Ask The Experts: Retirement

By Reg Jones

CSRS Offset

Bookmark and Share

Q. I started with the federal government on Aug. 18, 1986. I was recently reviewing my personnel records and noticed that from that day until Dec. 31, 1986, my retirement plan was listed on my SF-50 as CSRS Offset. Then on Jan. 1, 1987, it was changed to FERS. Were individuals who entered federal employment on Aug. 18, 1986, automatically changed to FERS the following January, or were employees given the choice to choose between CSRS Offset and FERS? Read the rest of this entry »

Tags: ,

FERS and VERA

Bookmark and Share

Q. If I accept a VERA with just over 30 years of service under FERS at age 54 and with just under 18 months to go before I reach 56 or my MRA, would I still be immediately eligible at early separation for the special retirement supplement under a VERA, or do I have to wait until I turn 56?

A. The special retirement supplement will begin when you reach your MRA.

Tags: , ,

Benefits for ex-spouse

Bookmark and Share

Q. My divorce decree doesn’t mention retirement. We made no claim for each other’s retirement nor did we waive any rights. It just wasn’t mentioned. Can my ex-spouse claim any of my FERS retirement benefits? If so, would it only be half of what I put in during our marriage? Read the rest of this entry »

Tags: ,

Deposits and Redeposits, part 2

Bookmark and Share

Last time, I focused on the basic rules governing deposits and redeposits for Civil Service Retirement System (CSRS) and CSRS Offset employees, pointing out how these could increase their annuities when they retire. This time, I’ll do the same for Federal Employees Retirement System (FERS) employees.

Deposits

The term “nondeduction service” is used to describe federal government employment where you didn’t make any contributions to the Civil Service Retirement and Disability Fund. Unlike the CSRS law that gives credit for that time in determining an employee’s total years of service, the FERS law doesn’t. If you don’t make a deposit, that time won’t be creditable for any purpose.

Although the FERS law bars you from making a deposit for most nondeduction service after 1988, there is one major exception. VISTA or Peace Corps service is creditable, no matter when it was performed, if you make a deposit for the service. On the other hand, if you don’t make a deposit, and that service is initially included in the annuity computation, OPM will re-compute your annuity to exclude it if you later are eligible for a Social Security benefit.

If you were ever employed by another federal retirement system (such as the Tennessee Valley Authority or the Foreign Service), that service is also creditable if you aren’t receiving any benefits for that time under the other system and the service was performed before 1989 or is creditable under the Foreign Service Pension System. To get credit under FERS, you’ll have to obtain a refund of your contributions under that other system and deposit it, with interest, in the fund.

Redeposits: FERS

For the first 20 years of the FERS program, employees who left government and withdrew their FERS contributions were barred by law from redepositing that money if they returned. As a result, they couldn’t recapture that time and receive retirement benefits based on that service. That changed when Public Law 111-84 was passed. For the first time it allowed FERS employees who were on the rolls on or after Oct. 28, 2009, to redeposit that money, plus interest. If they did, they’d get full credit for that time in determining their years of service and have it used in their annuity computation when they retire.

Redeposits: CSRS

If you ever separated from the federal government, took a refund of your CSRS retirement contributions, and later returned to work for the government, the rules are different. If you had less than five years of service, you’d have to deposit 1.3 percent of your earnings for that period, plus interest, for that time to be creditable under FERS.

If you had five or more years of CSRS service, you’d be eligible for a CSRS component in your annuity. If so, you’d get credit for that time in determining your eligibility to retire, whether or not you make a redeposit. However, in order for the time to be used in your annuity computation, you’d have to redeposit the money you withdrew, plus interest. (Since the first pay period in January 1970, the contribution rate for CSRS has been 7 percent. Law enforcement officers and firefighters under CSRS began contributing 7.5 percent on the first pay period after Dec. 31, 1974.)

For FERS employees entitled to a CSRS component in their annuity, there is one exception to the redeposit requirement. If you received a CSRS refund that covers a period of service ending before March 1, 1991, you have a choice. You can either make the redeposit or you can have your CSRS annuity component reduced actuarially based on your age and the amount of the redeposit you owe, including interest, on the day you retire. (This option is not open to disability retirees.)

