Ask The Experts: Retirement

By Reg Jones

Make informed choices during open enrollment

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The open season for health benefits, dental and vision insurance, and flexible spending accounts will run from Nov. 8 through Dec. 13. Not only will it give employees and retirees who are already enrolled the opportunity to change their health care coverage, but it will also give eligible employees who aren’t enrolled the opportunity to elect coverage.

In this column, I’ll focus on the Federal Employees Health Benefits Program.

Premiums will rise an average of 7.2 percent for employees’ share. That isn’t good news, but at least it’s better than the expected 8.9 percent to 10.5 percent for large-employer health programs in the private sector. Still, that’s small consolation for retirees, who didn’t receive a cost-of-living increase this year and won’t be getting one next year, either.

To put the increases in dollar terms, enrollees with self-only coverage on average will pay $5.53 more each biweekly pay period, while those with family coverage will pay $11.45 more. Since retirees pay on a monthly basis, they can double those numbers to estimate what their increase will be.

Among the changes that can help offset the pain of increased premiums are these. As a result of the recently passed Affordable Care Act, preventive care and screening will be available in all plans with no out-of-pocket costs. Further, enrollees will be able to add their adult children younger than 26 to their family health plan coverage. Also, all FEHBP plans will now be in compliance with the Public Health Services’ clinical substance guide on tobacco cessation. That means that if you need help to stop smoking, you won’t be charged any co-payments for the following: seven Food and Drug Administration-approved medications, four counseling session per quit attempt, and two quit attempts per year.

Of interest to seniors is the news that two plans, Government Employees Health Association (GEHA) and Mail Handlers, will be offering a pilot program designed to coordinate their benefits with Medicare. Those plans will contribute toward the cost of the Medicare Part B premiums of their Medicare-eligible enrollees who participate in the pilot. In exchange, the participants agree to accept the same co-payments or co-insurance for FEHBP benefits as non-Medicare enrollees. Medicare currently offsets some of those costs. The expectation is that overall costs for those who participate will go down.

Because the premiums charged by individual plans will vary widely in 2011, it’s important for you to carefully assess your current plan’s costs and benefits and then compare them with other plans that offer similar benefits and health care quality. You can do that with the help of the Office of Personnel Management’s Guide to Federal Benefits, which also includes consumer satisfaction surveys. Copies of the guide and each participating health care plan brochure are available at OPM’s website, www.opm.gov/insure.

While at OPM’s website, you can also access the federal benefits FastFacts site, compare dental and vision plans, use the flexible spending calculator and, if you are an employee, get agency contact information.

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Health insurance: overseas and after leaving federal service

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Q: Is there a Federal Employees Health Benefit provider that provides care in case something happens while traveling overseas? What happens to my insurance if I leave federal service for a year and do something else? Can I still pay and keep my health benefits?

A: Every FEHB plan has a section in its brochure that explains what it will cover if you live or travel outside the U.S. and Puerto Rico. As to your other question, if you were to leave government, you would receive a 31-day extension of coverage at no cost to yourself. During that time, you could elect to continue being covered by that plan (or choose another) under the temporary continuation of coverage provision of law. You would be required to pay 100 percent of the premiums for that coverage, which would last for up to 18 months.

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Social Security benefit will be reduced

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Q: I retired at age 55 with 34-plus years of service. I quit after 13 years of civil service and returned to civil service after 3 1/2 years of private employment.  I just turned 61. I paid Social Security for over 20 years.  If I elect to request Social Security benefits at age 62, how will this affect my civil service pension?

A: Because you are now covered by CSRS Offset, at age 62 your annuity will be offset by the amount of Social Security benefits you earned while covered by CSRS Offset. The net effect will be that you’ll get the same amount of money, but it will come from two different places: the Office of Personnel Management and the Social Security Administration. However, since you will be receiving an annuity partly based on employment where you didn’t pay Social Security taxes and have fewer than 30 years of substantial earnings under it, your Social Security benefit will be reduced through the workings of the windfall elimination provision.

