Ask The Experts: Retirement

By Reg Jones

Service toward retirement

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Q: I worked for the U.S. Postal Service for 13 years, from November 1986 to November 1999 as a FERS employee. When I left the service, I did not pull any funds from my FERS account. I was rehired by the federal government in September 2010. I was born in 1963, and I’m currently 47 years old. My question is, what is my earliest eligible retirement age and will all of my government service be considered when I do retire? I’d like to work another seven years, but no more than 12 years.

A: Because you didn’t take a refund of your retirement contributions, all that time will be included in determining your total years of service and in your annuity computation. The earliest that you could retire is when you reach your minimum retirement age, which is 56. At that point you could retire under the MRA+10 provision (minimum retirement age with at least 10 years of service but fewer than 30). However, your annuity would be reduced by 5 percent for every year you were under age 62. You could, of course, retire and postpone the receipt of your annuity to a later date to reduce or eliminate the age penalty. On the other hand, if you wanted to retire on an immediate, unreduced annuity, you would have to work until you reach age 60. By that time you’d have more than enough service to retire under the 60 + 20 provision.

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Retired and rehired excepted service

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Q: I retired as a federal law enforcement officer (Series 1811, Treasury IRS Criminal Investigations) during 2010, and accepted a federal excepted service, law enforcement position with Department of Defense’s Inspector General the very next day. Do I have to worry about cashing out my annual leave (approximately 350 hours) with Treasury? Do I need a break in service equal to the annual leave time before I begin/began work with DoD, before the annual leave is cashed out? Both HR departments did not mention any such treatment of annual leave. An employee in my similar situation advised that I may have to pay the annual leave cash out back because I’m continuing federal service without a break, and that my annual leave would have to be transferred to DoD. Another employee, who is a co-worker, retired from the FBI and accepted the same position as I did with DoD. He cashed out last year and had no problems. Is there a difference in which federal agency you retire from (the first employee, who offered the warning worked as a Series 1811 with NCIS)? Any recommendations would be appreciated.

A: Because unused annual leave is projected forward as if you were still on the rolls, you are required to repay any money you received for hours that fall on days after you return to work for the government. Because you began working the day after you retired, you must repay the entire amount, plus accrued interest.

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Military service retirement plus civilian retirement

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Q: I served for 27 years in the Navy and so earned retirement annuity. After a few years in the private sector, I was hired under the National Security Personnel System on August 4, 2008. At the time of my hire they awarded me partial credit for military service and gave me the service commencement date of July 4, 1992. In was born in 1955. The FERS retirement calculator says that I would therefore be retirement eligible as soon as July 4, 2012. Should I elect to retire at his point or a date after that, will I earn both retirements in full? If not, what will be offered when I retire from the civilian DOD position?

A: Some retired members of the armed forces may receive credit for certain periods of active duty service in determining their leave accumulation rate, which is reflected in their service computation date. However, that time isn’t generally creditable for retirement purposes unless a deposit is made to the civilian retirement system and, at retirement, the retired military pay is waived. If you didn’t do that, you’d be able to keep your military retired pay. Then in 2012 when you reach your minimum retirement age (56) and have 20 years of FERS service, you could retire under the MRA+10 provision (minimum retirement age with at least 10 years of service but fewer than 30). Your FERS annuity would be reduced by 5 percent for every year you are under age 62, unless you retired and postponed the receipt of your annuity to a later date.

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Discontinued service retirement

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Q: I have been affected by the National Reassessment Process by the Postal Service. I was sent home and told there is no longer work available for me within my restrictions after being accommodated for the past 11 years. Would I be eligible for discontinued service retirement, and how would I go about getting it? By the way, I am two months from turning 56 years old and I have 25+ years of service as a FERS employee.

A: You would only be eligible for discontinued service retirement if your agency sends you an official notice of intent to separate you.

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Break in service vs. annual leave payout

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Q: I will be retiring under CSRS and plan on returning as a rehired annuitant under the National Defense Authorization Act hiring authority for the part-time re-employment of civilian retirees. What is the minimum break in service necessary to obtain a payout for unused annual leave?

