Ask The Experts: Retirement

By Reg Jones

Pay for unused sick leave at retirement

Bookmark and Share

Q: I am aware that there is some support to propose legislation this year to pay federal employees for unused sick leave by depositing the money into one’s TSP. Is there any further support for this and has anything been proposed in this arena? I believe Rep. Stephen Lynch, D-Mass., had said that he would introduce legislation to pay federal employees for unused sick and annual pay at retirement by having it deposited to your TSP.

Do you have any current information in reference to this matter?

A: I have found no evidence that Lynch did anything more than talk about introducing a bill to do that.

Tags: ,

Locality pay and retirement

Bookmark and Share

Q: I will be covered by the Civil Service Retirement System. I have been offered a position for which locality pay is in effect. Will this locality pay be incorporated in my annuity?

A: Locality pay is considered to be a part of basic pay and will be used in the calculation of your annuity.

Tags: , ,

Buy back military time

Bookmark and Share

Q: I received a medical retirement from active duty in the Army after serving 15 years. I am working as a YA-02 (GS-11 equivalent) and I was wondering if I could buy back my military time. I am no longer receiving retirement pay because my VA compensation is more than my retirement pay. I have been a civil servant (FERS) for almost 2 years and my probationary period is just about over. Would it be beneficial for me to buy back my military time?

A: To get credit for you period of active duty service, you would need to make a deposit to the civilian retirement system and, at retirement, waive any entitlement to military retired pay. That would not adversely affect any VA compensation you are entitled to receive. The immediate effect of making a deposit would be to change the amount of your creditable service from two years to 17. Not only would this change your annual leave earning category but, in the long term, it would put you closer to retirement and substantially increase your retirement annuity.

To find out what you would have to pay to get credit for that time, complete a copy of Form RI 20-97, Estimated earnings During Military Service, and send it to your military finance center along with a copy of your DD Form 214, Report of Transfer or Discharge. When you hear back from the finance center, take that letter, a copy of your DD 214 and Standard Form 3108, Application to Make Deposit or Redeposit, to your local payroll office. They’ll figure out what you owe and arrange for the deposit to be made, if that’s what you decide to do. You can download copies of the RI 20-97 and SF 3108 at www.opm.gov, click on Forms.

Tags: , ,

Creditable service

Bookmark and Share

Q: Can you tell me how many years I have of Creditable Service? I am a FERS employee. I have also paid back about eight years of active duty Air Force.

A: Write down the amount of time you have worked under FERS. Then write down the amount of active duty service for which you made a deposit. Add the two figures together and you’ll have the total amount of your creditable service.

Tags: ,

CSRS and Social Security

Bookmark and Share

Q. I will be fully eligible to retire in 2012. I am under CSRS. I also receive Social Security notices about how much SSN I will receive at Social Security age. Will I be able to receive both?

A. You will receive your full CSRS annuity. However, the amount of Social Security benefit you’ll get will be affected by the windfall elimination provision of law. The WEP reduces the Social Security benefit of anyone who receives an annuity from a retirement system where he or she didn’t pay Social Security taxes, such as CSRS, and has fewer than 30 years of substantial earnings under Social Security. While the Social Security Administration has a calculator you can use to determine the amount of that reduction, you’ll find a simpler and more efficient piece of software at www.FEDbens.us.

Tags: ,

CSRS & FERS Postponed & FEHBP

Bookmark and Share

Q. Thank you for the informative article on “Making Sense of 2 Types of Annuities.” I am a CSRS employee planning to retire in 2011 (at 57/32+). Our Self & Family FEHBP is and has been under my name since 1980 with out-of-pocket medical bills reimbursed via our FSA. My wife, born in 1956, is a FERS employee planning to retire in 2014 (at 58/10) under the MRA+10 provision. We wish to continue to utilize our FSA when I retire by moving our Self & Family FEHBP coverage under my wife’s name until she retires. But as I understand from your article, when she retires under the FERS MRA+10 provision and postpones receiving her annuity until age 62, she cannot continue our Self & Family FEHBP coverage and will have to re-enroll in FEHBP when her annuity begins at age 62. If true, that will leave me also without FEHBP coverage during those four years since our FEHBP Self & Family coverage will be under her name after I retire. Do we keep our FEHBP Self & Family coverage under my name even after I retire and simply forgo the tax advantages associated with our FSA to avoid the gap in FEHBP coverage upon my wife’s retirement and receipt of her FERS annuity? Or are there other options?