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Disability pay will remain intact

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Q: I was an Air Force reservist on orders for six months beginning in 2006. I injured myself while on active duty, and the six-month orders turned into two years before it was all said and done. I was put on the Permanently Disability Retired List (PDRL) with a 30-percent disability (non-combat related). I served 29 years in the Air Force Reserve, with a total of four years, eight months of active duty. I was hired in October 2008 as a federal employee. I am in the process of buying back those those four years and eight months of military time. I attended a Federal Employees Retirement System retirement seminar recently, and on one of the slides it said that the government would allow one to “waiver military retirement pay” for those with a “combat-related injury.” My questions are: Will I be able to continue to buy back my military time with a disability retirement check for a non-combat related injury? Is this counted as military retirement? Can I add my military time to my civilian seniority?  Do I need to cancel my payment?

A: What you were told in the retirement seminar only applies to those who have retired from active duty and are receiving military retired pay, not reservists. There isn’t any requirement that you waive your disability pay. On the other hand, to get credit for that period of active-duty service, you will have to complete what you’ve already begun — making a deposit to the civilian retirement fund.

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Social Security earnings limit

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Q: I know that I can draw my Federal Employees Retirement System annuity and my Social Security benefits. My question is, will my Social Security benefits be reduced if my annuity is more than the yearly limit of $1,480?

A: The Social Security earnings limit only applies to earnings from wages or self-employment, not what you receive in your annuity. In 2010 and 2011, the earnings limit is $14,160.

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Part-time work and annuities

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Q: I recently had my retirement pay calculated. I was a part-timer during my first three years of employment — approximately 25 hours per week.  I subsequently have had 13 years of full-time federal employment. It appears that I will incur a 10 percent penalty in my retirement pay because of those part-time years. Do you know if that will always be true no matter how long I stay as a federal employee?

A: The longer you work, the smaller the reduction in your annuity will be.

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Annual leave buyout

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Q: How is an annual leave buyout calculated? Is it “accumulated hours x current hourly wage”? Is this considered unearned income? I have also heard they take 40 percent in taxes for this.

A: Lump sum annual leave payments are calculated using the hourly rate of basic pay you would have received had you remained on the agency’s rolls. Therefore, if you were to retire before the annual pay adjustment becomes effective, any hours before that will be computed at the old rate and those after on the new rate. Any step increase that would have occurred after you retired won’t be included; you have to actually be on the job to receive that. For tax purposes, lump sum payments are treated as earned income. Check with your agency to find out what it will deduct from your payment.

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Time needed to draw retirement

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Q: I am 70 years old. I was in the military for three years, from 1981 to 1984, then worked 2.5 years for the Army as a civilian. In 2009, I worked for a VA hospital for 16 months. While at the VA hospital, I bought in my military time. Do I have enough time to draw any retirement? Or, how much additional time would I need in the federal system?

A: If you had at least 20 years of service, you would have been eligible for a deferred retirement at age 60; if at least five years of service and fewer than 20, age 62. To apply for a deferred annuity, go to http://www.opm.gov/forms and download a copy of OPM Form 1486A (CSRS) or RI 92-19 (FERS). After filling it out, mail it to OPM, Retirement Services and Management Group, P.O. Box 45, Boyers, PA 16017-0045.

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Will COLA, locality pay be used to compute annuity?

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Q: I work in Alaska as an Army civilian police officer. Where I am stationed, we receive specialty pay. For example, I am a GS 08 about to move up to GS 09. My current GS 08 step 4 pay is $54,633. On top of this, we still get cost-of-living allowance here, which for me turns out to be $11,440.15. A normal GS-scale employee as an GS 08 step 4 receives $41,393. Does my specialty pay count toward my Federal Employees Retirement System annuity? In other words, is my retirement based on the $54,633, or is it based on $41,393? If I transfer to a different location in the U.S., does my gaining employer have to base my pay off of the specialty pay base of $54,633 or off the $41,393? My leave and earnings statement shows my base pay in block 7 as: Basic pay $41,393 + $13,240; Locality Adjustment = Adjusted Basic pay of $54,633. My SF50 shows this, as well. As I stated earlier, we also receive COLA (transitioning to locality pay) and my COLA is $11,440.15. With this, my real earnings are a base of $66,073.15 but I know that COLA does not count toward retirement. Can you explain this? And finally, when we do get transitioned to full locality pay, will it count toward retirement? I have heard it will, and it that will be taxed as income unlike COLA, but our base pay will then read as $66,073.15.