Interest rates: FERS

If you are making a deposit to capture or recapture prior service that will be creditable to your FERS annuity, the annual interest charged is 3 percent through Dec. 31, 1984. Thereafter, a variable rate is charged. In 1985 that rate reached a high of 13 percent, in 2013 and 2014 a low of 1.625 percent.

Interest rates: CSRS

If you are recapturing service that will be used in a CSRS component of your annuity, the interest rate is 3 percent for pre-Oct. 1, 1982, nondeduction service performed before Oct. 1, 1982, and refunded service if the application for refund was made on or after that date. Interest for nondeduction and refunded service on or after Oct. 1, 1982, is also 3 percent through Dec. 31, 1984. Thereafter, a variable rate is applied.

If you owe any deposits or redeposits, download a copy of the Application to Make Deposits or Redeposits. For FERS go to www.opm.gov/forms/pdf_fill/sf-3108.pdf. For CSRS go to www.opm.gov/forms/pdf_fill/sf-2803.pdf.

Once your personnel office tells you how much you owe, you can decide if it’s worth the cost. If you decide to make the deposit, you can pay it in a lump sum or you can do it through monthly deductions from your pay, with payments as low as $50 a month. Just remember. The longer you wait to complete the payment, the more you’ll have to pay in interest.

You’ll have to decide whether to make a deposit or redeposit based on the amount owed compared with the potential benefits.

Reg Jones was head of retirement and insurance programs at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com, and view his blog at blogs.federaltimes.com/ federal-retirement.

 

Military time

Bookmark and Share

Q. I have three periods of LWOP due to military deployments over the past 11 years. I am in the process of buying back my time. I have been told that my service deposit should be calculated at a lesser rate, not the standard 3 percent, due to me being a federal employee. I cannot find information regarding the lesser percentage. Can you clarify this issue and provide a reference? Read the rest of this entry »

Tags:

Deferred vs. postponed retirement

Bookmark and Share

Q. I am a FERS (non-LEO) employee and plan to leave government service at age 50 with 26 years of service. Do I elect to defer or postpone my retirement? At what age do I draw from my retirement; 56, 60 or 62? At what age would I qualify for life insurance to be included again? Read the rest of this entry »

Tags:

Civil service redeposit

Bookmark and Share

Q. My wife was told she could apply for a redeposit of service credit funds. The state agency she worked for has a program that let’s her file for retirement on funds she withdrew. This program will then take a portion of her monthly retirement to repay the withdrawn amount. I worked for the Defense Department civil service from 1977-1991 but withdrew all funds. Does the civil service retirement system have a similar program?

A. No, it doesn’t. You could only redeposit that money if you returned to work for the federal government.

Tags:

Disability retirement

Bookmark and Share

Q. I am an injured postal worker and I have many  conditions that  have accrued as a result of my past 12 years at the Postal Service carrying mail. I just met with the surgeon who did my last carpal tunnel surgery, and he told me that I should start exploring my options and consider medical retirement. Where do I begin to start the ball rolling and who do I need to get in contact with to help me through this difficult time?

A. Download a copy of Standard Form 3112 (Documentation in Support of Disability Retirement), available at www.opm.gov/forms. Take it to your personnel office, which is responsible for helping you complete the form and guide you through the application process.

Tags:

Sudden retirement

Bookmark and Share

Q. My mother is 66 and a letter carrier with 32 years of employment with the Postal Service. She loves her job, but as cuts are made and demands are harsher, she was wondering what would happen if she were to go to work one day and decide she wants to retire immediately. She wants to be sure that she could still get her accrued annual in a lump-sum payment. She als wants to know how long would it take for her to start receiving benefits? Read the rest of this entry »

Tags: ,

Disability retirement

Bookmark and Share

Q. I work for the Air Force, and I have 35 years of actual service under CSRS and I am 62. I have confirmed from OPM that I can apply for disability retirement within a year after retiring and start receiving annuity payments. I have had FEHB for only one year so the regular retirement will not allow me to keep FEHB (five-year rule). Can I apply for disability retirement before my regular retirement, or do I have to wait until after I retire to apply? Read the rest of this entry »

Tags: ,

FERS annuity

Bookmark and Share

Q. I have 20 years of federal service, am 52 years old and currently work for a Federally Funded Research and Development Center. When I separated from federal employment, I was told I have an annuity based on my employment years (contributions made).

