Ask The Experts: Retirement

By Reg Jones

Special retirement supplement

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Q: I am a Federal Employees Retirement System employee who will be 55 with 25 years of service. The U.S. Postal Service has offered a voluntary early retirement. If I retire, will I be able to collect the supplement at age 56 and who determines the amount?

A: If you accept an offer of early retirement, you will be able to receive the special retirement supplement when you reach your minimum retirement age. Your SRS will be based on the Social Security benefit you earned while employed under FERS. The amount will be determined by the Office of Personnel Management using data supplied by the Social Security Administration.

– Reg Jones

Break in service

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Q: I have 11-plus years of 6(c) service in a primary law enforcement position from a prior appointment. After a two year break in service, I have been reinstated into a secondary law enforcement position with career tenure. Since I have more than three years in a covered position, am I entitled to maintain my 6(c) coverage, or will I stay under Federal Employees Retirement System due to the break in service?

A: While that break in service shouldn’t affect your eligibility to remain covered under the special retirement provision for law enforcement officers, you need to confirm that with your agency.

– Reg Jones

Early out penalties

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Q: Two questions about a 51-year-old Federal Employees Retirement System employee of the U.S. Postal Service who is offered an early retirement: 1) Is there any deduction/penalty for age years below 62? 2) Is that employee eligible for the annuity supplement immediately? If not, does that benefit ever kick in?

A: If you retire under the Voluntary Early Retirement Authority, you won’t be subject to the age reduction penalty. And you’ll be eligible to receive the special retirement supplement when you reach your minimum retirement age. Since you were born between 1953 and 1964, your MRA will be 56.

– Reg Jones

Health care plans

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Q: My husband and I are both retired federal employees. He has always carried our Federal Employees Health Benefits coverage under Blue Cross Blue Shield, Standard Option, self and family. He is enrolled in Medicare Part B. I am 62, so have three years to go before I will be eligible for Medicare coverage. We are now considering changing to two self only plans during Open Season because we will save $500-plus on the premiums. Are there any cons to this proposed change that we should consider? How can I avoid problems with my enrollment, since I have been personally enrolled since our marriage in 1971?

A: There are two obvious downsides to having separate coverage. First, you will each have to pay deductibles up to the dollar limit set by your plan. Second, you will have separate catastrophic limits to meet, instead of one for the both of you. If you decide to go for separate coverage, I see no problem in the two of you enrolling on your own during the upcoming open season.

– Reg Jones

Sick leave bill

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Q: Reimbursement for Federal Employees Retirement System sick leave was being processed thru Congress, but it seems to have dropped out of sight after the House. Would you provide an update on this issue?

A: Congressman Jim Moran did introduce a bill that would reimburse retiring employees for unused sick leave. However, in a surprise move that bill was converted into an amendment which would grant retirement credit for that leave. That amendment was attached to HR 1108, the Family Smoking Prevention and Tobacco Control Act, and passed by the House on Aug. 1. On its arrival in the Senate, it was referred to the Committee on Health, Education, Labor, and Pensions, where it has sat ever since, perhaps because the president has threatened to veto the bill to which it’s attached.

– Reg Jones

Annual leave hours

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Q: I was reinstated to my present federal agency. During the time I was gone, I worked for another federal agency. I was finally credited with the annual leave I was due because with the reinstatement, I passed 15 years of service while with the second agency. On my statement of earnings and leave, my max carryover was increased from 240 hours to 334 hours. Is there a time limit in which I have to use the extra carryover? Or will I retain this level of carryover until I retire or take enough annual leave in a year to eat into it?

A: In all likelihood, the hours above 240 will be treated in the same way as restored annual leave. If so, you will either have to use within two years or by the date set by your agency head. Check with your personnel office to find out which.

– Reg Jones

Government pension offset

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Q: I worked for the Social Security Administration from 1966 through 1973, at which time I became disabled. I have not been employed since that time, and have been receiving a Civil Service Retirement System disability annuity. In April 2009, I will be 62, will my annuity be recomputed? My husband is 71 and receives a Social Security pension. Would my annuity be affected if in the future, if I were to collect a widow’s benefit through my husband’s benefit?

A: No, your annuity won’t be computed at age 62. While your annuity won’t be affected if you become eligible for a Social Security survivor benefit, that survivor benefit will be affected by the government pension offset provision of law. The GPO will reduce the amount of that benefit by $2 for every $3 you receive in your annuity.