A: If you are referring to special salary rates, like locality pay they are considered to be a part of base pay and will be used in the computation of your high-3 when you retire. Non-foreign area cost-of-living allowances until recently weren’t considered to be a part of base pay and couldn’t be included. However, P.L. 111-84 changed all that. These COLAs are being phased out, with a guarantee that employees won’t lose ground financially during the transition from non-taxable COLAs to taxable locality pay. However, to get credit for that, employees will have to make additional contributions to the retirement system. Your own payroll office can give you the details. Note: If you transfer to a different area of the country, your salary would be based on your grade and pay at that location, not what you previously received somewhere else.

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Teaching and creditable service

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Q: I have 30-plus years as a federal employee. I worked as a temporary teacher with D.C. public schools, which I understand to be creditable service. How much creditable service is permitted under the Civil Service Retirement System for a teacher who taught for 10 months (academic year) in Defense Department schools or in D.C. public schools? I taught for 10 months and was paid on a 12-month basis. I have read the statutes and regulations and Office of Personnel Management guidance. However, I cannot find anything that pertains to how teacher employment is credited. Surely, OPM has some sort of policy on this.

A: Assuming you were first hired in the D.C public schools before Oct. 1, 1987, that period of service is creditable. The amount of time that would be creditable is the months and days that you were actually employed, not the length of your contract. As a CSRS employee, you would need to make a deposit for that time in order to get credit for it in your annuity computation. As far as I can determine, employment in the DoD school system isn’t considered creditable service.

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Husband’s health plan will take over

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Q: I am currently under workers’ comp from the Postal Service. My health insurance is through workers’ comp. My husband is a retired Postal Service employee with MVP family insurance. I would like to disability retire but I need to know that I can be added to my husband’s insurance effective immediately. I have been advised to cancel my workers’ comp health insurance first, then I can be picked up on his. This is very risky. Please advise.

A: If your husband is enrolled in the self and family option of his Federal Employees Health Benefits plan, you are already covered by it even though your medical expenses are currently being paid by OWCP. Once your period of workers’ compensation ends, any medical needs you have will be covered by his plan.

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No crossover from city government service

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Q: I spent almost 11 years as a New York City police officer. I then became and am still an FBI special agent (1811). My question is, can my NYC government service time count toward my federal service time?

A: No, your city government service can’t be combined with your federal government service.

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How does repaying military service affect annuity?

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Q: I am not retired yet, but I’d like to know how I will calculate what the additional benefit will be to my retirement income if I were to repay my military service deposit? In other words, from an expected retirement income perspective, how do I determine if it’s in my best financial interest to repay my military service deposit?

A: Here’s the simple answer. If you are a Civil Service Retirement System employee, each additional year of service would produce approximately 2 percent increase in your annuity. If you are a Federal Employees Retirement System employee, it would produce a 1 percent increase. You’ll need to compare what you’d get for life with what you’d have to shell out to make the deposit. To get a more exact estimate of what you’d get by making a deposit, use the handy software at http://www.fedbens.us.

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Medicare premium raise was legal

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Q: Will federal retirees who pay Medicare through their federal pension because they have insufficient Social Security quarters ever receive a refund and correction for an improper raise in Medicare premiums in 2010?  We, too, received no cost-of-living allowances.

A: There wasn’t any “improper raise.” What you are referring to is the fact that when there wasn’t any cost-of-living increase in Social Security benefits in 2010, an increase in Medicare premiums for Social Security beneficiaries was prohibited under the “hold harmless” provision of that law. On the other hand, there wasn’t any legal restriction to the required increase in premiums for those not covered by Social Security. I’m not aware of any plans in Congress to provide a “refund and correction.”

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Salary may be reduced by annuity

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Q: I have a question on returning back to work part time in a federal job. I retired in February 2004 from the Postal Service. I retired in the Federal Employees Retirement System. I am thinking of returning back to work with the Transportation Security Administration. If I do, will it affect or reduce my annuity and my supplemental allowance?

A: Unless you are hired into a position that allows you  to keep both your annuity and the full salary of your position, your new salary will be reduced by the amount of your annuity. Check before accepting the job.