A. Assuming that you didn’t get a refund of your retirement contributions when you left, you’d be entitled to a deferred annuity at age 60.

Tags:

Cumulative Retirement

Bookmark and Share

Q. Item 19 of the LES has “Cumulative Retirement” FERS:
What exactly does this number mean? Is it just a total amount in FERS, or something else? Monthly or yearly amount at retirement?

A. It tells you how much you’ve contributed to the retirement system.

Tags:

Military service time

Bookmark and Share

Q. I served eight years in the Navy Reserve and was honorably discharged. How do those years count toward retirement if I become employed by a federal agency?

A. Only time where you were called to active duty in the service of the U.S. would be creditable, and then only if you made a deposit for that time.

Tags:

Buyback on terminal leave

Bookmark and Share

Q. I have 28 years of active-duty service in the Navy. I am on terminal leave and just started working as a civilian federal employee. Can I buy back my military service while on terminal leave to get credit in the federal service without losing my military retirement once my terminal leave is over and I am fully retired from the military? Read the rest of this entry »

Tags:

Deposits and redeposits, part 1

Bookmark and Share

Based on the mail I’ve been getting, there’s a lot of confusion about the rules governing deposits and redeposits to get credit for prior service in determining your eligibility to retire and having that time used in your annuity computation when you retire. In this column, I’ll deal with the rules that apply to Civil Service Retirement System and CSRS Offset employees. In my next column, I’ll do the same for Federal Employees Retirement System employees.

Deposits

The term “nondeduction service” applies to any period of federal government employment where retirement deductions weren’t taken from your pay. If you are a CSRS and CSRS Offset employee, you can make a deposit to get credit for that nondeduction service. The deposit equals the amount of the contributions you would have made to the Civil Service Retirement and Disability Fund if your job been covered by CSRS, plus accrued interest.

Retirement eligibility

If you are covered by CSRS or CSRS Offset when you retire, most kinds of federal government employment that aren’t covered by CSRS count toward the years of service needed to be eligible to retire. That includes federal government employment where only Social Security deductions were taken from your pay. It also includes employment covered by another federal retirement system, such as the Foreign Service, as long as you aren’t receiving any benefits for that time under the other system.

Annuity computation

When you performed that nondeduction service has a significant effect on the way it will be treated.

If you had any nondeduction service before Oct. 1, 1982, you’ll get credit for that time in determining your eligibility to retire; however, unless you make a deposit, your annuity will be reduced by 10 percent of the amount you would have paid into the fund, plus interest.

If you had any nondeduction service on or after Oct. 1, 1982, it, too, will be creditable for determining your eligibility to retire; however, if you don’t make a deposit to get credit for that time, it won’t be used in the computation of your annuity.

Redeposits

With one important exception, if you ever separated from the federal government, took a refund of your CSRS retirement contributions, and later returned, you’ll have to redeposit that money, plus accrued interest, before the time can be used in the computation of your annuity. However, if you don’t make the redeposit, you will still get credit for the time in determining your length of service for retirement, as well as for determining your “high-3.” Your high-3, is the average of your three highest consecutive years of average pay, regardless of when they occurred in your career.

Here’s the exception: If you received a CSRS refund covering a period of service that ended before Oct. 1, 1991, you won’t have to pay the redeposit if you don’t want to. You’ll receive full credit for it in your annuity computation (unless you retire on disability). However, your annuity will be actuarially reduced based on your age and the amount of the redeposit you owe, including interest, on the day you retire.

Contribution rates

Beginning with the first pay period in January 1970, the contribution rate for CSRS has been 7 percent (7.5 percent for law enforcement officers and firefighters beginning with the first pay period in January 1975). If the nondeduction service you performed was before that date, the contribution rate will be lower.

