Ask The Experts: Retirement

By Reg Jones

FERS and VERA

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Q. If I accept a VERA with just over 30 years of service under FERS at age 54 and with just under 18 months to go before I reach 56 or my MRA, would I still be immediately eligible at early separation for the special retirement supplement under a VERA, or do I have to wait until I turn 56?

A. The special retirement supplement will begin when you reach your MRA.

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Benefits for ex-spouse

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Q. My divorce decree doesn’t mention retirement. We made no claim for each other’s retirement nor did we waive any rights. It just wasn’t mentioned. Can my ex-spouse claim any of my FERS retirement benefits? If so, would it only be half of what I put in during our marriage? Read the rest of this entry »

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Deposits and Redeposits, part 2

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Last time, I focused on the basic rules governing deposits and redeposits for Civil Service Retirement System (CSRS) and CSRS Offset employees, pointing out how these could increase their annuities when they retire. This time, I’ll do the same for Federal Employees Retirement System (FERS) employees.

Deposits

The term “nondeduction service” is used to describe federal government employment where you didn’t make any contributions to the Civil Service Retirement and Disability Fund. Unlike the CSRS law that gives credit for that time in determining an employee’s total years of service, the FERS law doesn’t. If you don’t make a deposit, that time won’t be creditable for any purpose.

Although the FERS law bars you from making a deposit for most nondeduction service after 1988, there is one major exception. VISTA or Peace Corps service is creditable, no matter when it was performed, if you make a deposit for the service. On the other hand, if you don’t make a deposit, and that service is initially included in the annuity computation, OPM will re-compute your annuity to exclude it if you later are eligible for a Social Security benefit.

If you were ever employed by another federal retirement system (such as the Tennessee Valley Authority or the Foreign Service), that service is also creditable if you aren’t receiving any benefits for that time under the other system and the service was performed before 1989 or is creditable under the Foreign Service Pension System. To get credit under FERS, you’ll have to obtain a refund of your contributions under that other system and deposit it, with interest, in the fund.

Redeposits: FERS

For the first 20 years of the FERS program, employees who left government and withdrew their FERS contributions were barred by law from redepositing that money if they returned. As a result, they couldn’t recapture that time and receive retirement benefits based on that service. That changed when Public Law 111-84 was passed. For the first time it allowed FERS employees who were on the rolls on or after Oct. 28, 2009, to redeposit that money, plus interest. If they did, they’d get full credit for that time in determining their years of service and have it used in their annuity computation when they retire.

Redeposits: CSRS

If you ever separated from the federal government, took a refund of your CSRS retirement contributions, and later returned to work for the government, the rules are different. If you had less than five years of service, you’d have to deposit 1.3 percent of your earnings for that period, plus interest, for that time to be creditable under FERS.

If you had five or more years of CSRS service, you’d be eligible for a CSRS component in your annuity. If so, you’d get credit for that time in determining your eligibility to retire, whether or not you make a redeposit. However, in order for the time to be used in your annuity computation, you’d have to redeposit the money you withdrew, plus interest. (Since the first pay period in January 1970, the contribution rate for CSRS has been 7 percent. Law enforcement officers and firefighters under CSRS began contributing 7.5 percent on the first pay period after Dec. 31, 1974.)

For FERS employees entitled to a CSRS component in their annuity, there is one exception to the redeposit requirement. If you received a CSRS refund that covers a period of service ending before March 1, 1991, you have a choice. You can either make the redeposit or you can have your CSRS annuity component reduced actuarially based on your age and the amount of the redeposit you owe, including interest, on the day you retire. (This option is not open to disability retirees.)

Interest rates: FERS

If you are making a deposit to capture or recapture prior service that will be creditable to your FERS annuity, the annual interest charged is 3 percent through Dec. 31, 1984. Thereafter, a variable rate is charged. In 1985 that rate reached a high of 13 percent, in 2013 and 2014 a low of 1.625 percent.

