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Federal employees affected by FERS-FRAE implementation

The Defense Civilian Pay System (DCPS) FERS FRAE system update was implemented and effective July 27th, as scheduled.  Many of the DOD retirement corrections have been processed by personnel offices and DOD Human Resources (HR) estimates a November 1, 2014 completion date.

If your servicing Human Resource (HR) office has processed your retirement correction to DCPS, you can expect the following:

  1. correct retirement deduction amount should be being withheld from your pay
  2. underpayments of retirement deductions are now a debt
  3. receipt of a debt notification letter from your payroll office

If your retirement correction to DCPS has not processed by approximately November 1, 2014, please contact your servicing personnel office.

If you are a new federal civilian employee covered by the Federal Employees Retirement System (FERS) who was hired after Dec. 31, 2013, your retirement contributions have increased by 1.3 percent of your gross basic pay based on a new law that was enacted in late December 2013.  This rate increase also applies to former employees rehired after Dec. 31, 2013, who have less than five years of creditable FERS service.  A new employee who must contribute the 1.3 percent increase is referred to as a “FERS-Further Revised Annuity Employee” or “FERS-FRAE employee.”

Insufficient contributions are being deducted from your pay to accommodate the 1.3 percentage increase in required contributions. The underpayments will become debts once DCPS is updated.

All FERS-FRAE employees paid by DFAS can expect to receive a debt notification letter that will provide your due process rights and will begin the debt collection process for correcting any underpaid deductions.  The letter will include the options available to repay the debt, as well your right to request a waiver or a hearing.

Our  FAQ page provides additional information that may address your questions.  If you don’t see your question listed, please speak with your Human Resources (HR) office for additional information.

What caused the contribution increase and debt?

On Dec. 26, 2013, the President signed the Bipartisan Budget Act of 2013, also known as Public Law 113-67.  Section 401 of the law created the new FERS-FRAE designation within FERS for employees hired or rehired (with less than five years creditable FERS service) after Dec. 31, 2013.

If you are in this category, you are considered a FERS-FRAE employee.  The employee contributions required for FERS-FRAE employees were increased by 1.3 percent.  The federal pay systems, such as our Defense Civilian Pay System (DCPS), require updates to process these new percentage increases.  The HR personnel systems also require updates to properly identify affected new employees as FERS-FRAE employees when submitting personnel actions to DFAS that impact pay.

What to expect

Once your HR office submits the personnel actions to the pay system and DCPS is updated, your retirement contributions will be computed accurately and deducted from your pay account every payday.  Unfortunately, DFAS must collect from you all of the under deductions before that date.

Depending on your payday schedule, we anticipate paydays in mid-to-late August to reflect correct retirement withholding amounts.  At that time, DCPS will also compute each employee’s debt amount.  DFAS will send you a debt notification letter so you’ll know the total amount you owe, as well as your due process rights and what options are available for repayment.

We encourage you to save a portion of your pay now to help lessen the impact of repayment.  Our FAQs can help you estimate what your final debt amount will be.

If you have questions on the FERS-FRAE issue, check the FAQs or speak with your servicing HR office.  We will keep this FAQ page updated as new information becomes available.
 

Updated October 2, 2014