Ask The Experts: Retirement

By Reg Jones

Partial annuity

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Q. I am A CSRS employee who is retiring Dec. 31 and wish to elect a partial annuity for my husband. He’s a retired civil service employee and receives his own pension. We’ve decided that about 25 percent of my annuity would be sufficient for him. However, on the Application for Immediate Retirement Form, Section F, it seems that I can only elect 55 percent of a fixed dollar amount. If I do this, say 55 percent of 50,000 per year ($27,500), would this amount still be indexed for future cost-of-living adjustments, or would it always remain at $27,500? I’ve asked the retirement branch at my agency, and they don’t know. I’ve also researched all of the Office of Personnel Management documentation and can’t find this addressed, either.

A. If your spouse agrees to a lesser amount in writing, you can elect any dollar amount you want him to receive. If you predecease him, he will receive that amount increased by any cost-of-living adjustments that have been applied to your own annuity since you retired. From that point forward, his survivor annuity will be increased by future COLAs, just as yours would have been.

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Buyout rules

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Q. I am a Civil Service Retirement System postal employee. I am eligible for optional retirement in December 2011. Are there any incentives available, or are they only for early retirement?

A. If your agency offered you an opportunity to retire early or a buyout, you would be free to accept it.

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Unresolved CSRS contribution balance

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Q. I am getting ready to retire at the end of December after 37 years with the Civil Service Retirement System. In 1986, the Office of Personnel Management converted to a new system and I had a rather large balance in CSRS contributions. We noticed that our balance went to zero when the new pay stubs were issued. They told us not to worry back then and the money would be added back in when we retired. My current LES shows again a large amount of contributions. I asked the human resources office about a document that combined both balances, and they had no knowledge of this requirement. I am trying to search for a reference so I can get this resolved. I already found out they changed the legal binding contract for my retirement in 1986 and now I have to follow IRS pub 721, which states I will only get a small percentage back each year. It will take 331 months to get the entire balance returned. Can someone tell me where it is written that they have to combined both amounts so I can submit the entire amount using IRS pub 721?

A. When you retire, OPM will provide you with a statement that includes all your contributions to the retirement system. That’s the figure you’ll use when calculating the tax-free amount of your annuity. The way to do that is laid out in IRS Publication 721, which you mentioned.

While you assert that you had a legally binding contract, that contract was amended by a new law requiring that anyone retiring on or after July 1, 1986, would no longer be able to receive a tax-free refund of his retirement contributions and then be taxed on the full amount of his annuity. Since that change in the law, the tax-free portion of an annuity has been based on actuarial tables provided by the Internal Revenue Service.

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Social Security reduction

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Q. I am in the Federal Employees Retirement System and will retire Dec. 31. I will be 62 when I retire, with 41 years of service. Because Social Security is part of my retirement, will my Social Security checks be reduced if I work and earn more than the max allowed?

A. Yes. Your Social Security benefit would be reduced by $1 for every $2 you earn through wages or self-employment until the year in which you reach your full retirement age. At that point, the reduction would be $1 for every $3 you earn. There is no limit to the amount you can earn starting with the month in which you reach full retirement age. Note: The earnings limit is $14,160 in 2011. It will be $14,640 in 2012.

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Best month to retire

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Q. What is the best month and day to retire? I should have 240 hours at the end of December, which could be carried over to the next year. If I retire in December, would I not only receive the 240 hours but 208 for the next year. If I retire Jan. 1 of the next year, would I receive the 240 in the hole plus the 208 I would accrue for the new year? I am trying to get 400 hours. How can I do this? I know it takes a while for the retirement benefits to arrive and I need something to tide me over.

A. You can only receive a lump-sum payment for the number of hours you have actually accrued. If you have accumulated 240 hours and retire Dec. 31, you’ll be paid for all the hours you’ve accrued, even if they exceed 240. If you retire Jan. 1, you would only be paid for a maximum of 240 hours. Assuming that you went into 2012 with an annual leave balance of 240 hours, earned 208 more hours in 2012, and retired no later than Jan. 12, 2013, you’d receive a lump-sum payment for 448 hours.

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Dental and vision coverage

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Q. I am voluntarily retiring Dec. 31 with full benefits under the Civil Service Retirement System. I understand that my health insurance will continue to be covered with the same amount paid by Uncle Sam as was covered when I was working. I have heard that dental and vision insurance will not receive the same amount matched in retirement. Do I have to pay the full amount for these extra plans in retirement?

A. Enrollees in the Federal Employees Dental and Vision Insurance Program, whether employees or retirees, pay the full cost of premiums. There isn’t any government contribution.

