FERS-FRAE Frequently Asked Questions

Q1: Why wasn’t a correct contribution deduction taken from my first pay check in 2014?

As a federal employee hired or rehired (with less than five years of creditable FERS service) after Dec 31, 2013, you are classified as a Federal Employees Retirement System-Further Revised Annuity Employee (FERS-FRAE) based upon the provisions in Section 401 of the Bipartisan Budget Act of 2013.  The Act was signed into law on Dec. 26, 2013.

The Office of Personnel Management issued guidance to federal civilian payroll providers and human resources (HR) offices on Jan. 30, 2014.  At that time, pay systems, such as the Defense Civilian Pay System, could begin planning updates to accommodate the retirement contribution rate increase applicable to FERS-FRAE employees.  The changes required in DCPS will be completed on July 27, 2014.  As with the pay system changes, HR systems and processes require updates to ensure input to employees’ pay accounts reflect the proper federal retirement plan employee contribution designation.  The bottom line is that the system and process changes required, as well as interagency coordination, will take some time.

We expect that as of your payday on Aug. 15 or 21 (depending on your regular payday); the correct amount of retirement contributions will be deducted from your pay if your servicing HR office has provided your new retirement classification to the pay system.

Q2: Why isn’t DCPS capable of making correct deductions once the OPM guidance and input from my HR office is received by DFAS?

Like all federal payroll systems, DCPS uses multiple supporting programs and databases to calculate and process pay for 1.2 million federal employees. To ensure requirements of the law and federal policy are met, changes must be made throughout the system and tested for accuracy and reliability.

This effort will be completed on July 27th, and your payday in mid-to-late August should reflect the correct deductions if you’re servicing HR office have provided your new retirement classification to the pay system.

Q3: Is there anything I need to do to make sure correct FERS-FRAE deductions are made?

Not at this time. The updates to pay and HR systems and processes are being completed by DFAS and your agency’s HR office. Once complete, the correct deductions will be withheld from your pay going forward. Ensuring that you are receiving the correct amount of pay with the proper amount of deductions is a shared responsibility between you, your servicing HR office, and DFAS. Once the system updates are completed, we strongly encourage you to review your LES to make sure the retirement contribution deduction has increased and is correct. If not, please contact your servicing HR office for corrections.

Q4: Why did retirement contributions for federal employees hired on or after Jan. 1, 2014, increase?

The Bipartisan Budget Act of 2013 (Section 401) created a new employee designation to the Federal Employee Retirement System (FERS) known as FERS-Further Revised Annuity Employee (FRAE). This designation applies to all newly hired federal employees and rehired employees (with less than five years of creditable FERS service) hired after Dec 31, 2013.

If you need any additional information regarding your retirement plan, your requests should be directed to your servicing HR office.

Q5: Will the increase in my retirement contributions increase the annuity amount I will receive once I retire?

No.The change in employee retirement contribution amount does not affect the amount of your retirement benefit.

You are encouraged to seek information on your retirement plan and benefits from your servicing HR office.

Q6: Why were the percentages paid by employees hired before Jan. 1, 2014, lower than what will be deducted from my pay?

Employee contributions for FERS are governed by law. At the same time that the Bipartisan Budget Act of 2013 increased the amount of employee contributions for new employees covered by FERS and rehired employees (with less than five years of creditable FERS service), it did not make any changes to the employee contribution rates of employees already covered by FERS on December 31, 2013, including individuals with five or more years of FERS covered service. 

Q7: Is there a process for protesting the debts caused by the delays in upgrading the pay system?

Available options for disputing or repaying the debt will be stated in the debt notification letter.

We recognize that this debt is created through no fault of your own; however, the debt is the result of federal legal requirements that is subject to collection by DFAS.

Q8: When will I receive the debt notification letter from DFAS? How will it be sent to me?

Your debt, including the amount of that debt, will be created during the first pay period following the DCPS update and your HR office’s submission of required documentation. The notification letter will be processed one pay period after appropriate actions are submitted by the servicing HR office.
Please visit our FAQ web page often for any updated information.

Q9: The DFAS webpage on the FERS-FRAE issue stated that I can request to repay the debt through $25 deductions per payday. How do I start that?

Instructions to select this repayment method, along with the other options available, will be included in your debt notification letter.

Q10: How can I estimate the amount of debt I owe?

Use your most recent Leave and Earnings Statement (LES) to find your gross regular pay, standby pay, shift differential (shift diff) pay, pharmacy exec (pharm exec) pay, market pay and nurse exec pay and any of these payments made retroactively.

For example, an employee earned $2500 in regular pay and $85 retroactive regular pay.

$2500 + $85 = $2585 gross pay for retirement purposes

As a FERS-FRAE employee, the debt generated by insufficient retirement contributions during this pay period should be 1.3% of your gross basic pay.

$2585 x .013 (or 1.3%) = $33.61

In this example, the employee’s required FERS-FRAE contribution is $33.61 more than what was actually withheld.  Of course, this $33.61 FERS-FRAE underpayment is for one pay period only.  If the employee had five pay periods before the July 27 DCPS update and gross pay remained the same, the estimated debt would be:

$33.61 x 5 = $168.05

Q11: What do I do if I think I have been placed in a FERS FRAE retirement plan incorrectly due to prior Federal Civilian employment or because my previous military time was not considered?

If you believe you should be in a different retirement plan, for any reason, contact your servicing HR office. The action to place you in the FERS-FRAE retirement plan was implemented by HR and would need correction through that office to cancel the debt and have proper deductions in the future.

Q12: Will this debt damage my credit rating or have an impact on my federal employment?

Upon receipt of a debt notification letter, an employee should take appropriate action to repay or to resolve the debt.  If an employee fails to take any action, it is likely that some type of action will be taken, such as collection of the debt by involuntary deductions from the employee’s pay (at the maximum rate of 15% of the employee’s disposable pay).  Like any debt, non-repayment could result in negative information being forwarded to the credit reporting agencies.    

The best way to avoid any negative effects is to pay attention to the debt notification letter, to understand all of your rights and responsibilities when it arrives and to take appropriate action.