Ask The Experts: Retirement

By Reg Jones

Annuity reductions

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Q. My wife is a CSRS Postal Service employee with four years of military time and will retire in February with 36 years total. She did not pay back her military time. She was told by the post office that Social Security would deduct the money from her check when she reaches 62.

1. My wife does not plan on trying to collect Social Security at age 62, so will they still lower her retirement check?

2. I was told during a civil service retirement seminar that if she waited until age 68, she could go back to work and earn Social Security credits without a reduction to her CSRS postal retirement check. Is this true?

3. I will soon be a CSRS retiree (Jan. 3). I paid my military buyback. If I go back to work and earn enough for Social Security and I were to die, would my wife’s retirement check be reduced if she applied for my Social Security benefits?

A. 1. Because your wife is eligible for a Social Security benefit, at age 62 her annuity would be automatically recomputed to eliminate those four years, unless she makes a deposit to get credit for that time before she retires. Note: Unless your wife has 30 years of substantial earnings under Social Security, her Social Security benefit will be affected by the windfall elimination provision. The WEP will reduce but not eliminate that benefit.

2. Yes. Anyone who reaches full retirement age can earn as much as they want without it affecting their Social Security benefit.

3. If you become eligible for a Social Security benefit, that benefit would be affected by the WEP. Any Social Security spousal benefit to which either of you would be entitled would be affected by the government pension offset provision. The GPO would reduce that benefit by $2 for every $3 you receive in your CSRS annuities.

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Earnings limit

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Q. As a CSRS Offset employee for retirement purposes, what are the dollar limits on either federal employment or private employment after retirement and receiving your pension? Are there tax implications?

A. If you return to work for the federal government, in most cases your annuity will be reduced by the amount of your Social Security benefit. On the other hand, working in the private sector would have no effect on it. Note: When you are eligible for a Social Security benefit at age 62, two things will happen: First, your CSRS annuity will be reduced by the amount of Social Security benefit you earned while a CSRS Offset employee, whether or not you apply for that benefit. Second, if you were receiving a Social Security benefit, it would be subject to the Social Security earnings limit. Your benefit would be reduced by $1 for every $2 you received in earnings from wages or self employment that exceed the limit, which, in 2012, is $14,640.

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Why keep the sick leave?

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Q. I will have 28.75 years with the Postal Service in FERS when I’m eligible to take the Voluntary Early Retirement Authority offered for Jan. 31. With half of my eight months of sick leave, I will have another four months credited to me. I will be 56 years old in January, so this is a real birthday present!

I understand that my FERS annuity will not be reduced because of the VERA. So, if my annuity is not reduced before I would retire with 30 years of service because of the VERA offer, is there any incentive to keep my sick leave before I retire?

Is that extra four months of leave advantageous to me in any way? Is retiring with 28.75 years any different from retiring with 29 years of service when an employee retires through a VERA? (I don’t plan to call in sick for the next few months. I just wondered if I still get “credit” for that accumulated sick leave).

A. I think you misunderstand what no reduction in your annuity means. It doesn’t mean that you’ll get the annuity you would have had if you’d worked for 30 years. It means that your annuity won’t be penalized by 5 percent per year for retiring before you reach age 62.

Your FERS annuity will be computed using your actual service plus half of your unused sick leave. It will only be half because you’ll be retiring before Jan. 1, 2014. Four months of sick leave would increase your annuity by 1/3 percent.

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Retirement date

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Q. I am contemplating retiring Dec. 31, Jan. 2 or Jan. 3. I am not sure how the CSRS annuity check is computed. Based on a full month? Or if I retire during the month, is it prorated, or is that month lost.

1. When does my CSRS pension start if I retire on Dec. 31? Do I receive an entire month’s (January 2013) pension check? When would I receive it?

2. If I retired on Jan. 2 or 3, when would I receive my annuity check? Is it prorated for January?

3. Also, since the leave year ends Jan. 12, would it be advantageous to retire on that date? When would I receive my annuity, and would it be prorated?

A. 1. If you retired Dec. 31, you would be on the annuity roll in January with a benefit payable Feb. 1. When you actually began receiving your annuity would depend on two things: when your agency got your paperwork to the Office of Personnel Management and when OPM processed it.

2. If you retired Jan. 2 or 3, you’d be on the annuity roll in January, but your annuity for that month would be reduced by 1/30 for every day you weren’t retired.

3. If you retired after Jan. 3, you wouldn’t be on the annuity roll until February, with the first annuity payment due March 1.

