By Reg Jones
Q. In August 2006, I was hired as a marketing/outreach/sponsorship director (nonappropriated funds). My responsibilities grew to include a supervisory role of the graphics department (two employees).
In August 2012, I had the opportunity to apply — and was selected for — public affairs specialist (1035-9). I am now the deputy public affairs officer. I was told that, with an NAF-to-GS transition, my pay would rise only to the next step. My concern is that the human resources office included locality pay as part of the equation in determining my GS pay. I didn’t receive locality pay at NAF and the cost-of-living adjustment was frozen. My annual pay at NAF was $53,000. My basic pay now is $44,333 but adding $9,217 in locality boosts the total to $53,550.
When I questioned the HR person, she said that was the way the rules were set up. Yet, the job announcement listed the salary for position at $50,000 to $65,000. This still doesn’t make sense to me. Can you help me understand the effect of locality pay on determining salary for NAF who transition to GS?
Q. I am looking at retiring in September 2014 at age 57 years and five months. I will have 34 years in FERS and a little less than a year of sick leave to convert. I have $359,000 in my Thrift Savings Plan account. I am single, never married. What are my best options? I am located in an isolated area and am unable to attend any retirement seminars, especially now with the budget issues.
Q. I always thought retiring Jan. 3 was a good idea, but let’s assume I plan to retire in 2014. If there is a retiree cost-of-living adjustment in 2015, and I retire Dec. 3, 2014, will my annuity increase in January by the 2015 COLA percentage? (If not, how far back into 2014 would I need to retire to get the next COLA?) Is it 1/12 of COLA per month prior to the January increase?
Q. I have 174 hours of sick leave. I’m 62 under FERS. Should I retire Dec. 29, where I’d only get half of my unused sick time to add to my annuity but get the 1 percent cost-of-living adjustment in January? Or should I retire Jan. 3, 2014?
Q. Could you please tell me what the 2014 cost-of-living adjustment will be for federal retirees who retired under FERS with a civil service component? I retired with 30 years of service. Of that 30 years, five years was under civil service.
I am 57 years old. When will I get my first COLA? Does my age play a role in that determination?
Q. I will be retiring Dec. 28. Will I be on the annuity roll in January 2014 and eligible for a full cost-of-living adjustment on my January 2015 annuity check?
October 30th, 2013 | Benefits COLA Creditable service: CSRS Creditable service: FERS CSRS annuity computation Disability retirement FERS annuity computation PAY RETIREMENT SOCIAL SECURITY spouse benefits SURVIVOR BENEFITS
Every fall, readers ask me what the cost-of-living adjustment will be for CSRS and FERS retirees and Social Security beneficiaries. And they want to know where the numbers come from, who is eligible for a COLA, when are they effective, if they are prorated, and why they are sometimes different for CSRS and FERS retirees.
Because of the government shutdown, it took a little longer than usual to find out that the what the 2014 COLA will be. It’s 1.5 percent. Not great, but better than a poke in the eye with a sharp stick.
Where do the numbers come from? COLAs are a byproduct of data collected by the Bureau of Labor Statistics, which it uses to produce the Consumer Price Index for Urban Consumers. The CPI-U covers about 87 percent of the population. However, to more closely match the spending patterns of federal beneficiaries, BLS uses a subset made up of Urban Wage Earners and Clerical Workers — the CPI-W.
The CPI-W is based on the spending patterns of households where more than half of the income comes from clerical or wage occupations and where at least one of the household’s earners has been employed for at least 37 weeks during the previous 12 months. The COLA amount is determined by the difference in the CPI-W from one year to the next. The arithmetical mean of the CPI-W for the third quarter of the current year — July, August and September — is compared with the arithmetical mean from the base quarter in the previous year.
