By Reg Jones
Q. I am 59 years old with 23 years of service and six months with VISTA in 1978. My wife (56 years old, and a Washington state employee) and I are covered by Federal Employees Health Benefits. If I retire at 62 with 26 years of service, will I be eligible for FEHB coverage?
Q. I have selected a retirement date of June 28, 2014. I will be 59½ years old with 33½ years of government service. I have been FERS my whole career. If I were to marry after retirement, what is the policy for covering my future spouse on my Federal Employees Health Benefits? If I choose to want a survivor benefit for my future spouse, is it possible to change from a self-only pension to one with survivor benefits?
Q. I’m a permanent Department of the Army civilian employee under FERS. I was hired July 27, 2009, as a temporary term employee and converted to permanent status Feb. 14, 2010. I’ve had full benefits from the start of my employment, except for medical, which I started in January 2010. All of my benefits have continued without interruption (I think I had either two or three days leave without pay while on term).
I have two years and seven months of military service from the 1960s. I’ve been looking into buying back my service time, but since I don’t have the buyback numbers yet, I haven’t made a decision one way or the other.
I’m 66 years old. What would be the earliest date I could retire maintaining my pension benefits and medical insurance (vesting)?
Q. If a FERS employee goes out with a disability, where can they get their health insurance, or can they keep what they have?
Q. I am married to a retired federal employee. I have been covered on her health insurance for well over five years. She’s getting ready to have Medicare as her primary insurance and Blue Cross/Blue Shield (FEP) as her secondary coverage. Will this change anything for me on my BC/BS coverage? Will I still have the same coverage although my wife’s BC/BS is her secondary coverage?
Q. I am turning 65 in December. I am retired from the federal government and have Aetna HMO. I am also retired from the Army Reserve and have Tricare and I am 30 percent disabled from the Veterans Affairs Department (diabetic). I live in New Jersey with my wife at 59; my son is still in college at 22; my 19-year-old daughter is also in college. I work part time and use my retirement health care and Tricare to cover myself and family. I am not filing for Social Security until I am 66.
I am totally confused on Medicare Part B. I have read that if I don’t take Medicare Part B, then I don’t have Tricare. If I take Part B, do I have to pay a monthly fee?
November 18th, 2013 | annuity reduction Benefits CSRS annuity computation FEHBP FERS annuity computation Government pension offset HEALTH INSURANCE LIFE INSURANCE Military service deposits PAY RETIREMENT Retirement date SOCIAL SECURITY substantial earnings Tricare Windfall elimination provision
It’s easy to make mistakes when you are planning to retire. Some of the biggest mistakes apply to all employees; a few apply only to CSRS or FERS retirees. All can be costly. Here they are and what you can do to avoid them:
Retiring on the spur of the moment. It can be disastrous, for two reasons. First, if you hand in your retirement application at the last minute, it may contain errors that delay processing or even cause it to be rejected. Second, decisions made in haste often come back to bite you. Once committed to a course of action, it’s hard to undo it if you change your mind. If you do change your mind before you actually retire, you won’t be able to withdraw your application if your job has been abolished or it’s been offered to someone else. If you’ve already retired and want to cancel your retirement, your agency has no obligation to bring you back on board.
Confusing a salesperson with an adviser. The two are not the same. Actually, they’re opposites. One is paid to convince you to buy what they have to sell; the other is paid a fee to conduct analysis and provide you with decision support. One is your ally. The other is your adversary. Why would you trust an adversary for advice? Be skeptical of any source of “advice” that might be influenced by a conflict of interest. This is single mistake probably costs the American public more than any other when it comes to financial decision making.
