Ask The Experts: Retirement

By Reg Jones

Spouse’s death and new survivor benefit request

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Q. Consider a retired federal employee who was married and has chosen a spouse survivor benefit at the time of retirement. If the spouse dies and the annuitant remarries:

1. Are further annuity reductions needed to cover the new spouse?

2. Is the nine-month waiting period still required?

3. If the original survivor benefit was less than full, can the benefit be increased (with increased annuity reduction)?

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WEP

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Q. I would like to know who is responsible for informing employees who work for the government of the windfall elimination provision. I was not told about the WEP until I went to the Social Security office to file for my Social Security retirement. My Social Security benefits were reduced by more than $1,000 per month. I worked hard all my life with two jobs for over 30 years. For what? Just to have my benefits go to someone who did not work but gets benefits. How are you to be informed of this law?

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Catch-62

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Q. I was told I am included in the catch 62 provision. I served four years in the Air Force from 1974 to 1978 and began Postal Service employment in 1979 (to present). I’d like to retire this year. I also have 2,282 hours of sick leave, and my service computation begins in 1975.

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RIF, special retirement supplement and penalty

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Q. If I retire at 59 years and five months with 28+ years of service, under a reduction in force, would I qualify for the special retirement supplement and only be penalized until I reach 60?

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Post-1956 deposit

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Q. The following statement was made in an answer to a question ask about post-1956 deposit: “You can’t get a refund of the deposit you made for your active-duty service. What’s done is done. If you retire at age 62 and aren’t eligible for a Social Security benefit at that time, you’ll never have to worry about losing those years and having your annuity recomputed.”

I will retire at age 60 and have paid in a post-1956 deposit. I am in CSRS and will have 41 years and eight months with the post-56 deposit (eight years, six months of military service). I have worked for 40 quarters and am eligible for Social Security (military service and work prior to the military). However, due to the windfall elimination provision, I do not plan to ask for Social Security benefits until I am 65 or older. Will my annuity be recomputed after I reach 62 even though I have no intention of requesting my Social Security benefit until 65 or 70? Can I expect some kind of reduction in my annuity? I understand my Social Security benefit will be reduced by two-thirds once I apply for it.

A. Because you made a deposit for your active-duty service, you’ll not only get credit for that time in your annuity computation but your CSRS annuity won’t be affected no matter when you apply for a Social Security benefit. However, as you noted, your Social Security benefit will be reduced because of the windfall elimination provision. That’s because you will be receiving an annuity from a retirement system where you didn’t pay Social Security taxes and have fewer than 30 years of substantial earnings under Social Security.

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Defer annuity or collect at MRA+10?

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Q. I am 54 and have over 26 years of creditable service under FERS. I am going to be leaving government service in the next few months. Is it better to take a reduced annuity at age 56 or wait until I can take the full annuity?

A. You don’t have a choice. If you leave government, you won’t be eligible for a deferred annuity until you reach age 60. And the only reason you won’t have to wait until age 62 for that annuity is because you have at least 20 years of service.

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Retirement eligibility

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Q. I am 52 years old and have 22 years of federal employment. Can I retire? If so, how soon can I receive monthly payments, and how much would they be reduced by?  How would this affect my Social Security benefits later? Also, how would this affect my medical insurance?

A. Unless you are a special category employee, such as a law enforcement officer or a firefighter, you don’t meet the age and service requirements to retire.

For FERS employees, these are: age 62 with five years of service, 60 with 20, at your minimum retirement age (MRA) with 30, and at your MRA+10, but with a 5 percent-per-year age penalty for every year you are under age 62. Your MRA is 56.

There is an option. Because you have at least 20 years of service, you could resign and apply for a deferred annuity at age 60. After 31 days of free health benefits coverage, you’d be able to continue it for up to 18 months under the temporary continuation of coverage provision of law. However, you’d have to pay the entire premium plus 2 percent.

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Annuity reduction?

