Ask The Experts: Retirement

By Reg Jones

Early retirement penalty calculation

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Q. If I were to retire Jan. 3, 2013, and will turn 55 on July 7, how is the CSRS early retirement penalty computed?  Is it by days or months?

A. In months, with a reduction of 1/6 percent per month.

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Higher pension contributions

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Q. An article about a House panel approving higher pension contributions for feds said that if you do not have five years by 2013 that you would be subject to the 5.8 percent. What is the cutoff date in 2013? I started Aug. 4, 2008.

A. You are the victim of a common misunderstanding. The law doesn’t apply to current employees, only to those first hired on or after Jan. 1, 2013, and any former employees that return to work for the government and have fewer than five years of creditable service.

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Annuity reduction

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Q. I am eligible to retire in July (CSRS). In the event I retired and subsequently went to work in private industry, would my pension be subject to any form of offset based on those earnings?

A. No.

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Temporary NTE and “sold” leave

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Q. I’m a full-time FERS employee with 21 years of service and over 60 years in age. I am on a temporary promotion that is to “Not to Exceed 12/31/2012”. I am planning on retiring Nov. 30, a month before the temporary promotion expires. I am also planning on “selling” my 100 hours of unused annual leave at retirement. Will my leave be sold at my temporary promotion salary (GS-14) or at my permanent grade (GS-13)?

A. Since your agency has the right to return you to your official position of record before you separate, the amount of your lump-sum payment will depend on which position you are occupying when you retire.

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Medicare

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Q. I hope to retire under CSRS at age 60. Will Medicare deductions continue to be taken from my CSRS pension checks when I retire?  If so, will the deductions end when I turn 65 and am eligible to invoke Medicare coverage?

A. Deductions for Medicare are only taken from earnings from wages or self-employment, not annuities.

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Accrued time transfer

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Q. I was employed by the Postal Service for more than five years with a start date of March 17, 2007. I applied for a position with the Defense Department, DCMA division, and was accepted. I started work with DoD on April 9. I have received three paychecks to date, earning six hours of leave per pay period, so my start date with the federal government went back to March 17, 2007. I had accrued approximately 136 hours of annual leave and 327 hours of sick leave. I am in the new position, and human resources in Kansas is telling me my time does not carry over. Am I losing out on sick time?

A. Whoever told you that is mistaken. Your accrued sick and annual leave is transferable. If you get an argument, make them show you in writing where it says that it isn’t. If they can’t and still hold the same view, ask them to refer the question up the line. Eventually, your agency headquarters or Office of Personnel Management will square them away.

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Military buyback

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Q. I spent 20 years in the Navy and am currently receiving my pension from the Defense Finance and Accounting Service and a 30 percent disability pension from the Veterans Affairs Department. In 1991, I began my employment with federal government under FERS. In 2009, I applied for disability due to my health condition.

I spent 18½ years in federal service.  In June 2009, I began receiving my disability pay from the Office of Personnel Management, computed based on 60 percent of my high-3 for the first 12 months and 40 percent thereafter until I reached age 62.

I will turn 62 in October, and my disability annuity will be converted to regular annuity effective the following November.

Can I still buy back my military time and waive my military pension before October? I was under the impression that I am not considered retired from the service until I reach 62 because if there is a possibility of recovery, my employer has the option of hiring me back.

Also, I don’t have enough time to buy back my military time because I received the approval of my disability application 10 days before the effective date of disability retirement.

What is considered the date of retirement? The effective date they approved my disability, or the date they converted my disability to regular annuity? I was advised by OPM that the buyback should had been done before disability retirement (May 2009).

My Social Security disability was recently approved, and I have to pay the OPM back for the overpayment due to the offset rules. In my estimate, I need to pay around $18,000 to buy back 20 years of service. In return, my pension will increase by $440 a month.

A. No, you cannot make a deposit for your active-duty service. That had to be done before your application for retirement was finalized. The rule applies to both disability and regular retirements.

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Lump-sum death benefit

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Q. I have read that “If there is no spouse, former spouse, eligible child or some other insurable interest named to receive a survivor annuity upon the death of the FERS annuitant, then a lump sum of the employee’s contributions to the FERS Retirement and Disability Fund will be paid to the individual(s) entitled under the order of precedence.”

The order of precedence is: designated beneficiary, widow/widower, children, parents, etc.

Does this mean, if I haven’t named someone to receive my FERS annuity, upon my death, anything not paid to me while I was retired will be paid in a lump sum to the people as listed in the order of precedence? How does that person know what the lump sum will be? How do they request it?