Losing your health or life insurance. Make sure you are enrolled in the Federal Employees Health Benefits or Federal Employees’ Group Life Insurance programs for the five consecutive years before you retire. If you aren’t, with few exceptions, you won’t be able to carry that coverage into retirement. Here are the exceptions: you are covered by your spouse’s FEHB policy; you have been covered by Tricare of CHAMPVA, enroll in the FEHB program before retiring and the total equals five years; you enrolled in the FEHB at your first opportunity and retire in less than five years; or you accept an early retirement offer and were enrolled before the latest offer of early retirement was made by your agency.
Before you retire, check with your personnel office to be sure that you’ve met either the five-year rule or one of its exceptions.
Not getting credit for active-duty service in the military. If you served on active duty in the military, you can get credit for that time in determining your years of civilian service and have it used in the computation of your annuity. If you are a FERS employee, you’ll have to make a deposit to get credit for that time. If you are a CSRS employee, the rules differ depending on when you were first hired. If it was before Oct. 1, 1982, you will only have to make a deposit if you retire and are eligible for a Social Security benefit at age 62 (or when you retire, if it’s after age 62). If you were hired on or after that date, you’ll get credit for that time only if you make a deposit for that service. Whether you are a CSRS or FERS employee, if you’ll be eligible for or receiving military retired pay, in most cases you’ll have to waive that pay when you retire from your civilian job. You won’t have to do that if you are eligible for or receiving reserve retired pay.
Check with your personnel office to make sure that any active-duty service is recorded in your Official Personnel Folder and find out if a deposit will be required to get credit for that time.
Getting caught by “Catch-62.” If you are a CSRS employee who served on active duty in the armed forces after Dec. 31, 1956, and haven’t made a deposit for that time, you could be in for a rude awakening. If you retire and are eligible for a Social Security benefit at age 62 (or when you retire if it’s after age 62), your annuity will be reduced by 2 percent for each of those years of military service for which you haven’t made a deposit.
Determine whether you’ll be eligible for a Social Security benefit at either of those points in time. If you will, you may want to make a deposit for that time. If you won’t, don’t waste your money. Your CSRS annuity won’t be affected.
Rolling over Thrift Savings Plan assets. This mistake is usually caused by either trusting the wrong source for advice or failing to think “outside the box” a little when it comes to planning for your cash flow needs. Financial salespeople generally have to gain custody of your assets in order to be paid their commissions or fees, so naturally, their advice always includes rolling over any significant TSP sums into an IRA or other investment vehicle with higher costs. This is a formula for diminished investment performance. If the reason for leaving the TSP isn’t to enrich a financial salesperson, it’s often to gain more freedom in withdrawing TSP assets. While this is sometimes a valid reason to leave, it can often be dealt with through a combination of a lump-sum withdrawal or a series of fixed monthly distributions that will create and maintain a slush fund outside the TSP that is sufficient to meet your cash flow needs.
Focusing on wealth instead of cash flow. Speaking of cash flow, this mistake is propagated by financial professionals and journalists all the time. Much of what you’ll read and hear from financial and investment experts is aimed at maximizing economic wealth — basically your net worth. The mistake is in assuming this is your retirement goal. It’s probably not. And managing to this goal can cause serious problems for you in retirement. Paying off a fixed-rate, low-interest-rate mortgage is an example. It is often proposed that saving the interest over 10, 20 or 30 years will dramatically increase your net worth. While the validity of this proposal will vary from case to case, and is certainly debatable, it also completely misses the point that your retirement standard of living is not dependent upon your net worth but rather on your ability to generate cash flow. Having massive amounts of equity in a piece of real estate is of little use to you in making a car payment or paying for a cruise if you can’t sell the property or borrow against the equity on attractive terms.
Getting hit by the windfall elimination provision. If you are a CSRS retiree who will be eligible for a Social Security benefit, it may be reduced by the windfall elimination provision. That will happen if you have fewer than 30 years of “substantial earnings” under Social Security. The difference between the amount needed to earn four credits under Social Security and the amount considered to be substantial earnings is significant. In 2013, you would only need to earn $4,640 to get four credits; however, you would have to earn $21,075 for it to be considered substantial. (Since the Social Security Administration doesn’t know which retirement system you are in, if you are a CSRS employee, any estimate of future Social Security benefits they give you will very likely be wrong, often very wrong.)