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Q. I can start drawing Social Security this year, but I am retired from the federal government under CSRS. I had eight years in the Marine Corps, which I got credit for at retirement, and I didn’t pay the deposit of 7 percent for those years. Will my government retirement check go down? I read that I am already being penalized 10 percent each year because I didn’t pay the deposit.

A. If you are eligible for a Social Security benefit at age 62, those eight years for which you didn’t make a deposit will be eliminated and your annuity recomputed downward.

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Health benefits after retirement

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Q. I am a 51-year-old FERS employee whose minimum retirement age is 56. I will have over 30 years of service when I reach the minimum retirement age.  A couple of years ago, I went under my wife’s health plan.  We incorrectly assumed that she needed five years to become vested and that we could just stay under her plan when we retired (as with FERS). However, she is a Non-Appropriated Funds Defense Department employee and would need 15 years.

I am picking up my Federal Employees Health Benefits insurance again so that I will have five years under the plan when I reach the MRA. If I were to retire at 56, my understanding is that I can (a) begin receiving a reduced annuity immediately or (b) defer receiving my annuity until I reach 62. I was told that if I begin immediately receiving a reduced annuity, I can keep my FEHB and still benefit from the government contribution.

What happens if I defer the annuity until I am 62? Will I need to pay the whole premium, plus 2 percent, for the years between 56 and 62? My wife will likely work until I am 62, so could I go under her health insurance between 56 and 62 and then pick up my FEHB again when I begin collecting my annuity?  Under either of those scenarios, could I change my coverage from self-only to self and family to add my wife to my coverage when I am 62?

A. I think you are suffering from a misunderstanding, which I hope to clear up. If you will have 30 years of service when you reach your MRA, you could retire on an immediate unreduced annuity. And you would also be entitled to the special retirement supplement, which approximates the Social Security benefit you earned while a FERS employee. If you had five years of continuous enrollment in the FEHB, you could carry that coverage into retirement and, unless you are a Postal Service employee, the premiums you’d pay as a retiree would be the same as those you have been paying as an employee.

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Retirement eligibility

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Q. I plan on retiring in 1½ years. I will be 56 and have 23 years federal service. I bought back my three years of military time, but I understand that I will not be able to use that unless I do 30 years. I am FERS and was born in 1958, so my minimum retirement age is 56. Will I be able to retire at 56 with 23 years of federal service?

A. You could retire under the MRA+10 provision. However, your annuity would be reduced by 5 percent for every year (5/12 percent per month) that you were under age 62. To avoid the age penalty, you could retire and postpone the receipt of your annuity to a later date. Note: Regardless of when you retire, you will receive credit for those years of active-duty service for which you made a deposit in determining your length of service and in your annuity computation.

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Survivor annuity

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Q. Regarding your article on survivor benefits published Feb. 18, it was my understanding that under CSRS, an employee could designate a permanent reduction in their annuity to enable a surviving spouse to receive a portion of the annuity upon the employee’s death after retirement. Since I saw no reference to this in the article, and it would have no impact on the employee while still working, is my understanding incorrect? Outdated?

A. That column included information about specific death benefits available to the survivors of federal employees who die in service. What you are asking about is the survivor benefit that a retiring employee can elect for a spouse. Under CSRS, a full survivor benefit is 55 percent of the annuity a retiree is entitled to before any reductions are made in it for such things as federal taxes, health benefits, etc. Under FERS, a full survivor annuity is 50 percent. Both systems permit the election of a lesser amount but only with the signed and notarized consent of the spouse.

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Early retirement and annuity reduction

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Q. I am a 45-year-old letter carrier under CSRS with 25 years of service. If I accept an early retirement offer from the Postal Service, will I still be subject to the 2 percent-a-year penalty for being under my minimum retirement age? What other penalties will I face accepting a VERA at an early age?

A. Yes, as a CSRS employee, you’d be subject to the 2 percent per year permanent reduction in your annuity. Another effect would be that your annuity would be based on fewer years of service than if you’d waited until you reached age 55 and were eligible for an immediate unreduced annuity.

