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A Summary Guide To Choosing Between Army NAF and FERS

Portability Decision Guide For Employees who Move from Army NAF to Civil Service

A summary to choosing between the Army NAF or FERS retirement plans when you are given a portability election under Public Law 101-508.

Published by: US Army NAF Employee Benefits Office-CFSC-HRB

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Table of Contents Topics

How to Use this Guide Non-Retirement Portability of Benefits Introduction Simplifying Your Decision Decision Summary Marginal Losses NAF Service Credit Under PL 107-107 Comparison Grid Between Army NAF Retirement/401(k) & FERS/TSP Making Your Own Decision Frequently Asked Questions Information for Your Human Resources Office References Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F Appendix G Appendix H Appendix I Appendix J DCPDS Coding Instructions, NAF to Civil Service with Portability Links to Sites with Portability Instructions Checklist & Forms, In-processing civil service Employee with NAF Retirement Army NAF 401(k) Form Continuation US Army NAF Retirement and 401(k) Remittance Instructions Sample LES from Civil Service with Army NAF Retirement & 401(k) The Portability Laws Checklist & Forms, Civil Service employee, Retiring in Army NAF. Election to Retain NAF Retirement Coverage (RI-38-134 Apr 2002) Comparison graph scenario between NAF Retirement/401k Plans and FERS/TSP and CSRS/TSP

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How to use this Guide

Retirement programs are, at best, extremely complex and affected by laws, regulations, and plan documents. While we have done our best to simplify and explain some of the major elements of the retirement plans from which you can choose, the information here is no substitute for the detailed information available from the retirement plan documents or the advice and assistance you can obtain from trained retirement professionals. NOTE: If you decide to remain in the Army NAF Retirement Plan, make sure your HRO has your completed Portability Election Form, a copy of which is in this guide, within 30 days after appointment. You must monitor your civil service Leave and Earnings Statement (LES) to make sure the deductions are occurring. There is a sample LES in this guide (at Appendix F) so you know what to look for. Continue to monitor your LES throughout your civil service career because retirement indicator codes can be easily changed due to administrative errors. If you notice any change in your LES with regards to your Army NAF Retirement or 401(k) deductions, please contact your HRO or the Army NAF Employee Benefits Office at 1-877-384-2340 as soon as possible. The Army NAF Retirement program posts its information at www.nafbenefits.com. You can obtain detailed plan information and guidance at that site. You can also contact the NAF retirement program staff at 1-877-3842340 from the United States. From overseas, you can call toll free by dialing your country AT&T Direct Access Code, then 877-384-2340. If you are a newly appointed Army civil service employee, you can contact your Civilian Personnel Advisory Center (CPAC) representative, who will coordinate with the Army Benefit Center for information regarding FERS/TSP. Most other agencies have POCs for benefits, and you should ask your servicing human resources office for contact information. While FERS is the most common modern federal retirement program, it is not the only one. There are still employees eligible for Civil Service Retirement System (CSRS), the special CSRS-Offset system, law enforcement retirement programs, air traffic control programs, and others. Your servicing human resources office should be able to tell you which program you are eligible to participate in and what its benefits are.

Non-Retirement Portability of Benefits

There are a number of benefits, other than retirement, which accrue to you if you move from NAF to civil service. While these benefits are not elected in the same sense as your retirement benefits, it is important that you know about them and understand their benefits and limitations.

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Although portability of retirement benefits allows a break in service of up to 1 year, portability of other benefits require that the break in service be 3 days or less. Service credit for annual leave accrual and SCD-RIF is only available if the move is within DoD. If you accept a civil service position with a non-Defense agency, you will not be allowed to transfer your accrued or accumulated annual or sick leave and you will not be allowed credit for NAF service toward annual leave accrual. By the same token, if you return to a NAF position from a nonDoD civil service position, you will not be given credit for your civil service time toward NAF annual leave, and your sick leave will not transfer from civil service.

