Ask The Experts: Retirement

By Reg Jones

When can I retire, part one

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It’s that time of year, when employees start thinking hard about retiring. If you are one of them, you need to know the two factors that determine if you’ll be able to do that. The first is age. The second is years of service. In this column I’ll go over the rules for Civil Service Retirement System, and in the next one, Federal Employees Retirement System.

CSRS requirements:

Immediate retirement

  • Age 62, five years of service.
  • Age 60, 20 years of service.
  • Age 55, 30 years of service.

Early retirement

  • Age 50, 20 years of service.
  • Any age, 25 years of service.

Deferred retirement

  • Age 62, five years of service.
  • Age 60, 20 years of service.

Immediate retirement means that you have the age and service needed to retire on an immediate annuity. Once you’ve got that combination, you can retire whenever you feel like it. Early retirement is an option, if your agency is offering you that opportunity through the Voluntary Early Retirement Authority and/or a Voluntary Separation Incentive Payment. It’s also an option if you are being separated through reduction-in-force or for poor performance. A deferred retirement is one where you leave government before being eligible to retire and apply for an annuity when you meet the eligibility requirements.
Service credit rules
Under CSRS, creditable service includes any service for which retirement deductions were taken from your pay and not refunded. With one exception, if it was refunded, the time will be creditable as long as you repaid the refund. Here’s the exception: If you got a refund for service performed before Oct. 1, 1990, and didn’t make a redeposit, it will still be used in determining your length of service; however, your annuity will be reduced actuarially based on your age at retirement and the amount you owe.
You’ll also get service credit for any period of civilian employment where retirement deductions weren’t taken from your pay, but only if it was performed before Oct.1, 1982. If it was performed on or after that date, you’ll only get credit for the time in your annuity computation if you make a deposit. If you don’t, your annuity will be actuarially reduced based on the amount you owe, plus accrued interest.
If you were on active duty in the armed services before Jan. 1, 1957, you’ll get full credit for that time. If it was performed after Dec. 31, 1956, and you were first hired before Oct. 1, 1982, you’ll also get credit for it; however, if you are retired and eligible for Social Security at age 62 and haven’t made a deposit for that time, those years will be deducted and your annuity reduced. If you retire on or after age 62, haven’t made a deposit, and are eligible for a Social Security benefit, the reduction will be made when you retire.
If you were first employed on or after Oct.1, 1982, you’ll have to make a deposit in order to get credit for that time. If you are receiving military retired pay, you’ll usually have to make a deposit for that time and waive that pay before retirement in order to get credit for it. On the other hand, if you are receiving reserve retired pay, you’ll still have to make a deposit to get credit for your active duty service, but you won’t have to waive your reserve retired pay.
Time in a nonpay status is also creditable if it doesn’t exceed six months during any calendar year.
Once you have enough years of creditable service to retire, any unused sick leave will be added.
Computing your length of service
Your length of service is based on all the years you’ve worked, plus any full months that don’t add up to a year. Any days that don’t add up to a full month are converted to hours and added to unused sick leave. If you have enough of those hours to create one or more months, they’ll be used to compute your annuity.
So what are “enough hours”? In order to produce 12 equal annuity payments, each month is treated as if it was 30 days long. To convert those leftover hours into additional retirement months, 2,087 (the number of hours in a work year) is divided by 360. As a result, each additional month is roughly 174 hours long.

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.

Retirement under CSRS

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Q. I am a CSRS offset, full-time, Term (NTE April 2015) federal employee. I am also a formal federal employee (all permanent positions) with breaks in service. My service comp date is 1983 and I am 60 years old. Can I apply for retirement now as a Term employee? I have paid into CSRS in my previous and current position. Read the rest of this entry »

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Credit for Peace Corps service

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Q: My husband and I are getting ready to retire and are both CSRS employees. My husband was actually hired in 1984, which would have put him in FERS, but he had Peace Corps service, so his SCD is 10/1982. He never made the deposit for Peace Corps service; he is now 64, and we believe he is eligible for Social Security. Can he make the deposit now? I understand that they take forever to process. Does the payment need to be received by the Office of Personnel Management before his separation date? If it is not received and he loses the credit for the 22 months of Peace Corps service, will they convert him to FERS, or will he simply lose 22 months from his total time of federal service? Read the rest of this entry »

Social Security and pension reduction

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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.

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Deposits and redeposits, part 1

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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 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 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 questions to fedexperts@federaltimes.com, and view his blog at blogs.federaltimes.com/ federal-retirement.

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Creditable service

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Q. I received nine years creditable service for Annual Leave accrual for non-federal work experience when first hired for federal service. A friend of mine recently told me that the creditable service will also be factored into my CSRS retirement date. For example, if I plan on retiring after 30 years of service, I would only need to work an additional 21 years for the government. I cannot seem to find anything on the internet to support his claim. Can you tell me if my friend is correct?

A: Your friend is mistaken. You wouldn’t receive any credit for that time in determining your eligibility to retire.

