Ask The Experts: Retirement

By Reg Jones

Retirement and rehiring under FERS

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Q. I am a 51-year-old Defense Department employee with 13 years of continuous service under FERS and am considering relocating out-of-state and working in the private sector. Since my MRA is 56, I am not eligible for the optional (voluntary) retirement or MRA+10. My plan is to apply for a deferred annuity and leave my FERS retirement untouched after separation to avoid benefit reductions. However, I plan on returning to federal service.

Having recently attended the FERS midcareer retirement planning workshop, I am aware of the pros and cons of each retirement option.

More specifically, under MRA+10, FEHB and FEGLI are terminated upon separation and can be reinstated when the postponed annuity begins; however, under the deferred retirement option, FEHB and FEGLI are not reinstated.

My questions are: 1. If I return to federal service at age 56, is there a minimum duration I need to work before I can retire under the MRA+10 option? 2. Once I return to federal service, will my contribution to FERS remain at 0.8 percent? (I realize employee contributions to FERS may be increased based on recent proposals in D.C.) 3. Is there any other scenario where, upon returning to federal service, I would not simply be picking up where I left off?

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6(c) coverage and retirement

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Q. I joined the Marine Corps in 1988, served until 1992 and bought back my deposit. I then worked under federal law enforcement — 6(c) coverage — until 2001, when I transferred to a non-6(c) covered position until 2004, with no break in service. I then immediately obtained a position under the 6(c) provisions with no breaks in service as a special agent and am still employed. I am 43 years old and will have 32 years of federal service at age 50.

At what age can I switch to a non-6(c) position and still retire with the law enforcement/firefighter retirement? Am I correct that I can switch to a non-6(c) covered position at 46 because I will have 20 years under the covered 6C provision and still retire at 50?

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Retiring at 30 years with FERS

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Q. I am a FERS employee with 22 years of service. I will have 30 years of service in eight more years and will also be 50. Can I retire with 30 years of service and collect (i.e., request an early retirement package)? I’ve read the deferred retirement, but my understanding is I would not be able to receive a pension until my MRA, 57.

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Retirement options before MRA at 20 years in

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Q. I entered federal service as a 1811 in 2001. I will reach 20 years of service in 2021 and would like to retire (at 20 years), but I will only be 46 years old. Can I retire with partial retirement and then, upon reaching age 52, receive full retirement benefits? OR am I required to have 20 years and minimum retirement age? I am confused as to when I can retire as an 1811.

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Years of service and deferred retirement benefits

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Q. If I have 20 years of federal service (including more than 15 in the foreign service) but I haven’t turned 50, can I retire but defer receipt of my benefits/pension until I am eligible at age 50? For example, an employee is 47 years old and has completed 20 years of federal service. Can that employee leave the service and still receive full retirement benefits beginning at age 50?

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Survivor annuity

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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.

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FEHB re-enrollment

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Q. I was a federal employee for 26 years and, from 1987 onward, was under FERS. I left my last federal job in June 2009 at age 58, after having passed the minimum retirement age and having been enrolled in the Federal Employees Health Benefits plan over the entire 26 years of my federal employment. In June 2009, I said that I intended to take a postponed retirement, some time after I reached age 60. It is my understanding that my enrollment in FEHBP was suspended at the time I left my last federal employment, in June 2009.

I had health insurance coverage under temporary continuation of coverage, ending in December 2010.

I applied to the Office of Personnel Management for a postponed retirement on Dec. 28, 2011, by filing Form RI 92-19. OPM acknowledges having received my application in February 2012, and I have been in interim status since that time. I began receiving interim payments in March 2012.

In a phone conversation I had with OPM in February 2012, I was told that I would not be able to re-enroll in FEHBP until my retirement was finalized.

Another year has passed, and my retirement is still not finalized. I am still in interim status. Is it really impossible for me to re-enroll with FEHBP before my retirement is finalized? Does the word “annuity” apply to my interim pay? If so, it seems that I can re-enroll in FEHB now.

An article by Reg Jones on your website says, “…if you were enrolled in FEGLI or FEHBP for the five continuous years before you retired, you may re-enroll in them when your annuity begins.” This suggests that the statement made to me on the phone in February 2012 was incorrect. Could you please clarify this? If I am eligible to re-enroll in FEHBP, what procedure should I follow to re-enroll?

