Ask The Experts: Retirement

By Reg Jones

Retirement waiting period

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Q. I am a federal employee under CSRS and can retire at any time. If it is now taking an average of 133 days to process retirement claims, do you have to leave while your claim is in progress? Also, will I receive checks or one check for the more than four-month waiting time? How does one survive for four months without any income? It used to be that if you retired by the 3rd of the month, you’d receive your first check the following month.

A. Your retirement application can’t be sent to the Office of Personnel Management until you have retired and are off your agency’s rolls. While no one disagrees that the processing times have been unacceptable, things are improving, with interim annuity payments going out much more quickly. However, if you have a choice on when to retire, you might want to consider waiting until the end-of-year glut of retirement applications has made it through the system.

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Excess contributions

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Q. I am a career federal employee with almost 41 years of service and plan to continue my federal employment well beyond 41 years. I understand that the maximum retirement benefit for CSRS employees (excluding sick leave credit) is 80 percent and to achieve that level requires 41 years,  11 months of credible service.  Since CSRS employees contribute 7 percent of their salary into their retirement fund, what happens to the 7 percent contribution after completing 41years, 11 months of service and reaching the maximum benefit of 80 percent?

A. When you retire, any excess contributions will be returned to you, with interest, with the option of purchasing additional annuity that isn’t subject to the 80 percent limit.

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Double dipping

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Q. I am an active-duty E-9 with a retirement date of July 1. With terminal leave and permissive temporary duty, I will be leaving the service in April. Am I eligible to start work in April if selected for a GS position? Are there any restrictions to going to work for a government contractor while on terminal leave?

A. Yes, you can go to work as a civilian government employee during your period of terminal leave. I don’t know if that’s true if you go to work for someone else. You’ll have to check with your personnel office.

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First-year rules

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Q. I’ve heard there is some sort of tax break (deduction/credit?) that may be claimed if you earned less in your first year of CSRS retirement than you earned while working. Is this true?  Local tax filers are unfamiliar with this, but then there are few federal retirees in my area. How do you claim this? Any specific tax form, etc., to use? I retired in June 2011. Would I claim it on 2011 tax year (half-year retired) or 2012 (first full year in retirement)?

A. While there is no such tax break for either CSRS or FERS employees, there is a “first year rule” that applies to the Social Security benefit or special retirement supplement. It applies to employees who retire midyear with an entitlement to one of those benefits and have already earned more than the annual Social Security earnings limit. It protects them against having their Social Security benefits reduced. You can read more about it at www.socialsecurity.gov/pubs/10069.html. Just scroll down to “Special rule for the first year you retire.”

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VERA and leave

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Q. Our agency is offering VERA, closing at the end of the month.  My husband has 20 years of service and will be 50 years old two weeks later. Is there way for the agency to allow him to use leave or leave without pay to reach eligibility? Or would they have to extend the closing date for all employees? He’s also subject to involuntary relocation due to transfer of function if he isn’t able to do the VERA?

A. VERAs have a fixed beginning date and, while they can be terminated earlier than the announced closing date, they can’t be extended beyond it.

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CSRS Offset

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Q. I am a retired federal employee covered under CSRS Offset. I am 65 and have been receiving Social Security payments since I was 62. I will be submitting a request for withdrawal of my Social Security and pay back all the Social Security that I received to date. I will be applying for new Social Security after the process is complete. My pension was reduced when I first received the Social Security payment. Once I receive the new higher Social Security payment in the future, would my pension be reduced more?

A. At age 62, your annuity was permanently reduced by the amount of Social Security benefit you earned while covered by CSRS Offset. It won’t be reduced any further.

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Deferring FEHB?

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Q. If I’m eligible for CSRS retirement and eligible for the Federal Employees Health Benefits plan, can FEHB be optional into immediate retirement but activated later? I will retire with 33 years in CSRS and I will have primary insurance from a new job. I would like to save the money on FEHB until I leave this second job. Is it possible to defer the FEHB until five to 10 years after retiring?