If you’ll be affected by the WEP, know in advance how much less your Social Security benefit will be. You can get started by reading the Social Security Administration’s publication at ssa.gov/pubs/EN-05-10045.pdf.
Getting hit by the government pension offset. If you will be receiving a CSRS annuity, any spousal Social Security benefit you may be entitled to will be reduced or eliminated by the government pension offset. The GPO will reduce those Social Security benefits by $2 for every $3 you get in your CSRS annuity.
If you’ll be affected by the GPO, you need to find out how great the impact will be. That’s because it isn’t uncommon for the GPO to wipe out those benefits. You can learn more at ssa.gov/pubs/EN-05-10007.pdf.
Relying on emotion instead of reason. This mistake is so common, it’s the norm. It also has the potential to cause disaster. There have been books written about this mistake and how to avoid it, yet the behavior continues to be rampant. If you’re going to get the most of what you want from what you have, you need to realize that markets have evolved to take advantage of your fear and greed, which are amazingly predictable, and turn them against you. The investment markets aren’t fair; they’re like poker games, and trust me, you’re not the best player in the game. If you want to survive and, better yet, enjoy the game, you need to rely on a strategy that acknowledges the odds you face, accepts them and uses reason to turn them to your favor.
Failing to account for inflation. Inflation is a pervasive threat to any retirement plan. Not so much inflation in general, but differential rates of inflation among the various incomes and outflows that affect your plan. Your expenses will inflate, over time, at varying rates, while your income may or may not keep pace with that inflation. CSRS annuity and Social Security income increase with the Consumer Price Index (for now), FERS annuity income increases less than the rate of inflation, and many other pension and annuity income streams either don’t increase at all or increase at a fixed rate. Differences in these inflation rates can have a profound impact on your financial picture in retirement and failing to properly account and plan for this impact can leave you without the resources you’ll need to live the life you’ve been expecting years, or decades, down the road.
Q. I retired in 2003 after 32 years as an air traffic controller. I will reach age 65 in August 2014. My wife will not reach age 65 until March 2017. I am enrolled in the Blue Cross of Idaho Federal Employees Health Benefits plan. I have questions about Medicare.
1. If I sign up for Medicare, I understand it become my primary provider. Will my FEHB premiums be reduced, or will they stay the same?
2. Will my wife continue under FEHB until she reaches age 65?
3. Do you have any literature concerning the transition to Medicare from FEHB where the spouse will not be on Medicare for three years after me?
Q. My husband has been a federal worker for 20+ years and is 56 years old. Because my health insurance is cheaper at my nonfederal job, we have been on my work health plan. We both want to be on the federal health plan when he retires. How long does my husband have to be on the federal health plan before retirement so he is covered after retirement? When do I have to join the federal health plan so I am covered after retirement?
Q. Do I lose my Federal Employees Health Benefits coverage if I am retired and I turn 65?
Q. How will the Affordable Care Act affect our health insurance that we selected through Federal Employees Health Benefits. We have Cigna through NALC. What do we need to do, if anything?
Q. I am a federal employee at Fort Drum, N.Y., with a self-and-family Federal Employees Health Benefits program enrollment. I have two daughters: one is 25 and still in college the other is 22 and works full time in a job that offers insurance. Can I keep her on my policy so she does not have to pay the high premiums?
Q. I am looking at the Trust Fund Data of Social Security & Medicare Tax rates from the Social Security Administration website. For the year 1971-72, I see a 4.6 withholding rate under OASDI and .600 under HI.
Would a federal employee covered under CSRS in 1972 have paid the 0.6 percent into Medicare? I know they would not pay the 4.6 under OASDI.