Who is eligible for a COLA? If you are a CSRS retiree, when you’ve been on the annuity roll long enough, you’ll receive a COLA regardless of your age. With certain exceptions, if you are a FERS retiree, you won’t receive your first COLA until you reach age 62. If you are a FERS employee who retired under the special provisions for law enforcement officers, firefighters or air traffic controllers, you’ll begin receiving your COLA regardless of your age. The same is true for military reserve technicians whose separation from technician service resulted from a loss of military membership or rank because they became disabled after reaching age 50 and completing 25 years of service. Also entitled to non-age-restricted COLAs are survivor spouses, former spouses and insurable interest survivor annuitants.
COLAs are effective Dec. 1 of the year in which a retiree, survivor or Social Security beneficiary becomes eligible. The increases are reflected in the January payments.
When and how are COLAs prorated? For those of you who are eligible and have been retired for an entire year, you’ll receive the full amount of the COLA. If you’ve been retired for less than a year, it will be prorated. The proration will be based on the number of months that have elapsed between the date your annuity began and the effective date of the first COLA after that date. For example, if you retired after Nov. 30, 2012, (FERS) or Dec. 3, 2012, (CSRS), your 2014 COLA would be reduced by 1/12th for each month that you were still employed.
Why are COLAs different for CSRS and FERS retirees? While the 2014 COLA will be the same for CSRS and FERS retirees, it isn’t always that way. That’s because the FERS law states that if the CPI/W increases by 3 percent or more in any year, FERS-covered retirees and survivors will receive 1 percent less than that number. That happened in 2012, when CSRS retirees received 3.6 percent and FERS retirees 2.6 percent. If the CPI/W increases by 2 percent to 3 percent, the adjustment will be 2 percent. If the CPI/W increases by less than 2 percent, the adjustment will equal the CPI/W. That is happening this year.
Q. I may be a little confused, under CSRS, as to when I should retire: Nov. 30, 2013 or Jan. 12, 2014. I heard Social Security and retirees will get a 1.5 percent cost-of-living adjustment Jan. 1. My agency may only get a 1 percent COLA in January. But, for my annuity, would the calculation for the high-3 years with that 1 percent make little difference? I chose Nov. 30 because it is the last day of the pay period and within that one-to-two-day window at beginning or ending of the month as recommended for CSRS retirement processing. I wanted to be sure I was an official federal retiree come Jan. 1. Won’t I then get that 1.5 percent COLA applied?
It’s that time of year when employees start asking, “What’s the best date to retire?” Well, there isn’t a single date that’s best for everybody. Still, there are some dates that are better than others. I’ll explain why.
Time of month
The rules governing the time of month to retire are different for CSRS and FERS. FERS employees have to retire no later than the last day of a month to be eligible for an annuity payment in the following month; CSRS employees may retire up to the third day of a month and be eligible for an annuity in the same month. However, their annuity payment for that month will be reduced by 1/30 for every day they aren’t on the annuity roll. (All months are treated as though they are 30 days long.)
Picking the wrong date by as little as one day can affect your annuity. If you are a FERS employee who retires Jan. 1 instead of Dec. 31, you won’t be on the annuity roll until Feb. 1, and you won’t receive your first month’s annuity payment until March 1. The same delay applies if you are a CSRS employee who retires Jan. 4 instead of Jan. 3.
When you retire also affects your annual cost-of-living adjustment, which is based on the month you are first on the annuity roll. For example, to receive a full COLA in 2014, a FERS retiree must retire no later than Nov. 30, 2012, and a CSRS employee no later than Dec. 3, 2012. For every month you are not on the annuity roll, your 2014 COLA would be reduced by 1/12 of 1 percent.
Unused annual leave
Most employees are limited to carrying 240 hours from one leave year to the next. Therefore, if you have a lot of “use-or-lose” leave, there’s a financial incentive for you to retire before those hours are lost because you’ll receive a lump sum payment.
To calculate that payment, your agency treats every hour of leave as though you were still on the job. Assuming that there’s a pay increase in 2014, the closer you retire to Jan. 11, 2014 (the last day of the 2013 leave year), the larger your lump sum will be because more of those hours would be paid at the higher rate.