A: You misunderstand how the process works. When you retire, your unused annual leave will be projected forward as if you were still on the payroll. When you return to work for the government, you will have to repay any part of the lump-sum annual leave payment that overlaps with your period of re-employment. For example, if you received a payment for 30 days (240 hours) and went back to work after 7 days (56 hours), you’d have to refund 23 days (184 hours) of the money you received.

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Surviving spouse annuity

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Q: I am the surviving spouse of a federal employee and have been receiving an annuity since the death of my husband in 1993. My question is whether my annuity will continue if I marry again. I am well over the age of 55. I cannot seem to find the answer to this on the official website.

A: Because you are age 55 or older, if you remarry your annuity will continue.

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Retirement Equity Assurance Act of 2009

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Q: I have been retired from CSRS for five years. I just saw some briefing slides on “Non-Foreign Area Retirement Equity Assurance Act of 2009.” It mentioned phasing in locality pay over three years (2011-2012). I am a math analyst, and I like taxes, but still can’t understand the slides. Looks like an advantage, but I’m still trying to understand. Please help explain this.

A: The purpose of the act is to phase in the conversion of non-foreign area cost-of-living adjustments — which aren’t included in the computation of an annuity — to locality pay, which is included.

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Retirement computation

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Q: I started at the Bureau of Land Management July 19, 2009, with no previous federal experience, except U.S. Army. I retired from the Army (early retirement) with about 17 years and 6 months active duty and six years Reserve. I have been told that as I retired from the Army, I am not due more leave time; I need to start at the bottom. Some people say that my Army time should count toward years of service for more leave. Can you enlighten me?

A: For retired members of the armed forces, annual leave credit is only given for 1) actual service in a war declared by Congress or while participating in a campaign or expedition for which a campaign badge is authorized or 2) all service when retirement was based on a disability received as a direct result of armed conflict or caused by an instrumentality of war and incurred in the line of duty during a period of war as defined in 38 U.S.C. 101(11).

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Switching health plans

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Q: My wife and I are both CSRS retirees. During our active careers and up to this point in our retirement she has been covered under my family health plan. Now that our youngest son is in the Air Force we want to switch to two single plans. Is that possible? Do we have to do it during open season?

A: Yes, you can switch to two self only enrollments, but the only time you can do it is during the annual open season.

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Lump-sum leave at retirement

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Q: If I retire at the beginning of January before the end of the current leave year, could I receive payment for 568 hours of unused annual leave — maximum carryover of 360 hours of unused annual leave from the previous year, plus my 208 hours of unused annual leave in the current year. I am allowed to carry over a maximum of 360 hours of accumulated annual leave from one leave year to the next.

A: Yes, you can. However, you’d have to retire no later than Jan. 1, 2011, which is the end of the current leave year.

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USPS hiring date

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Q: I was hired by the USPS on Jan. 5, 1985, as a casual. Two weeks later, on Jan. 19, 1985, I was converted to career status. I was told at the time that was because of a new retirement system going into effect, and I have been in FERS my entire career. My question(s): Is there a significance to the date Jan. 19, 1985? If FERS did not become effective until Jan. 1, 1987, was I placed in the wrong retirement system? If that is the case is there anything that can be done at this point in time to be placed in CSRS?

A: No, you weren’t placed in the wrong retirement system. Anyone first hired after Dec. 31, 1983, and before Jan. 1, 1987, was placed in an interim system (CSRS and Social Security). When FERS went on line, anyone who didn’t have five years of CSRS service was automatically converted to FERS.

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“Use or lose” leave

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Q: For retirement purposes my date of “separation” is planned to be Jan. 1, 2011. I chose this date so that I would accrue leave for the last pay period. I am, however, concerned if I will lose my “use or lose” leave balance if I retire/separate on Jan. 1, 2011, as opposed to Dec. 31, 2010.

