Ask The Experts: Retirement

By Reg Jones

Pension eligibility

Bookmark and Share

Q. I worked for the National Security Agency from 1961 to 1968. Am I eligible for a pension?

Read the rest of this entry »

Tags: , , , ,

Survivor annuity

Bookmark and Share

Q. My father who lives in Puerto Rico, is retired from the Postal Service, and is 64 years old. He told me that if he passes, I’m listed to get his pension which would be $1,200 a month, what he gets now. He is not married, and I’m curious if it’s that simple. Am I eligible? Will I get that much? For how long? I am 34.

Read the rest of this entry »

Tags: , , , ,

Annuity after death

Bookmark and Share

Q. If a person dies after they receive their annuity check, what happens to the money left in their account?

Read the rest of this entry »

Tags: , , , , ,

Deferred retirement

Bookmark and Share

Q. I’m considering resigning from federal service because I’ve been unable to find a federal job at my husband’s new job location across the country. I have career status with 18 years of total federal service, six of which was bought back military time. I was born in 1959, so my minimum retirement age is 56; I’m 53 now. If I resign now with the intention of taking a deferred annuity when I reach 62, do I do anything in the process of separating that might affect my ability to return to the federal workforce? It’s my understanding that I don’t apply for the deferred retirement until I’m ready to receive it.

Read the rest of this entry »

Tags: , , , , , , ,

Resignation and pension

Bookmark and Share

Q. I am 45 years old with 13 years of service under FERS and will be resigning this month to pursue other activities. I understand that I would eligible for a full pension (computed on my high-3) at age 62. That is 17 years away and, in the meantime, my defined benefit pension would remain static and thus be seriously eroded by inflation. Is there a way to protect myself against this within the pension system, or can I take a lump sum on separation and roll that into an IRA? If I take the lump sum, must I do it as of my separation, how is it computed, and does it represent only my contributions to the basic pension, or also those of the government? I have a separate Thrift Savings Plan, which I plan to roll into an IRA.

Read the rest of this entry »

Tags: , , , , , , , , ,

Withdraw or defer

Bookmark and Share

Q. I have a little over 13 years of FERS service. I am 51 years old. I originally planned on retiring at 56 (MRA+10) but I have recently been contemplating retiring now under a deferred retirement.

1. If I retire now (deferred), will I be able to draw the retirement at 56, or will I have to wait until age 62?

2. If I choose to withdraw my retirement versus defer it, is there a calculator somewhere that can give me a general idea of how much I would get?

A. You can’t retire. What you can do is resign from the government, leave your retirement contributions in the fund and apply for a deferred annuity at age 62. There isn’t any calculator that would tell you what you’d receive if you took a refund of your retirement contributions. What I can tell you is that you’d receive every penny you contributed to the fund plus accrued interest based on variable market rates set by the Department of the Treasury.

Tags: , , , , , , ,

Beneficiaries

Bookmark and Share

Q. I will be retiring this summer, and my ex-husband has remarried, so he has no claim to my annuity when I die. Can I choose to leave my annuity to my children?

A. No. However, if you designate them as your beneficiaries and die before your contributions to the retirement fund have been returned to you in your annuity payments, any remaining amount would be paid to them.

Tags: , , , ,

Alternate form of annuity

Bookmark and Share

Q. I am anticipating retiring Jan. 3 after almost 40 years of continuous service for the Veterans Affairs Department. I recall, many years ago, retirees electing withdrawal of their cumulative contributions to the retirement fund and receiving a minimum penalty in their annuity. I am unable to find anything online relating to this option and my human resources people say they’ve never heard of it. When did we lose this option?

On that subject, my earnings and leave do not reflect the total amount that I have contributed to the retirement fund, but only the amount contributed since conversion to the Defense Finance and Accounting Services. I’m told “they never figured out a way to convert the figures from the old system.” Other than searching through my attic for old E&L records, and adding the two figures, where can I find the amount of my total contribution?

Also, I’ve read where under Obamacare, congressmen and their staffs will no longer be under Federal Employees Health Benefits after January 2014 and will have to go under a state program. Is there any plan to move federal employees and retirees also?

A. You are referring to the alternative form of annuity. When it became law in 1986, it allowed a retiree to receive a tax-free payment of his contributions to the retirement system and accept a reduced annuity.

However, Public Law 103-66 eliminated this lump-sum option for everyone other than those employees who have a life expectancy of less than two years and who are not retiring on disability.

When you retire, the Office of Personnel Management will provide you with the exact amount of money you have contributed to the retirement fund. I’m not aware of any way you could get that figure now.