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Annual leave payout

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Q. I am a Civil Service Retirement System employee who will be retiring Dec. 31. I currently have 360 hours of CY2010 carryover leave (based on my overseas assignment). I also have 120 hours of use or lose for CY2011, for a total of 480 hours. When I retire, will I get annual leave payout for 480 hours?

A. Yes.

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Social Security credits and annual leave

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Q. I am a Civil Service Retirement System employee planning to retire Dec. 31. I will receive a lump-sum payment for unused annual leave in 2012. I understand that this payment will be subject to federal and state (where applicable) taxes but that other deductions (health care, retirement and Thrift Savings Plan contributions) are not taken. Do I have the option to have a Social Security contribution taken from this payment? (I need seven credits to get to 40 credits/[quarters]) and this would seemingly represent an opportunity to acquire four of them if it is an available option). Is there a way to accrue Social Security credits via this lump-sum payment?

A. No, there isn’t. Social Security credits can only be acquired through deductions taken from wages or self-employment that is covered by Social Security.

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Final paycheck

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Q. If I retire on Dec. 31 with 30 years at age 57 with a buyout, when will I receive my final paycheck, lump-sum buyout payment and my first FERS retirement annuity and supplement pay?

A. Only your agency payroll office can tell you when you’ll receive your final paycheck and lump-sum buyout payment. And only the Office of Personnel Management knows when you’ll receive your first annuity interim payment, which won’t include the special retirement supplement. You’ll only get that when you receive your first full annuity payment, which will include any amounts you are owed for both benefits. There is no way to estimate how long that process will take.

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20 years or 21?

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Q. I am a Postal Service employee whose retirement comp date is Feb. 6, 1991. I also have four years of military service credit. I would like to retire Dec. 30. But I am confused by how my total years of service are calculated. I should have 711 hours of sick leave accrued, so at 50 percent of that, my calculations are that I will have more than enough hours to get my total years of service to 21 instead of 20. However, I read somewhere that any months that you work fewer than 30 days are thrown out. So does that mean I don’t get credit for my first month of work because I started on Feb. 6? Also, is the time you work prorated for partial years (20½ versus 21)? Basically, do I have to work a week or so longer than I planned to make sure I get the benefit for 21 years?

A. Your personnel office can give you the exact date on which you will have 21 years of service or you can go to www.opm.gov/retire/pubs/handbook/C050.pdf and read Sections 50A2-1 and 3, plus the job aids at the end of the chapter, and figure it out for yourself. As you’ll quickly learn, your annuity will be based on all your years and full months of service. Any days that add up to less than a full month are discarded.

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Rehired annuitant

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Q. I plan to retire on Dec. 31. I plan to return as a rehired annuitant Jan. 2. Can I elect to defer the receipt of my 240 hours of annual leave pay out until my final departure from the agency?

A. If you return to work for the government, your unused annual leave should be restored to you. If you are going to work for the same agency, you’ll need to alert your payroll office of that fact. If you are going to a different agency, you may end up with a lump-sum payment for your annual leave, which you’ll have to return in order for that leave to be recredited to you.

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Annual leave deadline

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Q. When must I use 2011 annual leave that exceeds the 240 maximum so that I will not lose it?

A. It must be used by Dec. 31. However, for most agencies the date for scheduling use or lose leave was Nov. 19.

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Six parts

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Q. I will be age 56 on Feb. 15 with 22 years FERS time and nine years, 11 months active-duty military time (deposit paid); 31 years total. I also retired from the Navy Reserve and looking forward to a pension at 60. I would like to retire under the Federal Employees Retirement System at the end of 2012.

1. Will the nine years, 11 months be used to calculate my special retirement supplement? If no, why not?

2. Will the nine years, 11 months affect my social security benefits at age 62; if so, how and where can I find more information?

3. Will the nine years, 11 months affect my military retirement pension? If so, why and how?

4. Why is all this pertinent information not disclosed by personnel offices upon hiring so that employees can make better decisions about retirement earlier?

5. How long does it take the Office of Personnel Management to adjudicate my annuity?

6. Would it be more beneficial for me to withdraw my service deposit for the active-duty time and work another nine years and forget the confusion?

A. 1. No. By law, the special retirement supplement is based solely on actual years of service as a FERS employee.

2. All years of employment where Social Security deductions were taken from your pay will be included in determining the amount of your Social Security benefit.

3. The fact that you have made a deposit for your active-duty time won’t have any effect on your reserve retired pay.

4. Some agency personnel offices do a good job of providing the information that employees need; other don’t. Apparently yours is one of the latter.