A. The lump-sum payment consists solely of any unexpended contributions you made to the retirement fund while working. When your death is reported, the Office of Personnel Management will ask that the executor of your estate provide them with the names of those who would be eligible to receive such a payment.

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Special retirement supplement and military time

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Q. I’m a DoD federal employee with three years of military service included in my FERS retirement. I know the three years count toward my pension calculation, but do they count toward the supplemental Social Security benefit? I’m eligible to retire in October and will be 56 with just over 30½ years of service including my military time. Will the supplement be calculated at 27½ years or 30½?

A. Your special retirement supplement will be based solely on your period of FERS employment. Unless you made a deposit for your three years of military service, they won’t be included when determining your years of service or in your annuity computation.

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Retiring firefighter

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Q. I am a firefighter for the Department of the Army. I was hired at age 41 and will be 61 at the end of my career. I understood that I would be able to retire with 20 years of service, and not be forced to retire at age 57. Could you please help me find the documentation that states this?

A. You’ll find what you are looking for at www.opm.gov/retire/pubs/handbook/C046.pdf. Scroll down to Section 46A3.3-2B2.

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VSIP

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Q. My agency was planning to conduct a reduction in force in November 2011. Prior to that, there was a mock RIF in which we pretty much determined where employees would bump/retreat to. Based on that information, I elected to apply for a Voluntary Separation Incentive Payment and was approved in September 2011, under optional retirement (30 years FERS with minimum retirement age). Retirement would be by March 31, 2012, for the VSIP.

Two months later, in November, the RIF was canceled, and a second VSIP date established, where we could leave Aug. 31.

Since the RIF was canceled, I continue in my current position, which is where I wanted to stay, rather than where I would bump to. Also, I inquired about the six-month payment option for the VSIP and was told it was only lump sum. The VSIP statement the agency had me sign, according to DoD 1400.25-M Subchapter 1702 (SC1702.3.6.2.3) is supposed to offer three payment options. There was no payment option listed on the form (which is an in-house unserialized one-page letter). This letter included a statement that “this application will constitute my commitment to retire or resign no later than 31 Aug 2012,” which I had to initial.

Can I disregard the VSIP? I have not submitted retirement papers. Can the agency force me to retire? I didn’t think they could if I haven’t signed retirement papers. I’d like to not exercise the VSIP and stay in government employment.

Also, since the letter did not have the required payment options listed as specified by SC 1702, does that make the letter void? I had counted on the six-month delayed payment when I signed, which was one reason I signed it to begin with, as a tax issue, to be told later I had to take a lump sum in late 2012.

It seems that canceling the RIF before doing the VSIP changed the game as the RIF being imminent is what drove me to sign a VSIP.

A. If the buyout is still on AND if the RIF was canceled because enough employees accepted the buyout offer, your agency may be able to hold you to your written acceptance of one. The failure to spell out the payment options may be a weak reed on which to hang an argument that you don’t have to do what you agreed to do. You’ll have to talk to the folks in your personnel office and, perhaps, in your Office of the General Counsel to find out if you can pull back your agreement to retire with a buyout.

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Windfall elimination provision

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Q. I have 30 years with the federal government. I am under CSRS. I plan to retire in about four years, at age 55. I do not have all the credits I need to receive Social Security at age 63. I believe I will have to work one year after retirement to get my 40 quarters in. With the Social security windfall elimination provision, is there a way to figure out what my Social Security benefit will be?

A. Yes. Go to www.socialsecurity.gov/retire2/wep-chart.htm. There you’ll find an explanation of the windfall elimination provision and directions to the WEP calculator.

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Creditable service

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Q. I entered federal service Sept. 6, 1977, under CSRS. I transferred to FERS, effective Jan. 3, 1988. I resigned from federal service April 30, 2001. (I did not withdraw any of my retirement contributions.) I was born in 1952.

The FERS website states, “If you completed at least 10 years but less than 30 years of creditable service before you left federal service, your annuity will be reduced if it begins before age 62. The only exception to this is if you had at least 20 years of service and your annuity begins when you reach age 60.”

Does the “20 years of service” refer to service under FERS only? Or does it refer to combined service under CSRS and FERS? If it refers to combined service under CSRS and FERS, am I correct that there would be no age reduction for my annuity if I retire at age 60 (rather than at age 62)?

A. The quote refers to total service. So there wouldn’t be any reduction in your annuity if you applied for it at age 60.

