TN 29 (06-16)
GN 02608.400 Determining Pension Applicability and Pension Amount
A. Determining if payments are a pension
1. Pension contains employee and employer contributions
If employer and employee contributions are used to determine the payment or the contributions are included in a withdrawal from a pension plan, it is generally a pension subject to the GPO. For withdrawals from defined benefit plans, see GN 02608.400.A.3. in this section.
If only employee contributions are involved and the payment amount is based on employee contributions plus interest (e.g., a savings plan), it is subject to GPO only if it is the employee’s primary retirement plan.
2. Payments from primary retirement plans and optional savings plans
Payments from a defined benefit plan or defined contribution plan (e.g., 401(k), 403(b), or 457) based on earnings from non-covered government employment are pensions subject to GPO regardless of the source of contributions (employer only, employee only, or a combination of both), if the plan is the employee’s primary retirement plan. If the plan is a supplemental plan, the payments are subject to GPO when the plan payments contain employer or both employer and employee contributions.
Payments from defined contribution plans may require an employee to satisfy certain requirements. Review the plan’s requirements to determine whether to apply GPO or see appropriate regional issuances for guidance on specific defined contribution plans.
Payments from optional savings plans (e.g., the Federal Thrift Savings Plan for Civil Service Retirement System (CSRS) employees) are not pensions for GPO purposes. For payments to qualify for this exclusion, the savings plan must be separate from the employee’s primary retirement plan and yield only the amount the employee paid in (plus interest and dividends), rather than an amount calculated based upon certain conditions such as retirement or termination, or meeting age, earnings, and length of service requirements.
3. Withdrawals from pension plans
Withdrawals from a defined benefit plan, before or after eligibility for the pension, of only employee contributions plus any interest (i.e., none of the employer contributions are included in the withdrawal), and whereby the employee forfeits all rights to a pension, are not pensions for GPO purposes. This rule applies even if the employer paid the employee contributions for the employee (i.e., some employers may pay for the employee’s contribution).
Any other separation payment, withdrawal, or refund that consists of both employer and employee contributions from a defined benefit or defined contribution plan is a pension subject to GPO.
4. Federal judge pension
Federal judges are federal employees and can pay into the Civil Service Retirement System or Federal Employees’ Retirement System (FERS) depending on the hire date or election of coverage. Upon retirement, a federal judge receives an annuity equal to his or her salary at the time of retirement that continues for a lifetime. This payment is a pension subject to GPO if the payment is based on non-covered earnings, unless any exceptions apply.
5. Disability pension for permanent disability
For GPO purposes, a permanent disability is a condition that is expected to continue throughout the person's lifetime (i.e., not for a limited time) and precludes his or her return to work. However, if the condition unexpectedly improves and the person is able to resume employment but the permanent disability payment continues, the payment is a pension subject to GPO.
B. Payments that are not pensions for GPO
The following payments are not considered pensions for GPO purposes:
Social Security benefits,
Veterans Administration benefits,
Black Lung benefits,
Railroad Retirement Board annuities,
A survivor annuity,
Early incentive retirement payments (e.g., a bonus paid as an incentive for the person to retire early),
State supplemental disability payments, which are not based on employee contributions and may include reimbursements for Supplementary Medicare Insurance (SMI) premiums, or
Workers' Compensation (WC) paid under Federal or State law which cause offset of Disability benefits under Section 224 of the Social Security Act. Do not exclude benefits that an employer or pension agency pays as “like” or “in lieu of” WC payments.
C. Determining the monthly pension amount
1. Monthly payments
If the pension is paid monthly, use the actual monthly amount to calculate the GPO. It may be necessary for the pension payer to prorate the annuitant’s first pension check. Be sure to show the full monthly amount payable in the following months.
To apply the GPO, determine the gross monthly amount payable before any deductions for:
Do not include a state reimbursement for Supplementary Medical Insurance (Part B) premiums or a state deduction for a survivor annuity in the gross monthly amount payable. The Office of Personnel Management (OPM) already deducts the adjustment for a survivor annuity from the gross amount of an OPM pension.
2. Payment contains both government and private employment
Some entities may pay a pension based on both government employment and private employment.
For pensions based on a combination of federal, state, or local government employment and private employment (i.e., non-government employment), GPO applies only to the portion of the pension based on government employment.
Request verification from the employer or pension-paying agency showing the amount of the pension based on only the government employment.
EXAMPLE: A worker receives a pension for non-covered service in a public school (government employment) and a private school (non-government employment). In this case, GPO applies only to the portion of the pension based on the government employment.
3. Payments paid on other than a monthly basis
Convert the amount of a pension that is paid other than monthly as though it were paid monthly according to the following methods and use the results to calculate the GPO. These rules of multiplication and division apply to bonuses or pension increases that are paid in a lump sum.
Weekly - Multiply the pension amount by 52 and divide by 12.
Biweekly - Multiply the pension amount by 26 and divide by 12.
Semiannually - Multiply the pension amount by 2 and divide by 12.
Annually - Divide the amount by 12.
4. Increase in past pension amount
If the spouse, employer or pension-paying agency is unable to provide exact past pension amounts, but the percentages of increase are known, divide the current pension amount by one plus the percent of increase.
EXAMPLE: If the pension amount beginning 5/2011 is $935.00 and this represents a 10 percent increase, then the pension amount before 5/2011 was $850.00 (935.00 divided by 1.10).
5. Unique payments
When an employer, or pension-paying agency allows an individual who is eligible for retirement or disability benefits to determine the payment amount, the duration of payments, or the start date (e.g., defined contribution plans), treat the value of the entire pension plan as a lump sum payment, and follow the instructions in GN 02608.400D.4.