5. I don’t know how long it will take. Not surprisingly, it varies.

6. You don’t really have a choice. Having made the deposit, the only way you could get a refund is if you resigned from the government before being eligible to retire and withdrew both your deposit and your retirement contributions.

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Disability and retirement

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Q. I medically retired as a Chapter 61 with 14.6 years active duty. I don’t and haven’t received any of my retirement pay because my disability through the Veterans Affairs Department has always been higher than what my service retirement pay would’ve been. Because my medical retirement is less than 20 years, I don’t get both entitlements. Because I’m not drawing both entitlements, is there any reason why I shouldn’t be able to add the 14.6 years toward leave accrual?

A. Go to www.opm.gov/feddata/gppa/gppa06.pdf, which contains the chapter on Creditable Service for Leave Accrual, and scroll down to section 1.6. Creditable Uniformed Service.

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Four retirement options

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Q. I am a 58-year-old letter carrier covered under the Federal Employees Retirement System with 27½ years of service. I recently became incapacitated due to an occupational disease/illness. I am considering submitting a CA-2 form for worker’s comp under the Federal Employees’ Compensation Act, applying for FERS disability and Social Security disability, or applying for early retirement. Can I apply for all four options at the same time and choose the best option later?

What is not clear to me is the FERS disability option. Since I have reached my minimum retirement age and qualify for immediate retirement excluding the Social Security supplement, am I stuck with the 1 percent of high-3 annuity only, or can I receive the option for 60 percent of my current salary? The annuity option seems to be a huge disadvantage to the tune of $18,000 yearly until age 62 (estimated on a $53,000 base salary).

A. You are free to apply for any or all of the benefits you mentioned. In fact, you have to apply for a Social Security disability benefit if you apply for FERS disability retirement. Regardless of your eligibility for discontinued service retirement, you can apply for FERS disability retirement. If approved, during the first year you would receive 60 percent of your high-3 minus 100 percent of any Social Security disability benefit to which you were entitled. After that, you’d receive 40 percent of your high-3 minus 60 percent of any Social Security disability benefit. At age 62, your disability annuity would be converted to a regular annuity.

If you are also found eligible for both FERS disability retirement and employees compensation, you’d have to choose between the two. Your decision most likely would be based on which of the two provides the better benefit financially.

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Re-enroll in FEHB?

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Q. I accepted a buyout in 1997 under the Federal Employees Retirement System. I had 22 years of continuous service at that time but was under age 50, so I couldn’t retire. In February, I will be 60 and eligible to receive my pension. I was covered by the federal health insurance program for my entire federal career. Can I opt into it when I start receiving my benefits in February?

A. No, you can’t. Anyone receiving a deferred annuity, like you will be, can’t re-enroll in the Federal Employees Health Benefits program.

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Break in service

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Q. I had 22 years of service when I resigned from the government in July 2010 at age 55. I am under the Civil Service Retirement System. I worked for Department of Agriculture from 1972 to 1978 and returned from 1994 to 2010. I would like to know when I can get some of my retirement monthly.

A. Assuming that you didn’t take a refund of your retirement contributions, you can apply for a deferred annuity at age 62.

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Wasted buyback effort?

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Q. I’ve been in federal service a little over a year. If I decide not to stay in federal service, is all the money I’m spending to buy back military time being wasted?

A. If you stay for a full five years and then leave, you’d be eligible for a deferred annuity, and the military service for which you made a deposit would be included in your annuity computation. If you stay for less than five years, you wouldn’t be eligible for any retirement benefit. Therefore, you’d be better off asking for a refund of both your Federal Employees Retirement System contributions and your military deposit.

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Disability time and annuity

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Q. In 1999, I was forced to go on disability retirement by the Postal Service after 13 years of being under the Federal Employees Retirement System. In 2006, I was deemed to be back to full earning capacity by a few hundred dollars. In 2007, I finally obtained another federal position, which I have been in ever since.

What happens to those 7 years I was under disability retirement? I know if I had stayed under disability retirement when I reached age 60 or 62 (I forgot which age it was), all my time including the years on disability retirement would have been counted for the final annuity amount.

A. The time you were on disability retirement cannot be included when determining your total years of federal service.

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Federal employment and Social Security

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Q. I withdrew my accumulated retirement money when I left my state ($3,000) and federal ($18,000) jobs in 1978 and 1992. I will not receive any government pensions. Will my being a previous state and or federal employee affect the amount of my Social Security benefit?

A. No.

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