Ask The Experts: Retirement

By Reg Jones

WEP

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Q. I worked four years under CSRS and drew the retirement funds out and did not pay them back. When I was reinstated, it was under the CSRS Offset. I retired and drew the CSRS Offset but did not apply for my Social Security benefits until I reached age 66 in October. I just got notified by Social Security that I would be subject to the windfall elimination provision from my Social Security check. Is this correct? I have 29 years and three months of substantial earnings, according to their table for substantial earnings. Actually, for these years, I far exceed that amount on their table. They have given me 30 days to submit additional information to them, and that time is running out. I have tried to research this myself from a number of publications both by OPM and Social Security and the information seems to be conflicting.

A. The fact that you withdrew your CSRS retirement contributions doesn’t alter the fact that a portion of your annuity will come from that period of service. Therefore, you are subject to the windfall elimination provision. However, if you have 29 years and three months of substantial earnings under Social Security when you retire, the reduction in your annuity would be minimal.

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Voluntary vs. mandatory retirement

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Q. I am eligible for retirement March 21 as a law enforcement officer under FERS. I will have 20 years of law enforcement experience and am age 56. Because I turn 57 in October (seven months later), I will be forced to retire Oct. 31.

Aside from the extra approximately $8.56 per month I will get in my annuity for each month I stay after March and the benefit of having a full salaried job for seven more months, is there any advantage to me retiring under mandatory retirement age versus voluntary?

The combination of my projected annuity and special retirement supplement provides me with a net of approximately $500 per month less than what I currently take home.

My intention is to get a part-time job to bridge the $500 gap not to exceed the maximum allowed wage of $14,640 so as not to affect my Social Security.

Also, I heard from a retirement counselor who said if you wait until you are forced out, you might qualify for unemployment benefits depending on your state.

A. While the final decision is up to your state, it’s unlikely that you’d be eligible for unemployment benefits.

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Leave usage

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Q. I plan on retiring in the near future. I will have around 300 hours on annual leave at that time.  Is there any Office of Personnel Management guidance that discusses my option to take the leave immediately prior to retirement rather than being paid for that leave at retirement?

A. There is no such thing as terminal leave in the federal civilian service. Therefore, you don’t have a choice. While you can take annual leave at such time and in such amounts as are approved by your supervisor, you can’t burn it off.  Just be happy that your unused annual leave will paid to you at the hourly basic pay rate you are receiving when you retire.

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401(k) rollover and military buyback

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Q. My husband has 10 years of Air Force service and is in the process of negotiating to take a federal position. To buy back his service, is it possible to use a 401(k) rollover? I am thinking not, since a rollover is only allowable to an IRA or other “qualified plan.” We certainly can take a direct taxable distribution of a portion of that 401(k) plan and use that money to buy back, but he wondered if it can be done with the rollover.

A. No, it can’t.

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Medicare Part B penalty

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Q. I am 68 years old and signed up for Medicare Part A before my 66th birthday. I have not signed up for Part B for several reasons.

1. My husband is 60 years old and we have insurance coverage with Federal Employee Plan Blue Cross/Blue Shield.

2. We are posted out of the country, in the Czech Republic.

3. I have no occasion here to use Medicare or incur its costs.

Health costs are self-paid upfront in full and then partially reimbursed by our insurance company.

I believe individuals are penalized 10 percent per year for not signing up for Medicare when they are 66.

It will have been five years past that stipulation when we return to the U.S. and I am 70. My husband swore an oath of availability for worldwide service when he joined the State Department.

Why will I be penalized up to 50 percent for not acquiring Part B, a service that I don’t need and cannot use?

A. Because you were either enrolled in or covered by a group health plan when you first became eligible to get Medicare Part B, there won’t be any penalty. Under special enrollment period rules, you may enroll during any month that you are covered by a group plan or during the eight-month period that begins the first full month that you are no longer covered under that plan based on current employment. Whether you decide to enroll in Part B or not is up to you. Just check with your plan to find out how your decision will affect your plan benefits.