D. Pension paid in a lump sum
The following apply when a pension is paid in a lump sum payment in addition to a monthly pension payment or the entire payment is a lump sum:
1. Federal monthly annuity payment and lump sum
If a retired federal employee elects to receive a lower monthly annuity (Alternative Form of Annuity or AFA) instead of the regular annuity otherwise payable, the employee also receives a lump sum payment.
Obtain proof from the employee (an election letter from OPM) stating:
the amount the monthly regular annuity would be if no lump-sum payment were paid, and
the amount of the lower monthly annuity (alternative annuity) after reduction because of the lump sum.
The difference between the two amounts is the lifetime proration of the lump sum and is fixed.
To calculate the GPO amount, use the monthly regular annuity amount that would have been payable if no lump sum was paid.
2. Alternative annuity amount increases
If OPM applies a cost-of-living-adjustment (COLA) to the alternative annuity, the Title II system determines the new regular monthly annuity amount to use in the new GPO calculation as follows:
Step 1: Adds the new alternative annuity amount furnished by OPM (as shown on the alert resulting from the OPM/GPO Interface Operation) to the lump sum prorated monthly amount (fixed proration amount) shown on the Master Beneficiary Record (MBR). For information about the OPM/GPO Interface, see GN 02608.301.
Step 2: Uses the results of Step 1 as the new regular monthly annuity amount to calculate the new GPO. See GN 02608.100D.
3. State or local monthly pension payment and lump sum
If the claimant is receiving a monthly state or local pension and a lump sum payment, obtain proof of the monthly amount that would have been paid as if no lump sum was paid.
If unable to obtain proof, prorate the lump sum payment according to GN 02608.400D.4. below and add the proration amount to the monthly State or local pension amount. Use the total to calculate the GPO.
If the monthly pension amount increases or decreases, the TII system uses the steps in GN 02608.400D.2. to determine the pension amount to use in the new GPO calculation.
EXAMPLE: Jean is 63 years old on December 1, 2014, when she receives a lump sum from her state pension plan of $25,000.00 and a periodic monthly pension amount of $550.00. Jean’s pension payer did not provide the proration amount for the lump sum. Using the actuarial values in GN 02608.400D.4.c, the prorated monthly amount (fixed proration amount) for the lump sum is $186.10 ($25,000/134.4). The GPO amount is $736.10 ($550.00 + $186.10). Jean’s government pension offset amount is $490.80 ($736.10 x 2/3).
4. Entire pension is a lump sum payment only
When the entire pension is paid in a lump sum, the amount may represent a specified period of time or a “lifetime.” Generally, the pension-paying agency will prorate the lump sum to determine a monthly amount for GPO purposes.
If the agency will not provide this information, prorate the lump sum as follows:
a. Specified period
Divide the lump sum by the number of months in the period specified by the pension-paying agency.
b. Lifetime or unspecified period
Divide the pension lump sum amount by the appropriate actuarial value in the table below that corresponds to the worker's age on the date of the lump sum award.
NOTE: The Title II system determines which actuarial value to use in a computation using the Lump Sum Pension Award Date entered in Modernized Claim System.
c. Table of actuarial values
Age on the Lump Sum Award Date (years)
Actuarial Value Lump Sum Award Date 6/1/2016 or Later
Actuarial Value Lump Sum Award Date 6/1/2011 through 05/31/2016
Actuarial Value Lump Sum Award Date 6/1/2007 through 05/31/2011
Lump Sum Award Date 5/31/2007 or earlier
40 or under
80 or older
E. Federal employee retirement options
1. Federal employee and redeposit for a prior withdrawal
Federal employees can withdraw their retirement contributions if they separate from federal employment. Upon rehire, the employee can pay back (redeposit) the amount of the prior withdrawal; later the amount of a future pension may be larger.
In addition to the option to redeposit any amount withdrawn, some employees may elect to receive an alternative form of annuity (AFA) with a lump sum payment.
The claimant should provide an OPM "Alternative Annuity Election" form showing the options and annuity information.
After verification of the claimant’s final election, calculate the GPO amount for the options as shown below.
a. Regular annuity if the claimant owes but does not redeposit
Use the amount shown in Option 1A of the election form, which is the regular monthly annuity payable. This amount includes a reduction if the claimant owes but does not redeposit.
b. Regular annuity if the claimant owes and redeposits
Use the amount shown in Option 1B of the election form, which is the regular monthly annuity payable if the claimant owes and does redeposit. The amount of the redeposit owed is shown under amount due.
c. Alternative annuity (a lower monthly annuity) with a lump sum
OPM gives credit for a redeposit owed in the calculation of the alternative annuity as though the redeposit has been paid. For additional information about calculating the GPO for an AFA with a lump sum, see GN 02608.400D in this section.
2. Federal reemployed annuitant
OPM refers to a federal retiree who subsequently returns to federal employment as a reemployed annuitant. This includes a person who is in trial retirement.
a. Voluntary retirement
If a reemployed annuitant who voluntarily retired and who is receiving a CSRS pension returns to federal employment, the CSRS pension payment continues and will cause GPO regardless of whether the new employment is under CSRS or covered employment.
The GPO continues to apply unless both civil service and Social Security covers the reemployed annuitant’s last 60 months of federal employment. For an explanation of the 60-month exemption, see GN 02608.107.
Do not use the reemployed annuitant’s salary from the new employment to compute the GPO.
The salary may count as earnings under the annual earnings test. For an explanation of the earnings test, see RS 02501.021.
b. Involuntary retirement
A federal employee who involuntarily retired (e.g., discontinued service or a reduction-in-force) and who later returns to a permanent position in federal employment forfeits his or her CSRS annuity upon rehire.
GPO no longer applies effective the first month the employee no longer receives a pension. If the employee later retires and begins receiving a CSRS pension again, a new GPO determination is necessary.