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Special retirement supplement

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Q. I am planning on retiring in February. At that time, I will be 60 years old and will have 27 years under FERS.

1.  Am I entitled to the special retirement supplement?

2.  Does receiving the supplement affect my Social Security payment at age 62?

3.  How long after retiring can I expect to receive my first payment, and roughly how much will it be?

4.  Are state and federal taxes deducted from it?

A. 1. Yes.

2. No. The special retirement ends at age 62 when your Social Security benefits begin.

3. I have no idea. However, the Office of Personnel Management has improved the speed at which it puts retirees into interim pay. Receiving the first full annuity payment takes longer. Since I’m not a psychic, I can’t tell you what your annuity will be. I can only give you the formula and let you take it from there. Here’s the formula: .01 x your high-3 x your years and full months of service.

4. Yes. However, you will be able to adjust the amounts, if you wish to do that.

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Health insurance change

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Q. If I change my health insurance to self-only (due to my wife having insurance through her company) and I retire next year, can I add her back to mine if she loses or changes jobs. I ask because it’s open season and I plan on retiring the end of May from the Postal Service. I have my minimum retirement age and 31 years, three of which are my military buyback.

A. As a retiree, you could change from self-only to self and family under Qualifying Life Event 2G. And you could do that from 31 days before through 60 days after her loss of coverage.

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High-3 calculation and leave without pay

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Q. I am a Postal Service employee under CSRS. I am planning on taking the incentive and retiring Jan. 31, which will give a total of 34 years and nine months of service including sick leave. I have used approximately 3,700 hours of leave without pay over my entire career with the maximum used in one year being 408.46 hours and the minimum being zero.

1. It is my understanding that any LWOP used during that time, as long as it does not exceed six months in any year, will not affect my length of service used to determine my retirement annuity. Am I correct?

2. My base pay for the past three years — 2010, 2011, 2012 — is the same: $53,102. During each of these years, I have used some LWOP time: 178.51 hours for 2010, 71.8 hours for 2011, and 115 hours for 2012. Will the dollar amount used for my high-3 be my base pay of $53,102 for those three years, or will my base pay amount be reduced by the amount of LWOP I have used in each of those years. For example, will my base pay for 2012 be reduced by 115 hours of LWOP times my hourly rate for a total of approximately $3,000? Or will my base pay of $53,102 be used?

A. Being on leave without pay for less that six months in a calendar year won’t affect your years of service, nor will it affect the high-3 used in the computation of your annuity.

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WEP

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Q. I worked in high school and through college paying into Social Security and earned 28 quarters. From 1974 to 2009, I worked under CSRS and paid no Social Security. Upon retirement, I collected my monthly annuity from CSRS, then started working in private sector and will get my 40 quarters in January. I turned 62 in October. How is the reduction computed for my monthly Social Security payments? My monthly retirement is around $6,500 from CSRS.

A. Your Social Security benefit will be affected by the windfall elimination provision. The WEP reduces the benefit of anyone who is receiving 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 your Social Security benefit would be affected, go to www.ssa.gov/pubs/10045.html.

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Sequestration and retirement

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Q. I am part of CSRS set to retire Feb. 1. However, with the fiscal cliff looming and consideration of a change to the retirement calculation based on a high five years of performance, should I consider retirement in 2012. How quickly could retirement criteria change, and could this change affect those of us who are considering retirement in the next few months?

A. There is no way to know what the future will hold. Nevertheless, things will become clearer as we get closer to the so-called fiscal cliff. The best you can do is keep your eyes and ears open. While changes are usually prospective and contain some lead time, these are not usual times.

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Leaving Medicare Part B

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Q. The cost of optional Medicare Part B coverage goes up by $60 this year and a lot more the year after.  I want to rescind this coverage.  Am I right in assuming that it is still optional?

A. Yes, enrollment in Medicare Part B is optional. Call the Social Security Administration at 1-800-772-1213.

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Military buyback

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Q. Can I buy back my reserve schooling and my summer camps that are active duty on my chronicle statement?

On SF 50 block 31, if I buy back three years of my active duty from my reserves and I started in 2005 for the civilian federal government, is it supposed to be counted from 2002?

It’s now 2012. Does it mean I have 10 years of federal time?

I retired out of the Army Reserve with 20 years. Out of those 20 years, I have two DD-214s — one for basic and Advanced Individual Training and one for Afghanistan service. Both of them add up to one year and 10 months. If you add all of my annual training and schooling that is active duty, it comes to more than three years. I have bought back one year and 10 months. They don’t issue a DD-214 for 90 days or less, I was told.