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VERA/VSIP and age

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Q. I have 26 years of uninterrupted federal service, am 58 years old, in FERS, no military service.

1. Is Voluntary Separation Incentive Pay ever offered without Voluntary Early Retirement Authority, or VERA without VSIP?

2. Can I, at less than 60 years old, accept the VERA/VSIP and retire if one or the other is offered?

3. If I take VERA and am not 60 years old but have over 25 years of service, will I be eligible to receive the special retirement supplement immediately or have to wait until age 60? How about under VSIP only?

4. If I take VERA and am not 60 years old, will I get a pension reduction for early retirement before age 60 with 5 percent off for each year short of 60? Or, does that get waived and my pension will be based on age 60?

A. VERAs are usually offered without a VSIP. And when both are offered, the positions covered are much broader in scope than the VSIPs, which are normally targeted. Only employees who are eligible for retirement can access a VERA. Anyone who is offered a VSIP can accept it, even if he’s not eligible to retire. CSRS employees who retire under a VERA will have their annuity reduced by 2 percent for every year they are under age 55. The age penalty is waived for FERS employees.

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Retirement conversion and offsets

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Q. In February 2014, my FERS and Social Security disability retirements will convert to regular retirements. Will my Social Security retirement be reduced by any offsets?

A. According to the Social Security Administration, “If you receive workers’ compensation or other public disability benefits and Social Security disability benefits, the total amount of these benefits cannot exceed 80 percent of your average current earnings before you became disabled.” You’ll have to do the math to find out if this limitation will affect you.

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CSRS Offset and WEP

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Q. I am a CSRS Offset GS14/10 employee who left Veterans Affairs Department employment in 1985 after 11+ years and returned to VA employment in 1991. I will be 66 years old in July and am considering retiring Jan. 3, 2014. At that point, I will have 24 years of offset employment, 30 years of Social Security contributions (including the 24 offset years) and 37 years of service (including sick leave).

My wife is in a similar CSRS Offset situation and is also considering retirement Jan. 3, 2014, at age 61. She will not take Social Security benefits until age 66. She will have 18 years of offset employment, 19 years of Social Security contributions (including the 18 offset years) and 32 years of service.

What impact will offset and the windfall elimination provision have on my VA pension and Social Security benefits?

A. Your CSRS annuity will be reduced by the amount of Social Security benefit you earned while a CSRS Offset employee. The same is true for your wife. Both of you would also be subject to the windfall elimination provision if you had fewer than 30 years of substantial earnings under Social Security. Note: While someone would have only needed to earn $4,520 in 2012 to earn four Social Security credits, he or she would have had to earn $20,475 for it to be considered substantial earnings. For more information about the WEP, go to http://ssa.gov.pubs/10045.html.

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Military buyback and postal retirement

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Q. I have been a postal Service employee for 19 years and a member of the Air Force, Air Force Reserve and Air National Guard for 26 years. I have approximately three years of active-duty time. If I buy back my military time to put toward my postal retirement, will that affect my military retirement? Also, when is the earliest I can retire/separate from the Postal Service and keep my pension, and what effect will retiring early have on my benefits?

A. First, making a deposit for your active-duty service will have no effect on your reserve retired pay. Second, the earliest you could retire is at your minimum retirement age with at least 10 years of service. Under the MRA+10 provision, your annuity would be reduced by 5 percent for every year (5/12 percent per month) that you were under age 62. MRAs range between 55 and 57, depending on the year in which you were born. Note: You could, of course, resign from the government at any time and apply for a deferred annuity. If you had 20 years of service (actual and bought back), you’d be eligible at age 60. I you had fewer than 20, you’d be eligible at age 62.

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Changes in health insurance cost

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Q. My December federal retirement take-home pay was $1,609.11. My January federal retirement take-home pay was $1.645.66. My February federal retirement take-home pay was $1,511.67. My take-home pay was reduced by $133.99. In my 15 years of retirement pay, I have never seen this much taken for medical at once.  For the past few years, my take-home pay has continued to reduce. Inflation is not keeping up with medical costs. What’s going on?

