By Reg Jones
Q. I have insurance payments taken out of my survivor annuity check each month. Are they pretax?
Q. I am 65, have worked for USDA intermittently since 1965 (recurring and temporary in the early years) and have been in my present position with USDA-ARS since 1999. I plan to retire (in FERS) in two or three years. My insurance provider for more than 10 years has been Blue Cross/Blue Shield Federal Employee Program. I am signed up for Medicare Part A. My wife, several years younger than I, is a health provider in private practice. She and my two children (elementary school age) are now covered under the federal employee plan above. My understanding is they can remain covered by the plan when I retire (although some aspects of plan coverage change because of my enrollment in Medicare Part A). After retirement, can I continue to pay premiums (covering me and my family) of the same amount as I now pay? In other words, will the U.S. government continue to pay the same portion of the premium as it does now?
Q. I am a CSRS employee. Upon retirement, I would like to know what minimum percentage/amount of survivor benefit has to be in effect for my husband to continue to receive health benefits if I pre-decease him. Does the annuity have to be enough to cover the premium? If so, what would happen if the insurance rates increased dramatically over time and the annuity no longer covered 100 percent of the premium? My husband is willing to provide a notarized “less than all” annuity base. The bottom line is that I want to carry only enough survivor benefit to ensure health benefits.
Q. I retired as a GS-14, CSRS employee, at 30 years. If I take a GS-15 position, does the retirement stop, or is the pay just offset by the amount of the annuity? Do you pay into the CSRS retirement fund or FERS, or can one defer? Does health insurance continue from the retirement or from the new payroll?
Q. It seems to me that if I choose to take Medicare Part B with my Blue Cross/Blue Shield standard Federal Employees Health Benefits insurance, my maximum additional out of pocket would be $2,500 Medicare premium plus $5,000 expensive drugs = $7,500. If I decline Medicare Part B, my max out of pocket would be $5,000. Am I missing something?
March 4th, 2011 | Premiums
Q: I remember reading that in 2017, 100 percent of the health insurance premiums will be paid for federal retirees. Not sure if I read ALL federal retirees or just postal service retirees. However, I am unable to locate any information on this. Can you clarify whether or not this is factual?
A: You can’t find any information about this because there isn’t any. If you did indeed read this somewhere, it was written by someone whose mind had blown a gasket.
Q: I have heard that the new health care law requires all federal employees to pay income tax on the government-paid portion of our heath care plan’s cost. Is this true?
A: No, it isn’t true. What is true is that in 2018, a 40 percent tax will be levied on health insurance plans that cost more than $10,200 per individual or $27,500 per family. The tax will be on any coverage that exceeds the limit. Those figures will be based on the combined contributions of enrollees and the government, and the expense will likely be passed on to consumers. To get you accustomed to what those total costs are, beginning in 2011 they will be included on W-2 forms for employees and 1099 forms for retirees.
April 5th, 2010 | Premiums
Q: I have heard that under the new health care bill, the dollar amount of employer-provided health care premiums will be added to one’s income on one’s W-2 starting next year. Is this correct?
A: Relax. That provision doesn’t go into effect until 2018. Further, it’s not entirely clear what its effect would be.
For employees, 2010 is a mixed year for benefits. For retirees, it’s pretty much a bust.
General Schedule employees received a 2 percent pay increase, with 1.5 percent going to all employees and the remainder being distributed through locality pay. If you want to compare how you made out against employees in other areas, go to the Salaries and Wages page on the Office of Personnel Management Web site.
The maximum taxable earnings for Social Security withholding stay at the 2009 level — $106,800. So, if you are a Federal Employees Retirement System or Civil Service Retirement System Offset employee, any amount you earn above that amount won’t be subject to the 6.2 percent Social Security deduction. However, the 1.45 percent of salary that goes to pay for your eventual coverage under Medicare Part A will continue to be deducted.
Of course, depending on which Federal Employees Health Benefits Program plan you are enrolled in, a substantial bite may have been taken out of your pay increase. The same is true if you are enrolled in the Federal Long Term Care Insurance Program, where premium increases triggered a loud and anguished cry from affected enrollees.
If you are a retiree, you have the same concerns about increases in health insurance and long-term care insurance premiums. But you also have a bigger problem. For the first time in decades, you won’t receive a cost-of-living adjustment in your annuity. If you receive a Social Security benefit, you won’t get an increase in that, either.
COLAs for retirees and Social Security beneficiaries are determined by changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of one year to the third quarter of the following one. Not surprisingly, considering the tumble the economy took, the CPI-W dropped. The good news is that there’s a “hold harmless” provision in the law: It prevents benefit recipients from having their annuities and Social Security benefits reduced, and it means most Medicare beneficiaries who are enrolled in Part B won’t see an increase in their monthly premiums. In fact, the Centers for Medicare and Medicaid Services said 73 percent of beneficiaries will be protected.
However, about 27 percent of Medicare beneficiaries will see increases because they are new enrollees, are subject to the income-related additional premium or don’t have their Part B premiums withheld from Social Security benefit payments.
If you receive a Social Security benefit, the Social Security exempt amount — the amount you can earn from another job or self-employment without causing that benefit to be reduced — is the same as it was in 2009: $14,160 for an individual or $37,680 for a couple.
If you are under full retirement age, $1 in benefits will be deducted for every $2 you earn above the limit. In the year in which you reach full retirement age, benefits will be reduced by $1 for every $3 you earn above the limit. There isn’t any limit beginning with the month in which you reach full retirement age.
While there’s been talk in Congress about giving all Social Security recipients a $250 payment to compensate for their loss of a COLA in 2010, and there have been finger-pointing hearings about the increases in premiums for health benefits and long-term care insurance, I wouldn’t hold my breath waiting for something positive to happen.
While things look bleak for retirees in 2010, they won’t be any better next year. According to those who crank out the numbers at the Social Security Administration, there won’t be any COLA increase for 2011 either. Sad to say, it’s just the way the numbers crunch in a downturn that hasn’t yet turned up.