NOTE: The rules for crediting the non-retirement benefits become more complex as the number of moves and the number of employers (NAF programs or various federal agencies) increases. If you are concerned about leave credit, RIF, etc., contact your HRO or the Portability Office at (407) 824-1026 or mail to:[email protected]

Complete information on non-retirement benefits is available in the DoD Portability Handbook at www.cpms.osd.mil/nafppo/documents/PortabilityHandbook.pdf. You may also find this link through the Portability section of www.NAFbenefits.com

Introduction

You were given this book because you have accepted (or are considering) a permanent position in the civil service. Under Public Law 101-508, regular employees of a nonappropriated fund activity who accept a position in the civil service with a break in service of one year or less are eligible to continue participation in the NAF retirement plan in lieu of participating in the Federal Employee Retirement System (FERS) or other civil service retirement systems, as applicable. (Note: For the employee to "continue" participation requires that, at the time of separation from NAF, (s)he was participating in the NAF Retirement plan (not just 401k). Vesting is NOT required for moves that occur after 28 Dec 2001). Since the extreme majority of employees moving from NAF to civil service are eligible for participation in FERS, this guide does not address the choice between NAF and the other federal plans. Advice and assistance on choosing between NAF and other retirement programs can be obtained from the NAF retirement program staff at 1-877-384-2340 in cooperation with your servicing human resources office. You should realize after reading this guide that the underlying law has been modified by PL 104-106 and PL 107-107, and there are a number of

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implementing instructions from OPM, DoD, and the Army. We will try to give you the sources of information to allow you an opportunity to independently review them and verify how they affect you. If you still have any questions, feel free to call the toll-free number above. The information in this guide is based on the law, regulations and program documents in effect as of the edition date.

Simplifying Your Decision

Portability was created because it is generally better to stay in one retirement system rather than moving between two or more retirement programs. Before portability, employees who moved between NAF and civil service

had to "start over" each time they moved; it was not uncommon for employees to "lose" credit for large blocks of time because of moves between the systems (and frequently without changing locations or even jobs). Whether you choose FERS or Army NAF, you can't change your mind later, so you want to choose the plan that fits best with your future plans. Both Army NAF and FERS are good retirement plans. Each plan has advantages and disadvantages. Neither plan is best for all employees. If you are like many people, your initial reaction may be that this will be a complicated decision. For some people who have complex situations, it may be. However, for most people, it becomes a fairly simple decision when they think about the choices in terms of their own situations. REMEMBER: Portability was created because it is generally better to stay in one retirement system rather than moving between two or more retirement programs, so portability will be the best choice for most employees. Retirement plans often reward longer service with a higher percentage rate in the calcuation. The same election considerations apply, whether you are working full time or part-time. If you are married, we encourage you to discuss your choice with your spouse. Employees eligible for an early or normal benefit from your present retirement program may receive maximum value by retiring and beginning a new retirement program, or by remaining in their current retirement program. Retirement-eligible employees should calculate their expected benefits under both options before making a decision on portability (web sites are listed below). Retirement from one program does not generally affect the applicability of non-retirement benefits such as leave computation credit or leave transfer. However, if you retire from Army NAF, your sick leave over 80 hours converts to creditable service in the Army NAF Retirement Plan. If your sick leave was used to add retirement service in the Army NAF Retirement Plan, it cannot also be transferred to your civil service position.

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This summary refers you to important considerations and shows you where they are different in NAF and FERS. In most cases, you shouldn't have to do any calculations to decide which retirement plan is better for you. However, retirement calculation worksheets are available from www.NAFBenefits.com for Army NAF retirement, and from http://www.seniors.gov/fedcalc.html for FERS retirement.

DECISION SUMMARY

The full retirement plan description (available at www.nafbenefits.com) can provide you with the information you need to compare NAF/401(k) with FERS/TSP. Applying this information requires that you think through your plans for a career with the federal government. We recommend that you review these options carefully before making a choice about portability. Portability decisions are one-time-only opportunities, so you will not be able to later change your mind about continuing with the Army NAF plan. In addition to the plan-to-plan comparison, you should also consider some of the losses that result from changing retirement systems.

