Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Voluntary Benefits

Do you want a safe place for your savings that will provide a 4.125 percent rate of return this year with tax-deferred growth? Are you looking for a way to invest more than the annual limit on Individual Retirement Arrangement contributions? Would you want to buy yourself an increase to your CSRS retirement benefit without working longer?

The federal Voluntary Contributions program provides all of the above, if you qualify. To do so, you must:

  • Be covered by the CSRS or CSRS Offset retirement systems.
  • Have no outstanding civilian service credit deposits (see the Feb. 10 and Feb. 17 columns).
  • Be employed or have an application for retirement that is being finalized by the Office of Personnel Management.
  • Have not received a refund of voluntary contributions during your current federal appointment.
What Is It?

A Voluntary Contributions account allows an employee to invest after-tax dollars in the Civil Service Trust Fund above the required retirement contributions. Such investments earn tax-deferred interest at a variable rate determined by the Treasury Department each year.

According to OPM, about 13,000 employees have Voluntary Contributions accounts, totaling $20.9 million. Ninety-five percent of withdrawals are lump sum payments.

Enrollees must make contributions in multiples of $25 via check or direct deposit. The amount cannot exceed 10 percent of total base pay received during all of the employee's federal service. In other words, an employee who has earned a total of $750,000 during his or her federal career could contribute as much as $75,000.

Money from this plan can only be withdrawn once and it must be the full amount. Once contributions are withdrawn, no further deposits can be made unless the employee separates from federal service.

Here's a look at how the Voluntary Contributions program stacks up against other options for retirement investments:

Voluntary Contributions Thrift Savings Plan Individual Retirement Arrangements
Contributions made by check or direct deposit Pre-tax contributions, tax-deferred interest After-tax contributions, tax-deferred interest (if qualified for Roth IRA; tax-free interest)
Interest stops accruing on day of retirement Contributions made by payroll withholding
Contributions made by check or direct deposit
A lump sum deposit of up to 10 percent of lifetime
salary may be made
Interest continues to accrue after retirement, until
Interest accrues until withdrawal
CSRS employees only Annual limit on tax-deferred
contributions (In 2006,
$15,000 plus $5,000 catch-up
Those 50 and older may contribute $5,000 in 2006 and 2007, up to $6,000 in 2008. Under age 50, limit is $4,000 until 2008, then $5,000.
One investment choice: CSRS trust fund. CSRS, FERS, Uniformed Services Anyone with earned income
One investment choice: CSRS trust fund.
Five investment choices plus lifecycle funds Unlimited investment choices
Withdrawal options: Transfer interest or interest plus
contributions to IRA. Transfer interest only to TSP. Purchase additional CSRS
annuity with voluntary contributions. Cash out.
Annuity, cash refund, transfers to IRA or eligible fund, series of monthly payments. Mix and match options. Elect a partial withdrawal. Unlimited choices
Voluntary Contribution Annuities

An employee may elect to receive a lifetime annuity purchased with Voluntary Contributions funds in addition to his or her regular CSRS retirement annuity. Interest stops accruing on a Voluntary Contributions account on the last day of employment. If the money is not withdrawn or transferred to another retirement account, OPM assumes it was invested to increase the CSRS retirement benefit.

Every $100 invested in voluntary contributions brings a $7 increase in the annual CSRS retirement benefit. For every year the employee is over age 55 at retirement, the extra annuity benefit increases by 20 cents. For example, if an employee retires at age 60, voluntary contributions will increase his or her CSRS annuity by $8 per $100 invested each year.

You may elect to receive a reduced amount and provide a survivor benefit for any person you name. The reduction is 10 percent of your voluntary contributions benefit plus an additional 5 percent for each full five years the person you designate is younger than you (with a maximum reduction of 40 percent). The survivor amount is 50 percent of your reduced voluntary contribution benefit.

Let's look at one example:

Voluntary contributions: $30,000
Age at retirement: 65
Increase to CSRS for every $100 = $9 per year
Annuity: $300 x $9 = $2,700 / year or $225 / month The extra voluntary contributions benefit will be included in your regular CSRS retirement benefit payment. The benefit is not increased by annual cost of living adjustments. The reduction to provide a survivor's benefit is permanent, and it will not end even if the person named dies before you. The benefit cannot be transferred to anyone other than the person designated at retirement.

Getting Started Here's how to establish a Voluntary Contributions account prior to your retirement:

  • Submit form SF 2804 (Application to Make Voluntary Contributions) to your agency retirement benefits office. Do not send money.
  • OPM will send a notification that the agency is ready to accept your Voluntary Contribution deposit.
  • Deposit a check in the amount of your desired contribution (up to 10 percent of total career basic pay). Additional contributions may be made in increments of $25.
  • An employee may withdraw all voluntary contributions with interest at any time before receiving additional annuity payments based on those contributions.
  • At retirement, submit form RI 38-125, Application for Withdrawal of Voluntary Contributions, with your CSRS retirement application. Indicate on the form whether you want to transfer the entire account (or just the interest) to an IRA.
  • If you do nothing, OPM will process your voluntary contributions as the additional annuity as explained above.
Here's how to set up a Voluntary Contributions account at retirement:
  • Submit form SF 2804 (Application to Make Voluntary Contributions) at the same time as your CSRS Application for Immediate Retirement (SF 2801). Do not send money.
  • Prior to OPM finalizing your retirement claim, a notification will be sent to you that the agency is ready to accept your Voluntary Contribution deposit.
  • Deposit a check in the amount of desired contribution (up to 10 percent of total career basic pay). If you want to transfer the money to an IRA, you should also submit the application for withdrawal of voluntary contributions (RI 38-125) at the same time your check is mailed.
Resources To Do:
  • At Home: Evaluate the benefit of a voluntary contributions account over other investment options.
  • Human Resources: Submit SF 2804 to establish a Voluntary Contributions account.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.


Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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