Ask The Experts: Retirement

By Reg Jones

Buying back time

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Q: I am currently a 52-year-old Department of Defense Education Activity employee with 23 years in the Army National Guard (six years active). Can I buy my six years of active duty time if I will be receiving a reserve pension when I am age 60?

A: Yes, you can.

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Benefits eligibility

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Q: I worked for the Defense Department (Long Beach Naval Shipyard) from 1980 until 1990. I had a retirement fund which I paid into. When I left the shipyard in 1990, I took out my retirement fund in a lump sum. Am I eligible for any benefits from the government besides the retirement fund I paid into. I am now 63 years old. Can you explain to me how that works. Since I started working in 1980, I believe I must have been under the Civil Service Retirement System, I worked as a GS-4 for three years, then I transferred into a wage grade position: WG-10. Is there anything else I am eligible to receive?

A: Since you withdrew your retirement deductions, you aren’t eligble to receive any retirement benefits. Nor, as far as I am aware, are there any other benefits for which you would be eligible.

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Social Security earnings test

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Q: I provide financial services to federal employees and have been posed with a question I have not had before. My client has recently retired under Federal Employees Retirement System and has been an Army reservist for 20-plus years. Will his reservist earnings count against his FERS supplement earnings test? If he is called to active duty, are there any other considerations? And lastly, am I correct in understanding that military or reservist retired pay does not count as earnings against the FERS supplement earnings test?

A: The Social Security earnings test applies to earnings from wages or self-employment. Having been on active duty in the armed forces and served in the reserves, I know that my pay was always treated as earned income when filing my federal and state taxes. I’m not aware of any exception that would exempt active duty or reserve pay from the Social Security earnings test.

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Involuntary separation

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Q: If you were a Federal Employees Retirement System dual status federal technician in the Air National Guard and
were non-retained at age 50 with 28 years of service (discontinued service retirement), can you qualify for disability retirement if you have a disabling condition? Or must you take the standard FERS 1 percent high-3 retirement?

A: If you are involuntarily separated from technician service after reaching age 50 and having 25 years of service, you are entitled to an immediate annuity, which would be computed using the standard FERS formula. If that separation is due to a disability that disqualifies you from membership in a reserve component or from holding your military grade, you may retire under the disability provisions as long as you aren’t appointed to another position in the federal government of have declined an offer of a position at the same grade or pay within your agency’s commuting area.

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Special category positions

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Q: I am currently in a law enforcement position, as a Federal Employees Retirement System employee, and I am covered under the special group of employees Firefighters, Law Enforcement Officers, and Air Traffic Controllers retirement. I am considering, after 10 years of service, a lateral transfer to a GS-13 position, with the Defense Department (non-law enforcement) with more potential for promotion and a significant decrease on my commute. Since I paid an increase of .5 percent to FERS for 10-plus years, why doesn’t the 1.7 percent transfer in government to government services?

A: Under the law, only those special category employees who have completed 20 years of covered service are entitled to have their annuities computed using the more generous formula. The standard formula is used to compute the annuities of anyone who has fewer than 20 years of covered service.

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Social Security benefits

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Q: I plan to retire in June 2011 on my 62nd birthday. If I work up until that date and make approximately $20,000 will my Social Security benefits be reduced?

A: The Social Security Administration has a special “first year” rule that lets them pay a full Social Security check for any whole month they consider you retired, regardless of your yearly earnings. In other words, the pay you received before retiring won’t count against the earnings limit. Note: In 2010, if you are below full retirement age, you are considered retired in any month that your earnings are $1,180 or less and you did not perform substantial services in self employment.

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Disability payments

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Q: I am an 80 percent disabled veteran right now. I have applied for a Federal Employees Retirement System disability retirement, and they I was told it would take three to six months. Is that about the right time? I thought it would go through rather quickly.

I went to apply for Social Security, but until I am not working, they can’t process my claim. Same thing with Veterans Affairs. I gave them an individual unemployment form, then they said I had to wait until I am not working. Is that right? I applied for Social Security under the Wounded Warrior Program – Desert Storm and Afghanistan in 2003 Veteran – and it is supposed to be fast tracked. I also got to meet the people I need to contact when I have to file again.

Why is disability from the federal government taxable? It is ridiculous that they do that, and can you provide me info on that as well?

A: The speed with which disability retirement applications are processed by the Office of Personnel Management depends on the volume of work they are handling and the complexity of the cases that are in line before they get to yours.