A: Don’t be concerned. You can either retire at the close of business on Dec. 31, 2010 or on Jan. 1, 2011, which is the end of the leave year, and get paid for the leave you accrued in the last pay period. The same is true for any “use or lose” leave you might have to your credit.

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Overseas employees

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Q: I am a DoD civilian stationed in Europe and receive the full benefits (housing, overseas post allowance, etc.). My wife transferred from a U.S. Government civilian agency in the states and continues to work for the same agency in Germany. She only receives the base salary and no other benefits. My question is is she entitled to receive overseas post allowance? Currently I receive the family post allowance rate but would gladly switch to the single rate for her to receive her overseas single rate post allowance as well (we have no dependents). Her agency says that they do not have to pay any type of additional benefits other than the base pay.

A: The State Department’s standardized regulations (DSSR) are the basis for allowances and differentials for civilians assigned to foreign areas. You should ask your wife to check her agency’s implementing regulations, which may be more restrictive than the DSSR.

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Retirement and divorce

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Q: I am a letter carrier with the Postal Service and am under CSRS. In 2006 I received a divorce and as part of the settlement my ex-wife will receive a portion of my retirement. I became eligible to retire at the end of 2008 when I reached 55 years of age. However, for financial reasons I cannot afford to retire at this time. Can my ex receive her share of my retirement now even though I continue to work and am not retired?

A: As a rule, we’re not qualified to answer questions about divorce; however, I can tell you that your ex-wife won’t be eligible for a portion of your retirement annuity until you retire.

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Social Security earnings limit

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Q: Has the government considered raising the earnings limit, given the financial strain many seniors are facing? Why does COLA have to be tied to the earnings limit?

A: The method used to determine the Social Security earnings limit and cost-of-living adjustments are governed by the same law, and are based on the CPI-W. Because the CPI-W has stayed in negative territory, no adjustments were made  in 2010, and none will be made in 2011.

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Adding wife to BCBS

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Q: I have been on the phone on several occasions talking to BCBS customer service people and all seem to be at a loss and I never get the same answer to what I believe should be a simple question. I am a federal employee currently covered by BCBS under the standard program self only. My wife arrived in country this past March and now that open season is here I want to add her to my policy. I know I have to upgrade to the family plan; I am all for that. Please tell me what I must do to make this happen. Please do not refer me to customer service as they have no idea how to get this accomplished. Trust me on this. I am sure that my recent marriage is not the first one to happen with BCBS so why can I not be given simple instructions on how to get this completed. My wife needs to see a doctor; I do not need this aggravation any longer. I would think this would be a simple thing to accomplish but for me it has been like a quest for the Holy Grail.

A: The health benefits open season began on Nov. 8 and runs through Dec. 13. You should have already received notice of that and information about your current enrollment and options. Whether you have or haven’t, your personnel office or joint servicing center can help you change your coverage from self only to self and family. That change would be effective Jan. 1, 2011.

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Advantages to retiring in 2010 and 2011

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Retiring at the end of leave years 2010 or 2011 offers maximum advantage to employees who want to hold out for the maximum payment for unused annual leave and get the benefit of the pay increase that starts on the first pay period on or after Jan. 1 each year.

Keep in mind, however, the end-of-year avalanche of retirements will further challenge the Office of Personnel Management’s ability to process applications in a timely fashion. New applications will be on top of a backlog of 38,000 applicants, 40 percent of whom have been waiting three months or more to receive their full annuities. OPM has pledged to increase its staff to speed processing, especially for simple cases. And, instead of its long-time practice of making partial payments, it plans to make retirees’ initial annuity payments as close to the maximum as possible.

The 2010 leave year ends Saturday, Jan. 1, 2011. This is good news for both Civil Service Retirement System and Federal Employees Retirement System employees. FERS employees have to retire no later than the end of a month to be on the annuity roll in the following month.

While CSRS employees can retire up to the third day of any month and be on the annuity roll in that month, they lose 1/30th of that first month’s annuity payment for every day they are still on the payroll. By retiring at the close of business on Dec. 31, you’ll be on the annuity roll in January.