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Counting military service toward retirement

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Q: I read something in Reg Jones’ column in the Oct. 4 issue of Federal Times that I would like more information about. The district office of the Equal Employment Opportunity Commission in San Francisco, my employer, no longer has a personnel specialist. I was hired by EEOC in February 1993. I retired from the Navy Reserve in 1995, and have just recently begun to draw retired reserve pay at age 60. I plan to retire from EEOC at the end of 2014. I will be 64 years old and have 21 years’ civilian service then. Questions: May I make a deposit to have my 13 years of active military duty (already figured into my Navy Reserve retirement) count toward my Federal Employees Retirement System retirement from EEOC? Who calculates the amount of the deposit? Can I have it deducted from my paycheck so that it will be paid up by the time I retire? If it is deducted from my paycheck, does that reduce my taxable income by a corresponding amount? How do I  start the process of paying a deposit for FERS retirement credit?

A: Yes, you can make a deposit for any periods of active-duty service by making a deposit to the civilian retirement fund. To find out how much you owe, you’ll need to complete Form RI 20-97, Estimated Earnings During Military Service, and mail it to the finance center for your branch of service along with a copy of your DD Form 214, Report of Transfer or Discharge. When the answer comes back, take it to your local payroll office along with a Standard Form 3108, Application to Make Deposit or Redeposit, and a copy of your DD 214. They’ll calculate what you owe and make arrangements for you to make the deposit by payroll deduction, if you decide that’s what you want to do. You can get copies of the RI 20-97 and SF 3108 from your personnel office or download them at http://www.opm.govforms. Note: Making a deposit to get credit for your active-duty service wouldn’t reduce your taxable income.

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Reservists’ creditable service

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Q: I am a reservist with 33 years of service, six of which were active. I purchased that time back before I became a Federal Employees Retirement System employee. I spent four years in the reserves that were not covered in my computation date. A typical year has about 50 points for reserve weekends, then active duty for training (two weeks) and occasionally longer schools and so forth. What periods of reservist time can be bought back?

A: You can’t make a deposit to get credit for any reserve time, only periods when you were called to active duty. However, neither weekend drills nor annual periods of active duty for training are creditable under any circumstance. You’ll have to check with your branch of service to find out if your orders to attend longer periods of training would allow you to get credit and make a deposit to the civilian retirement system. Note: If you took annual leave or were placed on LWOP-US, they wouldn’t be.

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Annuities, health care for dual-fed couples

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Q: My husband and I are both federal law enforcement officers. The family health plan is under my husband. We both plan to retire this year. He wants me to waive my survivor annuity and he says I will still be covered under our federal Blue Cross/Blue Shield plan because I was covered for the last five years of my employment under the Federal Employees Health Benefits family plan that he carried. He wants a bigger retirement check. My question is, if I sign the survivor annuity waiver and he dies before me, am I still automatically covered under our FEHB plan because I was also a federal retiree and would have been eligible for coverage? I think he is wrong and will not sign any waiver. I told him there is no “federal spouse rule” laid out in the Office of Personnel Management’s guidelines concerning FEHB.

A: Whether you decide to waive your entitlement to a survivor annuity is entirely up to you. However, your husband’s explanation of why you would be able to continue your FEHB coverage if he were to die before you is wrong. As long as you are covered under his FEHB plan enrollment and either employed or receiving an annuity when he dies, you would be able to continue that coverage. As the one carrying the enrollment, it’s your husband who needs to be enrolled for the five consecutive years before he retires, not you.

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Family leave to care for aging relatives

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Q: I’m a Federal Employees Retirement Service employee, 54 years old with 25 years of service. I have a 91-year-old father with Alzheimer’s disease who requires full-time care. Is there any program where I could take an early retirement to care for him?  Also, I have an upcoming background investigation due. If I didn’t provide this, could I be fired, but still be eligible for immediate retirement?

A: Along with receiving approval for the use of annual or sick leave, you could request up to 12 weeks of unpaid leave under the Family and Medical Leave Act. Whether you would be eligible for discontinued service retirement if you were fired would depend on the nature of the action used to separate you. You’d have to discuss this with your agency before making a decision.

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Retroactive buyouts for USPS retirees

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Q: According to the American Postal Workers Union, the grievance to give postal employees who took early out in 2008 and 2009 severance pay is now 15 months old. Is this going to happen? I voluntarily left, moved over for the next person, then in October 2009, they came out with the $15,000 buyout. I feel that postal employees who retired early really got the shaft.

A: No one who accepts an offer to retire early is eligible for severance pay. On the other hand, what you may be asking is whether the U.S. Postal Service is going to give a buyout payment to those employees who weren’t offered one when they retired in 2008 and 2009. To the best of my knowledge, there is no basis in law for them to do that.

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