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Retirement application

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Q. I am in the process of completing my CSRS SF2801, Application For Immediate Retirement. Concerning Section B, Federal Service, block 5: “Are you receiving or have you applied for military retired pay?” I am retired from the Air National Guard and receiving monthly retirement pay. Should I answer yes to this because I am receiving retirement pay for reserve service, or does this question only apply to active-duty retirees?

A. It applies only to military retired pay, not reserve retired pay.

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Special retirement supplement

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Q. I am planning to retire this year at age 60 with 29.7 years of service under FERS. I understand that I will receive the annuity plus special retirement supplement. However, as a widow, I am also allowed to receive my husband’s Social Security payment at age 60. Does this reduce the special retirement supplement? Also, does the special retirement supplement act as earned income under the Social Security earnings test? Finally, does the check you receive after you retire for annual leave count as earned income under the Social Security earnings test?

A. Only earnings from wages and self-employment count. Therefore, the special retirement supplement doesn’t count. However, your lump-sum payment for unused annual leave does. Fortunately, you’ll be covered by the “first year rule,” which usually eliminates the possibility that your special retirement supplement would be reduced.

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OASDI and taxes

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Q. I recently started working part time. I requested taxes be deducted from my payroll.  I note that I am being taxed old age, survivors and disability insurance. Is it a mandatory tax if I’m already retired?

A. Yes. Anyone who has earnings from wages or self-employment is required to pay that tax, even if he or she is already receiving a Social Security benefit.

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Rehire

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Q. I did early retirement in 2005 by way of a buyout. I receive an annuity. What would the issue be if I return to federal service now?

A. Because you didn’t meet the normal age and service requirements to retire, when you went back to work, your annuity would stop, and you wouldn’t be able to retire again until you did.

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Medicare and Blue Cross/Blue Shield

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Q. I’m a federal retiree who is considering changing to Blue Cross/Blue Shield Basic during the next open season. How does Medicare Part A work in conjunction with BC/BS Basic? Which would be the primary?

A. Medicare would be primary and your Federal Employees Health Benefits plan secondary. To find out how the two benefits would be coordinated, check with your plan.

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FERS employment and computation dates

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Q. I am a FERS employee with approximately 28 years of service. Do service computation dates for leave normally vary substantially from service computation dates for retirement? What factors might cause an SCD for leave to be different from an SCD for retirement? At the beginning of my career, as an AF dependent, I worked GS jobs overseas on excepted appointments. I know I received credit for SCD for leave for that service, and I assume I received credit toward retirement from the time served in those appointments as well.

A. The rules governing leave accrual rates and retirement are different.

Those for leave are more encompassing, while those for retirement are more restrictive. For example, periods of employment after Jan. 1, 1989, from which retirement deductions weren’t taken are never creditable under FERS.

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Military and federal service and retirement

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Q. I served four years in the Navy and four years in the Army consecutively, and two tours in Vietnam in the Navy. In mid- to late 1987, I began working at the Federal Bureau of Prisons under FERS as a correctional officer.

I worked for 11-plus years in the prison system and left. I cashed out my TSP. I am 59.

With nearly 20 years of service, if I were to return to federal employment and work for several more years, would I qualify for retirement and a federal pension?

A. Yes. If you didn’t take a refund of your contributions when you left, you’d get credit for that period of service. If you did, you’d have to redeposit that money, plus accrued interest, to get credit for it.

You didn’t mention whether you had made a deposit to get credit for your periods of active-duty service. If you did, those years would be included in determining your total years of service and in your annuity computation. If you didn’t, they wouldn’t. You could get credit for them by making a deposit to the retirement system, plus accrued interest.

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CSRS retirement money source

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Q. I’ve been a federal retiree under the CSRS for more than 25 years. I am curious about the fact that I have received in monthly benefits more than 10 times the amount I and my employer, the federal government, contributed during my 30-plus years of employment.

I am aware that CSRS was phased out more than 25 years ago with consequent reduction of new contributions from the existing employees.

