Ask The Experts: Retirement

By Reg Jones

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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Substantial earnings and military buyback

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Q. I served 9.5 years in the Air Force and just short of five years for the FAA under CSRS. When I left the FAA in late 1987, because of a misunderstanding of how CSRS worked, I thought I had to withdraw my contributions to CSRS because I had fewer than five years.

Counting most of my Air Force time, I have 39 years of substantial contributions to Social Security. I returned to government employment two years ago and am considered CSRS Offset.

Since I plan to retire in four years, I am trying to determine my best option regarding paying back military time as well as withdrawn, and how that will affect my overall retirement income. Payback would come out of my 401(k)s.

From what I’ve determined from government websites, the windfall elimination provision does not apply if I have 30 or more years of substantial contributions.

But I have been unable to determine if this includes CSRS Offset and if making the military contribution subtracts from my years of substantial contributions. In other words, do I damage myself if I use 401(k) funds to make the military deposit?

A. If you had fewer than five years of CSRS-covered service when you left and had been away for one year before you returned, you should have been placed in FERS, not CSRS. That would be true regardless of whether you left you contributions in the fund or took them out when you left.

Further, if for some inexplicable reason you did have a choice between CSRS Offset and FERS, you would have had to make that decision on your return to government employment, not two years later.

Putting all that aside, all Social Security covered employment is counted when determining if a CSRS-covered employee has 30 years of substantial earnings under Social Security.

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VERA/VSIP vs. military retired pay

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Q. I’m a civil service employee covered by FERS. My agency is offering Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay. I am 62 and receiving military retired pay. I’ve been told that I’m not eligible for either VERA or VSIP because I’m receiving military retired pay. Is that true?

A. Not that I’m aware of. According to the Office of Personnel Management:

Employees in the following categories are not eligible for VSIP. Employees who:

1. Are re-employed annuitants;

2. Have a disability such that the individual is or would be eligible for disability retirement;

3. Have received a decision notice of involuntary separation for misconduct or poor performance;

4. Previously received any VSIP from the federal government;

5. During the 36-month period preceding the date of separation, performed service for which a student loan repayment benefit was paid, or is to be paid;

6. During the 24-month period preceding the date of separation, performed service for which a recruitment or relocation incentive was paid, or is to be paid; and

7. During the 12-month period preceding the date of separation, performed service for which a retention incentive was paid, or is to be paid.

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Military buyback

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Q. I retired Aug. 31 after 30 years as a mailhandler. Would it benefit me now to buy back my military time?  I have the information I need and I am ready to put the check in the mail to buy it back. I just can’t find the info on how long I have after retirement to buy it back. Will it benefit me after I have already retired under the mailhandler early-out? I am 57, and retired under FERS.

A. You’re too late. Only employees can make a deposit to get credit for their active-duty service.

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CSRS Offset

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Q. I am contemplating retiring this year with 30 years in FERS. I was under CSRS when I started in 1970 and left in 1974 to start my family. I was reinstated into the federal government in March 1987, with a new service computation date of 1983 and four years in CSRS. When I returned, I was automatically placed into FERS.

Now that my retirement is drawing closer and I have been to Social Security, they are telling me that they will take two-thirds of my Social Security benefits, listed as CSRS Offset. I have done some research and see that since I only worked four years and not the specified five, that I am not considered a CSRS Offset.

Chapter 3 of the Federal Retirement System Handbook states: “Returning employees eligible for re-entry into CSRS, either with or without Social Security coverage, may choose coverage under FERS; such an election must be made during the first six months after rehire. Employees without five years of creditable service under CSRS are automatically enrolled in FERS with their previous service credited under that program. Employees either automatically enrolled or who elect FERS are not subject to the offset.”

Am I correct in my interpretation?

A. You are reading it correctly. Whoever told you that you were CSRS Offset doesn’t know what he or she is talking about. All of your CSRS service automatically became FERS service when you returned to work for the government.

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Deferred retirement

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Q. I am a full-time letter carrier with 25 years of service at 50 years of age. I am having health issues and have trouble completing my job. I am considering deferred retirement this month. As I understand, I’ll lose my health insurance, but I can apply for my FERS retirement at my minimum retirement age of 56 with no penalty. What is your opinion?

A. Unfortunately, you are mistaken. If you resigned and applied for a deferred retirement at age 56, your annuity would be reduced by 5 percent for every year you were under age 60 (5/12 percent per month). If you wanted to receive an unreduced deferred annuity, you’d have to wait until you were age 60. If health issues are making it difficult for you to carry out the essential elements of your job, you should apply for FERS disability retirement. If you do that, you’d also need to apply for Social Security disability benefits, otherwise the Office of Personnel Management wouldn’t review your application.