Your Choice NOT to Exercise Your Portability Rights and Marginal Losses

Without regard to which system fits your career plans better, there are some marginal losses that will occur if you choose not to exercise your rights under the portability statute. 401(k): If you have less than three (3) years total Army NAF service at the time you resign to accept a civil service position, you will forfeit the employer's contributions to your 401(k). You can determine the amount of this loss by logging into your account at www.fidelity.com. NAF Retirement (unvested): If you have less than five (5) years participation in the Army NAF retirement plan at the time you resign to accept a civil service position, you have no entitlement to a pension from the NAF plan. Because NAF retirement benefits are based on the number of years of service (as well as Hi-3 salary and age), you will lose credit for any service you have accrued under NAF retirement. If you participate more than 15 years total, this amounts to 1.6% of your final Hi-3 for the years of participation over 15 years, for the rest of your life. As an example, 1 additional year of service for an employee retiring from a $60,000 high-3 salary would mean $960 per year for life. But, if you do choose NOT to continue participation in the NAF Retirement Plan, and you have less than 5 years participation, you may request a refund of your retirement

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contributions and interest by completing DA Form 3715-R. Your personnel office needs to send this form along with your declination for portability to the Army NAF Employee Benefits Office. NAF Retirement (vested): If you have 5 or more years participation in the Army NAF retirement plan at the time you resign to accept a civil service position, you are entitled to an immediate or deferred annuity from the NAF plan (as applicable). The amount of that annuity will depend on your age at the time you elect to receive it, as well as your Hi-3 salary and length of service. However, your pension will only be based on your service while participating in the NAF plan, so additional civil service time will not be creditable if you do not continue in the NAF plan. Also, your Hi-3 will be based only on Army NAF service, so your later wages (which are presumably increasing over time) will not be considered in computing your benefit. NAF Retiree Medical Insurance (vested): If you are vested in the NAF retirement program and elect not to use your rights under portability, your retirement benefit may be deferred until you reach normal or early retirement eligibility. NAF retiree medical benefits are not available under a deferred annuity. Generally, you would need to reach eligibility under FERS/FEHBP to obtain retiree medical coverage. Your participation time in the Army NAF Medical and Life Insurance plans, will count towards the qualification time to meet FEHB/FEGLI retiree benefits.

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NAF Service Credit Under PL 107-107

NAF employees who transfer to FERS may be allowed credit for their NAF service under some fairly limited circumstances. It is not safe to summarize this credit, but we will note that it only applies to being eligible for certain benefits, and specifically will not increase the amount of benefit you receive under FERS. At the time of the preparation of this guide, final rules for this credit had been published in Benefits Administration Letter 03-102 at www.opm.gov.

Compare Grid

Army NAF Defined Benefit Retirement Plan and FERS HI-3 SALARY REPLACEMENT % RETIREMENT MATCHES 401K AND THRIFT SAVINGS ER

Ret. Yrs of Army Partic. NAF

FERS

Army NAF 401 (k) EE Empl Match

Thrift Savings

5 10 15 20 25 30 35 40 45

6% 12% 18% 26% 34% 42% 50% 58% 66%

Summary Guide

5% 10% 15% 20%

27.50 %

1%=1% 2%=2% 3%=2.5% 4%-100%=3%

1%=2% 2%=3% 3%=4%

4%=4.5% 5%-14%=5%

33%

38.50%

2004 401k IRS Max 2005 401k IRS Max

$13,000* $14,000* $16.000* $18,000*

44% 49.5%

2004 Over 50 Max 2005 Over 50 Max

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* TSP participants cannot reach the IRS max deferral in 2004 if annual salary is less than $93,000

Making Your Own Decision

Remember, the decision whether to stay in NAF or to participate in FERS is yours to make. This guide contains much of the information you need to consider, but it won't tell you what to do. You must decide based on what you know about yourself, your past, and your expectations for the future. You shouldn't decide based on what someone else did. There may be one key factor in that person's situation that would make his or her choice inappropriate for you. We have tried to keep this guide as simple as possible, but if you have questions, your servicing human resources staff can help answer your questions. If there is a part of the guide that is important to your situation and that you don't understand, you should ask for help. However, while your agency should help answer your questions about the guide, they will not tell you what to do. Finally, remember that you are choosing between two different retirement systems. This guide stresses the differences. If you try to understand the differences between the systems in terms of what's important to you, your choice will be easier. If you try to master exactly how each system works, your decision will take more time and effort on your part. Of course, this guide in no way replaces the many pages of regulations that govern benefits under the various federal retirement plans, but it should contain much of the information you need to make your decision.

Frequently Asked Questions

What Happens If I Do Not Make an Election?

If you do not make an election, your opportunity for continuing participation in the Army NAF retirement and 401(k) programs will terminate in 30 days. If that happens, you will remain covered by FERS for all future civil service that is not excluded from FERS by law or regulation (generally temporary appointments that last for less than 1 year). You will not have another opportunity to choose the NAF Retirement Program. If you think you'll need more time to decide let your human resources office know. Your agency can extend the time limit for making an election under certain circumstances.