A. You could only have re-enrolled in the Federal Employees Health Benefits program if you retired and postponed the receipt of your annuity to a later date. You didn’t do that. Instead, you resigned from the government and later applied for a deferred annuity. Deferred annuitants cannot re-enroll in the FEHB program.

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‘Death benefit’ vs. ‘life insurance’

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Q. My mother is a Postal Service retiree residing in a nursing home. She had to use up all of her own assets to pay the nursing home until she qualified for Medicaid. Now, she has nothing left. I’ve been told that as a retired postal worker, when her time comes, there is a Postal Service “death benefit” that will pay out to her beneficiaries and that Medicaid cannot take that money from her estate because it is technically a “death benefit” as opposed to “life insurance.” Is this true?

A. I’ve never heard of such a death benefit and don’t believe there is one. That leaves only two possibilities. First, your mother has a Federal Employees’ Group Life Insurance policy that, at her death, would be paid to whomever she designated on a Standard Form 2808 (CSRS) or 3102 (FERS). If she didn’t make such a designation, the money would be paid out according to the standard order of precedence. Second, if all of the money she contributed to the retirement system had not been returned to her in her annuity payments when she dies, any residual amount would be paid out according to the standard order of precedence.

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Retiree increasing life insurance

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Q. I am a former CSRS employee who retired in 2000. I have life insurance. Can I increase my death benefits?

A. Assuming you are talking about Federal Employees’ Group Life Insurance, no.

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FEGLI premium recovery

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Q. While the human resources department was preparing my CSRS retirement notice, it discovered an error in my life insurance. Twenty years ago, I elected an amount equal to “five times my salary.” However, my agency has only been deducting premiums from my salary for “one times my salary.” They now want me to repay almost $30,000 in back premiums covering the past 20 years. Is there not a statute of limitations on premium recovery or other reasonable remedy?

A. No, there isn’t.

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Getting retirement annuity information

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Q. Why isn’t OPM publishing how much (percentage wise) of federal retirement annuities are to be withheld BEFORE an individual puts in for their retirement? I have found several other people who plan on retiring who had no idea how much may be withheld from their retirement annuities. It’s like everyone is keeping it a secret. We are all told to plan ahead of time for our retirements, but neither OPM nor personnel offices are telling people how much is going to be withheld from our annuities when we start asking for our retirement estimates.

Considering the tidal wave of upcoming baby boomer retirees, individuals need to know this information when they start planning their federal retirements and take that into consideration when estimating how much they are going to have to live on because it is not the estimated amounts they are getting from their personnel offices, which is based on years of services, high-three, etc.

How many people are not aware of this information? I know I feel like I am beating a dead horse, but I really feel potential retirees have a right to know this information upfront, not AFTER they have made the decision to retire or AFTER they get their first check.

A. OPM can’t do that because there are too many variables. Let me explain.

Just as was true when you were first hired, when you retire you’ll be asked to designate the amount you want to have deducted from your annuity for federal and (if applicable) state taxes. If you don’t say what you want done with federal taxes, OPM will sign you up for yourself and three dependents. OPM won’t do anything if you are required to pay state taxes as an annuitant and haven’t elected to have deductions taken out.

You’ll have to do a little research to decide how much money you want deducted from your annuity for taxes. There are two reasons for that.

First, your annuity will be less than what you were receiving before you retired, so you may end up in a lower tax bracket. Second, a portion of your annuity will be tax-free because it will represent a return of the money you contributed to the retirement system while working. You can find out more about that by going to www.irs.com and downloading a copy of publication 721.

Things that won’t be deducted from your annuity include Social Security taxes, Medicare taxes and union dues, if any. Things that will be deducted include FEHB premiums and, in most cases, FEGLI premiums.

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Directed reassignment

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Q. I am 46 with 22 years of service, and have been told that I will soon receive a letter of directed reassignment to a job in my same grade far outside my commuting area. When the letter arrives, if I should decline to move to the new position, what are my options for drawing retirement? How about insurance? Severance pay? What about my 401(k) in the Thrift Savings Plan? My performance ratings are not an issue.

A. Reg: Because you wouldn’t meet the age and service requirements to retire, you’d only have one option. If you didn’t take a refund of your retirement contributions, you could apply for a deferred annuity at age 60.

You would be entitled to severance pay only if you lost your job through no fault of your own. However, if you were to resign or decline a reasonable offer, you wouldn’t. A reasonable offer is defined as one that is in the same agency, in the same commuting area, of the same tenure and work schedule, and not more than two grades or pay levels below your current position. Note: If you are covered by a mobility agreement, the reasonable offer exception wouldn’t apply.

