58; Sec. 831.201(b)(1) also issued under 5 U.S.C. 
8347(g); Sec. 831.201(b)(6) also issued under 5 U.S.C. 7701(b)(2); 
Sec. 831.201(g) also issued under sections 11202(f), 11232(e), and 
11246(b) of Pub. L. 105-33, 111 Stat. 251; Sec. 831.201(g) also 
issued under sections 7(b) and 7(e) of Pub. L. 105-274, 112 Stat. 
2419; Sec. 831.201(i) also issued under sections 3 and 7(c) of Pub. 
L. 105-274, 112 Stat. 2419; Sec. 831.204 also issued under section 
102(e) of Pub. L. 104-

[[Page 2178]]

8, 109 Stat. 102, as amended by section 153 of Pub. L. 104-134, 110 
Stat. 1321; Sec. 831.205 also issued under section 2207 of Pub. L. 
106-265, 114 Stat. 784; Sec. 831.301 also issued under section 2203 
of Pub. L. 106-265, 114 Stat. 780; Sec. 831.303 also issued under 5 
U.S.C. 8334(d)(2) and section 2203 of Pub. L. 106-235, 114 Stat. 
780; Sec. 831.502 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. p. 317; 
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 Pub. 
L. 103-66, 107 Stat. 412; Sec. 831.682 also issued under section 
201(d) of Pub. L. 99-251, 100 Stat. 23; Sec. 831.912 also issued 
under section 636 of H.R. 5658, incorporated by reference in Pub. L. 
106-554, 114 Stat. 2763, and published as Appendix C to Pub. L. 106-
554 at 114 Stat. 2763A-125; subpart V also issued under 5 U.S.C. 
8343a and section 6001 of Pub. L. 100-203, 101 Stat. 1330-275; Sec. 
831.2203 also issued under section 7001(a)(4) of Pub. L. 101-508, 
104 Stat. 1388-328.

Subpart C--Credit for Service

    2. In Sec.  831.305, paragraph (d) is added to read as follows:


Sec.  831.305  Service with a nonappropriated fund instrumentality 
after June 18, 1952, but before January 1, 1966.

* * * * *
    (d) Crediting other service in a nonappropriated fund 
instrumentality. Service not creditable under this section may become 
creditable for retirement eligibility purposes under the provisions 
outlined in 5 CFR part 847, subpart H.

Subpart G--Computation of Annuities

    3. Section 831.704 is revised to read as follows:


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

    (a) An annuity that includes credit for service with a 
nonappropriated fund instrumentality performed after December 31, 1965, 
based on an election under 5 CFR part 847, subpart D, is computed under 
5 CFR part 847, subpart F.
    (b) An annuity that includes credit for service with a 
nonappropriated fund instrumentality based on an election under 5 CFR 
part 847, subpart H, is computed under 5 CFR part 847, subpart I.

PART 837--REEMPLOYMENT OF ANNUITANTS

    4. 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 E--Retirement Benefits on Separation

    5. Section 837.506 is revised to read as follows:


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

    (a) The redetermined annuity of a former employee of a 
nonappropriated fund instrumentality who elected CSRS or FERS coverage 
under 5 CFR part 847, subpart D, is recomputed under 5 CFR part 847, 
subpart F.
    (b) The redetermined annuity of a former employee of a 
nonappropriated fund instrumentality who elected CSRS or FERS 
retirement credit under 5 CFR part 847, subpart H, is recomputed under 
5 CFR part 847, subpart I.