Q. I will have been on Federal Employees Health Benefits insurance for more than five years when I retire. However, for now, I am covered by my wife’s plan, which she can’t carry into retirement (she’s a teacher). I’m enrolled as self only in a cheap plan that I don’t intend to carry into retirement. Prior to retirement, will I be able to change to a better plan and add my wife to that plan?
November 15th, 2013 | annuity reduction Coverage after retirement Deferred retirement Eligibility EMPLOYMENT HEALTH INSURANCE Minimum retirement age MRA + 10 PAY Postal Service Re-enrollment Resignation RETIREMENT Special retirement supplement
Q. I am 49 and was wondering if I can retire at 52 with 20 years of Postal Service time even though my minimum retirement age is 56. If so, could I defer my pension until 60 and collect it then with a 5 percent penalty for each year before 62? Would I be eligible to continue my health benefits and collect the special retirement supplement until age 62 if I were to do that? Or would I have to use my MRA+10 computation to retire? If that is the case, would I then be able to continue my health benefits and receive the special retirement supplement at 56?
Q. My husband is 65 and planning to retire from the federal government the first of the year. He just signed up for Medicare A. We were planning to keep the Federal Employees Health Benefits Blue Cross coverage at $300 per month for both of us. We would rather not pick up Part B because of the cost. We have been advised by several agents not to pick up Part B. We were told we would “lose our open enrollment” status if we picked up Part B now. What does that mean?
If down the line in a couple of years or so, we decide to pick up a Medigap plan instead of the Blue Cross plan, will we have to pay the Part B penalties for late enrollment even though we have had Blue Cross coverage all along?
Q. In 1997, I retired from the federal government at age 58. I will soon be 74. When I became eligible for Medicare, I chose only Plan A, since most of Plan B would have duplicated my Blue Cross/Blue Shield benefits. My wife is 59, and went on Social Security disability in 2008. She chose only Plan A of Medicare for the above stated reason. Now, I am rethinking my situation. If we were to apply for Plan B, would we be required to pay the 10 percent annual penalty for each year because we chose not to take Plan B? If so, that would make it unaffordable. Or, will my creditable coverage over those years result in a waiver of the penalty?
Q. I was employed by the federal government between 1978 and 1985. Both my first wife (as my dependent) and I were insured by the government plan. I worked in private business from 1986 to 2007, divorcing in 1997. I remarried in 2001. My second wife’s benefit plan was more extensive, and her plan covered me as a dependent for the past 12 years. I am still covered by her plan as a secondary. In 2007, I returned to the federal government, but did not take the Federal Employees Health Benefit plan, as I was still covered by my wife’s plan. Last year, I learned that even though I can take the FEHB after I retire in two years, which I plan to do in 2015, when I will be 68, my wife may not be able to be covered under the government plan. I signed both her and myself up for FEHB in January. Since she will only be 63 when we retire in 2015, I will not have been in the plan for the five continuous years prior to then. Does that mean there is no way for her to have coverage as my dependent? If that is the case, is there any mechanism by which we can buy into the plan or circumstances under which she could be eligible? Does the dependent coverage I provided for my first wife for seven years count in any way?
Q. My Illinois United Health Care of the Midwest increased by $261 per month to $742 a month. I don’t understand this, and I called them for an explanation, but no one could provide one. Isn’t this increase abnormal?
Q. As a government civilian, you have the benefit to carry your Federal Employees Health Benefits into retirement provided you:
1. Are eligible to receive an immediate annuity.
2. Are insured on the date of retirement (or covered as a family member under the FEHB program), and
3. Have been covered for the five years of service immediately preceding retirement or since your first opportunity to enroll.
The decision to accept a reduction in force and move to unemployment is one option, but would you lose the right to carry FEHB into retirement because your were separated by the RIF. If you retire, you only need Medicare Part A as Part B is waived (do not have to pay the premium) because you can carry the FEHB medical with you. So is it true that if you want to carry the FEHB, you have to retire not accept the RIF?