Ask The Experts: Retirement

By Reg Jones

COLA

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Q. Are FERS annuities adjusted for inflation? I have 33 years of government service. With that many years of work, will my FERS annuity be lower if I retire in March, before my 62nd birthday in September?

A. Unless you are a special category employee, such as a law enforcement officer, you would first be eligible for a cost-of-living adjustment at age 62. Be aware that COLAs are applied based on the number of months you are on the annuity roll after reaching age 62. Therefore, if you retired in March, you would first be eligible in September and receive a fraction of the 2014 COLA.

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Disability retirement and taxes

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Q. I am a 52-year-old FERS clerk working for the Postal Service. I was been diagnosed with Parkinson’s disease in November 2005. I am wondering about a disability retirement and how the money I am paid, if approved, is taxed or not?

A. The Internal Revenue Service considers CSRS and FERS disability annuities taxable income. If you were also approved for a Social Security disability benefit and judged by them to be totally disabled for any gainful employment, then your benefits would be tax-free.

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Annuity computation

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Q. I am a 62-year-old federal police officer. I have over 33 years of combined military and civilian time. I have an adjusted service computation date of Jan. 4, 1978, and I have FICA, CSRS (partial) and FERS offset.

Promotions and upward mobility are few and far between in my job series, not to mention reaching a “high- 3.” I am contemplating retirement. However, since we no longer have a local human resources department to assist us, I am writing to ask if you can advise me.

A. It doesn’t make any difference what level of income is used, the formulas for calculating federal employee annuities are the same. For CSRS the formula is:

.015 x your high-3 x 5 years of service, plus

.0175 x your high-3 x 5 years of service, plus

.02 x your high-3 x all remaining years and full months of service

For FERS, the formula is:

.01 x your high-3 x all years and full months of service

(.011 if you retire at age 62 or later with at least 20 years of service)

Since you have both CSRS and FERS service, you’d do two calculations and add the results together. If you made a deposit to get credit for your active duty service, you’d be done. If you didn’t make a deposit, you’d get credit for the time in determining your eligibility to retire.

However, your annuity would be reduced actuarially by the amount you owe and your age when you retire.

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Special retirement supplement

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Q. I am a FERS retiree who was RIF’d into retirement in October 2009 with 27 years of service. I reached my minimum retirement age of 56 on Jan 4. I understand I will receive the special retirement supplement for first year regardless of my employment income. Will that continue for the 12 calendar months from February through January 2014? Or is it only until Dec. 31, which would be 11 months?

After that first year, I understand that the Office of Personnel Management will evaluate my previous year’s income (I assume total 2013) and then cut off my supplement or at least adjust it based on how much over the $14,160 earnings limit I made. I will have made more than three times the $14,160, so I assume, in my case, they will cut me off. Will they cut me off for 12 months and evaluate me again on Jan. 1, 2015, looking at my 2014 income? Or will they look at each month of 2014 to see if I exceed the prorated allowable income during 2014?

A. Start your search for answers at www.socialsecurity.gov/retire2/rule.htm.

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Social Security and Medicare

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Q. I am retired and on Social Security disability. I am 63 and now receiving regular pension since 62. I am covered by FERS BC/BS. I was under the impression that my coverage continued till age 65 when I retired in 2000. I will have to wait till 66 to retire under the new Social Security rules for retiring. Will the health coverage continue till age 66, or will it stop at 65, leaving me with no insurance since I can’t get Medicare till age 66 now? And how does one keep the coverage later?

A. First, a correction. The eligibility age for Medicare is still 65. Only the age at which someone becomes eligible for a Social Security benefit has changed.

Now on to your basic question. As long as you continue to have premiums deducted from your annuity, you will be able to continue your Federal Employees Health Benefits coverage for the rest of your life.

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Military service and federal employment and retirement

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Q. I was born on Aug. 2, 1967, and was in the military for nine years and three months (Feb. 25, 1992, to June 13, 2001). I worked at the VA hospital for 11 months (October 2003 to September 2004) and while there received my 10 years of service pin.

I am looking to obtain GS employment again (soon) and wanted to know if I could retire and receive a retirement check once I complete 10 more years of service, giving me 20 years of service. If I am unable to receive my retirement check after 20 years of service, at age 55, when would I be eligible to? Given the scenario above, what is the best retirement option for me once I am back in the GS system (FERS or CSRS), and do I have to pay money back to receive a retirement check?

A. No, you couldn’t retire with 20 years of service. The earliest you could retire would be when you reached your minimum retirement age, which is 56 years and six months. Further, you would get credit for your active-duty service only if you made a deposit to the retirement system.

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FERS RIF and annuity

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Q. I am 57 and have 27 years of service as a FERS employee with the Interior Department. I am in an RIF situation and would like to know my options.

It appears, because of my age, that I am eligible for an immediate annuity.

