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Federal employees affected by FERS-FRAE implementation

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.”

DFAS programmers have been working to update the Defense Civilian Pay System (DCPS) to process this increased deduction and expect the system to meet the new federal requirements by July 27th.

Until the system update is complete, 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.

You, as well as all of the other new FERS-FRAE employees paid by DFAS will be underpaying your required retirement contributions until DCPS and the HR systems are reconfigured to accept the new contribution percentage.  Our programmers have been working to make sure DCPS will be updated to meet the law’s requirements, as well as policies of the Office of Personnel Management.  The updated DCPS programming will be in place on July 27, 2014 (which is pay period end August 9).

What to expect

Once DCPS is updated and your HR office submits the personnel actions to the pay system, 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 April 23, 2014