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SCD Calculation

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Q. I was in the Kentucky National Guard for 7 years and was honorably discharged in 1976. During that time I attended basic training at Ft. Bragg and advanced training at Ft. Eustis from December 29, 1968 and June 23, 1970. I am currently in the FAA as a federal employee and I am near retirement.

Does this time in the Kentucky National Guard training for almost 6 months count toward my SCD calculation? Will I need to “buy back” the time? Read the rest of this entry »

Service credit and sick leave

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Q. I am a FERS employee with 32 years of service credit. I was in CSRS for 5 years, 10 months and 28 days. I left the government but came back 3 years later as a FERS employee. When I retire I will have 28 days of CSRS service credit and 25 days of FERS Service Credit. Will 7 days of my excess sick leave (56 hours) be applied to my remaining days of 23 to give me an extra month toward retirement?

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WEP and spousal benefit

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Q. I am a 63 year-old CSRS retiree with 40 Social Security credits but substantial earnings years of < 20. I think I understand the impact on my small SS benefit and the impact of the WEP provision.

My wife is 67 and waiting until she is 70 to collect her SS.

We have been reading a lot about the file and suspending of SS for the one with higher earnings, which is my wife, and the claiming now of the spousal benefit for me.

If my wife files and suspends her SS, we understand it will grow just like she did not file and at 70 she would get the full amount as calculated on the SS website.

However, as a CSRS retiree, am I eligible to apply for a spousal benefit under her since her SS is higher than mine, and if so, would there be the same WEP calculation to this spousal benefit as it would be to my own SS benefit?

Read the rest of this entry »

Calculating CSRS, FERS annuities

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In my last two columns I described the kinds of active duty service in the armed forces that are potentially creditable in your CSRS or FERS annuity, and what you have to do to get that credit. This time I’ll quickly go over the rules governing the computation of CSRS and FERS annuities for most federal employees. That way you’ll be able to see what the difference would be between a pure civilian annuity and one that includes credit for active duty service for which you’ve made a deposit.

Eligibility rules

Under CSRS, you can retire immediately if you are age 55 and have 30 years of service, 60 with 20 or 62 with 5. Under certain circumstances, you can retire at age 50 with 20 years of service or, if you have 25 years of service, at any age. However, your annuity will be reduced by 1/6 of a percent for each month you are under age 55. That’s 2 percent per year.

Under FERS, you can retire immediately at your minimum retirement age (MRA) with 30 years of service, 60 with 20 or 62 with 5, You can also retire at your MRA with at least 10 years of service but fewer than 30. However, if you retire under the MRA+10 provision and have fewer than 20 years of service, your annuity would be reduced by 5 percent for every year you were under age 62, age 60 if you had at least 20 years of service.

You could also retire early at age 50 with 20 years of service or, if you have 25 years of service, at any age. However, unlike CSRS retirees, there wouldn’t be any age penalty.

Note: To find out which kinds of active duty service in the armed forces are considered creditable and under what conditions, go to www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c022.pdf. To find out the same thing about civilian service, go to www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c020.pdf.

CSRS computation

Here’s how you compute a CSRS annuity:

*  1.5% x your high-3 x 5 years of service, plus
* 1.75% x your high-3 x 5 years of service, plus
* 2% x your high-3 x all remaining years and full months of service

This formula generates the basic annuity amount, which cannot exceed 80 percent of your average high-3 salary. However, unused sick leave is not included in that 80 percent limitation.

Two simple examples will illustrate the difference between making a deposit for four years of active duty service and not doing so. For simplicity’s sake, we’ll say your high-3 is $100,000 and you have 30 years of actual service.

* Without a deposit, your annuity would be $56,150.
* With a deposit, your annuity would be $64,250.

FERS computation

Here’s how to compute a FERS annuity:
.01 x your high-3 x all years of service
If you are age 62 and have at least 20 years of service, use this formula:
.011 x your high-3 x all years of service

Once again, some simple examples will illustrate the difference between making a deposit for four years of active duty service and not doing so. And I’ll use the same high-3 – $100,000 – and 30 years of actual service.

* Without a deposit, your annuity would be $30,000.
* With a deposit, your annuity would be $34,000.

If you were entitled to the .011 multiplier

* Without a deposit, your annuity would be $33,000.
* With a deposit, your annuity would be $37,400.

Note: Whether you are covered by CSRS or FERS, unused sick leave can’t be used to make you eligible for retirement. It can only be added to your years of service after you meet the age and service requirements.

The special retirement supplement

Because FERS is a retirement system that includes Social Security, if you retire before age 62, you’ll be entitled to the special retirement supplement, unless you are retiring under the MRA+10 provision.

The SRS approximates the amount of Social Security benefit you earned while a FERS employee. It doesn’t include periods of active duty service, whether or not you have made a deposit.

