By Reg Jones
COLA reduction, tax increase
March 2nd, 2011 | Cost-of-living adjustments
Q: What were you thinking? No COLA for two years, now a tax increase, causing my check to be $38 less. I am barely surviving. Do something. This is no way to repay veterans, or their widows, for their service.
A: You’ve come to the wrong place to point the finger of blame. The fact that no cost-of-living adjustments are being made on retiree annuities is a product of the same law that routinely gave you COLAs in the past. When the economy tanked, the index on which they are computed fell below zero. Just be thankful that this same law protected you from having your annuity reduced. As for the increase in federal tax deductions from your annuity, the answer is simple. The “Making Work Pay” credit expired Dec. 31. The IRS issued a notice in December saying withholding tables for 2011 would no longer be adjusted for the Making Work Pay tax credit and there is no longer an optional additional withholding adjustment for pensions.
Tags: annuity, military service, retired
Will COLA, locality pay be used to compute annuity?
October 26th, 2010 | Cost-of-living adjustments PAY POST-RETIREMENT RETIREMENT
Q: I work in Alaska as an Army civilian police officer. Where I am stationed, we receive specialty pay. For example, I am a GS 08 about to move up to GS 09. My current GS 08 step 4 pay is $54,633. On top of this, we still get cost-of-living allowance here, which for me turns out to be $11,440.15. A normal GS-scale employee as an GS 08 step 4 receives $41,393. Does my specialty pay count toward my Federal Employees Retirement System annuity? In other words, is my retirement based on the $54,633, or is it based on $41,393? If I transfer to a different location in the U.S., does my gaining employer have to base my pay off of the specialty pay base of $54,633 or off the $41,393? My leave and earnings statement shows my base pay in block 7 as: Basic pay $41,393 + $13,240; Locality Adjustment = Adjusted Basic pay of $54,633. My SF50 shows this, as well. As I stated earlier, we also receive COLA (transitioning to locality pay) and my COLA is $11,440.15. With this, my real earnings are a base of $66,073.15 but I know that COLA does not count toward retirement. Can you explain this? And finally, when we do get transitioned to full locality pay, will it count toward retirement? I have heard it will, and it that will be taxed as income unlike COLA, but our base pay will then read as $66,073.15.
A: If you are referring to special salary rates, like locality pay they are considered to be a part of base pay and will be used in the computation of your high-3 when you retire. Non-foreign area cost-of-living allowances until recently weren’t considered to be a part of base pay and couldn’t be included. However, P.L. 111-84 changed all that. These COLAs are being phased out, with a guarantee that employees won’t lose ground financially during the transition from non-taxable COLAs to taxable locality pay. However, to get credit for that, employees will have to make additional contributions to the retirement system. Your own payroll office can give you the details. Note: If you transfer to a different area of the country, your salary would be based on your grade and pay at that location, not what you previously received somewhere else.
Tags: COLA, locality pay, RETIREMENT
$250 stimulus
March 29th, 2010 | Cost-of-living adjustments
Q. My husband is retired civil service, and receives a civil service annuity retirement. When we filed our federal tax return, $250 was deducted from our return even though we did not receive $250 in January 2010. Is this correct? So we did not get a $250 tax credit, I suppose.
A. To better understand the mechanics of the stimulus payment, I recommend that you read the well-written summary provided by the National Association of Active and Retired Federal Employees (NARFE). Just go to www.narfe.org/departments/home/articles.cfm?10=1989.
Tags: annuity
COLA for postal employees
March 17th, 2010 | Cost-of-living adjustments
Q. I see that the approximate COLA for retirees this year might be 0.1 percent. My question is, does that include postal retirees? I know we all go through OPM now, but sometimes it looks like postal retirees fall into a different group.
A. The cost-of-living adjustment for retirees in 2010 was zero. While it’s been estimated that it will be 0.01 percent next year, when it comes to COLAs, no distinction is ever made between postal and non-postal employees
Tags: COLA, Postal Service
CSRS retirement
February 25th, 2010 | Cost-of-living adjustments CSRS annuity computation
Q. I am a CSRS employee who will have 40 years of government service in mid-April 2010 at age 63. When would it be in my best interest to retire to obtain the 80 percent annuity? Whatever that date may be, would I then be entitled to the next full cost-of-living increase?
A. To receive an annuity worth 80 percent of your high-3, you’d need to have 41 years an 11 months of creditable service and owe no deposits or redeposits to the retirement fund. If you worked longer than that, any retirement contributions you made to the retirement fund would either be returned to you or could be used to buy additional annuity. Like credit for unused sick leave, it would not be subject to the 80 percent limitation. As for COLAs, if you retired no later than Dec. 3 of a given year, you would be eligible to receive a full COLA one year later. So for example, if you retired on Dec. 3, 2012, you’d receive a full COLA in your January 2014 annuity payment. For every month you retired later than that, your COLA would be reduced by 1/12th.
Tags: annuity, CSRS, RETIREMENT
Civil Service Retirees COLA for 2010
December 28th, 2009 | Cost-of-living adjustments
Q. Can anyone explain why retirees are not included in the 2 percent cost-of-living allowance for 2010? Is it because the President is pro union and retirees are not covered by the union? As far as I know, this is the first time retirees were excluded from annual COLAs. It would seem to me that retirees are more in need of the COLA than currently employed full-time employees.
A: There are two pieces of law involved here. The salaries of employees are governed by the pay comparability act, which compares the salaries of federal jobs with those in the private sector. Employees never receive COLAs. Only retirees and survivors are eligible for COLAs, which, like Social Security benefits, are controlled by changes in the consumer price index.