A. I think you’ve done a good job of summarizing the situation. You can keep the FEHB enrollment under your own name and experience no break in coverage or have it under her name, and, when she retires, be without coverage until she reaches age 62. There aren’t any other options.

Tags: , ,

MRA retirement under FERS

Bookmark and Share

Q. I know that federal employees under FERS who have 30+ years of service at the minimum retirement age (MRA) are eligible to retire and receive an immediate annuity as well as the Social Security supplement until they reach eligibility for Social Security under normal circumstances. My question is: Who is actually paying this supplement?

A. The purpose of the special retirement supplement is to provide a bridge between retirement and when a retiree first becomes eligible for a Social Security benefit. The SRS is paid out of the Civil Service Retirement and Disability Fund. The amount needed to cover the cost was factored in when setting the retirement contribution rates for employees and agencies.

Tags: ,

Combining retirements

Bookmark and Share

Q. I retired from the Air Force after 23 years and have been receiving retired pay since 1996. I’ve been working under FERS now since January 1999 and hope to retire at age 59 in 2014 under the MRA+10 provision. Someone recently told me I would have the option to somehow combine the two retirements into one. He stated that for some people it means more money and for some less, so it has to be weighted individually. Are you aware of any such option and are their any issues to be wary about?

A. You can get credit for your period of active duty military service by making a deposit to the civilian retirement system. In your case the deposit would be 3 percent of your military base pay (not including allowances and differentials), plus interest. At retirement you would also be required to waive your military retired pay. To see if making a deposit would be worth it to you, use the following formula to approximate what your FERS annuity would be with and without that active duty service: 0.01 x your highest three consecutive years of average basic pay x your years and full months of service.
To find out what you would have to pay to get credit for that time, complete a copy of Form RI 20-97, Estimated earnings During Military Service, and send it to your military finance center along with a copy of your DD Form 214, Report of Transfer or Discharge. When you hear back from the finance center, take that letter, a copy of your DD 214 and Standard Form 3108, Application to Make Deposit or Redeposit, to your local payroll office. They’ll figure out what you owe and arrange for the deposit to be made, if that’s what you decide to do. You can download copies of the RI 20-97 and SF 3108 at www.opm.gov, click on Forms.

Tags: , ,

CSRS retirement

Bookmark and Share

Q. I am a CSRS employee who will have 40 years of government service in mid-April 2010 at age 63. When would it be in my best interest to retire to obtain the 80 percent annuity? Whatever that date may be, would I then be entitled to the next full cost-of-living increase?
A. To receive an annuity worth 80 percent of your high-3, you’d need to have 41 years an 11 months of creditable service and owe no deposits or redeposits to the retirement fund. If you worked longer than that, any retirement contributions you made to the retirement fund would either be returned to you or could be used to buy additional annuity. Like credit for unused sick leave, it would not be subject to the 80 percent limitation. As for COLAs, if you retired no later than Dec. 3 of a given year, you would be eligible to receive a full COLA one year later. So for example, if you retired on Dec. 3, 2012, you’d receive a full COLA in your January 2014 annuity payment. For every month you retired later than that, your COLA would be reduced by 1/12th.

Tags: , ,

SES and retirement

Bookmark and Share

Q. What office does a Senior Executive Service employee apply to for retirement and where is the pay office located for SES personnel? Is it a different office than a regular CSRS employee who deals with the Office of Personnel Management?

A. Senior Executive Service employees are no different from other employees when it comes to retirement. They fill out the same paperwork and submit it to their servicing personnel office. Once retired, their annuity, like that of other employees, is paid out of the Civil Service Retirement and Disability Fund, which is maintained by the Department of the Treasury and administered by OPM.

Tags: , ,

CSRS, part-time employment

Bookmark and Share

Q. I am eligible for retirement under CSRS with over 30 years of employment with the USGS. One intriguing retirement option was the proposal that was floated last year regarding a transition into retirement by working part time. I understand this proposal has been recently finalized; however, my main concern is how this legislation affects retirement benefits at the “high 3″ level.