– Reg Jones

Court leave

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Q: My friend who works for the Veterans Administration was recently subpoenaed to testify for the prosecution in a federal case. She had to take three days off from work and fly from the West Coast to the east. She’s being told that she has to use annual leave for this event, and there is no pay for this as in jury duty. Is this correct?

A: Your friend is entitled to court leave if she was summoned as a witness in a judicial proceeding in which the federal, state, or local government is a party. Whether that fits her situation is something for her agency to determine. See http://opm.gov/oca/leave/HTML/courtlv.HTM.

– Reg Jones

FEGLI premiums in retirement

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Q: I am a U.S. Postal Service employee and I will be retiring Dec. 31, under the early out option. The related annuity estimate I received as part of that offer lists the annuitant monthly premium for basic Federal Employee Group Life Insurance as $116.37. But the reference manual says I will pay “the same regular Basic premium that active employees pay,” which for postal employees is zero. There is also a chart included that says the premium would be $0.3358 for $1,000 coverage (for me, that’s about $5,4000, calculating out to about $17/month). So which of these premiums is it: $0, $17, or $116?

A: When you retire, you will pay the same premiums for Basic insurance as all other retirees. How much that will cost you depends on whether you intend to keep the full face value of your insurance on the day you retire, the 50 percent reduction, or the one that results in it declining to 25 percent beginning at age 65. In the latter case, premiums will cease when you reach 65. To see what your rates per $1,000 of coverage would be under these three options, go to http://opm.gov/insure/life/an_rates.asp.

– Reg Jones

Overtime pay in high-three calculation

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Q: I am a letter carrier for the U.S. Postal Service with 28 years of service. Is money taken out of my overtime pay for retirement contribution? My retirement is based strictly on my high-three taken from straight time hours only, and does not take overtime hours into consideration. Trying to figure out the taxes and other withdrawals from my check is over my head, but it seems like I don’t pay any less in withdrawals in my overtime hours than I do when I only work straight time. If so, where does the money go? Am I contributing toward some general retirement fund? And, if you don’t mind, why do overtime hours NOT contribute toward my retirement? Other civil service jobs do use overtime hours in their retirement computation. Is it legal not to use all work hours?

A: By law overtime is not included when calculating a high-three. For that reason, retirement contributions aren’t taken from any overtime pay you receive. Despite your assertion, I only know of one occupation where overtime pay is used when calculating average pay for retirement purposes. Law enforcement officers who are receiving AUO pay (administratively uncontrollable overtime) do have that pay included in their high-three.

– Reg Jones

Involuntary separation benefits

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Q: I have 23 (22 continuous) years federal service under the Federal Employees Retirement System. I am currently age 47. Should I be involuntarily separated, will I be penalized 5 percent a year for each year I am under 56 (my minimum retirement age as I was born in 1961)? Am I entitled to health benefits, as well as my annuity commencing on the day of involuntary separation?

A: Based on your age and service, you wouldn’t be eligible to retire. So, unless you later returned to government service, your only option would be to apply for a deferred annuity at age 60. On the date you separated from the service, you would receive a 31-day extension of your health benefits coverage at no cost to you. You would then be eligible to continue that coverage for up to 18-months under the temporary continuation of coverage provision of law. You would have to pay 100 percent of premiums for that coverage plus 2 percent for administrative expenses.

– Reg Jones

TSP mandatory withdrawal

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Q: I will turn 70½ in 2009. I’m under the impression I have to start withdrawals from my Thrift Savings Plan in 2009, but I was recently told by a friend that TSP changed the required withdrawal date, and I do not have to start required distributions until age 72. I cannot find this information on the TSP Web site. Can you tell me if this is true?

A: I know of no such change. If you are retired, your first required minimum distribution must be calculated for 2009, but you don’t have to take it until April 2010. You will then have to calculate and take your 2010 distribution by Dec. 31, 2010.

– Mike Miles

Retirement date calculation

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Q: I will be 55 in January and eligible to retire under the Civil Service Retirement System with 36 years of service. What would be the best day to retire if I stay until March or April at the latest? I’ve always heard about the third of the month. How will the date affect my annuity?

A: As a CSRS employee, you can retire up to the third of any month and be on the annuity roll in that month. Each day you delay retiring after the last day of the preceding month will reduce that month’s annuity payment by 1/30th. So, for example, if you retired on the third, your annuity for that month would be 27/30th of the full amount. One factor to consider when picking your retirement date is when a pay period ends. If you retire at the end of a pay period, you will get credit for any annual and sick leave you earned in that pay period.