A. Instead of trying to answer your questions one by one, I’m going to provide you with a short course on how you can get retirement credit for active-duty service.

While you received credit for your active-duty service in determining your annual leave accrual rate, as a FERS employee, you may only get credit for periods of active-duty service for retirement purposes if you make a deposit to the Civil Service Retirement and Disability Fund. The deposit equals 3 percent for periods of active-duty service prior to Jan. 1, 1999, and after Dec. 31, 2000. For periods of service during 1999, the deposit equals 3.25 percent, and for periods in 2000, 3.4 percent.

No credit is given for annual active duty for training unless it was performed before you became a federal civilian employee.

To find out how much active-duty service you have that can be credited for retirement purposes, fill out a copy of Form RI 20-97 and mail it to your military finance center along with any DD-214s or other evidence of active duty. When you find out what those periods were and the earnings you received, take it to your payroll office along with a copy of Standard Form 3108 and copies of your DD 2142, etc., and ask for an estimate of the deposit required. If you decide to make a deposit, they’ll tell you how to do that, either in a lump sum or regular payments. Note the RI and SF forms can be downloaded at www.opm.gov/forms.

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CSRS Offset

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Q. I am a CSRS Offset employee. I am 65 years old with 32 years of federal service and will retire Jan. 3. I will turn 66 in March. When I retire, $675 will be deducted from my monthly annuity — not much left to retire on. The benefit counselor told me to apply for Social Security now to start receiving in January. If I do that, would my Social Security be reduced since I’ll be two months short of being 66 years old?

A. While it’s true that your CSRS annuity will be reduced by the amount of Social Security benefit you earned while a CSRS Offset employee, if you apply for a Social Security benefit when you retire, you’ll receive the same amount of money. It will just come from two different places: the Office of Personnel Management and the Social Security Administration. Applying for a Social Security before reaching your full Social Security retirement age of 66 would reduce your maximum Social Security benefit by a few percent. It’s up to you to decide whether to have a seamless transition to retirement and receive a slightly lower Social Security benefit or have a financial bump and then be back on track with a slightly higher Social Security benefit.

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Leave without pay

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Q. I am retiring Jan. 31. I am out on medical leave. Can I use leave without pay for two months so I won’t have to return to work prior to retiring?

A. That’s entirely up to your agency. You’ll need to discuss the matter with your supervisor.

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Retirement date

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Q. I will be retiring Jan. 31 from the Postal Service, taking advantage of the incentive offer that requires that date as your retirement date. Jan. 31 is a Thursday and a regular workday for me. Do I report for work that day? If that is the case, isn’t my effective retirement date Feb 1? Essentially, is Jan. 31 my last day that I will be at work, or is Jan. 31 my first day of not going to work?

A. You will be retiring at the close of business on Jan. 31. You’ll be on the annuity roll Feb. 1.

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Special retirement supplement

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Q. I’ve been given the opportunity for an early retirement at the Postal Service in January, but I probably won’t take it. I’m in FERS. If I retire at my minimum retirement age of 56 in August, will I also be able to get the special retirement supplement without the Postal Service offering a monetary incentive to retire? What I’m trying to determine is whether the supplement is only offered under certain circumstances.

A. The special retirement supplement is paid to FERS employees who retire on an immediate, unreduced annuity when they reach their minimum retirement age. The following age and service combinations qualify for the SRS: 60 with 20, MRA with 30, and early retirement at 50 with 20 or at any age with 25. MRAs range between 55 and 57 depending on the employee’s year of birth. The presence or absence of a buyout has no effect on a retiree’s entitlement to the SRS.

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Suspension of FEHB coverage

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Q. I am a federal employee with 32+ years of civil service, planning on retiring in the next five years. I have been enrolled in a Federal Employees Health Benefits plan throughout my career. My husband retired from active duty Aug. 31 with 23+ years. We had dual coverage under Tricare and FEHB since August 1995, with FEHB being primary and Tricare as secondary. Now that my husband has retired, to continue to be covered under Tricare, he had to sign up for a specific Tricare plan, for which we are now charged a monthly premium. We are trying to determine whether or not we should cancel the FEHB and save the $3,500 per year. The Tricare representatives advised my husband that we should suspend the FEHB and not cancel it, so if we decided at a later date to re-enroll in the FEHB, we could. I have also read that if I don’t have FEHB for five years prior to retiring, I won’t be able to sign up for FEHB coverage when I retire, but that I can include the time in Tricare toward that five years.

