What is the Voluntary Contribution Program?
The Voluntary Contribution Program was developed for employees who are part of the Civil Service Retirement System (CSRS). It allows those employees to contribute their own money into an account which can later be used to increase their annuity they receive when they choose to retire. Contributions are not tax-deductible, but the interest inside of the account grows on a tax-deferred basis.
Who is eligible for the Voluntary Contribution Program?
In order to contribute money into the Voluntary Contribution Program, you must be part of the CSRS retirement, or the CSRS Offset provisions; you cannot be in FERS. Other rules apply if you had received a refund of your voluntary contributions in the past, as well as if you owe a deposit or redeposit for civilian service that wasn’t covered by retirement or for which you received a refund. In those cases, you will not be able to contribute to the voluntary account unless you’ve had a break in service after receiving the refund, or until you’ve paid back the deposits or redeposits.
How do I make voluntary contributions?
When you are ready to start contributing, you must fill out SF 2804 – Application to Make Voluntary Contributions. Once approved by OPM, you will be assigned an account number and sent specific instructions for setting up contributions.
You are allowed to contribute deposits in $25 increments; however, you cannot contribute more than 10% of your Basic Pay. This 10% limit applies to every deposit that you make, so you cannot contribute more than 10% today for having not contributed in the past.
What happens to my voluntary contributions when I retire?
When you are ready to retire, you will have a couple of options with your voluntary contributions. You will either be able to turn it into an additional pension, along with your regular CSRS pension, or you will be able to transfer it to an IRA or other retirement account, such as a TSP.
If you choose to take the additional pension, you will receive an additional $7 per year for every $100 you have in your voluntary contributions account. Each year you retire over the age of 55, your pension amount increases by 20 cents. You are also allowed to elect a survivor benefit option for a spouse or someone else that you want the money to go to upon your passing. This person does not have to be a spouse, and can be different than the person you select as your survivor on the regular CSRS pension you receive.
If you instead choose to transfer your voluntary contributions to your own IRA or other retirement account, it is recommended that you submit form RI 38-124 – Voluntary Contributions Elections – to OPM at least 60 days prior to retiring. This transfer will be tax-free if completed within 60 days of receiving the money.
Sources:
https://www.opm.gov/retirement-services/publications-forms/pamphlets/ri83-10.pdf