Will my annuity be reduced because of my age and my being three years short of 30 years of service?

A. Yes, you will be eligible to retire, and you won’t be penalized because you are short of the 30 years of service normally required for an immediate, unreduced annuity.

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Workers’ compensation and separation

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Q. I’m a postal worker under FERS. I started in 1988. I’ve been on workers’ compensation for the last four years. Now they are starting separation procedures.

I guess that’s code for termination, but am I eligible for retirement disability? And if so, do I have to take the retirement disability, or can I continue to collect workers’ compensation.

And if they separate me from the post office, does that mean that my workers’ compensation stops.

A. You’ll have to apply for disability retirement, which your agency is required to help you do. If you are approved for it and you continue to qualify for workers’ compensation, you’ll have to choose between the two benefits. As a rule, workers’ compensation is a better choice financially.

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Service computation date

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Q. I started in the government on Feb. 21, 1984, as a full-time equivalent temporary employee not to exceed one year but managed to get another job in November of that year — FTE, 18 months to three years — which became a permanent job. FICA was being taken out of my pays. What will be my service computation date for retirement purposes? I will have 29 years next month and be 56 years old. My personnel office is telling me January 1987. I am under FERS.

A. Your agency is correct. Unless you make a deposit for that period of nondeduction service, you won’t get any credit for it in determining your length of service or in your annuity computation.

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Special retirement supplement

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Q. In May, I will have 20 years under FERS with 10 years of military service included. I have bought back my military time. Will I be eligible for the special retirement supplement?

A. With 30 years of service, you could retire at your minimum retirement age.  MRAs range from 55 to 57 depending on your year of birth. If you retire on an immediate annuity before age 62, you’d be entitled to the special retirement supplement. However, the SRS would be based solely on your years of actual FERS service. Active-duty service for which you’ve made a deposit wouldn’t be  included in that computation.

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Wrong retirement package

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Q. I submitted my application for retirement at the Postal Service, accepting the early-out. While waiting for my returned papers, I received a letter from Postal headquarters stating I was put in the wrong retirement. As I had more than five years of prior service, I should have been put in CSRS Offset instead of FERS, so it says to be patient and Washington will send me a new retirement package. With my Jan. 31 retirement date approaching, what can I do?

A. If you had five years of CSRS service before Jan. 1, 1987, you should have remained in CSRS. If you had five years of CSRS service but left for at least a year and returned after Dec. 31, 1983, you should have been placed in CSRS Offset. Once you are off the Postal Service rolls and the Office of Personnel Management has your paperwork, they will let you know what your options are. You can find out more about the Federal Erroneous Retirement Coverage Corrections Act at www.opm.gov/retire/pre/fercca.

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Five-year rule

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Q. I will be 66 years old in April. I have been with the Postal Service (FERS) for 16 years. I am eligible for retirement, but I am concerned about health insurance. I was always covered under my spouse’s insurance, since she started in the workforce before I did. I took on my own health insurance in January 2011 since she retired on disability due to medical complications. When I took on health insurance, I also covered for her health insurance. I know it has not been five years yet. What do I need to do to be eligible to keep health insurance?

A. You can relax. You only need to be enrolled in or covered by the FEHB program for the five consecutive years before you retire. You’ve met that requirement.

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FERS firefighter retirement

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Q. I am a federal firefighter and a FERS employee. In 2022, I will have 21 years of creditable service and four years of bought-back active military time and be 48 years old.

1. Will I be able to retire under the provisions of 25 years of service at any age?

2. Will I receive the special category retirement percentages (1.7 x high-3 x creditable service, etc.)?

3. Will I receive the special retirement supplement until 62?

4. Will I not be able to withdraw any Thrift Savings Plan annuities until 62?

A. Reg: 1. No, you won’t be able to retire. Only actual service as a firefighter — not active duty for which you’ve made a deposit — counts toward the 25-year requirement.

2. When you are eligible for retirement and do so, your annuity would be computed using the special category percentage for the first 20 years; the remaining time would be computed using the standard multiplier.

3. When you retire, you would receive the special retirement supplement, regardless of your age, until you reach age 62.

Mike: 4. You will have access to your TSP assets, for withdrawal or to purchase an annuity, as soon as you retire.

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Sick leave

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Q. When I retire under FERS, do I add my sick leave time to my service time, or do I cash in my sick leave?

A. Sick leave has no cash value. When you meet the age and service requirements to retire, it will be added to your actual service and used in the computation of your annuity. However, if you retire before Jan. 1, 2014, you’ll only receive half credit for any unused sick leave.

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Military buyback

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Q. I was active-duty Navy (1980-84), then active Coast Guard (1991-2000). I received a tentative offer for employment with Army a few weeks ago (I’ve been a contractor since 2000). All required documents are submitted. Now I wait.

How do I buy my 13 years active duty into FERS? Can I use my existing 401(k) to pay this? How much would it cost me?