What Things Do I Need to Make My Choice?

For many employees, this guide will give you enough information to decide which retirement plan is best for you. You will need only a pen to fill out the retirement plan

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election form, Standard Form RI 38-134 (April 2002) and the associated enrollment forms. A sample of this form is at Appendix I. If you need more information, you may want to review the complete NAF retirement plan available at www.NAFBenefits.com . This guide also contains a list of references and web sites addressing portability.

How Do I Make My Election?

Whether you stay in NAF or switch to a federal plan, you MUST complete the election form (Form RI 38-134) and return it to your human resources office, with a copy to the Army NAF Employee Benefit Office. Your election is effective on the date that you were first appointed to civil service. If you have taken time after your appointment to make this choice (up to 30 days are allowed), your election is retroactive to the date of your appointment, which means it affects service you already performed.

How Do I Change My Election?

Your election cannot be cancelled or changed once it is processed by your human resources office.

Does My Spouse Need to Sign My Election?

Your spouse does not need to consent to a decision to change retirement plans. Regardless of which retirement plan you choose, we recommend that you file a new designation of beneficiary form and emergency contact information. Form SF 3102, Designation of Beneficiary, Federal Employees' Retirement System, and DA Form 3473, Application for USANAF Retirement Plan and/or Group Insurance Plans, are the forms to be used in designating beneficiaries. All civil service forms are available from OPM's web site at http://www.opm.gov/fers_election, while NAF forms are available from a NAF HRO or by calling 877-384-2340.

If I Make up My Mind to Exercise Portability and Remain in Army NAF, is there anything I need to Watch for on my Leave and Earnings Statement?

You need to watch your civil service leave and earnings statement every two weeks. There is a sample at Appendix G. Your Retirement Code should show "5A" and your 401(k) election should also be listed. If you see "FERS" or "TSP", there is an error and you should contact your HRO immediately. You should also contact the Portability Project Office at 407-824-3190 or email: [email protected] so that corrective action can be taken as soon as possible.

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If I Decide to Leave Civil Service Employment and Move to Another Service NAFI within 3 days, What Retirement System am I Eligible to Participate In?

If you elected portability when you moved from Army NAF to civil service, then the Army NAF Retirement Program is your retirement program for the rest of your federal or NAF career. If you did not elect portability when you moved from Army NAF to civil service, then you will have another portability option to remain in FERS or not, when you move to the new NAF position.

How are my Retiree Medical and Life Coverages Affected at Retirement from Civil Service, if I elected Portability and remained in the Army NAF Retirement Plan?

If you choose to participate in the Federal Employee's Health Benefit Plan (FEHB) and/or the Federal Employee's Group Life Insurance plan (FEGLI), and you retire through portability with an Army NAF Retirement, you are eligible to participate in the retiree FEHB and/or FEGLI, if you participated in both plans for a combined total of 5 years immediately preceding retirement.

Information for Your Human Resources Office

Official determinations of portability eligibility are the responsibility of the appointing office. Official guidance is obtained from the appropriate chain of command, normally the regional CHRA office and then the headquarters. While the portability project office will assist in any way possible in providing information and discussing technical issues, it is not an authoritative source of policy determinations or instructions for processing. Portability is a complex process, and it can be technically challenging to your servicing human resources office. Many HROs have never processed a portability action, and some do so only once every several years. If so, there will be a number of technical questions that need to be answered in order to avoid processing errors. The NAF Employee Benefits office has established a Portability Project Office that can be contacted through the NAF Benefits Toll Free number (877) 384-2340. The hotline will refer you to the portability office or have the portability staff return your call. At the time of writing, the direct line to the portability office is (407) 824-3190 or mailto:[email protected] The appendices to this guide include detailed technical information to be used by the servicing HRO and payroll offices. We have attempted to make these appendices as useful as possible, and will try to keep them updated. To be sure you have the best and most current information and support available, we have included contact information for

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the proponent of the procedures or policies, where available. Again, the full retirement plan can be obtained at http://www.nafbenefits.com.