Interest rates

Interest for pre-Oct. 1, 1982 nondeduction service earned before Oct. 1, 1982 (and refunded service if the application for a refund was made on or after that date) equals 3 percent. Interest for nondeduction and refunded service on or after Oct. 1, 1982 equals 3 percent through Dec. 31, 1984. Thereafter, a variable rate is applied. (In 1985 the rate reached an all-time high of 13 percent. In 2014 it’s at an all-time low of 1.625 percent, the same as it was in 2013.)

If you owe any deposits or redeposits, go to www.opm.gov/forms/pdf_fill/sf-2803.pdf and download a copy of Standard Form 2803, Application to Make Deposits or Redeposits. Once you’ve filled it out, take it to your personnel office. When they tell you how much you owe, you can decide if it’s worth the cost.

To help you make that decision, use the following formula: 0.015 x your high-3 x 5 years of service, plus 0.0175 x your high-3 x 5 years of service, plus 0.02 x your high-3 x all remaining years and full months of service.

As you can see, if you have over 10 years of actual CSRS service, each additional month of credit your get by making a deposit or redeposit is worth 1/6 percent. That’s 2 percent per year.

If you decide to make the deposit, you can pay it in a lump sum or set up a payment schedule, with payments as low as $50 a month. Just remember. The longer you wait to complete the payment, the more you’ll have to pay in interest.

Reg Jones was head of retirement and insurance programs at the Office of Personnel Management. Email your retirement-related qustions to fedexperts@federaltimes.com, and view his blog at blogs.federaltimes.com/ federal-retirement.

Taking benefits retroactively

Bookmark and Share

Q. As a younger federal employee with seven years in, I’m left wondering how I can plan for retirement with Congress constantly threatening to not only change contribution amounts, but benefit payouts. What, if any, limits does Congress face in reducing pensions? Since I’ve already worked 7 years and both I and my employer made contributions during that time, isn’t there an account somewhere with money deposited in my name? Or can Congress come in when I’m 61 and decide to vacate entirely the pension I’ve already earned? I understand changes in calculation of payout growth like what the military has faced, but the Simpson-Bowles Commission, for instance, proposed changing from 1 to 0.7 percent salary payout per year worked. Would that only be for new employees, new years worked, or retroactive? Put simply, is anything in my pension statement legally guaranteed, or can it all be taken away after the work is done? Read the rest of this entry »

Tags:

Re-employment after disability retirement

Bookmark and Share

Q. I was removed from my agency due to becoming “Medically Unqualified” after 4 years, 9 months under FERS and given disability retirement in 2007. I am considering returning to federal service with a job at the Defense Department. With the disability retirement, I understand that if I maintain the retirement until I am age 62, the time I was on disability retirement would count as time in service for computing my regular retirement. Does that mean the time I have been a disability annuitant will count as service time for a new federal job? Would I/could I buy back the time? I understand my annuity will cease on the date of re-employment. Read the rest of this entry »

Tags: ,

Social Security and pension reduction

Bookmark and Share

Q. In 2009, I took the postal clerk buyout and retired. I am under CSRS with 32 years with 2 years of military Service included. When military buyback was offered some 25 years ago, I passed. In 2009, the same buyback was almost $10,000 so I passed on that. I am working and will have 37 credits of eligibility toward Social Security at the end of this year. If I continue and become Social Security eligible, how much of my monthly pension will I lose?

A. If you become eligible for a Social Security benefit, you won’t lose a penny of your CSRS annuity. However, your Social Security benefit will be subject to the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who has fewer than 30 years of substantial earnings under Social Security.

Tags: , ,

Matching contributions

Bookmark and Share

Q. I’m a CSRS employee with more than 41 years of service and plan to continue my federal employment well beyond 41 years. I understand that CSRS employees contribute 7 percent of their salary into the retirement fund and that the government matches that 7 percent contribution into the fund. I’m told that, after completing 41 years, 11 months of service, I will reach the maximum annuity benefit of 80 percent. At that point, the 7 percent retirement contributions will continue to be taken from my pay and placed into an interest bearing account to be refunded when I retire. When that happens, does the government continue to pay its matching 7 percent contribution into the interest bearing account as well? Read the rest of this entry »

Tags: ,

Comp time

Bookmark and Share

Q. When I retire, will i get paid for compensatory time?

A. Any comp time you have to your credit when you retire will be paid at the hourly rate in effect when it was earned.

Tags: