Ask The Experts: Money Matters

By Mike Miles

Retirement contact info

Bookmark and Share

Q. I am a former employee that left employment with the federal government three years ago. I was under the old CSRS Offset system (23 years). I am 59 years old. It is my understanding that I can apply for my retirement at age 62. How do I go about doing that? Do I contact the Office of Personnel Management in Boyers, Pa.? Also, what forms do I need to complete? Is it possible to receive my retirement sooner than age 62? Do you have contact information for the OPM office?

I also participated in FERS (Thrift Savings Plan only, no match). How do I access these funds? Do you have the contact information for the TSP?

A. Mike: Visit www.tsp.gov for TSP account access and contact information.

Reg: If you didn’t take a refund of your retirement contributions when you left, you can apply for a deferred retirement at age 62. You can download the required form at www.opm.gov/forms/pdf_fill/opm1496.pdf and mail it to OPM when you’ve completed it. The address is on the form. If you need to reach OPM, you can call them at 1-888-767-6738 or 724-794-2005.

Tags: , , , ,

Disability retirement

Bookmark and Share

Q. I am being considered for disability retirement in the coming months. My application is pending consideration from the Office of Personnel Management. I am a GS-14 FERS employee, 54 years old, with about 32 years of service. I have approximately $250,000 in the Thrift Savings Plan, and my allocations are as follows: 15 percent C, 15 percent S and 70 percent I. I realize that is somewhat aggressive, but it has been like that for about seven years or so, and I have been hopeful of the international home run. Regrettably, this hasn’t necessarily come to fruition. I will likely shelter some of my remaining funds in G or F when I find out if my retirement is approved.

If I should retire, I plan to withdraw approximately $150,000 to pay off my mortgage. Therefore, should something happen to me or if the market fails, at least my home is paid for. I will have a reasonable annuity, and my wife draws $1,800 monthly as a service-connected disabled veteran. Combined, I feel we will have adequate income, especially when our mortgage of $1,000 per month is satisfied. Not rich, but with no real debt ($15,000 vehicle loan) consistent income and no mortgage. Sounds OK to me. Or am I off-base?

A. I think that what’s off-base is that, like too many investors, you are willing to gamble — without knowing the odds — with your life savings. If you’re not willing or able to prudently manage the money, then it’s probably your safest bet to use it to pay off your mortgage. At least you won’t lose it overnight. This might mean that later on, however, if you need the money to pay your bills, it won’t be available. There is no easy answer. That’s why I’m in business. If you’d like to discuss your options, you can contact me through www.variplan.com.

Tags: , , , , , , , , , , , , ,

Annuity

Bookmark and Share

Q. I spent 22 years with the Postal Service and quit in 2010 to take another career. I was under FERS. Do I get a pension from the Postal Service, or is that what the Thrift Savings Plan is? And can I collect it at 55?

A. Mike: If you left FERS service before the calendar year in which you reach age 55, you will be subject to the early withdrawal penalty rules.

Reg: If you didn’t take a refund of your retirement contributions when you left, you can apply to the Office of Personnel Management for a deferred annuity at age 60.

Tags: , , , , , ,

VSIP and re-employment

Bookmark and Share

Q. I worked for the federal government for over 28 years. I retired last year under Voluntary Separation Incentive Pay provisions June 30, 2012.

I am considering re-employing/reinstating. Am I eligible to return to work on July 1, one year after retiring? Can I repay the VSIP in cash or in payments?

I read once that you can make payments for up to 36 months upon re-employment but am not sure whether this is correct. I understand the VSIP must be paid back before I return to work.

Upon re-employing with the government, will I be able to contribute to FERS and the Thrift Savings Plan?

I noticed on the USAJobs website that some Navy notices state you can’t contribute to the retirement or TSP if your a re-employing annuitant. Yet others I read from other government agencies remain silent on this issue.

A. Mike: From published Office of Personnel Management materials: “If a re-employed annuitant is performing service covered by FERS or CSRS (i.e., the appointment is made pursuant to 5 U.S.C. § 8468 or § 8344(a), respectively), the re-employed annuitant is eligible to participate in the TSP.

Agency contributions for a FERS re-employed annuitant must begin with the effective date of the reappointment to the FERS position as discussed in Section VI (A) of this bulletin. The re-employed annuitant may make contribution elections as discussed in Section III of this bulletin.

If a re-employed annuitant is not performing covered service (e.g., a FERS annuitant who is re-employed on an intermittent basis or an annuitant authorized to receive full salary and full annuity under P.L. 101-509 or the National Defense Authorization Act of 2004), the re-employed annuitant is not eligible to participate in the TSP.

Generally, re-employed annuitants are performing covered service. In most cases, if the annuitant indicator on the Standard Form (SF)-50, Nature of Action, is coded “1,” “4,” or “5,” the re-employed annuitant is eligible to participate in the TSP. In the case of a FERS re-employed annuitant, this will be reflected in the retirement code (which indicates FERS) because the annuitant is required to have FERS deductions taken from pay.