References

Appendix A Portability Appendix B Appendix C DCPDS Coding Instructions, NAF to Civil Service with Links to Sites with Portability Instructions Checklist & Forms, In-processing civil service Employee with NAF Retirement Appendix D Army NAF 401(k) Form Continuation Appendix E US Army NAF Retirement and 401(k) Remittance Instructions FY 2005 Appendix F Sample Leave and Earning Statement from Civil Service with Army NAF Retirement & 401(k) Appendix G The Portability Laws Appendix H Checklist & Forms, Civil Service employee, Retiring in Army NAF. Appendix I Election to Retain NAF Retirement Coverage (RI-38-134 Apr 2002) Appendix J Comparison graph scenario between NAF Retirement/401k Plans and FERS/TSP and CSRS/TSP

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Appendix A

DCPDS Coding Instructions NAF to Civil Service w/Portability

Discussion: This is a common problem that occurs when NAF employees accept a civil service position. All retirement data flows electronically from DCPDS to DCPS at the payroll centers. If the retirement code is not properly entered, the employee may be erroneously enrolled in the wrong plan (usually FERS). If the retirement plan is entered as "5-Other" but the NAF Retirement Indicator is not corrected from its default value of "0", then no retirement deductions are taken from the employee and no retirement contributions are made by the activity. Question: Which data elements do we look at, and what should the value be in each, to identify those APF employees who have continued participation in the Army NAF Retirement Plan. Answer: The retirement plan should be "5" - Other. This code is used for more than just the NAF Portees so an additional data element is required which is NAF Retirement Indicator. The NAF Retirement Indicator autopopulates with a Zero (0). If the employee is a NAF Portee it should be changed to indicate what DoD agency the employee was employed by as a NAF employee. For Army it would be "A", Air Force "D" etc. To navigate to the data elements go to People/Enter & Maintain/Assignment/Entries/Entry Values and select Retirement Plan; People/Enter & Maintain/Extra Information/NAF Retirement Indicator. FYI: The NAF Retirement Indicators are: - A=Army ­B=Navy (BuPers) ­C= Navy Exchange (NEXCOM) ­D=Air Force NAF ­E=Marine Corps NAF ­F=Army Air Force Exchange System (AAFES) ­G=Navy NAF

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Army NAF 401(k)

CPAC to DCPS Initiating Procedures/Correction Procedures/Deferral% Changes

The CPAC completes and authenticates DA Form 7426 during inprocessing of the employee. If a current election is in place at the time of the portability move, a copy can be used to enroll the employee. The DA Form 7426 is forwarded to the CPOC for:

1) faxing to the payroll imaging center and 2) filing in the OPF Corrections: If the employee's enrollment does not flow to payroll and begin on schedule, a REMEDY ticket should be prepared and a copy of the original (appointment) and DA Form 7426 attached. The REMEDY ticket should specifically note the retroactive nature of the action and, if appropriate, request a repayment schedule to make up any missed deductions. The original of any REMEDY tickets and/or DA Form 7426 prepared and submitted by the CSR should be forwarded through the CPAC to the servicing CPOC. Deferral % Changes For changes in contribution levels after enrollment in 401(k), a REMEDY ticket should be submitted with a copy of the new DA Form 7426 attached. The original DA Form 7426 should be submitted to the servicing CPOC to be filed in the employee's OPF and a copy to the Employee Benefits Branch, PO Box 107, Arlington, VA 22210-0107. Beneficiary Designation and Changes CPAC/CPOC/CSR staff members should be reminded that the designation of beneficiary for 401(k) forms is included on the DA Form 7426, so it is critical that the most recent form be filed in the OPF and a copy submitted to Army NAF Employee Benefits, PO Box 107, Arlington, VA 22210-0107. Questions/Suggestions can be addressed to: [email protected]; [email protected] or [email protected]

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Appendix B Links to Sites With Portability Info