A. No.

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Survivor annuity and Social Security

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Q. I’m a CSRS employee. When I die after retirement, will my wife get full annuity payments if she is drawing Social Security, or is there a windfall elimination?

A. The fact that she is receiving a Social Security benefit won’t have any effect on her entitlement to a CSRS survivor annuity.

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FERS annuity

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Q. I have 25 years in civil service. I have a Thrift Savings Plan account and, once I retire, do I get an annuity automatically or do I have to use the money in the TSP account to get that? Should I buy an annuity or just take a monthly payment from the TSP account? Not sure if I will have enough to retire. I heard that in FERS, the government gives an annuity and then you get TSP. But when I go to the website to estimate how much I have in the TSP, I do not see the FERS annuity they talk about and see only one amount.

A. Reg Jones says: Assuming that you are eligible to retire, your FERS annuity would be calculated as follows: 0.01 x your highest three consecutive years of average salary (your high-3) x your years and full months of service. FERS employees can retire at their minimum retirement age with 30 years of service, 60 with 20 or 62 with five. They can also retire at their MRA with at least 10 but fewer than 30 years of service; however, if they do, their annuities will be reduced by 5 percent for every year they are under age 62.

Mike Miles says: You may use all or part of your TSP account funds to purchase an annuity from any source you choose. The TSP offers an annuity underwritten by MetLife, but you may also roll over TSP funds to an Individual Retirement Account and use those funds to buy an annuity from any insurer you choose.

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Military service credit requires payment to retirement fund

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In my April 2 column, I laid out some of the rules for getting credit for active-duty military service time in your federal civilian annuity. This time, I’ll explain how you can make a deposit to the Civil Service Retirement Fund — if you decide it’s to your advantage to claim any credit you are due.

For most of you, the decision about making or not making a deposit to gain military service credit in your annuity will be a matter of dollars and cents. You’ll have to compare the amount you owe to the retirement fund against what you would gain in increased retirement benefits over your projected lifetime.

The amount of the deposit is equal to a percentage of your military base pay, not including differentials and allowances. The percentage depends on the retirement system you are in and when the military service was performed.

If you are covered by the Civil Service Retirement System, the deposit is 7 percent of basic pay for periods of active duty before Jan. 1, 1999; 7.25 percent during 1999; 7.40 percent during 2000; and 7 percent after Dec. 31, 2000. If you are covered by the Federal Employees Retirement System, the deposit is 3 percent, 3.25 percent, 3.40 percent and 3 percent for the same periods.

If you have more than one period of service, you can pick the period or periods for which you want to make a deposit. However, to get credit in your civilian annuity, you have to complete the deposit before you retire.

In most cases, deposits are made to your agency.

If you pay your deposit within three years of being hired, you won’t be charged any interest on the deposit you owe. That same grace period applies if you are called to active duty or even if you leave your job to enter military service. When you return, a new three-year grace period begins for that specific period of service.

If your deposit is not paid within three years of your beginning or returning to civilian service, you will pay interest on the deposit you owe. Interest rates are set by the Treasury Department and have ranged from 13 percent in 1985 to 2.25 percent this year.

To find out how much you owe, fill out Form RI 20-97, Estimated Earnings During Military Service, which you can get from your personnel office or download at www.opm.gov under Find Form(s). Attach a copy of your DD-214, Report of Transfer or Discharge, or its equivalent, and mail to the finance office for your branch of service, which will verify your active-duty earnings.

If you don’t have a DD-214, fill out SF-180, Request Pertaining to Military Records, available from your personnel office or from the National Personnel Records Center website at www.archives.gov/ st-louis/. Send the form to your branch of service, which will send you a new DD-214 or its equivalent. You can attach a copy of that to a completed RI 20-97 and mail it to the finance office for your branch of service, which will send you an estimate of your earnings.