A. All plans in the Federal Employees Health Benefits program are experience-rated. This means that the premiums in the current year are based on an analysis of the premiums the plan took in versus the expenditures it made to pay enrollee claims. While sometimes a plan’s premiums go down, they often go up. To find out if the change you experienced is the result of increased plan premiums, go to www.opm.gov/healthcare-insurance/healthcare/plan-information/premiums and check the rates for 2012 and 2013.

The only way you can moderate the effects of premium increases is to shop around among the many plans in the FEHB program and find one that meets your needs but has lower rates. One of the benefits of the FEHB program is that you can change plans during any open season.

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Discontinued service retirement

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Q. I will be RIF’ed on July 29 with 24 years and seven months of service. Do I qualify for a discontinued service retirement? How much will my annuity be reduced? I am 43 years of age. I am covered in a law enforcement officer position. Additionally, I have six months of sick leave. Can I use this time to meet the 25-year DSR time period for any age?

A. You aren’t eligible for a discontinued service retirement. To be eligible for a DSR, you’d have to be age 50 with 20 years of service or any age with 25. Sick leave cannot be used to meet the length of service requirement.

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Retirement and marriage timing

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Q. I have decided to retire June 1. I’m in CSRS Offset, will have 36½ years of actual service, and 2,200-plus hours of unused sick leave, for 37½ years of credited service time. This is my 35th year of credited Social Security earnings. I’m aware of the offset reduction. I’m a widower and my retirement forms have been sent in as such.

If I were to remarry after the effective date of my retirement but before I were to receive the first full annuity payment, and sent in a revised retirement form, marriage certificate, beneficiary forms, etc., to the Office of Personnel Management, is there a period of time that the payback of the difference of nonsurvivor vs. survivor annuity and interest would not apply? I thought I read in an OPM circular that if this were to occur (marrying after retirement) before the first full annuity payment was received, the difference payback and interest would not be applied, just the permanent survivor annuity reduction.

A. That’s my understanding, too.

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Survivor annuity for my child

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Q. I will retire in six months and have joint physical custody of my 8-year-old child. I am not married, nor was I previously married.

My retirement counselor said that if I wanted my child to receive my annuity should I die post-retirement (and she is under a certain age and a full-time student), it would be very costly, and not only would my annuity be reduced greatly but she would only get small amount. I recently read somewhere that I could elect a survivor annuity benefit for my child at no cost. So:

1. When retiring, can I elect my child to receive my annuity?

2. Is it free? If not, what is the cost?

3. Is the cost a one-time fee and a permanently reduced annuity to me while I’m alive?

4. Approximately what percentage of my annuity would she get?

A. You can’t elect a survivor annuity for your child. You can only make such an election for a spouse. On the other hand, you may be able to elect an insurable interest annuity for the child. To do so, you would need to:

1. Establish by a current medical exam that you are in good health when you retire; and

2. Provide affidavits that explain the relationship between you and the child, and the extent to which that child is dependent on you and expects to receive a financial benefit from your continued life.

If you meet the criteria, your annuity would be reduced by a percentage based on the difference between your age and the age of the child. Because the difference in your case is so great, the reduction would be a steep one. Since you are about to retire, I have to assume that the difference is 30 years or more. If that’s so, the immediate and permanent reduction in your annuity would be 40 percent. For that amount, when you die, the child would be entitled to 55 percent of your annuity (if you are covered by CSRS) or 50 percent (if covered by FERS).

On the other hand, no reduction in your annuity would be required for the child to receive a children’s benefit if you die while he or she is under age 18 (age 22 if in school), and it can be established that although the child was born out of wedlock, he or she has been supported either based on a court order or with voluntary regular and substantial contributions from you. That benefit in 2013 would be around $500 a month.

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