Interest rates: CSRS

If you are recapturing service that will be used in a CSRS component of your annuity, the interest rate is 3 percent for pre-Oct. 1, 1982, nondeduction service performed before Oct. 1, 1982, and refunded service if the application for refund was made on or after that date. Interest for nondeduction and refunded service on or after Oct. 1, 1982, is also 3 percent through Dec. 31, 1984. Thereafter, a variable rate is applied.

If you owe any deposits or redeposits, download a copy of the Application to Make Deposits or Redeposits. For FERS go to www.opm.gov/forms/pdf_fill/sf-3108.pdf. For CSRS go to www.opm.gov/forms/pdf_fill/sf-2803.pdf.

Once your personnel office tells you how much you owe, you can decide if it’s worth the cost. If you decide to make the deposit, you can pay it in a lump sum or you can do it through monthly deductions from your pay, with payments as low as $50 a month. Just remember. The longer you wait to complete the payment, the more you’ll have to pay in interest.

You’ll have to decide whether to make a deposit or redeposit based on the amount owed compared with the potential benefits.

Reg Jones was head of retirement and insurance programs at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com, and view his blog at blogs.federaltimes.com/ federal-retirement.

 

Reduction to part time

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Q. I will have 18 years in FERS and I am 59. My job  will be reduced to a part-time position in September and I need to know if I should retire before it gets reduced? Should I take the hit and stay with the part-time position until I turn 60? Will the part time reduce my annuity if I stay for the following six months? Read the rest of this entry »

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Military time

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Q. I have three periods of LWOP due to military deployments over the past 11 years. I am in the process of buying back my time. I have been told that my service deposit should be calculated at a lesser rate, not the standard 3 percent, due to me being a federal employee. I cannot find information regarding the lesser percentage. Can you clarify this issue and provide a reference? Read the rest of this entry »

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Severance pay

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Q. I am 52 with 17 years in the federal government (FERS). I am not eligible to retire yet and am not eligible for a discontinued service retirement. My agency field office is closing, and I have decided to decline their directed assignment outside of my state. I am eligible for severance pay due to the fact that it is not a reasonable job offer (it is outside of my commuting area, and I am not subject to a mobility agreement). I have submitted my information and found I am eligible to receive one year’s worth of severance payments. I know that if I receive severance payments but soon after get hired into another federal job, the severance payments will stop. Read the rest of this entry »

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Health care coverage

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Q. I am a federal employee, 66 years old, planning to retire Jan. 3. I now have full coverage under Blue Cross Blue Shield for me and my husband. I understand that when I retire, I must sign up for Medicare Part A, but I am not sure about part B. If I elect to take Medicare Part B, and have BCBS as my supplement, may I still purchase my prescriptions through CVS Care Mark after I retire? Can you tell me the monthly cost for my spouse and myself to continue with full coverage under BCBS? Read the rest of this entry »

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Mandatory removal

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Q. I am a Dual Status Military Technician GS-12 and I will reach my Mandatory Removal Date in 2019 when I am 50 and not eligible for retirement yet. This will end my Federal employment as a military technician. What options are there for me to gain new employment in the federal system and what impact does my previous GS-12 grade have? Read the rest of this entry »

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Deferred retirement

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Q. I am 50 and I have been in government for 27 years. I am going to apply for a deferred retirement at age 60 or 62.  I thought I read somewhere that the “high-3″ was consecutive. If I was a GS-13 and due to BRAC had to come back into the government at a much lower grade, could I still use my high-3 including grades 11-13 or am I required to use the last grade I held?

A. Yes. Your high-3 is the highest three consecutive years of average basic pay (78 pay periods), regardless of when they occur in your career.