Finally, there is no plan to move federal employees to a state program or anywhere else, for that matter.

Tags: , , , , , , , ,

Postal Service trouble and retirement contributions

Bookmark and Share

Q. With all of the financial instability in the Postal Service right now, I am concerned that I will be able to draw retirement under FERS. I have 13 years with the USPS now and do not foresee being able to get a full 20 years, so I will be taking a short retirement. If the USPS goes bankrupt or is bought in a privatization move, what happens to the money I have been putting into FERS for retirement?  Would the FERS retirement money still be there should the USPS become insolvent or privatized?

My father worked for Kaiser Aluminum Corp. for 35 years. He retired and, eight years later, Kaiser went bankrupt and he lost his pension. Do you have any insight on this issue?

A. Your retirement contributions are safe. They aren’t in the hands of the U.S. Postal Service. Instead, they are in the Civil Service Retirement and Disability Fund, which is maintained by the Department of the Treasury.

Tags: , , , ,

Treasury’s contribution to annuity

Bookmark and Share

Q. What is the percentage paid by the U.S. Treasury toward our monthly annuity account when we retire under CSRS?

A. It’s not surprising that no one could answer the question, because there isn’t any one answer. It all depends. If an employee retired before June 2, 1986, all of his annuity payments were considered to be a return of his retirement contributions and weren’t taxable, since they had already been taxed as income while he was working. When the amount in his account ran out, all of the annuity payments he received were from the government and, as such, 100 percent taxable. If he retired after that date, the amount he received in each annuity payment depended on two things: first, if he was filing under the general rule or the simplified rule; second, his age at retirement. A third factor was added shortly thereafter: whether he re-elected a survivor annuity and in what amount. To learn more about this mare’s nest of rules, go to www.irs.gov and download a copy of IRS Publication 721, Tax Guide to U.S. Civil Service Retirement benefits.

Tags: , , , , , ,

CSRS Offset and WEP

Bookmark and Share

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.

Tags: , , , , , ,

Buying back retirement credits

Bookmark and Share

Q. I worked for the Postal Service from late 1979 until about 1991. I had a lot of personal and work-related problems and was also given a letter of termination. I decided to quit. I also tried to pursue a disability, but I dropped that because of stress and depression.

I withdrew my retirement to pay an accumulation of four months of bills and rent that I was behind in. I vaguely recall reading that there was a buyback of retirement. Is this true? I am applying for Social Security benefits. I am only 58, but, due to health concerns, am not able to work. I have 31 Social Security credits and need 40 for full benefits. If I could buy back those years of retirement, I would have the full number of credits.  I honestly don’t know how all this works.

A. If you took a refund of your retirement contributions when you left, you wouldn’t be entitled to any retirement benefit nor could you redeposit that money, plus interest, to get credit for that service unless you returned to work for the government. If you left your contributions in the retirement fund, you’d be eligible for a deferred annuity at age 62.

Tags: , , , , , , , , , ,

Survivor annuity for my child

Bookmark and Share

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.

Tags: , , , , ,

Retirement contributions and taxes

Bookmark and Share

Q. I am a recently retired CSRS employee. I note a huge inequity concerning my CSRS retirement contributions from the federal retirement benefits booklet the Office of Personnel Management sent me. I am told that I have a retirement contribution credit of $164,836 after-tax dollars. From this amount, I will get 310 equal monthly payments of $531.73 that will be a tax-exempt portion of my total monthly annuity.

However, I am told once I receive gross monthly retirement benefits that exceed my contributions (tax exempt and taxed portion), there are no more contribution credits in my account, and no lump-sum payment will be made.  What regulation under Title 5 U.S. Code (or others) allows the government to screw me by extending the time period to use up my tax-free portion of my annuity while minimizing the time to exhaust my contribution amount? According to the retirements benefits booklet OPM sends, recovering an amount equal to my retirement contributions for tax purposes is treated differently from exhausting my lump-sum contribution credit. Has there been a class-action suit addressing this issue?

A. The amount of your retirement contributions that are considered a tax-free part of your annuity during any calendar year are determined by actuarial (life expectancy) tables contained in the federal tax code. To learn about the whys, wherefores and how to file, download a copy of IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits. You’ll find it at www.irs.gov/pub/irs-pdf/p721.pdf.