The criteria for disability retirement from the civil service are different from those for the Social Security Administration. For the former, you only need to be disabled to the point that you can’t provide useful and efficient service in your current job or one that’s open at current current grade or pay within your agency’s commuting area. To be considered disabled by the Social Security, you have to be disabled for all gainful employment. If you are still working you are considered to be gainfully employed. While the VA’s rules may be the same, I’m in no position to comment about them because they apply to the military and fall outside the scope of this forum.

As a rule, civilian disability annuities are taxable as regular income, unless you are deemed to be totally disabled, a determination that is originally made by the Social Security Administration and reviewed by the Internal Revenue Service. While you may think that taxing that income is ridiculous, it is a matter of law.

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State service

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Q: I am currently a federal employee, having joined an agency in January 2010, late in my career. I am 64 years old. Between 1980 and 1987 I worked for the state and I paid into the state retirement system. Later, I transferred those funds into a private IRA. I was not vested in that system after only seven years. Can I make a deposit into the federal system for those years to add resources to what will likely be five years of employment with the federal government?

A: No, you cannot make a deposit and get credit for that time.

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Social Security disability benefits

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Q: I read somewhere that if you had enough quarters of Social Security, like 28 or 30, you could qualify for your Social Security pay based on that and I would get both my Federal Employees Retirement System and Social Security disability retirement money, without there being an offset. Is that correct?

A: The criteria for receiving a Social Security disability benefits are much higher than those for a FERS disability benefit. To receive such a benefit with fewer than 40 credits, you would have had to be covered under Social Security from the time you turned age 22. Under no circumstance would you receive both benefits without an offset. The FERS law is clear. If you are receiving a FERS disability benefit, during the first year you will receive 60 percent of your High-3, minus 100 percent of any Social Security disability benefit. After the first 12 months, you’ll receive 40 percent of your High-3 minus 60 percent of and Social Security disability benefit. At age 62, your annuity would be recomputed as if you had actually worked to that age.

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Service credit

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Q: I was in the Air Force from May 1980 to June 1993. I took a separation incentive. I have been in Federal Employees Retirement System from 1993 to present. What do I do to get the best possible retirement pay? Buy back time? Would I have to pay back the separation incentive? I am 48 years old.

A: If you want to get credit for your years of active duty service, you’ll have to make a deposit to the civilian retirement fund. In your case, that would be 3 percent of your basic military pay, not including any allowances or differentials, plus accrued interest. Doing so would add that time to your civilian service credit record and increase your annuity by at least 13 percent when you retire. You wouldn’t have to pay back your special separation incentive.

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CSRS employment

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Q: I was a Civil Service Retirement System employee who quit after eight years of service to take care of my ailing mother. After the what I believe is the three year window for rehire into CSRS, I never tried to go back. It has been 20 years. Recently, I have heard of a legal case that might allow me to be rehired under CSRS. Under what circumstances could I now go back as a CSRS rehire?

When I was hired originally in 1981, I was eligible for a GS-9, but took a much lower grade so I could get on board sooner to start earning money. I was assured that I would be able to move to the higher grade quickly. It never happened. I left as a GS-6, despite having been left in place in two positions where I was doing the duties of GS-12s who had gone elsewhere. I have been assured that under current rules, if I am eligible for a GS-12, I will be hired as a GS-12. Is that really likely? What is the rumor-mill saying?

A: Since you had at least five years of service under CSRS, if you were to return to work for the federal government, you would be offered a choice of being covered by CSRS Offset (CSRS and Social Security) or the Federal Employee Retirement System (FERS). No legal case was required to make this happen. It’s a matter of law and has been since 1987.

If you apply for a job with the federal government, your grade level will be determined the same way that it has always been. You can be hired or rehired into any grade level position for which you meet the requirements.

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Windfall elimination provision

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Q: I have been receiving Social Security benefits since turning 65 in 2003. I had to take another job and the company I am working for does not take Social Security from my pay. I have been employed for seven years. I am thinking about retiring from this position and when I do, I will receive a pension from state of California of about $600 per month. I have less than 20 years paid into Social Security. I had interview with Social Security representative, and she calculated my Social Security once I receive pension from California will be reduced by $360.