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VISTA and creditable service

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Q. I am looking into my retirement options. I have 28 years as a FERS employee. I was also in VISTA from 1978 to 1979. I would like to know what I need to do for that year to be counted as creditable service. I have spent the last two years trying to get this information from my human resources department and other retirement counselors. Everyone is familiar with buying back military time, but no one appears to know the specifics for VISTA. Can you help?

A. That’s shameful. All those folks needed to do was consult the Office of Personnel Management’s CSRS and FERS Handbook for Personnel and Payroll Offices. You’ll find what you need by going to www.opm/gov/retire/pubs/handbook/C020.pdf and scrolling down to Section 20A2.1-2, which applies to both CSRS and FERS employees.

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VERA and age penalty

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Q. I’m 58 and have worked under FERS for 20 years. If I take an early-out, do I get any penalties? What would my retirement benefit be?

A. If you retired under the Voluntary Early Retirement Authority, you wouldn’t be subject to an age penalty. Your annuity would be computed using the standard formula: .01 x your high-3 x your years and full months of service.

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VERA denial

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Q. I work for NASA and will be eligible for early FERS retirement under a Voluntary Early Retirement Authority this year. Can the agency or center deny an employee who requests a VERA separation if he/she is eligible? The response from my center has been, “While VERA requests are generally approved, employees must remember that separating under VERA is not an automatic entitlement and requests can be denied for various reasons.”

I would like some policy insight to substantiate this statement. Are there approved criteria associated with such a denial? I would like to plan in advance for an early retirement, but this would not be possible if a denial could occur at the time of application.

A. Your center is correct. VERA is a management tool, which it can use to achieve its organizational goals. In its sole discretion, it can identify the positions to which the VERA applies and omit others. What it can’t do is single out an individual who is part of a group holding the same occupation and grade and say, “X can sign up for early retirement and Y can’t.”

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Annuity calculation

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Q. How many years of federal service does one have to work before retiring and receiving the exact amount of pay they are getting while working? Someone said you had to work until 35 years of service to receive your full retirement pay.

A. Regardless of which retirement system you are in, it would be impossible to retire and receive an annuity that equaled what you were earning as an employee. Under FERS, even if you worked for 50 years, your annuity would only equal 55 percent of your highest three years of average salary (.011 x your high-3 x 50). Under CSRS, you would receive the maximum earned annuity of 80 percent when you completed 41 years and 11 months of service. Of course, under both retirement systems, unused sick leave would be added and allow you to receive additional annuity. And if you were a CSRS employee who continued working after 41 years and 11 months of service, you could use your excess retirement contributions to purchase additional annuity, just as you could if you had participated in the Voluntary Contributions Program. However, it’s unlikely that they would get you close to the exact amount you were earning when you retired.

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Term employee benefits

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Q. I am 58 years old and am separating from a Department of Interior agency due to a term employment expiration. I have 10 years in the federal system: six years as a permanent employee and four years as a term employee. The permanent position was as a GS 11 Step 3, and the term position is a GS-12 Step 5.

I am trying to find information regarding retirement options. Where can I look for this kind of information? Specifically, I’d like to calculate how much I may receive if I start taking a pension now, and how much I would be eligible for if I hold off until I’m 62 years old, four years from now.

A. Go to www.opm.gov/retire/pubs/handbook/hod.htm and review chapters 42 (MRA+10 Retirement) and 45 (Deferred Retirement). Then review the FERS portion of chapter 50 (Computation of Annuity Under the General Formula).

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Crediting unused annual leave to FERS

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Q. About two years ago, a bill was submitted to allow credit of unused annual leave to FERS. Has this bill passed in any form to date? Has this been implemented to date? If so, how does one pursue this?

A. Yes, a law was passed that allowed FERS employees to get credit for accrued and unused annual leave in the computation of their retirement annuities. However, the law only granted half credit to anyone retiring before Jan. 1, 2014. Anyone retiring after Dec. 31, 2013, will get full credit.

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VERA and special retirement supplement

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Q. I have been working for the Postal Service since September 1988, and I am now 58½. I will have 24 years and five months service time when the early retirement offer takes effect. Beside the annuity, do I also get that special retirement supplement? If so, how much is it if my retirement pay at 62 from Social Security is $1,350 a month?