The Army NAF Employee Benefits (877-384-2340) office operates a web site at www.nafbenefits.com. The portability home page contains a number of dynamic links to DoD and the other services that may be of value to you. You can access the portability page through www.nafbenefits.com The Army Deputy Chief of Staff for Personnel (G-1), Civilian Personnel Policy (CPP) maintains a web site at www.cpol.army.mil. The NAF personnel policy division has provided information regarding the comparison of benefits provided by APF and NAF employment; that comparison is at http://www.cpol.army.mil/library/naf/apfnafben.html. The Army Civilian Human Resources Agency (CHRA) operates a web site that provides information that is useful to the CPOCs Army-wide. For example, CPOCMA Guidance Instruction #02-01, which provides guidance on processing of APF employees accepting a NAF position, is contained at www.chra.army.mil under "Guidance Memorandums". Civilian Personnel Management Service (CPMS), Office of the Secretary of Defense (OSD), maintains a website which has a portability guide at : http://www.cpms.osd.mil/nafppo/documents/PortabilityHandbook.pdf. The guide contains valuable background information as well as references and processing guides for servicing CPUs. The Office of Personnel Management (OPM) oversees the administration of the Federal Employee Retirement System (FERS) and other civil service retirement programs. Information regarding all civil service benefits programs is available at http://www.opm.gov/retire/html/library/index.asp, where you can select the program you are interested in. Information from OPM on portability is available at: www.opm.gov/asd/htm/2002/02-102.htm. There are forms attached to the Benefits Administration Letter (BAL) and instructions on completing them. The BAL also refers to a prior letter, BAL 96-107, which explains portability eligibility in detail (noting that PL 107-107 eliminated the required for vesting). That BAL, and its counterpart for employees appointed prior to August 20, 1996, is available at http://www.opm.gov/asd/htm/bal96.htm. OPM also issued Payroll Office Letters until 2000, when they became incorporated into the BAL system. Payroll Office Letter 96-06, "Elections of Retirement Coverage by Employees of Nonappropriated Fund Instrumentalities", is available at http://www.opm.gov/asd/pdf/P-96-06.pdf.

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Appendix C Checklists and Forms Required for In-processing of Civil Service Employees with NAF Retirement

SF-50: Notification of Personnel Action The NOA Code (Block 5) should be 124, "Appt-Status Quo"

Retirement Plan (Block 30) should be 5, "Other". Note that this SF 50 shows "7--Army NAF"; this is not correct. See Appendix A: MDCPDS Coding Instructions NAF to APF w/Portability for full discussion.

5A

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RI 38-134, Election to Retain Non-Appropriated Fund (NAF) Retirement Coverage As a Result of a Move From A Nonappropriated Fund Position to a Civil Service Position On or After December 28, 2001. This form is part of BAL 02-102 from OPM, and is available from www.opm.gov/asd/htm/2002/02102.htm. See Sample on Next page for the following: Enter Employee Name, DOB, SSAN at top as requested. The Name of NAF Retirement Plan is "Department of the Army". The "Date of Move" is the date of appointment to civil service. The Human Resources Specialist completing the top of the form should sign, enter his/her title, and date as indicated. Part 2 of the RI 38-134 is the acknowledgement by the employee that they have received and understand the portability election option. This should be dated and signed by the employee WHILE INPROCESSING. While no official guidance has been issued, we recommend that the CPU retain the original of the RI 38-134 in the OPF. If no election is made within 30 days, then the employee is considered to have failed to elect portability and will be enrolled (or remain) in the APF retirement program applicable to their appointment.

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Part 3 of the RI 38-134 is the decision by the employee. Option 1 is to retain NAF retirement, Option 2 is to elect the civil service retirement plan. The original RI 38-138 remains in the OPF, and a copy is mailed to NAF employee benefits with the in-processing package. DA Form 3473, Application for USANAF Retirement Plan And/Or Group Insurance Plans . DA Fm 3473 is not required to in-process civil service employees participating in NAF retirement; the RI 34-134 and SF-50 are sufficient. SUMMARY The SF-50 (generated from DCPDS), and RI 34-134 are critical to re-establishing retirement participation for new civil service employees who are continuing their NAF retirement plan. Because the retirement enrollment data flows electronically from DCPDS to payroll (DCPS), correct coding of the appointment and subsequent actions is critical to continuing enrollment in retirement. Unlike most personnel/payroll actions, the 401k enrollment form (DA Fm 7426) must be physically transmitted to the CPOC and payroll. Enrollment, changes in participation, and termination are processed from the CPAC to CPOC to Payroll as a physical document (DA Fm 7426). Because almost all transactions between the Human Resources Office and payroll are electronic, this form is frequently lost in processing or is missed in the processing cycle. These errors can result in loss of tax benefits to the participating employee, and loss of employer contributions if the deductions are not made up. With 401k errors, the employee must choose when the enrollment should be effective, most commonly with the date of appointment or the date enrollment is accomplished. If the employee chooses to enroll retroactively due to administrative error, it is common for a lower deduction percentage to be used to allow for collection of the "arrears" while current deductions are being taken.