In the case of a CSRS re-employed annuitant, however, this may not be reflected in the retirement code because the annuitant may not be required to have CSRS retirement deductions taken from pay. Consequently, the retirement code of a CSRS re-employed annuitant may be “4” (i.e., none), though the annuitant is performing service covered by CSRS and is therefore eligible to participate in the TSP.”

Reg: You can return to work for the government at any time after you accept a VSIP. However, if you accept employment for compensation with the government of the U.S. within five years of the date of the separation on which the VSIP is based, including work under a personal services contract or other direct contract, you must repay the entire amount of the VSIP to the agency that paid it before your first day of re-employment.

Both things you read about re-employment are true. As a rule, your salary would be offset by the amount of your annuity and you would be able to contribute to the retirement fund. If you worked for a full year, you’d receive a supplemental annuity; if you worked for five years, you’d receive a redetermined annuity. On the other hand, there are certain limited authorities that would allow you to return to work and receive both your full annuity and the full salary of your new position. However, you would not be permitted to contribute to the retirement fund and, when you retired again, you wouldn’t be eligible for any additional retirement benefits.

Tags: , , , , , , ,

Rollover to avoid taxes

Bookmark and Share

Q. I would like to roll over the money from one retirement account (my Thrift Savings Plan) to my CSRS retirement account, so as to avoid paying tax. How am I supposed to be able to do this since neither the TSP nor the Office of Personnel Management nor the Internal Revenue Service can give me an answer on if it is possible and if so, how? I would be paying service time from Sept. 10, 1973, to May 30, 1983, and from Aug. 25, 1997, to June 19, 1999.

A. You’re not supposed to be able to do it because it isn’t allowed.

Tags: , , , , , ,

Reporting rollover on taxes

Bookmark and Share

Q. I am retired and made a voluntary contribution to CSRS and then rolled it over to a Roth IRA in 2012, prior to my retirement. Now I’m interested in what I need to do, if anything, on my 2012 tax returns regarding this rollover. Will the Office of Personnel Management be sending me a Form 1099-R? Any advice on how to report on my 1040 will be helpful. Pub 590 (tax year 2011) says that “you do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan.”

A. We can’t tell you how to complete your tax return. Your tax preparer is responsible for that. If you’re not comfortable doing it yourself, you should find someone who is.

Tags: , , , , , ,

VCP to Roth IRA

Bookmark and Share

Q. I retired from federal service last year. The Office of Personnel Management made a direct rollover of my Voluntary Contributions Program after-tax contributions to a Roth IRA, and a direct rollover of my interest earned on those contributions to my Thrift Savings Plan account. However, OPM will not issue 1099Rs documenting these two direct rollovers, forcing me to file Form 4852 “substitute for 1099-R” with my 2012 tax return. This form requires these two direct rollovers to be identified with a distribution code. Of course, the Internal Revenue Service instructions aren’t that clear about which code is appropriate for each direct rollover.   It appears that both Code 7 and Code G are appropriate to use. Is there additional information, applicable guidance or relevant experience to offer regarding the correct codes for these two types of direct rollovers?

A. This is a question for your tax preparer.

Tags: , , , , , , , ,

Workers’ comp and in-service withdrawal

Bookmark and Share

Q. I have a friend who has been receiving workers’ compensation benefits for about 25 years but is not yet separated from service and worked under CSRS. Can he apply to the Office of Personnel Management to receive the monies in TSP in a lump-sum payment without having to retire? Or will he have to apply for disability retirement first?

A. As long as he is employed, the in-service withdrawal rules will apply.

Tags: , , , , ,

Paying insurance premiums

Bookmark and Share

Q. What factors determine whether it is better to pay insurance premiums with pretax dollars or waive that and pay with after-tax money? My thought is that by paying with after-tax money, taxable income is increased, thereby increasing the Social Security entitlement. How do you determine if that is more beneficial than the reduced tax liability now?

A. The answer depends on your circumstances and a number of assumptions about the future. The issue is discussed on the Office of Personnel Management website at www.opm.gov/insure/archive/health/pretaxfehb/qanda/23.asp.

Tags: , , , ,

Survivor annuity for siblings

Bookmark and Share

Q. I am an unmarried federal employee. I max out my contribution to the Thrift Savings Plan. I plan to work until at least 62, which will give me 21 years of service, or possibly until 65 with 24 years. As a federal employee in FERS and with TSP, what is the best way to provide income for two siblings when I die? I am not opposed to taking a reduction in monthly benefits if that is the best way to do so. My home will be paid off in 2014. I have no other debt and live on about 58 percent of my take-home pay.

A. Mike: Providing income for survivors is a complex exercise, and there is no universally “best” way to do it.

Reg: With one exception, only a spouse (or former spouse by court order) can be provided with a survivor annuity. Here’s the exception: You can elect an insurable interest annuity for someone who is dependent on you financially and is a blood or adoptive relative closer than a first cousin. If you elect an Annuity With a Benefit to Named Person Having an Insurable Interest, the amount your annuity would be reduced depends on the difference between your age and the age of the person you name. I doubt that you can name more than one person to receive an insurable interest annuity. However, that decision will have to be made by the Office of Personnel Management.

Tags: , , , , ,