Ask The Experts: Retirement

By Reg Jones

FERS disability retirement at age 62

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Q. I had to retire from FERS on disability with 26 years and 9 months at the age of 53. The first year I got around $2,650 monthly from OPM. A year later I did get my Social Security at $1,788 per month and $1,195 monthly from OPM . Could you tell me what I will get at age 62? My average high 3 years were $59,755.00. Minimum retirement age was 56. Could you break this down for me?

A. I can’t tell you what the breakdown will be. I can give you the formula used. Here it is. During the first 12 months as a FERS disability retiree, you would receive 60 percent of your high-3 minus 100 percent of any Social Security disability benefit. After the first 12 months, you’d receive 40 percent of your high-3, minus 60 percent of any Social Security disability benefit. When you reach age 62, your FERS disability benefit will be recalculated as if you had actually worked to age 62. To do that, time spent on the annuity roll is added to your actual service. Your new annuity is calculated as follows:
0.01 x your high-3 at the onset of your disability increased by all FERS cost-of-living increases paid to you from that point to age 62 x your total service time (actual and disability).

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Sick leave at retirement

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Q. I’m in CSRS with the Postal Service. At retirement, will my annuity be credited at 174 hours of sick leave per month or is my total sick leave balance added to my actual service time and rounded down to the month?

A. As a CSRS employee, when you retire, your hours of unused sick leave will be added to your actual service time. Any combination of actual hours and sick leave hours that add up to 174 will increase your final service time by one month. Any leftover days will be dropped.

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FERS redeposit

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Q. Have you heard when OPM might come up with some guidelines regarding FERS redeposit? When I try to contact OPM, they just say there are no guidelines yet and to contact your agency’s retirement section. When I contact my agency’s retirement section, they say OPM doesn’t have any guidelines yet. So my question is, any idea when we might hear something?

A. I don’t have a firm date. However, effective immediately, OPM is accepting the current FERS Application to Make a Deposit, SF 3108, from employees wanting to make a FERS redeposit. You must indicate on the application that the period of service was refunded. They don’t want you to submit a payment with your application because if you do that before OPM calculates the deposit amount and establishes an account , they won’t have any way of identifying the payment and applying it correctly.

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Retired widower and marriage

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Q. Please help. My boyfriend, who is a widower, and I would like to get married. He is a retired federal employee for five years under CSRS and I am under the CSRS system but have not retired. He is concerned because someone has told him he has to pay “catch up” so that I can have the 55 percent death benefit as his spouse. What does “catchup” mean? Please give me the regulation that covers this as we are both concerned about our future. In addition, he is 80 years old and I am 63, and we are both under the Department of Health and Human Services.

A. If he wants to elect a survivor annuity for you, he must do so within two years after your marriage. There will be two reductions in his annuity to pay for it. First will be the standard reduction of approximately 10 percent. Second will be a permanent actuarial reduction to pay the survivor benefit reduction. The deposit equals the difference between the new annuity rate and the annuity paid to him for each month since he retired, plus 6 percent interest. The reduction will be calculated by dividing the amount of the deposit by an actuarial factor for his age on the date his annuity is reduced to provide the survivor benefit. You can learn more about survivor annuity elections at http://opm.gov/retire/pubs/handbook/C052.pdf.

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Gauging retirement benefits

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Q. The windfall elimination provision and government pension offset are so difficult to understand. Can you help? My husband will soon be retiring at age 62 after 21 years under FERS. I am 52, but hope to leave service ahead of retirement. I currently have the following:
* 52 quarters of substantial Social Security contributions, including three years under CSRS Offset.
* Three years under CSRS Offset (2007-2009).
* 12 years under FSPS (Pre-1983 Foreign Service Retirement system) (1982-1994).
* Seven years under an international employer where I did not pay Social Security (1994-1999; 2005-2007)
Can you help me determine what the impacts will be regarding my own pension and Social Security benefits, spousal benefits for me from my husband’s FERS and Social Security (he will elect to cover me under both, unless it provides no coverage), and spousal benefits for my husband under my government pension and/or Social Security should I predecease him.
I am planning to return to school, but given the difficult economy, want to understand the impacts on my longer-term retirement. Do I need five years in CSRS Offset to eliminate the GPO for spousal benefits from my husband’s Social Security? Will having 30 years of substantial Social Security earnings (with contributions in my post-PHD period) help? What will be the impact of the offset on my government pension? How do I calculate this amount?

A. The best source of information about the windfall elimination provision and the government pension offset is on the Social Security Administration’s Web site at www.ssa.gov/gpo-wep. Although they offer online calculators, a better way to figure out the effects of each is to use the user friendly software at www.FEDbens.us.

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CSRS vs. FERS

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Q. I entered into federal service in 1983 under CSRS and left in 1986 after three years in order to go into graduate school. I was told I could leave my retirement money in the CSRS system and come back in later and I would be able to continue as before with that system. When I came back into federal service in 1991 I was presented with a refund check and told essentially
“sorry, but you’re in FERS now”. Is this correct? Didn’t they change the rules while I was gone?