I went to the BENEFEDS and Office of Personnel Management websites and contacted a benefits and entitlements counselor through the Employee Benefits Information System to ask this question, but I am receiving conflicting information.

1. Can I suspend my FEHB and re-enroll, as long as it is during open season, at any time?

2. Can I cancel my FEHB and re-enroll, as long as it is during open season, at any time?

3. So if I cancel/suspend my FEHB and retire in five years, can I count the time in Tricare toward being enrolled in a FEHB plan?

4. If I cancel/suspend my FEHB and am no longer covered under Tricare (through no fault of my own) I can re-enroll in FEHB plan at any time; I don’t have to wait for an open season?

5. Can I sign up for a dental plan and/or a vision plan under the FEHB without being enrolled in a FEHB plan?

A. You can suspend your coverage in the FEHB in favor of Tricare. If you do, you could reactivate that coverage at any time if you were to lose Tricare coverage sometime in the future. If you canceled your FEHB coverage and were still employed, you could re-enroll at a later date; however, you would be required to maintain that FEHB coverage for five consecutive years to be able to carry it into retirement. If you canceled that coverage and retired, you wouldn’t be able to re-enroll. Retirees cannot re-enroll in the FEHB program. Finally, dental and vision coverage isn’t tied to enrollment in FEHB.

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High-3 calculation

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Q. I am a Postal Service level 21 employee, and will retire with about 41 years and 11 months in early 2013 with my high-3 close to my frozen level 21 value. When I retire, I will have been detailed to a level 23 position for about a year and a half, with a modest increase in pay during that time. Will the Office of Personnel Management use only my level 21 pay for annuity calculations or will the detail/higher level pay be considered?

A. A high-3 is based on the highest three consecutive years of average salary from which retirement deductions are taken. If retirement deductions were taken out of your pay while you were detailed to a level 23 position, it would be included in your high-3.

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WEP

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Q. I retired from civil service March 31 after 45 years and nine months under CSRS. Before that, I served three years in the military (1962-65), and other private industry jobs throughout the years went to Social Security to earn 40 quarters. At age 65, I started drawing a Social Security pension. Now, Social Security says it is reducing that check by half and I have to repay half of what was paid to me since April 1 unless I can prove it was not my fault I received the money. What? This all because I retired and started drawing my CSRS pension. What did they expect me to do, work until I drop dead? Why am I being penalized for working for the government?

A. Because you are receiving an annuity from a CSRS, a retirement system where you didn’t pay Social Security taxes, you are subject to the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who has fewer than 30 years of substantial earnings under Social Security.

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Sequestration and retirement

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Q. My plan is to retire Jan. 1, 2014. I am 66 years old and, as of Jan. 1, 2013, will have 33 years of government service under CSRS. If sequestration happens and I lose my job, will I be able to apply for retirement at that point, or will it be lost?

A. Since you already meet the age and service requirements to retire, you could do that at any time. Sequestration would have no effect on your entitlement to an annuity or its payment to you.

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Military buyback, Social Security, high-3 and TSP

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Q. I have 33 years in and am under CSRS. I will be 60 years old in May. I served less than two years in the Army in my 20s. I am a WG-8 making almost $25 an hour. I receive correspondence statements from Social Security that if I retire at age 62, I would be eligible for approximately $300 based on a second job 12 years ago and jobs before joining the government in the 1980s.

1. Should I buy back the time I have in the Army?

2. Will the buyback help increase my Social Security? Or will the money from Social Security lower my pension?

3. Should I get a part-time job to increase my Social Security benefit? I know I am not eligible for disability based on not having 40 quarters, but will the small amount of time I have paid into Social Security help or hurt me when I want to retire at 62?

4. Is there anything current on whether the top three years will be changed to top five? And, if it gets changed, should I retire before it is implemented?

5. Are there any ways to increase my pension other than saving with the Thrift Savings Plan or getting a second job (see above question)? I have reservations with TSP because of the taxes. I have money in it but am not saving. My understanding is I can’t touch it without penalty until age 62. Is this correct?

A. Reg: Because you were first employed before Oct. 1, 1982, you’ll get credit for your active-duty service in determining your eligibility to retire and in your annuity computation. If you aren’t eligible for a Social Security benefit at age 62, your annuity won’t be affected. The Office of Personnel Management only checks once, at age 62, if you are already retired, or when you retire if it’s at age 62 or later.

If you take a job after retirement and earn enough credits to be eligible for a Social Security benefit, it 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.

Mike: You’ll have access to your TSP money, without any early withdrawal penalty, as soon as you retire from federal service.

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