You would be given a month of free Federal Employees Group Life Insurance and Federal Employees Health Benefits insurance coverage. At the end of that period, you could elect private life insurance coverage at your own expense. You could also elect to continue your health insurance coverage for up to 18 months under the temporary continuation of coverage provision. For that coverage you would pay 100 percent of the premiums, plus 2 percent for administrative expenses.

Mike: Your circumstances will not affect the usual rules that apply to your TSP account. As long as you remain employed, you will be subject to the in-service withdrawal rules described at https://www.tsp.gov/planparticipation/inservicewithdrawals/basics.shtml. If you separate from service, the rules described at https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml will apply. If you separate from service before the calendar year in which you reach age 55, you will be subject to the Internal Revenue Service’s early withdrawal penalty unless you meet one of the exceptions specified on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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FEGLI

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Q. I plan to retire Jan. 3. In Federal Employees’ Group Life Insurance, I have $55,000 basic and three times Option B for a total of $161,000 of insurance. I have paid 38 years into FEGLI and recently found out that when I turn 65 years old, my insurance reduces to nothing. Due to health conditions — cancer three years ago and diabetes — finding whole life insurance is very expensive and hard to afford. If I have $55,000 of basic insurance and decide to reduce my insurance by 50 percent, which leaves $27,500, how much does my family receive if I should die at 80 years old or older? The same with my Option B, three times my salary? What other options do I have? I need to leave my family with something.

A. Let’s deal with basic insurance first. When you retire, you’ll have a decision to make about the amount of coverage you want to keep. Up to age 65, you’ll continue to pay your current premiums. After that, it will depend on the option you elect. If you want to keep the same coverage, you’ll have to pay more for that benefit. If you want to keep only half of that coverage, you’ll also pay more, but not as much as if you’d elected full coverage. If you elect the 75 percent reduction, the remaining coverage will be free.

Now to Optional Part B insurance. When you retire, you’ll also have to decide how much coverage you want beginning at age 65. You can choose to retain full coverage or full reduction. In either case, the premiums you’ll pay until age 65 will continue to rise. If you elect full coverage, they will rise even more. If you elect the full reduction, at age 65 you will pay no further premiums, but your coverage will decline at a rate of 2 percent per month until they reach zero.

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Postal job moving

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Q. I work for the Postal Service. If my job moves 75 miles away and I only have 15 years of FERS under my belt but will not move, what would be the difference in dollar terms under FERS of resigning with 14½ years at 43 years old vs. putting up with commuting or renting during the workweek for five more years of FERS to make 20 total years at 50 years old. Last high-3 basic pay would be around $56,000 per year.

A. If you really want an answer to your question, you’ll have to hire a financial adviser to do the math. However, even if you provide him with more information, such as the rent you’ll be paying, you’ll only end up with a rough estimate.

On the other hand, I can provide you with some facts that may help you to do the math yourself. Whether you resign or are separated by adverse action, you wouldn’t be eligible for a deferred annuity until age 62.

Assuming that your high-3 was $56,000 when you left, your annuity would be $8,120 (.01 x $56,000 x 14.5). It wouldn’t be increased by any intervening cost-of-living adjustments nor would you be able to re-enroll in the Federal Employees Health Benefits of Federal Employees’ Group Life Insurance programs when your annuity began.

If you accepted the transfer and continued to work, you’d receive the salary of that position, increased by any longevity and/or annual pay adjustments, thus increasing your high-3. You’d also be able to continue your FEHB and FEGLI coverage. While you cite age 50 with 20 years service as your goal, you wouldn’t be able to retire then unless presented with an early retirement opportunity. If you weren’t, the earliest that you could retire would be at your minimum retirement age, which would be 56 and 10 months. Since you wouldn’t have 30 years of service, you’d be retiring under the MRA+10 provision, and your annuity would be reduced by 5/12 percent for every month you were under age 60 when you retired.

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New job and benefits, service transfer

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Q. I’m an electronic technician with the Postal Service and applied for a electronic technician position with the FAA. If I were offered the job, would my time carry over? If my current pay is between the pay scales, is it matched to what I currently make? Since I’m already a federal employee, I wouldn’t need to go through probation again, right? Where can I find out the pay scales and how much annual and sick leave are accrued? Should I know or consider any other information?