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Part-time earnings and disability

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Q. How much money can I earn part time without negatively affecting my disability pension?

A. The maximum you can earn is 80 percent of the current rate of pay for the position you held when you retired on disability. If you exceed that amount, your disability annuity would be stopped until such time as your earnings fell below that level.

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Hearing aids and health coverage

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Q. My mother is a retired Postal Service employee and is trying to find out if her retirement insurance will pay anything for hearing aids.

A. If she is enrolled in the Federal Employee Health Benefits program, she can find that out by reading her plan brochure. If she still has questions, she can call the plan.

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FERS sick leave at retirement

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Q. I am a FERS employee and will be eligible to retire after Nov. 25. I have already received an estimate from human resources on pay. My sick leave balance will be about 400 hours at the time of my retirement. HR worked out a scenario with a retirement date of Dec. 31 and another with Jan. 31, 2013. Both showed my sick leave being worth only one month. I called and asked about the change on Jan. 1, 2013, of each 174 hours of sick leave being equal to one month of service, and that I should be able to get two months for 400 hours. HR said that may be a proposal but for now the only guideline they have is 174 = one month and 400 still only equals one month. Have you seen a policy change on when this will take effect?

A. Talk about being behind the times! On Oct. 28, 2009, the president signed Public Law 111-84, which, for the first time, allowed credit for unused sick leave to be given to retiring FERS employees. However, the credit was to be phased in. Any FERS employees retiring before Jan. 1, 2014, will only be given credit for half of their sick leave. After that, they’ll get full credit. Therefore, based on your planned retirement date, your HR people are correct.

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Military buyback

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Q. I am a guardsman who has been on continuous active-duty orders since June 2004. I was employed as a civil service technician from 1981 to 2004 (with FERS). When I went on orders in 2004, I was continued in leave-without-pay status in my civil service technician position by my Guard unit until my five-year Uniformed Services Employment and Reemployment Rights Act rule ran out in 2009, when I was forced to give up my technician position or face being placed in AWOL status. Now that I am nearing the end of my active-duty orders in October (I do not have enough active-duty time for a full active-duty retirement).

Is there a way to buy back my military time now that I am no longer an active civil servant? If so, how/who do I contact?

A. No, there isn’t any way you can make a deposit for your active duty service. Only employees can do that.

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Social Security spousal benefits

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Q. I retired under CSRS after 31 years. My gross CSRS annuity is about $3,580 a month. I’ve worked for 15 years in the private sector. I now get about $800 a month from Social Security, and my wife gets about $700/month before deducting for Medicare. Would either of us qualify for spousal benefits from Social Security?

A. Because you are receiving an annuity from CSRS, a retirement system where you didn’t pay Social Security taxes, any Social Security spousal benefit to which you’d be entitled would be affected by the government pension offset. The GPO would reduce that benefit by $2 for every $3 you receive in your CSRS annuity.

While your wife would be entitled to any spousal Social Security benefit based on your work record, she would only receive the larger of the two Social Security benefits, her own or yours.

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Law enforcement and the FERS supplement

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Q. I retired (federal law enforcement) on Feb. 29 at the age of 55. My total law enforcement time was 20 years with an additional seven years of federal service. I am receiving a partial annuity until the Office of Personnel Management has the time to finish it, which may be six or seven months. I received a lump-sum payment upon my retirement for my annual leave. I would like to take a job as a reinstatement employee with federal service. Do I lose my entire annuity if I do this? I understand that retirement deductions will be held, but I need to know if I can keep my annuity that I am receiving if I accept a federal position as a reinstatement employee.

Also, if I make more than the $14,500 limit, it’s my understanding that the additional supplement under FERS will be reduced by $1 for every $2 I make. Is this applicable at my age (55), or does this apply when I reach another age? I thought I could make as much money until I was 57 before the supplement was reduced.

A. Unless you are hired into a position that allows you to keep your annuity and the full salary of your new position, your salary will be offset by the amount of your annuity. You may earn as much as you want before you reach your minimum retirement age, which, in your case, is 56. After that, you’ll be subject to the Social Security earnings limit. In 2012 that limit is $14,640.

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Base pay vs. actual earnings

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Q. When the calculations are made for annuity payments, are actual earnings or base pay used in calculations? My base pay is higher than the actual pay in each of the high-3.

A. I believe you misunderstand the meaning of the words “base pay.” Base pay is the amount of pay from which retirement contributions are taken, not the amount you actually receive, nor the figure that is shown on a pay chart that exceeds the amount payable because of a pay cap.

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