I thought there was a maximum that Social Security could deduct from my current Social Security benefits. I have spent one hour with a representative, and she knew nothing about a minimum even the Social Security website states in a table there is a maximum. A difference of $100 is a lot. Can you tell me how I go about getting an answer to this question?

A: Because you will be receiving a pension from a retirement system where you didn’t pay Social Security taxes, you’ll be subject to the windfall elimination provision. The WEP reduces the Social Security benefit of someone like you who has fewer than 30 years of substantial earnings under Social Security. According to the Social Security Administration, “the reduction in your Social Security benefit cannot be more than one-half of the amount of your pension that is based on earnings after 1956 on which you didn’t pay Social Security taxes.” You can see what those maximum reductions are for each year by going to http://ssa.gov/retire2/wep-chart.htm#table.

An opening for military redeposit?

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Q: I just read an article about the 2010 Defense Authorization Act, and it speaks of allowing employees under the Federal Employees Retirement System to redeposit. I took a refund of $1,600 and lost 13 years of military time for retirement under the FERS system because redeposit was not allowed. I understand this new law authorizes FERS employees to redeposit for civil service time. Does it allow for redeposit for military time?

A: No, it doesn’t.

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Undoing a military buyback

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Q: I was a federal employee for the better part of 1991-1997, during which time I made a deposit for a percentage of my base pay received during active-duty Army service that totaled $8,098.17. I then separated from civilian service and returned to active duty, where I remained until retirement in 2007. I am now a civilian employee again. I no longer intend to use my years of military service toward a civilian retirement. Is there any way I can have that deposit refunded, either now or when I retire as a civilian employee?

A: You could only receive a refund now if you separated from the government without being eligible to retire and were entitled to a refund of all your retirement contributions. On the other hand, if you choose not to waive your military retirement pay when you retire from your civilian job, you will receive a full refund of that deposit.

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Social Security, spouse benefits and the WEP

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Q: I will be retiring in January with 31 years of federal service. I also have more than 40 quarters to qualify for Social Security. My wife will be applying for Social Security benefits when she turns 62 this January. When we retire, will she be able to collect her full Social Security benefit, and will I be able to collect my share of Social Security under the windfall elimination provision?

A: She will be able to collect her full earned Social Security benefit. When you apply for a Social Security benefit, it will, as you pointed out, be subject to the windfall elimination provision. Further, any Social Security spousal benefit to which you may be entitled will be affected by the government pension offset provision, which probably will reduce it to zero.

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How soon can I retire?

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Q: As a Civil Service Retirement System employee who will have 30 years of service by mid-2011 but wont be 55 until the end of 2013, is there any way to retire in 2011? If so, what kinds of penalties would I face?

A: The only way you could retire before reaching age 55 would be if your agency were to offer you an opportunity to do so. Early outs are only offered when an agency has received approval from the Office of Personnel Management based on the agency’s need to downsize or restructure its work force; those opportunities usually are only for selected occupations and grades.

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Annual leave and separation

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Q: I have 70.5 days of annual leave and will be separating very soon via a Medical Evaluation Board on a service-connected disability. Am I allowed to sell my annual leave? Are there any pros and cons?

A: All civilian employees who separate from the government either by resigning or retiring automatically receive a lump-sum payment for their unused annual leave.

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Unused sick leave and re-employment

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Q: I am retired under the Federal Employees Retirement System. I had sick leave accrued, but I did not use it before I retired. I am looking at returning to federal service; will the sick leave I did not use be given back to me if I am rehired?

A: Yes, it will.

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Social Security, CSRS and the WEP

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Q: I will be retiring in May 2011 at age 55 with 34 years of service in the Civil Service Retirement System. Four years of that time is added on from my military time, for which I did not make a deposit. If I work enough, will I be able to collect Social Security at age 65, not at 62? I only have 23 Social Security credits right now.

A: If you retire before age 62 and won’t eligible for a Social Security benefit at that age, your CSRS annuity won’t be affected. However, if you become eligible for a Social Security benefit after you reach age 62, you will be affected by the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who is receiving an annuity from a retirement system in which he didn’t pay Social Security taxes, such as CSRS, and has fewer than 30 years of substantial earnings under Social Security.

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Military service and reduction-in-force

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Q: Is a reserve-component retired military person considered a nonveteran the same as an active-duty retired military person in a reduction-in-force?

A: To find out how your service in the armed forces would be credited during a reduction-in-force, read the Office of Personnel Management’s VetGuide, located online here.

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