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

    6. The authority citation for part 842 continues to read as 
follows:

    Authority: 5 U.S.C. 8461(g); Secs. 842.104 and 842.106 also 
issued under 5 U.S.C. 8461(n); Sec. 842.104 also issued under 
sections 3 and 7(c) of Pub. L. 105-274, 112 Stat. 2419; Sec. 842.105 
also issued under 5 U.S.C. 8402(c)(1) and 7701(b)(2); Sec. 842.106 
also issued under section 102(e) of Pub. L. 104-8, 109 Stat. 102, as 
amended by section 153 of Pub. L. 104-134, 110 Stat. 1321; Sec. 
842.107 also issued under sections 11202(f), 11232(e), and 11246(b) 
of Pub. L. 105-33, 111 Stat. 251; Sec. 842.107 also issued under 
section 7(b) of Pub. L. 105-274, 112 Stat. 2419; Sec. 842.108 also 
issued under section 7(e) of Pub. L. 105-274, 112 Stat. 2419; Sec. 
842.213 also issued under 5 U.S.C. 8414(b)(1)(B) and section 7001 of 
Pub. L. 105-174, 112 Stat. 58, as amended by section 651 of Pub. L. 
106-58, 113 Stat. 430; Secs. 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 Pub. L. 101-508, 104 Stat. 1388; Sec. 842.707 also 
issued under section 6001 of Pub. L. 100-203, 101 Stat. 1300; Sec. 
842.708 also issued under section 4005 of Pub. L. 101-239, 103 Stat. 
2106 and section 7001 of Pub. L. 101-508, 104 Stat. 1388; subpart H 
also issued under 5 U.S.C. 1104; Sec. 842.810 also issued under 
section 636 of H.R. 5658, incorporated by reference in Pub. L. 106-
554, 114 Stat. 2763, and published as Appendix C to Pub. L. 106-554 
at 114 Stat. 2763A-125.

Subpart C--Credit for Service

    7. In Sec.  842.304, paragraph (d) is revised to read as follows:


Sec.  842.304  Civilian service.

* * * * *
    (d) Credit for service performed as an employee of a 
nonappropriated fund instrumentality. (1) Credit for service with a 
nonappropriated fund instrumentality is allowed in accordance with an 
election under 5 CFR part 847, subpart D or H.
    (2) Service under FERS for which the employee withdrew all 
deductions is creditable in accordance with an election made under 5 
CFR part 847, subpart D.
    (3) An annuity that includes credit for service with a 
nonappropriated fund instrumentality under 5 CFR part 847, subpart D, 
or refunded service under paragraph (d)(2) of this section is computed 
under 5 CFR part 847, subpart F.
    (4) An annuity that includes credit for service with a 
nonappropriated fund instrumentality under 5 CFR part 847, subpart H, 
is computed under 5 CFR part 847, subpart I.

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

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

    Authority: 5 U.S.C. 8461; Sec. Sec.  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 C--Current and Former Spouse Benefits

    9. Section 843.314 is revised to read as follows:


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

    (a) The survivor annuity based on service that includes service 
with a nonappropriated fund instrumentality made creditable by an 
election under 5 CFR part 847, subpart D, is computed under 5 CFR part 
847, subpart F.
    (b) The survivor annuity based on service that includes service 
with a nonappropriated fund instrumentality made creditable by an 
election under 5 CFR part 847, subpart H, is computed under 5 CFR part 
847, subpart I.

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

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

    Authority: 5 U.S.C. 8461; Sec.  844.201 also issued under 5 
U.S.C. 1104.

Subpart A--General Provisions

    11. Section 844.106 is revised to read as follows:

[[Page 2179]]

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 5 CFR part 847, subpart D, is computed under 
5 CFR part 847, subpart F.

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

    12. The authority citation for part 847 is revised to read as 
follows:

    Authority: 5 U.S.C. 8332(b)(17) and 8411(b)(6) and sections 1131 
and 1132 of Pub. L. 107-107, December 28, 2001, 115 Stat 1242; 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

    13. In Sec.  847.101, paragraph (a) is revised to read as follows:


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 
of certain current and former NAFI employees under the Portability of 
Benefits for Nonappropriated Fund Employees Act of 1990, section 1043 
of the National Defense Authorization Act for Fiscal Year 1996, and 
sections 1131 and 1132 of the National Defense Authorization Act for 
Fiscal Year 2002.

    14.-15. In Sec.  847.102, new paragraphs (a)(8) and (a)(9) are 
added and paragraph (c)(4) is revised to read as follows:


Sec.  847.102  Regulatory structure.