A. What you were told at the time was correct. However, when the Federal Employees Retirement System became effective on Jan. 1, 1987, the rules changed. From that day forward, any employee with fewer than five years of service under CSRS — whether current or returning — has been automatically converted to FERS.

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CSRS survivor annuity

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Q. My father passed away in 2001 and he retired under the CSRS plan in April 1983. My mother has been receiving a CSRS survivor annuity. This year the tax preparer is saying that her annuity is tax-free based on the contribution my father made into the CSRS. I’m a little confused because since her 2001 tax record no one has ever said her annuity was tax-free. Why are they saying it now? Her 1099 reflect the employee contribution amount, but also shows the taxable amount as unknown. I have tried to research the IRS pubs, but the formulas to use don’t reflect a retirement date of 1983 or sooner.
Any help would be appreciated so I can ensure her taxes are prepared correctly and will be a continued benefit to her.

A. Your tax preparer is mistaken. Because your father retired before July 2, 1986, it’s likely that he was covered by the “three-year rule.” In other words, his annuity payments were tax-free until he recovered the full amount of his retirement deductions, which would have happened within that three-year window. Thereafter, his annuity was 100 percent taxable. Therefore, your mother’s survivor annuity would be 100 percent taxable. If, on the other hand, he elected to be covered under the “general rule,” a small portion of each monthly annuity payment would have been tax-free regardless of how much he contributed. If that were the case, the same dollar amount would be tax-exempt on your mother’s survivor annuity. The only way to see which way he went is to look at his prior tax filings to see if the taxable amount of his annuity was less than the actual amount he received.

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New health care law

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Q. Does the new health care law that allows for dependents up to 26 years of age to remain covered under certain conditions apply to the dental and vision plans offered to federal employees?

A. The answer to this and many other questions relating to the new health care law have yet to be worked out between now and when the law becomes effective for the Federal Employees Health Benefits program on Jan. 1, 2011. In the meantime, we’ll all have to be patient.

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Medicare Part B

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Q. Why does Medicare become one’s primary insurer when they reach 65? I am a retired federal employee with FEHB, which becomes secondary at that age. Is Medicare better?

A. Medicare becomes primary because the law requires it. The law applies to anyone who is retired and enrolled in Medicare. It does not apply to those age 65 or older who are still employed. In their case, any private or public health insurance they have remains primary and Medicare secondary. Note: While you have already paid for Medicare Part A (Hospital Insurance) through payroll deduction, whether or not you enroll in Part B (Medical Insurance) is optional. In you don’t enroll in Part B, your FEHB plan will provide your medical coverage. Check your FEHB plan brochure to see how your claims will be handled in either case.

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Retirement benefits

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Q. I am a FERS employee, age 51 with 12 years civilian service. I have never been in the military. I currently receive from PERS my late husband’s nontaxable disability retirement. When I do retire, will this affect my FERS and/or Social Security? Does this count against me? Can I have PERS, FERS, Social Security and TSP annuity in retirement?

A. I can tell you that you will be entitled to the FERS annuity you earned, any Social Security benefit based on your own record, and your TSP account, without any modification. What I don’t know is if any of this will affect the PERS benefit you receive. Because PERS is not a federal benefit, I don’t now how it will be affected by your federal benefits. You’ll have to check with whomever provides that benefit to you.

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Health benefits

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Q. It is my understanding that members of Congress must now participate in the health insurance exchange under the new health care bill recently passed. Since members of Congress were under FEHBP previously, does that mean federal employees must also participate in this exchange? If not, is there going to be any changes to our health benefits under the new health care bill? Other than increased costs, of course

A. No, it doesn’t mean that you must also participate in the exchange. Federal employees retirees and survivor annuitants will be able to keep the insurance coverage they have now.

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CSRS questions

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Q. I have two questions if you don’t mind.
1. When I retired (CSRS), I elected full survivor benefits for my wife. Will her survivor benefit be based on the amount of my annuity when I retired or when I died?
2. With all the talk of private retirement funds being decimated by the economic downturn, is there any way of knowing or determining how financially solvent the CSRS retirement fund is?

A. If you were to die before your wife, she would receive 55 percent of the annuity you would have received if you hadn’t elected a survivor annuity, increased by every cost-of-living adjustment you’ve gotten on your annuity up to the day you died. And her survivor annuity will be increased by every cost-of-living adjustment that occurs up to her death.

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Retirement due to health

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Q. I joined the National Guard in March 1981. I served with no breaks in service. I have deployed twice, May 2002- May 2003 (Title 10) and January 2007-May 2008 (Title 10). I also served active status from November 2008-present. I am currently on active duty (Title 32) and it could be possible that I may be found unfit to continue service due to heath issues. I may not return to my previous job because of the restrictions brought on by my recent health issues. I am worried I will not be able to provide for my family as I always have.