However, unless you are willing to give up one month’s annuity in exchange for the additional annual leave hours you will gain by completing a pay period and the higher hourly rate at which all your unused annual leave will be paid, you’ll need to leave no later than Dec. 31 (FERS) or Jan. 3 (CSRS).
If you retire at the end of the year, the amount you pay in taxes will be greater than if you had retired earlier and had less income to report. But your income will be lower because you’ll be receiving an annuity, a portion of which will be tax exempt. To find out how much of it will be tax exempt, go to http://www.irs.gov/pub/irs-pdf/p721.pdf.
Questions to consider when deciding when to retire: Are you financially able to retire? Are you mentally and physically ready to retire? Consider the financial consequences and have a clear idea why you are leaving government. Then you’ll be in a much better position to pick the best retirement date for you.
Q. Public Law 111-84 provided for a phased-in conversion from nonforeign area cost-of-living allowances to locality pay over a three-year period beginning in 2010. Since the three year phase-in period has been extended (no change in COLA in 2013 or increase to locality rate as anticipated), doesn’t that change the rules for the buyback period, too? Shouldn’t we be allowed to buy back up to the time the final/full locality rate is actually achieved? Do you feel this is something worth pursuing?
September 29th, 2013 | COLA Creditable service: FERS Deferred retirement DOWNSIZING Early retirement EMPLOYMENT FERS annuity computation HEALTH INSURANCE law enforcement LIFE INSURANCE Minimum retirement age Reductions in force RETIREMENT SOCIAL SECURITY Special retirement supplement
In my last two columns, I described the procedures agencies are required to use when they conduct a reduction in force. In this column, I’ll focus on the options available to employees who are eligible to retire when facing a RIF.
If you have the right combination of age and service, you’ll be able to retire on an immediate annuity, even if you aren’t directly targeted by a RIF. Here are the rules, which are different for personnel under the Civil Service Retirement System and the Federal Employees Retirement System.
The immediate retirement rules are different for special category employees, such as law enforcement officers, firefighters and air traffic controllers. If you are covered by CSRS, you can retire at age 50 with 20 years of service; if you are covered by FERS, you can retire at age 50 with 20 years of service or at any age with 25.
If you aren’t eligible for immediate retirement, a general RIF notice won’t qualify you for early retirement. You’ll need a specific notice, which must identify your position as one that will be affected and that you will be separated from it on a specific date.
Rather than issue specific RIF notices, your agency may first authorize early retirements under Voluntary Early Retirement Authority or encourage retirements by offering buyouts to employees occupying certain positions under the Voluntary Separation Incentive Program.
Note: If offered a VSIP, you don’t need to be eligible to retire. You only need to be willing to leave and do so.
Whether offered a VERA, a VSIP or both, you’ll be eligible for early retirement if you meet the age and service requirements, which are the same for CSRS and FERS.
Special retirement supplement
If you are a FERS retiree, you’ll receive a special retirement supplement if you retire after your MRA with 30 years of service, at age 60 with 20 years, or on early voluntary or involuntary retirement beginning at your MRA. If you are a special category retiree, you will receive the SRS regardless of your age.
The SRS approximates the amount of the Social Security benefit you earned while covered by FERS. It is paid until age 62 when you become eligible for a Social Security benefit. The amount you receive in your SRS is fixed. It won’t be increased by any cost-of-living adjustments while you are receiving it. However, it will be reduced or suspended if you’ve reached your MRA and have earnings from wages or self-employment that exceed the annual Social Security earnings limit. In 2013, that limit is $15,120.
COLAs on retirement annuities
The rules governing COLAs for CSRS and FERS retirees are different. If you are a CSRS retiree, you are entitled to receive them annually regardless of the age at which you retire. The same is true if you are a special category retiree under FERS. On the other hand, if you are a regular FERS retiree, you won’t receive one until you reach age 62.