    (a) * * *
    (8) Subpart H of this part contains information about elections to 
credit NAFI service to qualify for immediate retirement under section 
1132 of Public Law 107-107, the National Defense Authorization Act for 
Fiscal Year 2002.
    (9) Subpart I of this part contains information about how benefits 
are computed when employees elect to credit NAFI service to qualify for 
immediate retirement under section 1132 of Public Law 107-107, the 
National Defense Authorization Act for Fiscal Year 2002.
* * * * *
    (c) * * *
    (4) Part 870 of this chapter contains information about the Federal 
Employees' Group Life Insurance Program.
* * * * *

    16. In Sec.  847.103, paragraph (b), the definition of Deficiency 
is revised to read as follows:


Sec.  847.103  Definitions.

* * * * *
    (b) * * *
    Deficiency means the remainder of the actuarial present value of 
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.
* * * * *

    17. In Sec.  847.104, paragraph (c) is added to read as follows:


Sec.  847.104  OPM responsibilities.

* * * * *
    (c) OPM will determine if an employee who wishes to make an 
election under 5 CFR part 847, subpart H, is eligible to make such an 
election, and OPM's determination is subject to reconsideration under 5 
CFR part 831, subpart A, or 5 CFR part 841, subpart C.

    18. Section 847.105 is revised to read as follows:


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 under subparts B and D of 
this part is qualified to do so, and for counseling employees in 
accordance with guidance issued by OPM.
    (b) If an agency determines that an employee is not eligible to 
make an election under subparts B and D of 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.

    19. In Sec.  847.106, paragraph (a) is revised to read as follows:


Sec.  847.106  Agency decision concerning eligibility.

    (a) If the agency determines that the employee is not eligible to 
make an election under subpart B or D of this part, it must issue a 
final decision to the employee.
* * * * *

    20. In Sec.  847.107, paragraph (b) is revised to read as follows:


Sec.  847.107  Appeals to MSPB.

* * * * *
    (b) Paragraph (a) of this section is the exclusive remedy for 
review of agency decisions concerning eligibility to make an election 
under subparts B and D of this part. An agency decision must not allow 
review under any employee grievance procedures, including those 
established by 5 U.S.C. chapter 71, and 5 CFR part 771.

Subpart B--Election To Continue Retirement Coverage After a 
Qualifying Move

    21. Section 847.202 is revised to read as follows:


Sec.  847.202  Definition of qualifying move.

    (a) A qualifying move occurring on or after December 28, 2001, that 
would allow an opportunity to elect to continue retirement coverage 
under CSRS and FERS must meet all of 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 moved from a position covered by CSRS or 
FERS to a retirement-covered position in an NAFI, and
    (3) The employee must begin employment in a retirement-covered 
position in an NAFI no later than 1 year after separation from CSRS- or 
FERS-covered employment.
    (b) A qualifying move occurring on or after December 28, 2001, that 
would allow an opportunity to elect to continue retirement coverage 
under an 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 moved from an NAFI to a civil service 
position subject to CSRS or FERS coverage; and
    (3) 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 on or after August 10, 1996, and 
before December 28, 2001, that 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 an NAFI;
    (3) The employee must have moved from a position covered by CSRS or 
FERS to a retirement-covered position in an NAFI; and

[[Page 2180]]

    (4) The employee must begin employment in a retirement-covered 
position in an NAFI no later than 1 year after separation from CSRS- or 
FERS-covered employment.
    (d) A qualifying move occurring on or after August 10, 1996, and 
before December 28, 2001, that would allow an opportunity to elect to 
continue retirement coverage under an 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 an 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.
    (e) A qualifying move occurring between January 1, 1987, and August 
9, 1996, that 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 an 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 an NAFI; and
    (4) The employee must begin employment in a retirement-covered 
position in an NAFI no later than 4 days after separation from CSRS- or 
FERS-covered employment.
    (f) A qualifying move occurring between January 1, 1987, and August 
9, 1996, that would allow an opportunity to elect to continue 
retirement coverage under an 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 an 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.
    (g) A qualifying move under paragraphs (a), (b), (c), and (d) 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.
    (h) 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.