Tags: , , , , , , , ,

CSRS survivor annuity withholding and taxes

Bookmark and Share

Q. I will be retiring in June and am trying to compute the number of federal tax exemptions, etc., that I take.  I looked through my notes from my last federal retirement planning class and saw that I jotted down that the amount withheld for survivor annuity from one’s monthly pension is a pretax item.  I thought it would be smart to obtain verification or validation rather than assume I heard and recorded this correctly.

If the survivor annuity withheld is subject to federal income tax at the time of withholding, then the portion withheld should be nontaxable when the survivor annuity gets paid out (sort of like the tax-free portion of one’s CSRS 7 percent contribution). Surely, CSRS pensioners and their survivors aren’t taxed twice on this income.

A. You’ll find out how your annuity and that of a survivor are treated in Internal Revenue Service Publication 721, Tax Guide for U.S. Civil Service Retiree Benefits, available at www.irs.gov/pub/irs-pub/p721.pdf.

Tags: , , , , ,

Pension eligibility

Bookmark and Share

Q. My husband, who is 98 years old, worked for the Postal Service in Chicago from 1937 to 1942, then joined the Army to fight in World War II. He took a leave of absence from the Postal Service until the war ended and returned to the Postal Service in 1947 and worked until 1948, when he entered graduate school under the GI Bill. He did not take a refund of his CSRS contribution. Is he eligible for a pension?

A. If what you say is true, he may very well be eligible for an annuity. To find out, he’ll have to complete a Standard Form 2801, Application for Immediate Retirement, and send it to the address on the form. You’ll find the form at www.opm.gov, click on Find Form(s).

Tags: , , , , ,

Lump-sum death benefit

Bookmark and Share

Q. My father was a federal employee for more than 40 years. When he died, he had the highest civil servant rank possible. My mom died 15 months ago, and my dad died in September at the age of 86 after being retired for 24 years. He was receiving monthly annuity payments of over $6,000 a month until he died. We just received paperwork about a possible lump sum that would be whatever was left in his annuity that was not paid out in monthly payments. What is the likelihood that there is a lump sum left? Typically, do federal employees have a residual lump sum after 24 years of being retired?

A. It’s not only possible, it’s likely. That’s because each of his annuity payments contained a small portion of the contributions he made to the retirement system, which were tax-free because he had already paid taxes on that money. That portion was determined by life expectancy tables published by the Internal Revenue Service. Therefore, his estate can expect to receive something, however small.

Tags: , , ,

Unused sick leave

Bookmark and Share

Q. I am retired military with 27 years in. Since that time, I have been a civil servant and am coming up on my 10-year anniversary under FERS. My service computation date is Aug. 10, 2003. I am planning to resign from my civil position Dec. 31, prior to my 62nd birthday. (I was born Dec. 11, 1952.) I plan to ask for a lump-sum check for my unused accrued leave. But it looks like I will not gain anything for having been such a healthy individual and that my many days of sick leave will simply go wasted. Is my sick leave balance used in any form to accrue additional deferred benefits or can I get paid for my unused balance?

A. If you leave your retirement contributions in the fund when you leave, you’ll be eligible for a deferred annuity. However, deferred annuitants receive no credit for their unused sick leave. FYI: If you stayed on until your 62nd birthday, you’d receive full credit for that unused sick leave in the computation of your annuity.

Tags: , , , , , , , , ,

FERS or FERS-RAE?

Bookmark and Share

Q. I received a conditional offer of employment in the fall. Processing has been continuous. My actual start date will be this year. Will I fall under FERS, based on the offer date, or FERS-RAE, based on the start date?

A. To the best of my knowledge, your retirement contribution rate will be based on the day you are employed, not the date on which the offer was made.

Tags: , ,

Buyback

Bookmark and Share

Q. I am 54 years old and was employed with a federal agency for 17 years from 1979 to 1996. Upon resignation to enter the private sector, I withdrew 100 percent of my CSRS contributions. If I return to full-time federal employment this year, do I have the option of buying back the creditable service of 17 years for the same amount that I withdrew in 1996? Secondly, would I be able to continue with CSRS rather than FERS upon re-employment? Would I be eligible to retire after eight more years of federal employment service?

A. If you returned to work for the federal government, you’d be placed in CSRS Offset (CSRS and Social Security) with the option of transferring to FERS. On your return, you would be able to redeposit the money you took out and get credit for your prior service. However, it wouldn’t be the amount that was refunded to you; it would be that amount plus accrued interest. If you made the redeposit, you’d get credit for your prior service in determining your total service and in your annuity computation; if you didn’t, you’d only get credit for it in determining your length of service. Either way, you’d be able to retire at age 62.

Tags: , , , , , , , , , , , , ,