(The Social Security System has a continuous source of new funds to pay into its trust fund, an advantage CSRS lacks.) What is the source of the extra funding that has paid me benefits (as well as other CSRS retirees) apparently tenfold more than the original contributions?

A. CSRS and FERS benefits are paid from the Civil Service Retirement and Disability Trust Fund, which is financed through employee, agency and government contributions. Any amounts not needed for the immediate payment of benefits are retained in the Treasury. As you suspected, contributions made by employees to FERS and CSRS provide only part of the revenue needed to meet the cost of paying benefits. The rest comes from general revenue acquired through the federal government’s taxing powers.

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Retirement money from three places

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Q. I retired with 30 years of active-duty service and plan to retire at 62 with 14 years of civil service retirement. How will my retirement for each be affected, if at all, with respect to Social Security benefits? Will I receive social security at all? Thank you.

A. You’ll be able to receive you military retired pay, a FERS annuity based on your FERS service and a Social Security benefit. The Social Security benefit will be based on all your years of Social Security-covered employment.

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Survivor annuity

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Q. I am a CSRS employee. If I elect survivor benefits and my nongovernment spouse dies before I do, will my annuity return to the full amount? If I should die before him, will he receive my full amount or the survivor amount? Does it matter if I elect a lower survivor benefit annuity — that is, not 55 percent?

A. If you elect a survivor benefit for your spouse and he dies before you, your annuity will be restored to what it would have been if you hadn’t made that election.

If you die before he does, he’ll receive 55 percent of the annuity you were receiving when you died. You may only elect less than a full survivor annuity with the signed and notarized consent of your spouse.

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Medical coverage

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Q. My husband is a retired federal employee and has Blue Cross Standard through the federal government. If he dies before I do, can I keep the medical coverage? And should we consider going to the basic Blue Cross Blue Shield plan if we have Medicare Part B?

A. As long as he is enrolled in the self and family option and you are receiving a survivor annuity, you will be able to continue that coverage.

Whether you should change your FEHB coverage level if you have Medicare Part B is something you’ll have to figure out for yourselves. You can do that by comparing the benefits, coinsurances and deductibles.

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Disability, military and federal service, and retirement

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Q. I retired in 1993 with 24 years of service and 30 percent disability. I am a government employee under FERS with 12 years. When I retire, will I able to receive both FERS and my military retirement pay without a reduction in pay?

A. You would be able to receive your military retired pay and an annuity based solely on your years of actual FERS service.

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CSRS and military service and Social Security

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Q. I retired from the Department of Veterans Affairs after 42 years of CSRS service. I also retired from the U.S. Army Reserve with 31 years of service. In the Reserve, I paid into the Social Security system. I always understood that I would not receive Social Security payments due to the windfall elimination provision or government pension offset. However while I was visiting a Social Security office on another matter, a rep told me that because I paid in for more than 20 years, I would receive a percentage of my Social Security entitlement. Is this true, and if it is, where can I find this information? I will be 66 in 18 months.

A. The windfall elimination provision reduces but doesn’t elimination a Social Security benefit. And it only reduces it if you have fewer than 30 years of substantial earnings under Social Security. You can find out more about the WEP and how it might affect you at http://ssa.gov/pubs/10045.html.

The government pension offset only applies to the spousal Social Security benefit of someone receiving an annuity from a retirement system where he didn’t pay Social Security taxes, such as CSRS. In most cases, it will eliminate that benefit. You can find out more about the GPO at http://ssa.gov/pubs/10007.html.

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Federal and military employment and retirement

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Q. Hello, I have seen many questions about getting credit for military service when retiring under FERS, but I wonder if it works the other way, too. If a person was in the military, separated from service and worked for the federal government under FERS, and then went back into the military, is his FERS time creditable to his military retirement?

A. No.

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Adding family member to health paln

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Q. I have been a federal employee for five years and have covered myself and my minor child under the BCBS basic family plan. My husband is disabled and receives Medicare for his primary and his employee plan for his secondary health insurance. His employer plan’s monthly premium has become expensive, and it would be more cost-effective if he were on my plan. Can I add him to my family plan during open enrollment?

A. Yes.

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