I also found out that, as of Jan. 1, the deduction for retirement went up to 3.1 percent. I guess a tentative offer before Dec. 31 doesn’t count for hired, so my pay is decreased. Adding on an increase in the cost of living (D.C. area), increase of health care coverage, retirement, Thrift Savings Plan, Social Security and decrease from my current salary, there’s not much of a paycheck left. What are the benefits of government employment? Any idea why Fort Belvoir does not have a cost-of-living adjustment?

A. Yes, you will be able to make a deposit to get credit for either or both your periods of active-duty service. When you are hired, your personnel office can explain how you do that and what it would cost. While you can use any source of money to make the deposit, I don’t know what the tax consequences of using your 401(k) would be.

The fact that you were made an offer of employment before the change in retirement deductions went into affect won’t change the fact that you’ll be required to pay the higher amount.

Your question about COLAs and Fort Belvoir makes no sense. Employees don’t receive COLAs, only retirees. And whatever COLAs one retiree gets are applied to the annuities of all eligible retirees. On the other hand, if you are referring to annual pay increases, these have been frozen for all employees for the past few years.

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Special retirement supplement

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Q. I would like to retire this year. I will be 56 in September with 34 years of creditable service — 28 under FERS and six years of military time that I bought back. Will I be eligible for the special retirement supplement, along with a FERS retirement? Or will I have to work for two more years under FERS to get the SRS?

A. Because you will have reached your minimum retirement age, you’ll be entitled to receive the special retirement supplement when you retire. However, the SRS will be based solely on the years you were covered by FERS. The active-duty service for which you made a deposit will not be included in that computation.

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Self-only vs. self and family

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Q. I am a FERS retiree with premium deductions from my annuity for Federal Employees Health Benefits family coverage. My wife is not a federal retiree.

1. If I change to single during open season, can I change back to family coverage the next year?

2. When I die, I assume FEHB coverage will halt for her, correct?

A. Yes, you can change from self-and-family coverage to self-only during any open season and change back during any open season. If you provided a survivor annuity for your wife, and you are covered by the self-and-family option when you die, she will be able to continue that coverage; if you were enrolled in self-only, she wouldn’t.

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Military service and retirement pay

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Q. I was hired in 1993 by the federal government under FERS. I made a military deposit for more than 10 years I served in the Army. I then joined the National Guard in 1995. I then transferred to the Army Reserve in 2000. In 2002, I was mobilized for 12 months (title 10) for Operation Noble Eagle. I returned to work. Then, in November 2004, I was mobilized again (title 10) for more than four years, I returned to work and made a deposit on that time. Then, in September 2009, I was mobilized again (title 10), and then I made the Army Reserve Sanctuary Program. I am to retire from this active duty in the next couple of months, and I am going to return to work.

I have been getting conflicting information; I am being told that I am still considered a reservist and that I am going to be able to collect my retirement now instead of at 60 years old. This is true; however, how is this going to affect my FERS retirement? Am I going to have to request a refund of all of my deposit, or will some of my active time or mobilized Reserve time still count toward my civilian retirement? My retirement order has my component as USAR.

A. While I can’t give definitive answers about individual cases, I can give you information that will help you determine where you stand.

First, you can receive credit for any periods of active-duty service by making a deposit to the civilian retirement system. That credit will be used in determining your length of service and in your annuity computation.

Second, if you make a deposit and are eligible for reserve retired pay, you’ll be able to receive that pay and your civilian annuity, with no reduction in either. However, if you have made a deposit and are eligible for military retired pay, you will have to waive that pay when you retire from your civilian job or you won’t get credit for that time. If you don’t waive that pay, you’ll receive a refund of your deposit, plus 3 percent interest.

Because this is a site for federal civilian employees and retirees, I don’t know when you could begin receiving your retired pay from either the reserves or active duty.

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Service computation date and military academy time

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Q. I am an Army retiree (July 2011) with 21 years and am serving as an Army civilian in Germany.

I recently bought back my military academy time in FERS. According to CPAC, they are not authorized to adjust my service computation date for leave accrual because of my retired military status. I do not believe this to be correct, since my service academy time did not count toward my military retirement.

What must I do to have OPM credit the 35 months of service academy time toward my service computation date?

A. CPAC is correct. The service computation date for officers is the date they graduate from a military service academy.

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Calculating retirement from part-time work

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Q. I’m in CSRS. In the 1980s, I worked part time for a few years, and my SF-50 shows part time, 32 hours a pay period. I saved all of my leave and earnings statements, which show that I actually put in 70 hours per pay period. How will this service be viewed for retirement calculation purposes? This situation doesn’t fit into an electronic calculator!

A. The method used to compute part-time service is at www.opm.gov/retire/pubs/handbook/C055.pdf. Scroll to Part 55B2.

Although this applies to FERS employees, as the result of a recent court case, it also now applies to CSRS.

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