Once you have your earnings estimate, take it to your local payroll office, along with a copy of your DD-214 or equivalent, and a completed SF- 2803 (CSRS) or 3108 (FERS), also available from your personnel office or the OPM website.

Your payroll office can determine how much you owe, including any accrued interest. If the time since you left active duty has been years rather than months, the accrued interest may exceed the principal you owe.

If you do decide to make a deposit, you don’t have to make it in a lump sum. It can be made in amounts as small as $50. And it can be made through payroll deduction.

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Military leave

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Q. At the beginning of the fiscal year, I took 120 hours of military leave as a federal employee. Recently, I was hired by another federal agency. Will I have a new balance of military leave with my new agency, or will I have to wait until the beginning of the next fiscal year?

A. You are only entitled to 15 days of military leave in a calendar year. This usually is taken when an employee is on active duty for training (ANACDUTRA). Such leave is treated as though you were still on the job, for pay and benefits purposes. Any military leave beyond that can be taken if you are called to active duty. You would get credit for that time in determining your length of service for retirement only if you made a deposit to the retirement system.

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Involuntary downgrade

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Q. I was involuntarily downgraded from a GS-07 (step 7) to a GS-04-00 in 2002 because of a contracting study to provide the most efficient organization. I challenged this downgrade at the union and Equal Employment Opportunity levels and was told that this was perfectly legitimate. However, I am reading some entitlements literature from the civilian personnel management service displaced employee guide which states that a reasonable offer must be made in writing and should not be lower than two grades or pay bands below my current permanent grade without consideration of grade or pay retention. I have not received any offers at my current level for re-promotion. Is this legitimate? What actions would I have to take? Is there another agency that I should be speaking to about this?

A. Your agency and union may be right. However, to verify it, you should ask them to show you in writing where it says that.

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Social Security

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Q. I am a former Postal Service employee (33 years of service) collecting a pension. This September, I will have my required 40 quarters for Social Security (I work part time). Will I be entitled to a Social Security benefit? If so, to what approximate amount?

A. Yes. However, if you are a former CSRS employee, that benefit will be affected by the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who receives an annuity from a retirement system where he didn’t pay Social Security taxes (such as CSRS) and has fewer than 30 years of substantial earnings under Social Security. To find out how much you would receive, use the handy calculator at www.socialsecurity.gov/retire2/anyPiaWepjs04.htm.

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VSIP

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Q. I am a FERS employee working at an Air Force base with the Defense Department. I have about 31½ years service and am 62 years old. During the last year, my base has offered two VSIP/VERA opportunities to reduce the manning levels to what they were in 2010 and accommodate some reorganizing, and I hear they will be making a third offer in May. I applied for the last two and was denied for both. I was told by my management that our wing organization had vacant slots they could give up so a person could be offered a buyout if they weren’t saving someone from losing their job. As it turned out, I was denied the VSIP both times and notified by personnel that my leaving wouldn’t result in saving someone’s job, so I didn’t qualify for a buyout. I’m thinking about applying for the third round coming up, but if the criteria remain the same, it will probably be another two- to three-month waiting game for nothing. Can an organization offer VSIP/VERA buyouts just to reduce manning levels, or does it always have to result in saving someone’s job that is a match to your own?

A. Although the Voluntary Early Retirement Authority is open to anyone to whom it is offered, the Voluntary Separation Incentive Payment isn’t. It is an incentive to leave that is offered sparingly, and then only to achieve specific management goals — for example, to eliminate a position that is surplus because of a reorganization or to save a position that is needed by getting rid of one that isn’t.

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Deferred annuity

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Q. I will be resigning from the Postal Service and need to know a few things. If I withdraw all of my Thrift Savings Plan funds after resigning, will I still be able to apply for a deferred FERS annuity?

Upon resigning, I will be 49 with 22 years and 10 months of time. When would I be eligible for a deferred retirement: 56 or 60?

A. Although withdrawing your funds from the TSP would have no effect on your eligibility for a deferred retirement, taking a refund of your retirement contributions would. So, if you want a deferred annuity, leave them in the fund. Since you have at least 20 years of service, you could apply for a deferred annuity at age 60.