A. Your years of service, leave accrual rate and TSP investments would transfer to the new job. If you are enrolled in the FEHB or FEGLI programs, they would transfer too. What you would be paid depends on the grade of the position you are hired to fill. You’ll have to check with agency you are considering joining. The pay schedules for each grade and area are at www.opm.gov/oca/12tables/index.asp.

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Returning to federal work

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Q. I am 48. I was active-duty enlisted Navy from 1983 to 1993, so I have 10 years’ active duty. I got out as an E-6 with an honorable discharge. I am also 10 percent disabled, which happened when I applied for the CAVET program. I live in California. I took an early-out special separation bonus lump sum to get out after 10 years. President Reagan was drawing down the forces at the time and offered the early out.

I don’t see any money because I understand I have to pay back the SSB lump sum.

I have been working in the civilian community (nonfederal jobs) since I got out in 1993.

I am employed with a good company and have been so for more than five years, so I am vested.

Lately, I have had the bug put in my ear that I should get a federal job because I can continue the 10-year tenure I started in the Navy.

1. Is this true?

2. If this is true, I have also been told I would have to buy back my military time to continue my tenure? ‘Is this true too?

3. If questions 1 and 2 are true, what should I do? If I can get a federal job and buy back my time, would it be worth it to quite my current stable (knock on wood) job? I would like to just understand my choices. I care more about using the 10 years I have in the Navy than making more money.

A. If you went to work for the federal government, you could make a deposit to the civilian retirement system to get credit for your active-duty service. If you did it within two years, no interest would be charged. After you worked for five years full time for the federal government, you’d be vested in the retirement system. Here are the age and service requirements to retire: age 62 with five years of service, 60 with 20, at your minimum retirement age with 30 or at your MRA with 10 but fewer than 30. MRAs range between 55 and 57 depending on your year of birth. In general, your annuity would be based on the following formula: .01 x your highest three consecutive years of average salary (your high-3) x your years and full months of service (actual and military service for which you made a deposit).

Further benefits that might help you make up your mind include getting credit for your active-duty service in setting your annual leave accrual rate; participation in the Thrift Savings Plan, where contributions you make would be matched up to a certain level by your agency; health benefit and life insurance coverage, with the premium costs shared by you and the government; and the opportunity to take those two benefits into retirement.

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Retirement benefits

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Q. I plan on retiring when I am approximately 62½ years old. I’ve worked for TSA 10 years now and 2½ years will be 12½ total years.

What would my retirement include, i.e. health benefits and anything else?

A. Your annuity would be 12.5 percent of your highest three consecutive years of average basic pay (your high-3). And you’d be able to apply for a Social Security benefit. You’d also be able to continue your health benefits and life insurance coverage if you had been continuously enrolled in those programs for the five consecutive years before you retired.

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Postal service retirement before age 56

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Q. My wife is 50 and has been a CSRS postal employee for 32 years. She may lose her job and wants to know if she can retire and freeze her retirement until she turns 56 to avoid the 2 percent per year penalty for her age.

A. No, she can’t. If she retires, the reduction will occur on that date.

Her only alternative would be to resign from the government and apply for a deferred annuity at age 55, not 56. However, if she is enrolled in the Federal Employees Health Benefits or Federal Employees’ Group Life Insurance programs, she wouldn’t be able to re-enroll in them when her annuity began.

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Annuity, life insurance after beneficiary death

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Q. My mother was receiving a federal annuity check every month. She passed away, and I am trying to understand if the benefits are transferred to her children, or if there is life insurance in place.

A. Annuity benefits end with the death of the person who earned them unless there are unmarried dependent children under the age of 18 (22 if enrolled full time in school). To find out if she had Federal Employees Group Life Insurance, you’ll have to call the U.S. Office of Personnel Management at 1-888-767-6738 and talk with a benefits specialist. When you do, have you mother’s full name, date of birth, Social Security and annuitant numbers at hand.

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Deferred annuity and FEHB eligibility

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Q. I will have 10 years of federal service as of Jan. 27, 2013. I am 59 years old. I may have a job opportunity to return to a private-sector job. If I changed jobs and deferred my annuity until age 62, would I still qualify for government insurance?

A. Since you would be retiring under MRA+10, you’d be able to re-enroll in the Federal Employees Health Benefits and Federal Employees’ Group Life Insurance programs but only if you were enrolled in them for the five consecutive years before you retired.

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