By Mike Miles
VSIP and re-employment
March 6th, 2013 | Uncategorized
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: annuity, contributions, CSRS, deduction, FERS, OPM, TSP, VSIP
Pretax payment of separation incentive
March 7th, 2012 | Uncategorized
Q. For Army employees: Have you heard anything regarding the Voluntary Separation Incentive Program and pretax payment? Or is there anything before Congress? What are the pros and cons to employees having their money from a VSIP benefit going to TSP? What would they need to do to ensure that money goes to TSP?
A. A VSIP is not eligible for deferral to the TSP.
Moving TSP funds into an IRA
February 27th, 2012 | Uncategorized
Q: I am a Federal Employees Retirement System employee retiring on April 30, under the Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay at age 55. Can I take some or all of my Thrift Savings Plan balance and transfer it to a self-directed individual retirement account? What is the process for doing that? What are the estimated costs and penalties?
A: You may roll over your TSP assets to an IRA following separation at at 55 with no penalty. Use Form TSP-77 to request a partial withdrawal or Form TSP-70 to request a full withdrawal of your account assets.
Tags: early withdrawal, FERS, Individual Retirement Account, IRA, thrift savings plan, TSP, TSP forms, TSP transfer, VERA, VSIP
Withdrawal/rollover penalty
August 23rd, 2011 | Uncategorized
Q. I plan to take an early out (Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay) effective Aug. 31, 2011. I am under the Federal Employees Retirement System plan. At the time of my retirement, I will be 54 years old. I have read that if you retire before age 55, your withdrawal/rollover is subject to a 10 percent penalty. I have also read that any action can be postponed, but postponed to what age? 55 or 59.5? Does this mean I cannot withdraw and/or roll over to an Individual Retirement Account until I reach age 59.5? I don’t understand why I would have to let my money sit from age 54 to 59.5 just because I take a VERA/VSIP. Would you please let me know any and all options I may have?
A. You may delay taking your Thrift Savings Plan money until required minimum withdrawals begin, usually at age 70½.
From the notice posted at https://www.tsp.gov/PDF/formspubs/octax92-32.pdf:
“If you receive a TSP distribution before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any portion of the distribution not transferred or rolled over. The additional 10% tax generally does not apply to payments that are:
* Paid after you separate from service during or after the year you reach age 55;
* Annuity payments;
* Automatic enrollment refunds;
* Made as a result of total and permanent disability;
* Made because of death;
* Made from a beneficiary participant account;
* Made in a year you have deductible medical expenses that exceed 7.5% of your adjusted gross income;
* Ordered by a domestic relations court; or
* Paid as substantially equal payments over your life expectancy.”
Tags: 70 1/2, FERS, IRA, penalty, retirement, TSP, VERA, VSIP, withdrawal
TSP and early retirement, redux
April 28th, 2010 | Uncategorized
Q: Your response to an earlier question on Voluntary Early Retirement Authority/Voluntary Separation Incentive Payments puzzles me. If a federal employee is eligible for a retirement annuity under the Federal Employees Retirement System despite the fact they are taking an VERA/VSIP, why would there be a penalty for “early” withdrawal of TSP?
A: I think that I clearly stated a fact (“There is nothing in your question that will exempt you from the early withdrawal penalty.”) that answers your question.
Tags: early withdrawal, early withdrawal penalty, thrift savings plan, TSP, VERA, VSIP
TSP and early retirement
April 28th, 2010 | Uncategorized
Q: I plan to take the Voluntary Early Retirement Authority/Voluntary Separation Incentive Payments at my organization. Because I will be 50 years old when I retire, I am entitled to the entire balance in my Thrift Savings Plan account; since I am retiring, does the penalty still apply?
A: There is nothing in your question that will exempt you from the early
withdrawal penalty.
Tags: early retirement, early withdrawal, early withdrawal penalty, thrift savings plan, TSP, VERA, VSIP