You don’t have to retire on Jan. 1, 2011, just because it’s the end of the pay period. When you’ve completed your work week, you are free to retire, no matter what day it falls on.

By completing a pay period, you’ll also get credit for any annual and sick leave you earned during that period.

The 2011 leave year ends on Saturday, Dec. 31, 2011. This is good news for both CSRS and FERS employees for the same reasons.

By retiring at the end of the leave year, most of you will get a lump-sum payment for all your unused annual leave, including the so-called “use or lose” leave you would have lost if you retired after the new leave year begins. I said “most of you” because there are limits on how much annual leave a U.S. Postal Service employee can cash in.

You’ll also reap the benefit of the 2011 pay increase — if there is one. That’s because your unused annual leave will be projected forward as if you were still on the payroll and paid at 2011 rates. The only potential pay change that won’t be factored in is any step increase you would have received. You have to be on the job and performing satisfactorily to get one of those.

There’s also a tax benefit if your income in the year after you retire, including any lump-sum annual leave payment or buyout, is lower than it was while you were working. Check IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, to see how much of your annuity will be nontaxable.

To assure that your retirement application is processed more smoothly and quickly, make sure it is complete and accurate. This year, you don’t have much time. When your agency personnel office reviews your application, ask if everything is in order. If it isn’t, work quickly to deal with whatever problems are spotted.

If you’re planning to retire next year, you’ll have more time to review your Official Personnel Folder to see if all your periods of service, whether civilian or active-duty military, are accounted for. If there are periods for which a deposit or redeposit to the retirement fund is needed to get credit for that time in calculating your years of service, in your annuity computation or both, find out if it makes economic sense to do that.

Check to be sure you are eligible to carry your health benefits and life insurance coverage into retirement. And ensure your designations of beneficiaries are up to date.

Then, well in advance of your retirement date, fill out Standard Form 2801 if you are covered by CSRS, or Form 3107 if you are covered by FERS. Give it to your boss or administrative officer.

With time to spare, you are more likely to be able to iron out glitches that may arise as your application makes its way through your personnel and payroll offices.

Annuity calculation

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Q: Is there a schedule that I can see that shows dollar amounts for age and years of service for civil service retirees?

A: No, nor could there be. That’s because annuities are computed using a formula that includes an employee’s highest three consecutive years of average salary and his years and full months of service. As a rule, age is only used in combination with years of service to determine if an employee is eligible to retire.

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Coverage for 23-year-old son

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Q: My son is 23 and is currently on Temporary Continuation of Coverage. Last open season we changed our insurance plan but our son continued with the old plan. It’s my understanding he is eligible to come back onto our plan January 1st. Does he need to change to our new insurance company/plan? Or can he stay where he is?

A: He would have to be covered by your plan.

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Coverage after death

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Q: I am currently 65 and a federal employee with four years and one month continuous full-time service with health insurance. My husband, age 62, is receiving a CSRS annuity, has federal health insurance, and retired after 34 years of civil service. We married 9/25/10, and were told I could be on his health insurance. He sent the required marriage certificate and letter of request. (We both had checked on the process for health insurance that this was acceptable). However, his health carrier stated that if he died before I did, I would be removed from the health insurance because he did not elect to have survivor benefits from his annuity. We have made other plans to provide for me after his death. I called my health insurance carrier and they had never heard of anyone being dropped from the health insurance because they were a widow or widower. My question is, if my husband changes carriers and puts me on as a wife during open season, would I lose coverage if he should die before me? If I would not be covered upon his death, can I elect coverage under a federal plan even though I’ve already retired? I plan on working about another year; however, I don’t know what the future will bring. Thank you for your time and attention to the questions.

A: Because your husband didn’t elect a survivor annuity, if he were to include you under the self and family option of his FEHB plan and died before you,  you wouldn’t be eligible to continue your FEHB coverage. However, you are already age 65 and can retire at any time after you have five years of service. Therefore, if you keep your self only enrollment, when you retire you’ll be able to carry that coverage into retirement.

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