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Deferred vs. postponed retirement

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Q. I am a FERS (non-LEO) employee and plan to leave government service at age 50 with 26 years of service. Do I elect to defer or postpone my retirement? At what age do I draw from my retirement; 56, 60 or 62? At what age would I qualify for life insurance to be included again? Read the rest of this entry »

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TSP and taxes

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Q. I intend to make a lump-sum payment this year to pay off the balance owed to recapture my military service for inclusion of this time toward my FERS retirement. I am paying it with after-tax dollars I have saved. Can this amount be claimed as a tax credit or claimed as a tax deduction? Which document says what can be claimed or that neither can be claimed?

A. No. It can neither be claimed as a tax credit nor a tax deduction.

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Sick leave

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Q. I have an estimate of 13 years, three months and eight days service credit. I have 43 hours of sick leave accrued. I’ll accrue 40 more by retirement. Would I be better off using them as needed for medical appointments as they will not add any time to service credit?

A. Assuming that your numbers are correct, those hours wouldn’t add up to the 174 needed to create an additional month and be used in your annuity computation.

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Civil service redeposit

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Q. My wife was told she could apply for a redeposit of service credit funds. The state agency she worked for has a program that let’s her file for retirement on funds she withdrew. This program will then take a portion of her monthly retirement to repay the withdrawn amount. I worked for the Defense Department civil service from 1977-1991 but withdrew all funds. Does the civil service retirement system have a similar program?

A. No, it doesn’t. You could only redeposit that money if you returned to work for the federal government.

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Retirement coverage

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Q. I plan to retire in approximately a year at age 55. I have been covered by my wife’s insurance and we thought that I could stop coverage with my wife in the next open enrollment and go on FEP, but they told me in my office that I had to have five years on FEP before I could have coverage upon retirement. Is this true? Why wasn’t this ever brought to my attention? Do I have any options? Read the rest of this entry »

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Disability retirement

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Q. I am an injured postal worker and I have many  conditions that  have accrued as a result of my past 12 years at the Postal Service carrying mail. I just met with the surgeon who did my last carpal tunnel surgery, and he told me that I should start exploring my options and consider medical retirement. Where do I begin to start the ball rolling and who do I need to get in contact with to help me through this difficult time?

A. Download a copy of Standard Form 3112 (Documentation in Support of Disability Retirement), available at www.opm.gov/forms. Take it to your personnel office, which is responsible for helping you complete the form and guide you through the application process.

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Sudden retirement

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Q. My mother is 66 and a letter carrier with 32 years of employment with the Postal Service. She loves her job, but as cuts are made and demands are harsher, she was wondering what would happen if she were to go to work one day and decide she wants to retire immediately. She wants to be sure that she could still get her accrued annual in a lump-sum payment. She als wants to know how long would it take for her to start receiving benefits? Read the rest of this entry »

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Disability retirement

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Q. I work for the Air Force, and I have 35 years of actual service under CSRS and I am 62. I have confirmed from OPM that I can apply for disability retirement within a year after retiring and start receiving annuity payments. I have had FEHB for only one year so the regular retirement will not allow me to keep FEHB (five-year rule). Can I apply for disability retirement before my regular retirement, or do I have to wait until after I retire to apply? Read the rest of this entry »

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FERS annuity

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Q. I have 20 years of federal service, am 52 years old and currently work for a Federally Funded Research and Development Center. When I separated from federal employment, I was told I have an annuity based on my employment years (contributions made).

A. Assuming that you didn’t get a refund of your retirement contributions when you left, you’d be entitled to a deferred annuity at age 60.

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Cumulative Retirement

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Q. Item 19 of the LES has “Cumulative Retirement” FERS:
What exactly does this number mean? Is it just a total amount in FERS, or something else? Monthly or yearly amount at retirement?

A. It tells you how much you’ve contributed to the retirement system.

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Military service time

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Q. I served eight years in the Navy Reserve and was honorably discharged. How do those years count toward retirement if I become employed by a federal agency?

A. Only time where you were called to active duty in the service of the U.S. would be creditable, and then only if you made a deposit for that time.

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