A. There hasn’t been any change in law regarding a transition into retirement by working part time. However, there has been a change to the way that the annuities of part-time CSRS employees are calculated, which will produce a better financial result. Previously, one high-3 average salary was based on the pay actually received and the other based on pay the individual would have received assuming they worked full-time (the deemed high-3). The new law provides that the “deemed high-3” average salary will be used for all service, regardless of when performed. This change doesn’t alter the other provisions applicable to calculation of annuities involving part-time service. The amendment applies only to annuities based on a separation from service occurring on or after Oct. 28, 2009.

Tags: , ,

Social Security, annuities

Bookmark and Share

Q. Thank you so much for your article entitled “Making sense of 2 types of annuities.” It was very informative to the fifty-something people in my office. Assuming FERS, two questions. When you refer to annuity, are you referring to 1) the person’s pension or 2) the person getting the equivalent of some of type of early Social Security benefits? And if the answer to the above is the person’s pension, is it possible for one to start collecting Social Security benefits (or the equivalent of) once they do early retirement (for example, age 57)? Obviously, if this was so, it would be at a reduced rate; I have 27 years at age 56 (assuming early-out provided).

A. In the federal employment arena, the monthly benefit you receive after retiring is referred to as an annuity. You can only receive it when you meet the eligibility requirements. With the exception of those who are totally disabled for all work, no one can receive a Social Security benefit before age 62. However, most FERS employees who have retired before age 62 and have reached their minimum retirement age (MRA) are eligible for a special retirement supplement (SRS) that approximates the Social Security benefit they earned while employed under FERS. The SRS is paid out of the Civil Service Retirement and Disability Fund and is intended to bridge the gap between retirement and age 62, when retirees are first eligible for a Social Security benefit. Those who retire under the MRA+10 provision aren’t eligible for that benefit. The SRS can be reduced or suspended if a retiree earns more from wages or self-employment than allowed under the annual Social Security earnings limit. In 2010 that limit is $14,160.

Tags: ,

FERS, taxes

Bookmark and Share

Q. I retired as a FERS annuitant on Feb. 1, 2006 at age 62 plus a couple of weeks.  If I am rehired please help with these questions. Will my current FERS gross annuity before taxes be deducted from the new gross salary before taxes? If I have the maximum  for retirement, including the over-50 extra amount, deducted and invested in the Thrift Savings Plan, am I matched by the federal government  and vested from day one for as long as I decide to work? I left my TSP with the federal government and I have not taking anything from the TSP. I currently work as a federal contractor.

A. As a rule, the amount of your annuity before any deductions will be subtracted from the salary of your new position. So, for example, if your annuity was $30,000 and the salary of your new position $100,000, you’d only receive a salary of $70,000. Before accepting a position, you should find out if you would be hired under one of the exceptions that would allow you to receive both your annuity and the full salary of the new position.

Tags: ,

FERS, Social Security taxation

Bookmark and Share

Q. I will be 62 years old in November 2010.  I plan on retiring Dec 31, 2010.  I will draw a FERS annuity from the government; I also will be drawing Social Security.  My question is, will my FERS annuity be considered taxable income to Social Security and will my Social Security benefit be taxed for it ?

A. Your FERS annuity will be taxable as regular income; however, a portion of it will be tax-exempt because it represents a return of the contributions you made to the retirement system, which have already been taxed. When determining if you have exceeded the Social Security earnings limit, the Social Security Administration only considers earnings from wages or self employment; in other words, earnings from which Social Security deductions are taken. The amount of your Social Security benefit that will be considered taxable will depend on your benefits and the total of your other income.

Tags: , ,

Social Security survivor annuity

Bookmark and Share

Q. I am retired under a combination of CSRS (14 years) and FERS (12 years).  My CSRS annuity is $3,000 a month and my Social Security is $600 a month.  If my spouse dies, can I get any part of his $1,600 monthly Social Security?

A. If you are a federal retiree who elected to switch from the Civil Service Retirement System to the Federal Employees’ Retirement System (FERS) on or before June 30, 1988 or you if you switched after that date, including during the open season from July 1, 1998, through December 31, 1998, the fact that you had at least five years under FERS will exempt you from the government pension offset and, therefore, make you eligible to receive a Social Security survivor annuity.

