Deemed Elections of Coverage Under the Federal Employees Retirement System

SUMMARY: The Office of Personnel Management (OPM) is adopting, as

final, its interim regulations to allow employees to remain covered by

the Federal Employees Retirement System (FERS), if their employing

agency erroneously placed them under FERS during the period when they

would have had the opportunity to elect FERS coverage. These

regulations deem employees to have elected FERS coverage unless they

notify the employing agency that they do not want to be deemed to have

elected FERS. These regulations are necessary to prevent the agency

error from depriving such employees of their statutory right to have

elected FERS coverage.

EFFECTIVE DATE: November 4, 1994.

FOR FURTHER INFORMATION CONTACT:

Harold L. Siegleman, (202) 606-0299.

SUPPLEMENTARY INFORMATION: On September 13, 1993, we published (at 58

FR 47821) interim regulations to allow employees to remain covered by

the Federal Employees Retirement System (FERS), if their employing

agency erroneously placed them under FERS during the period when they

would have had the opportunity to elect FERS coverage. The interim

regulations establish a procedure under which employees (who were

denied the opportunity to elect FERS coverage because their employing

agency erroneously placed them under FERS) would be deemed to have

elected FERS coverage unless they notify the employing agency that they

do not want to be deemed to have elected FERS. We designed the

procedure to minimize the actions that both an agency and an employee

would be required to perform to correct records. We received four

comments on the interim regulations.

All of the comments were supportive of the concept of allowing this

group of employees the opportunity to have FERS coverage. The

commenters expressed their concerns with specific aspects of our

interim method for choosing FERS coverage.

One commenter expressed concern that our proposal was too narrow

because it failed to cover employees who were correctly placed under

full CSRS, CSRS offset, or social security only, but were incorrectly

or never informed of their opportunity to elect FERS. We believe that

the decision of the United States Court of Appeals for the Federal

Circuit in Killip v. Office of Personnel Management, 991 F.2d 1564

(Fed. Cir. 1993), leaves us without authority to permit coverage

elections except for the situation of employees who were incorrectly

denied any right of election whatsoever during the election period

provided by statute. Specifically, the court determined that OPM did

not have authority to allow retroactive belated FERS elections made

after June 30, 1988, on the basis that the employing agency provided

incomplete information to the employee, or that the employee was

otherwise prevented form making an informed election by circumstances

beyond the employee's control.

Although the court decision technically applies only to elections

that should have been made during the 1987 open season, the court's

analysis is equally applicable to cases of employees rehired after the

open season. We believe that the court decision prevents us from

allowing retroactive transfers by any employees who did have an

opportunity to make an election, regardless of circumstances that may

have prevented the employee from making an informed election.

Accordingly, we could not adopt this suggestion.

Three commenters requested that we provide more information about

the procedures that agencies will be expected to follow when

implementing the regulations. We will provide agencies with

instructions on documenting elections and correction of records under

these regulations in the usual manner, through a payroll office letter.

Three commenters objected to the interim procedure that deems the

employee to have elected FERS coverage unless the employee informs the

agency of the desire not to be covered by FERS. Each objected for

different reasons.

The interim procedures were based on the premise that most

employees who have been automatically covered by FERS in error will

want to continue to be covered under FERS. One commenter questioned

this premise. However, our experience in handling belated FERS election

requests causes us to believe this premise is correct. We continue to

believe that this procedure will cause the maximum number of employees

to have the retirement coverage they want without having to elect out

of FERS.

One commenter suggested that we require an affirmative FERS

election to obviate the need for agencies to develop procedures for

handling requests to waive the time limit. The commenter also suggested

that the ``open-ended nature of the passive election almost guarantees

that there will be waiver requests and that agencies will feel

obligated to grant them,'' resulting in longer periods for which the

records will have to be corrected. The commenter states, ``The agency

will also sustain additional losses in contributions to the Thrift

Savings Plan. (Agencies forfeit automatic and matching contributions

that are more than one year old.)'' While these problems will occur, we

believe that requiring an affirmative FERS election, which, under

Killip, would also require an inflexible time limit, would not be

sufficiently responsive to the needs of the employee who has already

been placed in a difficult situation because of an agency error.

Agencies can avoid problems concerning waiver of the time limit by

providing adequate counseling and follow-up procedures to assure that

employees make informed choices during the 60-day period.

Although the regulatory procedures deem employees to have elected

FERS if the employee takes no action, we strongly encourage agencies to

follow-up all cases involving these regulations and to obtain and

document express (and written) elections whenever possible. We expect

agencies to approve waivers of the time limit in which to decline the

deemed election unless they can document that the employee did not act

with reasonable diligence or that the employee made an informed choice

of FERS. Because of the adverse consequence for agencies that the

commenter noted, agencies should develop procedures to fully document

their counseling efforts and employee elections.

One commenter questioned the provisions concerning the rights of

survivors. The regulations provide a special rule if an employee dies

during the election period. Because the employee's election period

ended prematurely due to death, the benefits payable to the survivor

(either FERS or the benefits available in the absence of a deemed

election) depend on whether the deemed election is forced upon the

survivor. Because of the unique situation created by a deemed election,

the regulations allow a survivor to decline the deemed election. In

this way, we are assuring that the deemed election will not deprive a

survivor of benefits established by statute, while providing what the

employee and survivor would be anticipating (benefits under FERS)

unless the survivor chooses otherwise.

One commenter raised questions concerning eligibility of an

employee to be deemed to have elected FERS when a former spouse is

entitled to a portion of the employee annuity or a survivor annuity.

Deemed elections are permitted only for employees who were eligible to

elect FERS during the election period. Agencies will have to confirm

eligibility by obtaining a certification from the employee concerning

former spouses, similar to the certification required on the SF 3109,

Election of FERS Coverage, or by obtaining telephone approval from our

Court-Ordered Benefits Section.

Two commenters specifically raised questions about the effective

date of the deemed elections. The effective date is the later of the

employee's entry-on-duty date or the beginning of the first pay period

commencing after June 30, 1987. In devising the interim procedure we

wanted to minimize the correction of records. If as we expect most

employees affected by these regulations will want FERS coverage,

records correction will be minimal. The only correction action required

in cases of employees whose entry-on-duty date is on or after the

beginning of the first pay period in July 1987, will be an SF-50

showing that FERS coverage, as of the entry-on-duty date was by

election, rather than automatic. Of course, if the employee was

erroneously placed in FERS before the beginning of the first pay period

of July 1987 or if the employee elects not to be covered by FERS, more

substantial records corrections will be required. We will issue a

payroll office letter to provide more details on correction of records.

Regulatory Flexibility Act

I certify that this regulation will not have a significant economic

impact on a substantial number of small entities because the regulation

will only affect Federal employees and agencies and retirement payments

to retired Government employees and their survivors.

List of Subjects in 5 CFR Part 846

Administrative practice and procedure, Government employees,

Pensions, Retirement.

Accordingly, under authority of 5 U.S.C. 8461(g), OPM is adopting

its interim rules under 5 CFR part 846 published on September 13, 1993,

at 58 FR 47821, as final rules without change.

U.S. Office of Personnel Management.

Lorraine A. Green,

Deputy Director.

[FR Doc. 94-24454 Filed 10-4-94; 8:45 am]

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