Federal Employees Voluntary Contributions Program

The Voluntary Contributions (VC) program is available to federal employees covered by the Civil Service Retirement System (CSRS) or by CSRS Offsets. Federal employees participating in the Federal Employee Retirement System (FERS) are not eligible for VC. By means of making contributions to VC, federal employees can use after tax dollars to build additional savings or a retirement annuity. Please note that the VC program is different from the Thrift Savings Plan (TSP).

Eligibility criteria for the Voluntary Contributions program:

• Federal employee covered by either CSRS or CSRS offset.
• No outstanding civilian service credit deposits.
• Not received a refund from the VC program prior to current application.

To open a VC account, federal employees must file Standard Form 2804. The form will be forwarded to the Office of Personnel Management (OPM). Upon approval, you will be assigned an account number and instructions for managing and funding the account. Contributions must be made in multiples of $25 and are limited to 10% of the total basic pay earned during the federal career. For example, if you have earned $800,000 during your entire federal career, you can contribute up to $80,000 towards the VC account. An additional annuity of $7 can be purchased for every $100 contributed to the VC account. The account can be funded directly or via direct deposit through your bank, but it is not possible to deduct contributions to a VC account from your paycheck.

All earnings in a VC account are tax deferred. The rate of return for 2007 was 4.875%. Upon withdrawal, usually on retirement or termination of your federal career, VC account holders can rollover funds into an Individual Retirement Account (IRA) or other qualified retirement plans to further defer income and withdrawal taxes, subject to interest payable being more than $200. To withdraw funds from your VC account, you need to make an application 60 days in advance using Form RI 38-125. Note that the account will stop earning interest on the day of retirement. Also, the only investment choice available is the CSRS trust fund as compared to five investment choices for TSP enrollees.

To date, over 13,000 federal employees are already have VC accounts, with total contributions of over $21 million. Maximum withdrawals are made in lump sums.

Resource: Federal retirees FAQ - http://www.opm.gov/retire/html/faqs/faq10.html