Tags: , ,

Retirement health benefits

Bookmark and Share

Q.  I am currently 54 years old under FERS and considering early retirement in the next 3 – 4 years.  I am also retired from the military and bought my service time.  I currently do not carry any Federal Health Care Benefit; I use my military benefit.  Once I retire from federal civilian service my retirement pay from the military will stop; does this have any effect on my military health benefits?

A. It’s my understanding that waiving your military retired pay will not affect any other military benefits to which you are entitled; however, to be sure, you’d need to check with your former branch of service.

Tags: ,

CSRS rehired annuitant

Bookmark and Share

Q. I retired from the U.S Forest Service on 7/03/05 at age 52 under CSRS Firefighter retirement. I retired out of a secondary firefighter position that I went into from a primary firefighter position with no break in service. If I am rehired by the U.S Forest Service now, after 4.5 years retired, into a secondary firefighter position, will I still have to take mandatory retirement at age 57 or will the break in service mean that no firefighter retirement will be in effect for any “supplemental” or separate annuity I may acquire? Basically, in this scenario, can I work past age 57?

A. If you were re-employed in a secondary position, you would not be subject to termination at a specific age; however, if you were hired into a primary position, you would not be permitted to work past age 60.  On re-employment, your special retirement supplement would be suspended and the salary of your new position would, in most cases, be offset by the amount you were receiving in your annuity.  Retirement deductions would be taken from your salary and, if you worked for at least one year, you would be eligible for a supplemental annuity; if for five or more years, a redetermined annuity. The computation used would be the standard one, not the enhanced formula used for special category employees.

Tags: ,

CSRS offset

Bookmark and Share

Q. I retired on June 30, 1999 at age 47 on disability under the CSRS offset. I had exactly 21 years of service at the time of retirement.  I show the disability amount as wages on my tax return.  At what point can I start showing this income as a pension rather than wages?

A. This is a tax matter and falls outside my area of knowledge.  You’ll have to check with the IRS.  To get a head start, download a copy of IRS Publication 721, Tax Guide to U.S. Civil Service Benefits, available at www.irs.gov/pub/irs-pdf/p721.pdf.

Tags:

Special retirement supplement

Bookmark and Share

Q. What happens to the special retirement supplement if I worked until age 62? … even though I am eligible to retire at age 56, with 31 years of service?  Do I lose the SRS completely?  It would total about $106,000 between ages 56-62.

A. The only purpose of the special retirement supplement is to help a FERS retiree bridge the gap between his retirement and his eligibility for a Social Security benefit. It you work until age 62, you won’t get it or need it. Note:  Even if you were to retire before age 62, began receiving the SRS, and had earnings from wages or self-employment that exceeded the Social Security annual earnings limit, your SRS would be reduced or eliminated. In 2010 that limit is $14,160.

Tags: ,

Spouse benefit reduced multiplier

Bookmark and Share

Q.  I am a FERS employee and I plan to retire in the near future. As I have a CSRS component, I will be impacted by the Windfall Elimination Provision when I begin to draw Social Security. As my spouse is also a FERS employee, it is possible that my spouse benefit for Social Security may exceed my own benefits. I will turn 62 eight years before my spouse. And we both plan to draw Social Security when we each turn 62, respectively. I understand that I will not be eligible for a spouse Social Security benefit until my wife begins to draw Social Security. I will be 70 years old when she begins to draw Social Security at age 62. I also understand that the calculation of my spouse benefit will be reduced because I began drawing at age 62, which is prior to my full Social Security retirement age of 66. I understand that the spouse benefit multiplier will be 35 percent rather than 50 percent because I began drawing on my own record at age 62. But here is the point that I am unclear on. Will the reduction in the calculation of my spouse benefit be applied to my wife’s full Social Security amount at her full retirement age? Or will the spouse benefit reduced multiplier be applied to the amount that she is drawing at age 62? The Social Security Web Page appears to be unclear as to which number the reduced multiplier will be applied to.

A.  It will be applied to the amount she is drawing at age 62.

Tags: , , ,