A. Yes, you’ll be entitled to the special retirement supplement. While I can’t tell you how much it will be, I can give you a formula that will approximate the amount. Here it is: Take that Social Security benefit estimate provided to you by the Social Security Administration, multiply it by your total years of FERS service, rounded to the nearest year, and divide the product by 40.

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Social Security disability benefits

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Q. I’m 50 years old, have worked for the Postal Service for 28 years, and am eligible for the voluntary early retirement offer. Would I be eligible to apply for Social Security disability benefits also? I am with FERS and have been profoundly deaf since birth.

A. As a FERS employee who is covered by Social Security, you would be eligible to apply to SSDI. To find out if you would qualify for that benefit, go to www.ssa.gov/dibplan/dqualify.htm.

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VERA and disability retirement

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Q. If I’ve accepted the FERS Postal Service voluntary early retirement offer, can I then file for disability retirement?

A. Yes. To find the rules and time limits on filing, go to www.opm.gov/retire/pre/fers/disability.asp and click on Applying for Disability Retirement.

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Early-out ramifications

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Q. My agency will be offering early retirement this year, and I am confused as to whether I will be penalized if I accept it. I have 25½ years of service and will turn 50 in October. What are the negatives for my taking an early retirement — that is, penalties, loss of benefits, etc.?

A. If you accepted the early retirement offer, your annuity would be based on the standard FERS formula and your years and full months of service.

You’d also receive credit for half of your unused sick leave in your annuity computation. Further, the 5 percent per year penalty for being under age 62 would be waived. Because you are under your minimum retirement age, you wouldn’t begin receiving the special retirement supplement until you reach age 56.

If you were enrolled in the Federal Employees Health Benefits and Federal Employees’ Group Life Insurance programs for five consecutive years (or at least before the early out offer was made), you’d be able to carry that coverage into retirement.

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Special retirement supplement and years of service

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Q. I am 55 and was hired Dec. 29, 1984, under CSRS and forced into FERS when it was implemented. I have since paid a deposit for four years of military service, and according to my SF-50, my service computation date is Dec. 29, 1981. I want to retire Dec. 29 with 32 years.

With 28 years of federal service and 4 years of deposit paid military time, for a total of 32 years, will I be eligible for the FERS special retirement supplement? Or will I have to complete two more years of FERS to be eligible for the supplement?

A. If you retire at your minimum retirement age (56) with 30 years of combined service, you will be entitled to the special retirement supplement. The SRS will be based solely on your years of actual FERS service. The active-duty service for which you made a deposit won’t be included in that computation.

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Military buyback

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Q. I am a FERS employee considering buying back my service time. I retired after 23 years in the Army. I’m 49 years old and have five years of federal time as of 2013. Would it be in my best interest to buy back my military time and put it toward federal retirement? What would be the impact?

A. Here’s the upside. If you make a deposit to get credit for your active-duty service, you’d have 28 years of creditable service. If you retired at your minimum retirement age (56), you’d have 35 years of service and your annuity would be 35 percent of your highest three consecutive years of average basic pay. You’d also be entitled to the special retirement supplement, which approximates the amount of Social Security benefit you earned during those 12 years while you were a FERS employee.

Here’s the downside. To get credit for those years of active-duty service, you’d have to waive your military retired pay before you retire.

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High-3 calculation

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Q. I have been on FERS disability retirement from the Postal Service since November 1996. I turned 62 in October and received a letter from the Office of Personnel Management notifying me that my annuity was recalculated and what my new monthly annuity would be.

My creditable service calculation is correct, but the high-3 doesn’t look right. FERS Publication RI 98-1 states, “The total service used in the computation is increased by the amount of time you were on the disability annuity roll and your average salary is increased by the FERS cost-of-living increase during the time you were on the roll. The basic annuity formula is then applied, using the adjusted time base and average salary.”

When I retired in 1996, my base salary as a PS4 Step F was $ 33,294. FERS tells me that my new high-3 is $ 33,934. Does this new high-3 seem correct for 16 years of FERS COLAs? (Currently, PS4 Step F base rate is $ 42,031).

A. I don’t do numbers, so I can’t confirm or refute the figure OPM gave you. What I can do is provide you with the COLA increases FERS retirees received beginning with the first full one you would have been entitled to: 1998 2%, 1999 1.3%, 2000 2.0%, 2001 2.5%, 2002 2%, 2003 1.4%, 2004 2%, 2005 2%, 2006 3.1%, 2007, 2.3%, 2008 2%, 2009 4.8%, 2010 0%, 2011, 0%, 2012 2.6%.

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