Using the FERS example above, if you are a FERS employee with 30 years of actual service and have made a deposit to get credit for your active duty service. That time will be included when determining your total years of service and used in your annuity computation. However only your actual service will be used in calculating your special retirement supplement. That’s because the SRS is paid out of the Civil Service Retirement and Disability Fund, not the Social Security Fund. However, when you apply for a Social Security benefit, it will be based on all your years of Social Security-covered employment.

A word about special category employees

Law enforcement officers, firefighters and air traffic controllers may retire at age 50 with 20 years of covered service. FERS employees may also retire at any age with 25 such years. All special category employees receive an enhanced benefit for which they pay by contributing more to the retirement system.

The rules for crediting are the generally the same for special category employees as they are for all other employees. However, there are a few variations on those rules. First, active duty service that precedes employment as a special category employee can’t be used to meet the years of service requirements for the enhanced benefit. Second, active duty service that interrupts a special category career is creditable toward the enhanced benefit, but only if the employee returns to a covered position and makes a deposit for that time.

CSRS annuity calculation and FERS

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Q. I switched from CSRS to FERS with about 10 years in CSRS and 25.5 yrs in FERS. When my service in CSRS is calculated, my total service, including 918 hours of frozen sick leave, equals 10 years 2 months and 17 days.  Is there any way to apply the 17 days to either credit service in CSRS or even FERS (17 days in CSRS is worth more than 34 days in FERS) or do I just lose the 17 days? Read the rest of this entry »

Unused sick leave over 41 years 11 months CSRS service

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Q. I have over 41 years 11 months creditable service under CSRS. I also have unused sick leave to take me over the 80% max threshold. I used the chart to convert sick leave hours into months and days (rounding up). Does sick leave just get added to the credible service years, months and days, or is it done separately? Also if it is added to the credible service and the days are dropped, does that mean that I can potentially lose up to a month of sick leave days? If so, should I begin taking sick days when I need them, instead of using annual leave, so I don’t just lose them?
Read the rest of this entry »

Military deposit refund for CSRS

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Q. I am CSRS and presently employed be the Air Force. I paid my military deposit in full, and as I will never have Social Security quarters, I would like to have it refunded back to me. Although OPM cannot quote the regulation, they said that if I was still making payments on it I could request a refund but because it is paid in full I cannot. Can you quote the regulation that states that? Can you quote the regulation that says that I can have this refunded! Read the rest of this entry »

CSRS Offset, Social Security and WEP

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Q. I am 69 years old and will be 70 in December of this year. I was rehired by the government in January 2013 after a 31 year break in service. I had almost 12 years of prior service and I withdrew my CSRS retirement fund when I left the government in 1981. I am now planning to retire at the end of March of 2016 when my High-3 will be reestablished at my current GS12-10 salary. Since I have over 30 (consecutive) years of substantial earnings under Social Security, will the windfall elimination provision come into play when I retire?

Also, I did not repay the amount I withdrew in 1981, and additionally, I am currently collecting my Social Security benefit and have been since 2010. How will these circumstances effect my CSRS retirement and/or Social Security benefit when I finally retire at the date I mentioned? Read the rest of this entry »

Redeposit of CSRS

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Q. I am a CSRS Offset employee with almost 30 years of service. After my first period of civilian service (1981 through 1992), I was laid off during a RIF. I withdrew my CSRS deposit in 1992 and have not paid it back.

Can I still get retirement credit for my civilian service prior to March 1, 1991, and receive actuarial reduction versus paying back my withdrawal plus interest? Read the rest of this entry »

Credit for CSRS service

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Q. I joined the federal government on Dec. 19, 1983, under CSRS and later switched to FERS in January 1988. No social security was paid in from 1984 to 1987. I am planning to retire now, and this is my first and last job in the federal government.

Will my 4 years of service under CSRS ( 1984-1987) will be credited to FERS? Read the rest of this entry »

CSRS remarriage

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Q. I retired in 2009 at the age of 59. I was a Civil Service Retirement System (CSRS) employee. I am drawing my pension and have never paid into the Social Security system. My future spouse will draw his full social security at age 66. If I understand correctly, if he should die before I do, I will never be eligible to draw his Social Security. Could this be possible since my annuity is twice as much as his Social Security?

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Life insurance

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Q. I have been retired from CSRS since 2004 with 34 years of service. It is my understanding that I have $25,000 in life insurance to be paid to my beneficiary when I die. That will most likely be my wife. How should she go about claiming the life insurance?

Read the rest of this entry »

Buying back LWOP for annuity calculation

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Q. At 19, I was recruited and placed into a civilian Defense Department position as a cooperative education student. I would be placed on leave without pay during periods when I was attending college and not working. This continued for five years. My start date was June 1980 and I finished my degree in August 1985. My service computation date is April 1982. Is there an option to buy those LWOP periods to bring my SCD to 1980?

Read the rest of this entry »

Phased retirement

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Q. I had heard that there might be an option to retire “gracefully,” e.g, work halftime for two years while also getting your retirement. I am under CSRS. Is this so?

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