    22. In Sec.  847.203, paragraph (a) is revised to read as follows:


Sec.  847.203  Election of CSRS coverage.

    (a) An employee who completes a qualifying move (under Sec.  
847.202(a), (c), or (e)) from a CSRS-covered position to an NAFI may 
elect to continue CSRS coverage.
* * * * *

    23. In Sec.  847.204, paragraph (a) is revised to read as follows:


Sec.  847.204  Election of FERS coverage.

    (a) An employee who completes a qualifying move under Sec.  
847.202(a), (c) or (e) from an FERS-covered position to an NAFI may 
elect to continue FERS coverage.
* * * * *

    24. In Sec.  847.205, paragraph (a) is revised to read as follows:


Sec.  847.205  Elections of NAFI retirement system coverage.

    (a) An employee who completes a qualifying move under Sec.  
847.202(b), (d), or (f), from an NAFI position to a CSRS- or FERS-
covered position may elect to continue coverage under the NAFI 
retirement system.
* * * * *

Subpart D--Elections of Coverage Under the Retroactive Provisions

    25. In Sec.  847.402, paragraphs (a)(1) and (b)(1) are revised to 
read as follows:


Sec.  847.402  Definition of qualifying move.

    (a) * * *
    (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(e) or (f);
    (ii) For moves occurring on or after February 10, 1996, the 
employee must not have made an election under Sec.  847.202(e) or (f);
* * * * *
    (b) * * *
    (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(e) or (f);
    (ii) For moves occurring on or after February 10, 1996, the 
employee must not have made an election under Sec.  847.202(e) or (f);
* * * * *
    26. In Sec.  847.421, paragraph (a)(2) is revised to read as 
follows:


Sec.  847.421  Election requirements.

    (a) * * *
    (2) A FERS employee who has had a previous opportunity to elect 
retirement coverage under Sec.  847.202(e) or (f) is not excluded from 
making this election.
* * * * *

    27. In Sec.  847.431, paragraph (a)(2) is revised to read as 
follows:


Sec.  847.431  Election requirements.

    (a) * * *
    (2) An NAFI employee who has had a previous opportunity to elect 
retirement coverage under Sec.  847.202(e) or (f) is not excluded from 
making this election.
* * * * *

    28. Add subpart H to read as follows:
Subpart H--Electing To Credit NAFI Service for CSRS and FERS Retirement 
Eligibility
Sec.
847.801 What information is in this subpart?
847.802 Who may elect to use NAFI service to qualify for immediate 
retirement under CSRS or FERS?
847.803 When do employees make the election to use their NAFI 
service to qualify for an immediate retirement under CSRS or FERS?
847.804 How do employees make an election to use their NAFI service 
to qualify for an immediate retirement under CSRS or FERS?
847.805 What NAFI service can employees elect to credit toward 
retirement eligibility under CSRS or FERS?
847.806 How much NAFI service must employees elect to use to qualify 
for an immediate CSRS or FERS retirement?
847.807 Do employees have to pay CSRS or FERS deposits for the NAFI 
service they use to qualify for immediate retirement under CSRS or 
FERS?
847.808 Is money in the NAFI retirement fund covering NAFI service 
that an employee elects to use for immediate retirement under CSRS 
or FERS, transferred to the Civil Service Retirement and Disability 
Fund?
847.809 What effect will NAFI service used to qualify for an 
immediate retirement have on the amount of the CSRS or FERS annuity?

[[Page 2181]]

Subpart H--Electing to Credit NAFI Service for CSRS and FERS 
Retirement Eligibility


Sec.  847.801  What information is in this subpart?

    This subpart contains OPM's regulations on the procedures, 
eligibility requirements, and time limits for elections under 5 U.S.C. 
8332(b)(17) and 5 U.S.C. 8411(b)(6).


Sec.  847.802  Who may elect to use NAFI service to qualify for 
immediate retirement under CSRS or FERS?

    CSRS and FERS employees may elect to credit NAFI service for 
retirement purposes under this subpart if:
    (a) They separate for retirement on or after December 28, 2001;
    (b) They do not otherwise qualify for immediate retirement; and
    (c) They have enough otherwise creditable civilian service to 
qualify for deferred retirement.


Sec.  847.803  When do employees make the election to use their NAFI 
service to qualify for an immediate retirement under CSRS or FERS?

    Employees about to retire must make their election to credit NAFI 
service under this subpart no later than the date of separation on 
which their retirement is based.


Sec.  847.804  How do employees make an election to use their NAFI 
service to qualify for an immediate retirement under CSRS or FERS?

    Employees electing to credit NAFI service under this subpart must:
    (a) Inform the NAFI retirement plan that they are electing to 
credit NAFI service for CSRS or FERS retirement eligibility;
    (b) Document the election on a form prescribed by OPM; and
    (c) Submit the election with their application for immediate 
retirement.


Sec.  847.805  What NAFI service can employees elect to credit toward 
retirement eligibility under CSRS or FERS?

    (a) Employees may elect to credit under this subpart any NAFI 
service that isn't already creditable under 5 U.S.C. 8332(b)(16), or 
under 5 CFR part 847, subpart D.
    (b) NAFI service used to qualify for an immediate annuity based on 
an election in paragraph (a) of this section cannot be credited in a 
NAFI retirement plan for any purpose including eligibility and 
calculations of NAFI benefits.


Sec.  847.806  How much NAFI service must employees elect to use to 
qualify for an immediate CSRS or FERS retirement?

    (a) Employees must elect complete periods of NAFI service under 
this subpart.
    (b) A complete period of NAFI service in paragraph (a) of this 
section consists of the period from the date of appointment with an 
NAFI employer to the date of termination.


Sec.  847.807  Do employees have to pay CSRS or FERS deposits for the 
NAFI service they use to qualify for immediate retirement under CSRS or 
FERS?

    Employees are not required to pay CSRS or FERS deposits for the 
NAFI service they use to qualify for immediate retirement under CSRS or 
FERS. In fact, deposits cannot be made for any NAFI service employees 
elect to credit for immediate retirement under this subpart.


Sec.  847.808  Is money in the NAFI retirement fund covering NAFI 
service that an employee elects to use for immediate retirement under 
CSRS or FERS, transferred to the Civil Service Retirement and 
Disability Fund?

    Money in the NAFI retirement fund covering NAFI service that an 
employee elects to use for immediate retirement under CSRS or FERS 
under this subpart cannot be transferred to the Civil Service 
Retirement and Disability Fund.


Sec.  847.809  What effect will NAFI service used to qualify for an 
immediate retirement have on the amount of the CSRS or FERS annuity?

    The annuity of a CSRS or FERS employee who elects to credit NAFI 
service under this subpart will be reduced under the provisions 
outlined in subpart I of this part.

    29. Add subpart I to read as follows:
Subpart I--Computing the Retirement Annuity for Employees Who Elect To 
Use NAFI Service to Qualify for an Immediate CSRS or FERS Retirement
Sec.
847.901 What information is in this subpart?
847.902 How does an election to credit NAFI service for immediate 
CSRS or FERS retirement under subpart H of this part affect the 
computation of the CSRS or FERS retirement annuity?
847.903 How is the monthly reduction to the retirement annuity 
computed?
847.904 What are Present Value Factors?
847.905 How is the present value of an immediate annuity with credit 
for NAFI service computed?
847.906 How is the present value of a deferred annuity without 
credit for NAFI service computed?
847.907 How is the monthly annuity rate used to compute the present 
value of the deferred annuity without credit for NAFI service 
determined?
847.908 If a retiree who elected to credit NAFI service under 
subpart H of this part earns a supplemental annuity under 5 CFR part 
837, how will that supplemental annuity be computed?
847.909 If a retiree who elected to credit NAFI service under 
subpart H of this part earns a right to a redetermined annuity under 
5 CFR part 837, how will the redetermined annuity be computed?
847.910 If a retiree who elected to credit NAFI service for CSRS 
immediate retirement returns to work for the Government under 
conditions that terminate the annuity, how will the retirement 
annuity be computed when the employee's service with the Government 
ends?
847.911 Is an employee who elects to credit NAFI service to qualify 
for an immediate FERS retirement under subpart H of this part 
eligible for an FERS annuity supplement under 5 CFR 842 subpart E?
847.912 If an employee who elects to credit NAFI service under 
subpart H of this part elects a survivor annuity will the monthly 
survivor annuity rate be subject to reduction?

Subpart I--Computing the Retirement Annuity for Employees Who Elect 
To Use NAFI Service To Qualify for an Immediate CSRS or FERS 
Retirement


Sec.  847.901  What information is in this subpart?

    This subpart contains OPM's regulations describing the computation 
of a CSRS or FERS retirement annuity when an employee elects to use 
NAFI service to qualify for immediate retirement under subpart H of 
this part.


Sec.  847.902  How does an election to credit NAFI service for 
immediate CSRS or FERS retirement under subpart H of this part affect 
the computation of the CSRS or FERS retirement annuity?

    The retirement annuity of an employee who elects to use NAFI 
service to qualify for an immediate CSRS or FERS retirement benefit 
will be reduced to ensure the present value of the benefits payable 
will be actuarially equivalent to those that would have been payable if 
the employee had separated on the same date, but without credit for the 
NAFI service.


Sec.  847.903  How is the monthly reduction to the retirement annuity 
computed?

    (a) The reduction equals:
    (1) The difference in the present value of the immediate annuity 
with credit for NAFI service and the deferred annuity without credit 
for NAFI service, divided by
    (2) The present value factor for the retiree's attained age (in 
full years) at the time of retirement.
    (b) The reduction computed in paragraph (a) of this section is 
rounded to the next higher dollar.


Sec.  847.904  What are Present Value Factors

    Present value factors have the same meaning in this subpart as they 
do in 5 CFR 847.602.

[[Page 2182]]

Sec.  847.905  How is the present value of an immediate annuity with 
credit for NAFI service computed?

    (a) OPM will determine the present value of the immediate annuity 
including service credit for NAFI service by multiplying the monthly 
annuity rate as of the commencing date of the annuity by the present 
value factor for the retiree's age on that date.
    (b) The monthly annuity rate under paragraph (a) of this section 
for CSRS and CSRS Offset retirees equals the monthly rate of annuity 
otherwise payable under 5 U.S.C. chapter 83, subchapter III, including 
all reductions provided under that subchapter.
    (c) The monthly annuity rate under paragraph (a) of this section 
for FERS retirees equals the monthly rate of annuity otherwise payable 
under 5 U.S.C. chapter 84, subchapter II, including all reductions 
provided under that subchapter.


Sec.  847.906  How is the present value of a deferred annuity without 
credit for NAFI service computed?

    (a) The present value of a deferred annuity 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.
    (b) The present value of the deferred annuity without credit for 
the NAFI service as of the deferred annuity date equals the retiree's 
monthly annuity 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.
    (c) The present value under paragraph (b) of this section is 
discounted for interest by dividing that amount by a factor equal to 
the value of the exponential function in which--
    (1) The base is one plus the assumed interest rate under 5 CFR part 
841, subpart D, on the commencing date of the retiree's immediate 
annuity, and
    (2) The exponent is one-twelfth of the number of months between the 
commencing date of the retiree's immediate annuity and the deferred 
annuity date.


Sec.  847.907  How is the monthly annuity rate used to compute the 
present value of the deferred annuity without credit for NAFI service 
determined?

    (a) The monthly annuity rate used to compute the present value of 
the deferred annuity under Sec.  847.906 of this subpart for CSRS 
retirees equals the monthly annuity otherwise payable under 5 U.S.C. 
chapter 83, subchapter III, including all reductions provided under 
that subchapter.
    (b) The monthly annuity rate used to compute the present value of 
the deferred annuity under Sec.  847.906 of this subpart for CSRS 
Offset retirees is computed as described in paragraph (a) of this 
section, except that the reduction under section 5 U.S.C. 8349 does not 
apply.
    (c) The monthly annuity rate used to compute the present value of 
the deferred annuity under Sec.  847.906 of this subpart for FERS 
retirees equals the monthly rate of annuity otherwise payable under 5 
U.S.C. chapter 84, subchapter II, including all reductions provided 
under that subchapter.