FYI: When the consumer price index is 2 percent or less, FERS retirees receive the same COLA as their CSRS counterparts. However, between 2 and 3 percent, they receive 2 percent, and at 3 percent or more, they receive the CPI minus 1 percent.
Even if you aren’t eligible to retire now, you may still be able to receive an annuity later on. For example, if you had at least five years of service when you left, you could apply for a deferred retirement at age 62. If you were a FERS employee who had 20 or more years of service, you could apply at age 60. In either case, your annuity would be based on your years of service and highest three years of average basic pay on the day you left. Note: FERS employees applying for a deferred retirement aren’t eligible for the special retirement supplement.
Health and life insurance
You must be covered under the Federal Employees Health Benefits program and/or the Federal Employees’ Group Life Insurance program for the five consecutive years immediately preceding your retirement (or from your first opportunity to enroll) to carry that coverage into retirement. (Coverage under Tricare also counts toward the five-year requirement, as long as you were enrolled in the FEHB program when you retired.)
Fortunately, the Office of Personnel Management has some flexibility. If you haven’t met the requirement to continue your coverage but are currently enrolled, you may be eligible for a pre-approved waiver.
A final note: If you are a FERS employee who is eligible to carry your FEHB or FEGLI coverage into retirement but you postpone the receipt of your annuity to a later date, you can re-enroll in those programs when your annuity begins. On the other hand, if you leave government and apply for a deferred annuity, you can’t re-enroll in either program.
Q. I worked for the federal government from September 1975 through April 1998 and elected to stay in CSRS when the new system was offered in 1987. I turned 62 on Aug. 12, 2012, but did not apply for my benefits under the assumption that the value of the annual benefits would increase if I waited until 65 or longer to begin collecting. Is that assumption correct, or should I apply immediately for the retirement benefits because there is no increase in the base annuity amount until I begin collecting and then I get cost-of-living adjustments?
Q. I’m a CSRS Postal Service retiree. I retired at age 52 under Voluntary Early Retirement Authority offered to postmasters in 2012. Am I eligible for cost-of-living adjustments now or when I turn 62 since I took early retirement?
Q. I will turn 62 with 27 years of service under FERS on Nov. 30, my birth date. If I retire on this date, when will I be eligible for the next federal retiree cost-of-living adjustment?
Q. I will be eligible to retire Aug. 3, 2016 (55 years old, 37 years of service – CSRS). I work in D.C., and the cost of living is added to my salary. Do I use this figure or the figure before the cost-of-living allowance to calculate my high-3 salary?
Q. I am receiving workers’ compensation benefits through the Postal Service. I am considering the switch from OWCP to OPM (FERS). My concern is that I have been on OWCP since 1997 and am worried that all my cost-of-living adjustments would somehow not roll over and be figured into the Office of Personnel Management payments. Is there a way to get an accurate calculation of what my current benefits with OPM would be so that I can make an informed decision rather than trying to guess-timate? I called OPM and they told me they thought that the payments would be based on my high-3 at the time of separation. I am 56 years old.
Q. I retired with federal disability in 2002. I had 18 years of FERS service. I was denied for Social Security disability. When my benefit is recomputed at age 62, will the new amount be greater or lesser?
Q. I have my minimum retirement age and 30 years of service. If I retire now (buyout), will my retirement check be recalculated when I turn 62 (1.1 percent vs. 1.0 (high-3 years) x years of service = retirement check)?
Q. I will turn age 62 on Aug. 29. I have 4½ years on my FERS disability with 24½ years of service. Will FERS automatically recompute this, or do I have to notify them of my pending birthday? Also, since my birthday is on the 29th day of the month, I read that FERS would retire me out not on my birthday but on the day before I turn age 62, which would be Aug. 28?
I know how to figure all of this according to my high-3 year earnings. However, the part that I cannot compute on my own is what my salary would be at time of retirement since I would be retired out due to disability at age 62 as if I never left federal service.
Q. Checking to see if you have any information when the cost-of-living adjustment for Hawaii will be completely converted to locality pay.