A. If you are a CSRS National Guard technician who is involuntarily separated (not for delinquency or misconduct) from your position, you can get a discontinued service annuity at any age with 25 years of service, or at age 50 with 20 years of service. That annuity is reduced by 2 percent for each year you are under 55 years of age. On the other hand, if you are medically disqualified for military duty and have five years of creditable civilian service, you may receive disability benefits without meeting the usual CSRS disability criteria.
The rules are different for National Guard technician covered by FERS. If you are separated from civilian service because you are no longer qualified as a member of a military reserve component, you may retire and receive an unreduced annuity at age 50 with 25 years of service. On the other hand, if your military status is lost due to a disability, FERS disability benefits are payable after only 18 months of FERS service. Also, the Special Retirement Supplement is paid until age 62. It is not subject to the Social Security Earnings Test until you reach your minimum retirement age.

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Overseas assignment and application of locality pay to annuity

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Q. I understand that my stateside locality pay will not count towards my retirement calculation for time that I serve in Naples, Italy. I am about to start a 3-year tour there, and when I return to the U.S., plan to retire. How will my annuity be calculated — based on my “high-3″ from my last three stateside years, or does the more current base salary in Naples have something added to it as well for annuity calculation purposes?

A. Your annuity will be based on your highest three consecutive years of average base pay, regardless of when that occurs in your career. While base pay includes locality pay, it doesn’t include any allowances or differentials that you may receive while overseas.

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Reduced annuity

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Q. I retired from civil service at the end of 1985. I chose at that time to take a reduced annuity to ensure my wife would receive an annuity if I died before her. She is still with me. My question is whether or not I can at this time discontinue the reduced amount. If so, will she still be eligible for some annuity to her in case I die before her? I ask this because I have received the reduced amount for the 25 years since my retirement, and it seems logical to me that stopping after this length of time should not preclude her from receiving some reduced amount in the event of my death before hers. If this is possible, what documentation is needed to accomplish it and what percentage would her monthly annuity be under this circumstance?

A. No, you can’t cancel your election of a survivor annuity. Since there isn’t any provision in law or regulation that would permit that, the rest of your questions are moot.

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FERS and military time

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Q. I work for the USPS. Last night a co-worker and I talked. We both are in FERS and have active military time and guard or reserve time to retire from there. If our active military time is used for USPS retirement, does that effect our military retirement?

A. As FERS employees, you will only get credit for your active-duty military service if you make a deposit to the civilian retirement fund for that time. (Reserve duty time isn’t generally creditable, so no deposit is required.) If you do make a deposit, you’ll get credit for that time in determining your eligibility to retire and in your annuity computation. Doing so will have no affect on your ability to receive retired pay based on your active-duty and reserve service.

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Retirement benefits

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Q. My husband, age 56, has worked on the railroad for 29 years and is now on a disability from the railroad. I am working under CSRS and have been a federal employee for 30 years (age 57). Can my husband collect any benefits under CSRS and railroad retirement at the same time? When I retire, are we able to collect half of each others retirement or is it the greater of the two?

A. The only CSRS benefits that are payable to a spouse are survivor benefits. At retirement you would need to elect that benefit and have your annuity reduced to pay for it. If you were to die before him, he would be entitled to 55 percent of the unreduced amount of your annuity. Unfortunately, I don’t know anything about benefits under the railroad retirement system. Your husband will need to check with his former employer to determine what benefits might be available to you.

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TCC FEHB for dependents

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Q. Per the new Health Reform Act, the FEHB has been extended for FEHB dependents till 26 years old; would the temporary continuation of coverage (TCC) be available for these dependents aged 26 for three years, as currently designed for dependents 22 years old? My son was under the TCC from 22 to 25. Currently, he is 25 and under an individual health insurance policy. He turns 26 years old on Nov 29, 2010; unfortunately, before this new reform law becomes effective. Would he be eligible for another three-year TCC term since he is still a full-time student, at medical school?

A. To the best of my knowledge, there is nothing in the new law that would allow that to happen.

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$250 stimulus

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Q. My husband is retired civil service, and receives a civil service annuity retirement. When we filed our federal tax return, $250 was deducted from our return even though we did not receive $250 in January 2010. Is this correct? So we did not get a $250 tax credit, I suppose.

A. To better understand the mechanics of the stimulus payment, I recommend that you read the well-written summary provided by the National Association of Active and Retired Federal Employees (NARFE). Just go to www.narfe.org/departments/home/articles.cfm?10=1989.

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Medicare deduction for CSRS retiree

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Q. I am a federal CSRS retiree and my 2010 monthly Medicare deduction increased from $96.40 to $110.50. My husband is a Social Security retiree only and his Medicare deduction remained the same for 2010 as was withheld in 2009, which was $96.40. In trying to find an answer to this disparity, one Web site tells me: “If you make less than $85,000.00 per year, it will be $96.40 per month. If you make more per year, see the link below for those amounts:” Since my gross monthly annuity is $3514.00 (annual total annuity of $42,168.00), is far less from the $85,000, I don’t understand this deduction. I only have Part B Medicare coverage since my federal Blue Cross and Blue Shield covers my prescription costs.

A. Because your husband is receiving a Social Security benefit and this year’s cost-of-living adjustment was zero, his premium was frozen under the “hold harmless” provision in the Social Security Act. The premiums of those who weren’t receiving a Social Security benefit, like you, went up.

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