– Reg Jones

Health coverage for spouse

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Q: What’s the law concerning when a spouse can be added to a health insurance plan before or after retirement? I have had continuous federal health coverage for more than five years. I will be retiring in the next few years, and my wife just landed a federal job. I have been carrying her on my policy, but we may get two separate health plans because it is cheaper. However, she does not know if she will continue to work for the feds toward her retirement or go back into the private sector. Either way, can I add her to my health policy in retirement, or is it mandatory that she be a part of my policy in advance of my retirement?

A: No, she doesn’t have to be covered under your Federal Employee Health Benefits plan when you retire. She can be added during any open season.

– Reg Jones

Part-time work

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Q: Is it possible to go from full-time employment to part time for a few years and then retire (from that part-time position)? If so, are there problems for my full-time Federal Employees Retirement System retirement benefits? Otherwise, I guess I do what everyone else does: retire and take a part-time job. However, I like my agency and the work I’m doing.

A: Yes, you can retire from a part-time position; however, under current law, going part-time would significantly impact the amount of your annuity when you retire.

– Reg Jones

FERCCA settlement

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Q: I received a packet from the Office of Personnel Management on April 6, 2006. They informed me I was eligible for relief under the Federal Erroneous Retirement Coverage Correction Act. I transferred from the Army as a GS-7 to the U.S. Postal Service. Do you know anyone at the Office of Personnel Management I can contact about the getting USPS to make the settlement; they seem to be dragging their feet in this matter? I had planned to retire in December, but I do want this matter settled before do.

A: I can’t give you a name but I can give you the phone number of the FERCCA hot line, where someone will be available to answer your questions: 888-689-3233. You can call Monday through Friday from 9 a.m. to 5 p.m. Eastern Standard Time.

– Reg Jones

Catch-up contributions

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Q: Do catch-up contributions made to a Thrift Savings Plan account reduce taxable income for the year in which they are made?

A: Yes, they do.

– Mike Miles

Special retirement supplement

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Q: I am anticipating retirement in July at age 60 with 21 years of service. I have been divorced for five years after a 22-year marriage. Can I draw this special retirement supplement on my ex-husband’s Social Security benefits, and if not, at what age will I be eligible to draw from his benefits? Also, where and how do I obtain a computation of what those payments are/will be?

A: If you retire at age 60 with at least 20 years of service, you will receive the special retirement supplement, which approximates the Social Security benefit you earned while employed under the Federal Employee Retirement System. The SRS ends at age 62. Because you were married to your ex-spouse for at least 10 years, you will only be able to receive a former spouse Social Security benefit at age 62 if you are 1) unmarried and 2) not entitled to a higher Social Security benefit based on your own work record.

– Reg Jones

Annuity options

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Q: I am considering leaving my federal position and had a couple of questions about how this would affect my Federal Employees Retirement System. I have been a federal employee for a little over four years and am nowhere near my minimum retirement age (not eligible for an immediate retirement benefit). I understand that because I do not have five years of creditable service I am not eligible for a deferred annuity under FERS and that I have the option to request a refund of my FERS retirement. Since I am not eligible for a deferred annuity, is it mandatory for me to request a refund of my FERS retirement? As I understand it, if I receive a refund for my FERS retirement, I am no longer eligible for FERS retirement and I also lose my creditable years of service. I would like to keep my options open as far as returning to federal service (I want to keep the years of creditable service). If it is not mandatory to request a refund of my FERS retirement, and I don’t request a refund, will my creditable service (less than four years) still count toward my FERS retirement if I return to federal service?

A: Yes, you can leave your retirement contributions in the fund. If you return to government service later on, you’ll pick up where you left off. If you don’t, you can always request a refund.

– Reg Jones

Substantial earnings

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Q: I am a retired teacher affected by windfall elimination provision/government pension offset in California. My question is specific and related to substantial earnings and the WEP/GPO formula. Over my working lifetime (1963-2005) I amassed twice the minimum amount required total earnings for substantial earnings, however, I did not have 30 individual years above the minimum standard. I made substantially more than the requirement in many years thereby doubling the total of the formula, if you added it year by year. I have substantial earnings; does the formula take this into consideration or is the number of years the only criteria used to determine Social Security benefit? I cannot find the answer anywhere on Social Security information Web pages.

A: Substantial earnings are set on a yearly basis. There is no carryover. So, for example, if you earned twice the mount to qualify as substantial earnings in one year, but less than that in the following year, you would only be credited with one year of substantial earnings. To see what constitutes substantial earnings in a given year, go to http://ssa.gov/pubs/10045.html and scroll down to “How does it work?”

– Reg Jones