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Reclassified position

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Q. I am a federal law enforcement employee, hired as a GS-1811 criminal investigator six years ago. I am 54 years old. The position was not under the SRC. However, CPAC has determined that it should have been. The agency has been directed to move 1811s to the SRC.

I have bought back 10 years of military service and understand I will be required to “buy in” to the SRC (extra 0.5 percent base salary x six years). I understand the SRC requires mandatory retirement at age 57 or as soon thereafter as I have 20 years “qualifying” service. From what I have read, it appears that only the six years I have served in the 1811 law enforcement position count as qualifying service. If that is the case, what benefit is the 10 years military service I have bought back already? My plan under FERS was to retire at age 62 with 24 years service. What impact will this change have, and what will my retirement options be if my agency moves me to the SRC?

A. Your understanding is correct. You would need to have 20 years of service in a covered position to retire under the special provision for law enforcement officers. Your active-duty service for which you made a deposit cannot be used to meet that requirement. However, that time will be added to your total service and calculated under the standard, rather than the enhanced, annuity formula.

Alternatively, you could retire on an unreduced annuity at age 60 with at least 20 years of service (served and bought back). However, all that service would be calculated using the standard annuity formula.

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Excess contributions

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Q. I have over three years of CSRS excess contributions. I plan on retiring Sept. 30 with 46 years total. Is there a form I submit to request these funds?

A. No form is needed. When you retire, the Office of Personnel Management will tell you the amount of your excess contributions and offer you a choice: Either accept a refund of those contributions, or purchase additional annuity that isn’t subject to the 80 percent limit.

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Military buyback

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Q. My husband has bought back his time in the military and now, after three years with the Department of  Veterans Affairs, he might have to leave before getting his five years needed to retire. Is there any reason why he would not be refunded the money he paid for those years?

A. If your husband resigns from the government before being eligible to retire, he can request a refund of all his retirement contributions, including the active-duty service deposit.

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Social Security and survivor annuity

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Q. I’m retired from the federal government under CSRS, receiving my retirement, but my husband passed away and Social Security tells me I cannot receive his benefits. He put into Social Security for 40 years, yet I’m not entitled to his benefits? Please advise me if I can collect.

A. Because you are receiving an annuity from CSRS, a retirement system in which you didn’t pay Social Security taxes, your spousal Social Security survivor benefit is subject to the government pension offset provision of law. The GPO reduces that benefit by $2 for every $3 you receive in your CSRS annuity. In many cases, it eliminates the benefit.

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Immediate annuity or disability retirement

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Q. I am a FERS employee, age 60 with 20 years service, and have several health issues which have decreased my ability to perform the duties of my position. There is no position in which I can be placed. I have been told by a human resources retirement counselor that because I am eligible for an immediate annuity, I cannot file for disability retirement since it would be more beneficial financially to voluntarily retire. I was also told that after applying for voluntary retirement, I should file for disability through Social Security. Is this correct? Which is the most beneficial financially?

A. Your HR retirement counselor is mistaken. The fact that you are eligible for immediate retirement based on your age and service isn’t a bar to your applying for disability retirement. However, if you do, you must apply for Social Security disability benefits. Otherwise, the Office of Personnel Management won’t review your application.

Your HR retirement counselor is also mistaken about which form of retirement would be most beneficial financially. As a disability retiree, for the first 12 months, you’d receive 60 percent of your high-3, minus 100 percent of any Social Security disability benefit. After the first 12 months, and until age 62, you’d receive 40 percent of your high-3, minus 60 percent of any Social Security disability benefit. At age 62, your annuity would be converted to a regular annuity, which would be based on your actual service, plus the time you were on disability retirement.

If you retired on a regular annuity, your annuity would be 20 percent of your high-3 (0.01 x high-3 x 20 years of service).

It’s obvious which kind of retirement would be financially most beneficial.

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