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EXAMPLE Employee X normally elects deductions of 10% to her 401k, receiving the full 3% employer matching contribution. Her 401k enrollment was not completed and she missed 8 pay cycles of deductions/contributions.

She could choose to make up the missed deductions at 10%. However, this would result in approximately 20% of her pay being deducted for 8 pay cycles (10% current deductions, 10% arrears), which she might not be able to afford. She might choose to enroll at 5% deductions during the collection period, resulting in a "normal" 10% deduction (5% current, 5% arrears) but receiving the full 3% employer match. She could also choose to enroll as of the current period with 10% deductions, resulting in no "arrears". However, she would be foregoing the 3% employer match for her missed participation period.

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No Open Season for Army NAF 401(k)

Some civil service offices which service employees enrolled in the NAF 401(k) ask about the "open season" for changes to the employee's contributions or enrollment. Unlike the Thrift Savings Plan for civil service employees, the Army NAF 401(k) allows employees to stop, start, or change their contributions at any time. Another difference between the TSP and Army NAF 401(k) is that participation in 401(k) is voluntary, where TSP enrollment is automatic.

Forms Required for Continuing or Enrolling In Army NAF 401(k)

DA Form 7426, Application For USANAF Employee 401(k) Savings Plan, Enrollment Form. Enrollment in the NAF 401k plan is OPTIONAL. The employee is given an opportunity to enroll, change contributions, terminate, or restart enrollment in the program on an unrestricted basis (subject, of course, to changes being effective on the first day of a pay period). The DA Form 7426 is available from the Portability Section of www.nafbenefits.com. A sample of this form, completed for termination of the NAF appointment, is provided on the following page.

Restoration of Participation

The DA NAF Retirement Program will accept the SF-50 appointment document and the RI 38-134 form to restore participation to employees who are eligible for portability. It is helpful if a copy of the employee's separation DA Fm 3434 (personnel action), DA Fm 3473, Part I (Retirement Enrollment), and DA Fm 7426 (401k Enrollment) are included with the submitted documents. Forms SF-50, RI 38-134, DA Fm 3434, 3473, and 7426 should be mailed to Army NAF Employee Benefits, P.O. Box 107, Arlington, VA 22210-0107. While retirement enrollment (Code 5A) is electronically fed to payroll by MDCPDS, the DA Fm 7426 must be mailed through CPOC to the payroll office to establish the 401(k) contributions.

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Appendix D

401(k) Form Continuation of Participation while civil service

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Appendix E

US Army NAF 401k and Retirement Remittance Instructions

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Appendix F

Sample Leave and Earnings Statement Civil Service Employee, NAF Retirement

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Appendix G What are the Portability Laws?

Portability of Benefits for NAF Employees Act of 1990, Public Law 101-508. This law has been amended by: FY 96 Defense Authorization Act, Public Law 104-106, Section 1043 The National Defense Authorization Act for FY 2002, Public Law 107-107

What are the key points about Public Law 101-508? Effective 1/1/87, Act Passed 11/5/1990, allowed for retroactive elections and adjustments. For moves which occurred between 1/1/1987-7/30/1996 Transfer within DoD only, transfer must occur within 3 days Eligible employees must be vested in either NAF or FERS or CSRS (5 years participation) Eligible employees must sign Portability Election Form (Lifetime Election) Retirement plan vesting determines eligibility. NAF retirement plan continuations also continue 401(k) eligibility CSRS and FERS continuations also continue Thrift Savings participation Cannot participate in NAF Retirement and Thrift Savings together or FERS and 401(k) together. Medical and Life eligibility is the responsibility of the employing agency. Eligibility for retiree medical and retiree life insurance is with the last employing agency. Participation time in NAF and APF medical/life plans count towards eligibility for retiree medical and life. Eligibility same for both NAF and APF which was 5 years combined continuous participation in the medical plan and 5 years combined continuous participation in the life plan. What are the key points about Public Law 104-106? Effective 8/1/1996, expanded retirement portability to the entire federal government for moves which occurred on/after 8/1/1996. Moves must occur within 1 year of separation from the NAF or APF position to qualify for retirement portability, within 3 days to qualify for other portability benefits. Same vesting requirement (5 years participation in either system to elect to remain participating in that system)