Sec.  847.908  If a retiree who elected to credit NAFI service under 
subpart H of this part earns a supplemental annuity under 5 CFR part 
837, how will that supplemental annuity be computed?

    This subpart does not affect supplemental annuities under 5 CFR 
part 837. Supplemental annuities will be computed in accordance with 
the provisions of that part.


Sec.  847.909  If a retiree who elected to credit NAFI service under 
subpart H of this part earns a right to a redetermined annuity under 5 
CFR part 837, how will the redetermined annuity be computed?

    (a) A redetermined annuity will not be subject to a reduction under 
this subpart if, on the date reemployment with the Government ends, the 
retiree qualifies for an immediate retirement without credit for the 
NAFI service.
    (b) A redetermined annuity will be subject to a reduction under 
this subpart if, on the date reemployment with the Government ends, the 
retiree does not qualify for immediate retirement without credit for 
the NAFI service.
    (c) The reduction in paragraph (b) of this section is computed as 
in accordance with Sec.  847.903 of this subpart as if the individual 
was retiring for the first time.


Sec.  847.910  If a retiree who elected to credit NAFI service for CSRS 
immediate retirement returns to work for the Government under 
conditions that terminate the annuity, how will the retirement annuity 
be computed when the employee's service with the Government ends?

    (a) If an individual whose annuity terminates upon reemployment 
with the Government elects to credit NAFI service under subpart B of 
this part to qualify for a new immediate retirement when the 
reemployment ends, the annuity will be subject to a reduction under 
this subpart.
    (b) If an individual whose annuity terminates upon reemployment 
with the Government qualifies for a new immediate retirement when the 
reemployment ends without crediting NAFI service, the new annuity will 
not be subject to a reduction under this subpart.
    (c) If an individual whose annuity terminates upon reemployment 
with the Government qualifies for a deferred annuity when the 
reemployment ends, the deferred annuity will not be subject to a 
reduction under this subpart.
    (d) The reduction in paragraph (a) of this section is computed in 
accordance with Sec.  847.903 of this subpart as if the individual was 
retiring for the first time.


Sec.  847.911  Is an employee who elects to credit NAFI service to 
qualify for an immediate FERS retirement under subpart H of this part 
eligible for an FERS annuity supplement under 5 CFR 842 subpart E?

    An FERS Annuity Supplement is not payable to a retiree who elects 
to credit NAFI service under subpart H of this part.


Sec.  847.912  If an employee who elects to credit NAFI service under 
subpart H of this part elects a survivor annuity will the monthly 
survivor annuity rate be subject to reduction?

    (a) The monthly survivor annuity benefit of an employee who elects 
to credit NAFI service under subpart H of this part will be subject to 
reduction.
    (b) The reduction under paragraph (a) of this section equals:
    (1) The difference in the present value of the initial survivor 
annuity generated from the immediate annuity computation with credit 
for NAFI service and the initial survivor annuity generated from the 
deferred annuity computation without credit for NAFI service, divided 
by
    (2) The present value factor for the retiree's age (in full years) 
at the time of retirement.
    (c) The present value of the survivor annuity generated from the 
immediate annuity with credit for NAFI service in paragraph (b)(1) of 
this section is computed under the provisions of Sec.  847.905 of this 
subpart.
    (d) The present value of the initial survivor annuity generated 
from the deferred annuity without credit for NAFI service in paragraph 
(b)(1) of this section is computed under the provisions of Sec.  
847.906 of this subpart.
    (e) The ages of the employee as of the commencing date of the 
immediate retirement and the commencing date of the deferred retirement 
are used to compute the present value of the survivor benefits under 
paragraphs (c) and (d) of this section.

[FR Doc. 03-819 Filed 1-15-03; 8:45 am]
BILLING CODE 6325-50-P