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Irrevocable election regardless of future movement between APF and NAF employment, breaks in service or change in retirement status DoD Health Benefit Plan Implemented 1/1/2000 Retiree medical eligibility rules change with implementation of the DoD NAF Health Benefit Plan o Involuntary transfers, 5 year combined participation requirement remains. (No change for moves from NAF to APF) o Voluntary transfers, 15 year combined participation requirement for DoDHBP Retiree Medical Plan (unless move occurred by 12/30/99 and participating in Unicare or Army NAF HMO) (For moves from APF to NAF) Retiree Life Insurance, 5 year combined participation requirement remains the same.

What are the key points of Public Law 107-107? Effective 12/28/2001, removes vesting requirement for moves that occur within 1 year. Retroactive elections permitted. Employees permitted 30 days from date of notification of eligibility to exercise portability, to sign form RI 38-134/144, irrevocable career election. Retiree Medical and Life eligibility remains the same as in PL 104106. Permits NAF service for Eligibility Only in FERS or CSRS. o ·Do not change retirement service comp date. o ·Does not increase annuity. o ·Must be actuarially reduced for the earlier commencement of the annuity. o ·Cannot use Retirement service that is paying a NAF annuity Instructions signed by Ms. Ginger Groeber, Deputy Assistant Secretary Civilian Personnel Policy. Instructions contain election forms, OPF banners and sample form letters. Forms and instructions also available from BAL 02-103. www.nafbenefits.com contains Portability Section with current portability information DoD Portability Handbook contains processing instructions, election forms. Link at www.nafbenefits.com

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Re-Cap all the main differences in the Portability laws Eligibility Depends On Date of Move Between Systems o Prior to 1987--No Portability o 1987-1995--Vested, DoD Only, 3 Days Time Limit (P.L. 101-508) o 1996-2001--Extended Gov't Wide, 1 year for Retirement Portability, vesting required (P.L. 104-106) o 12/28/2001-Present--Vesting Not Required (P.L. 107-107) Errors Must Be Fixed--Statutory

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Appendix H Steps For Civil Service Employee, Retiring in NAF

Step 1: Employee Prepares and Submits Request w/ Supervisor SF 52 (RPA), Separation (Retirement), Remarks: NAF Retirement DA Fm 3715-R Marriage & Birth Certificates Retiree & Spouse W-2's for Hi-3 consecutive years salaries Life Insurance SF-2818 ·SF-2821 Agency Cert. Of Ins. Status ·SF-2817 Life Ins. Elect FEGLI ·SF 2819 Notice of Conv. Priv. FEGLI ·SF-2823 Desig. Of Beneficiary FEGLI Medical Insurance (OPM requires these forms) ·SF 2809 (Employee Hlth Benefit Request Form) ·SF 2809-1 (Annuitant/OWCP Hlth Ben. Request Form) ·SF-2810 (Notice of Change in Health Benefits Form) Step 1: Employee Prepares and Submits Request w/ CPAC/Supervisor Step 2: Mail Forms to NAF EBB and ABC-C Step 3: ABC-C Prepares Retirement SF-50 (normal distribution and fax to 703-681-7369 Attn: Ms. Nadeau) Step 4: NAF EBB (Processes annuity and sets up retiree medical and life premium deductions from annuity check and pays OPM monthly) Step 5: Employee Contacts Fidelity at 1-800-835-5093, 30 days after Separation Re: 401k Distribution Outprocessing instructions at www.NAFBenefits.com

·

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Appendix I

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Appendix K

This illustration is intended to show a comparison of the NAF Retirement Plan benefits with the Federal Employee Retirement System (FERS) and the Civil Service Retirement System (CSRS). Under this scenario above (the criteria for the scenario is on the left), the Army NAF employee would receive approximately 56% of their Hi3 salary from retirement and 401k. The FERS/TSP participant would receive approximately the same percentage from FERS and TSP however, the source of the retirement income is different. Army NAF provides a richer defined benefit retirement plan benefit, but civil service has a higher employer match in TSP. When the retirement plan and the savings plans are combined, the net income result is approximately the same in this particular scenario. The Retirement Plan is the Red and the 401k or TSP is the blue section of the graph.

Summary Guide November 2004

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