Ask The Experts: Retirement

By Reg Jones

Social Security and FICA deductions

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Q. I receive FERS benefits but am now applying for Social Security, which will be my main retirement. I got to a question on the application process that asks whether I ever earned money where FICA was not taken out. I worked for two and parts of two other year for Gallaudet College, which was at the time a quasi-government and Civil Service. Those earnings do not appear on my Social Security statement of benefits I assume for that reason. I took the retirement in a lump sum when I left that position.

I was federally employed (FERS and Social Security) from 1984-97. When computing my years of service, I inquired if I could buy back those few Gallaudet years so as to count for years of service, and I did. So the Social Security benefits application asked if I benefited from in terms of pension or annuity by the earnings I didn’t pay FICA for. So do I benefit from years of service though no credit for money earned having bought back those years for greater benefit based on years of service? Will this influence the amount of retirement due me from Social Security?

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FICA withholdings for re-employed CSRS annuitants

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Q. I am a retired pure CSRS employee working part time as a rehired annuitant with no annuity offset. I am coming to the end of my third year. When I first began working, HR was not taking out FICA. Two years ago, HR said it had been told at some payroll class that it should be taking out FICA, so it started doing so. About 12 months later, HR sent a demand letter for the FICA it had failed to collect in the beginning. I filled an appeal immediately and have heard nothing.

Three of us here are in this predicament. We do not think FICA withholding is proper. We will never be able to collect Social Security.

Their total justification seems to be that we were hired as rehired annuitants after 1983.

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CSRS offset, temporary work and FICA

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Q. I am retiring under CSRS offset. In 2007, I worked as a temporary employee for four months. During that time I paid FICA, but not the additional 0.8 percent toward my retirement. OPM states that I need to pay the full 7 percent to get full credit toward my retirement.

Given that the CSRS offset contribution is 7 percent, divided by 6.2 percent toward FICA and 0.8 percent toward CSRS, wouldn’t paying an additional 7 percent be a double payment toward FICA? Shouldn’t I just be liable for the 0.8 percent deposit? If I must pay a full 7 percent, will this affect my SS offset amount?

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Social Security reduction?

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Q. I worked for a little more than five years as a full-time federal employee under FERS. I paid FICA taxes. I became entitled to a small pension under FERS. Will my Social Security benefit be reduced because of this pension entitlement?

A. No.

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Deducting FICA from military pay

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Q. In what year did the Air Force start deducting FICA from military pay?

A. Every branch of service began doing that Jan. 1, 1957.

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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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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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CSRS Offset

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Q. I was CSRS for seven years, reassigned in 1983 and was rehired 10 months later (1984) as a temp under FICA. Three months later, I got a new career appointment and was put under CSRS. Now I’m 55 and requested my retirement estimate and was told that for 29 years, I’ve been under CSRS but should have been under Offset. Is this a bad hit for me, or will I break even? My human resources office is avoiding me and my calls.

A. It is your agency’s responsibility to work with you on this. It has no choice. The law requires it. When the dust settles, you’ll end up getting a regular CSRS annuity until you reach age 62. At that point, your annuity will be reduced by the amount of Social Security benefit you will have earned while covered by CSRS Offset. The amount of that offset will then be paid to you by the Social Security Administration.

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FERS-FICA

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Q. I am 65 years old, have 30 years continuous military service and am retired, so I know I will get Social Security next year if I choose. However, I also now have 10 years continuous civilian federal service. My SF-50 indicates FERS-FICA. I am in a full-time indefinite status but have been a GS for three straight years and in NSPS status for two years following that. There have been no breaks in service. I also contribute 7 percent to TSP. If I retire from federal service next year, what, if any, are the retirements benefits under FERS-FICA excluding TSP?

A. Since you are at least 62 years old and have at least five years of civilian service, you can retire any time you want to and receive an unreduced annuity. That annuity would be calculated using the standard formula: 0.01 x your high-3 x all years and full months of service. If you were to apply for a Social Security benefit before reaching your full retirement age, it would be a few percentage points lower than it would be if you waited until you were 66.

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Interest payment after retirement

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Q. I recently retired from a federal ARS position having 35 years, three months and nine days of creditable service. I was informed for the first time to pay an accrued interest of $955 for FICA service ($529) for a period when I was first employed back in 1976, which I did.

I have requested that OPM review this interest charge, but I have not gotten a response. This service period doesn’t appear to me to have been included in computing my CSRS computation service for retirement or my buyout payment — which I find questionable.

Because I was never informed that I owed a deposit on the FICA service or that there was an accumulating interest, I feel this amount due is unjustified.

My personnel agency representative said if I had changed agencies, then I would have been informed, but because I stayed in ARS throughout my federal employment, I was never notified.

A. If you complete the required deposit before the final adjudication of your retirement application, you’ll get credit for that time in your annuity computation. If you don’t, you won’t, and the amount you already deposited will be refunded to you. The payment of interest is required by law and based on rates published by the Department of the Treasury. It’s unfortunate that you weren’t informed about the deposit requirement; however, no provision in law would permit the amount you owe to be reduced or waived.

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Health insurance costs after retirement

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Q. If I take the $15,000 retirement incentive being offered now, (I have 25 years under FERS, am a Postal Service employee, and am 64 years old), will my Blue Cross premiums go up? If so, by how much? I now pay $81.68 a month.

Also, if I decide to get married, my family option now would be $203.61 a month. How much would these premiums be if I take the retirement incentive? I must make the decision by Dec. 3.

Is the FERS pension amount taxed? If so, is it taxed by income and Federal Insurance Contributions Act? My gross pension amount is $1,288 a month. How much, approximately, would be left over after taxes and health care subtractions?

A. The easiest way to compare the cost of your Blue Cross/Blue Shield Standard premiums is to show you the difference between what Postal Service and non-Postal Service employees will be paying in 2013.

A Postal Service employee would pay $64.71 every two weeks for self-only coverage and $152.92 for self and family. A non-Postal Service employee would pay $85.71 for self-only and $200.14 for self and family.

When a Postal Service employee retires, his health benefits premiums are the same as those for all other non-Postal Service employees and retirees. And they are paid on a monthly, rather than a biweekly basis. In 2013, the BC/BS monthly rate for retirees will be $186.14 (self-only) and $438.63 (self and family). To find out how your annuity would be taxed, go to www.irs.gov/pub/irs-pdf/p721.pdf, and read the Internal Revenue Service’s Tax Guide to U.S. Civil Service Retirement Benefits.

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Lump-sum payment and tax law

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Q. Is the lump-sum payment subject to the same deductions and allotments to which one’s regular salary would be — i.e., federal tax withholding, state tax withholding, FICA and retirement?

A. Everything except retirement.

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Social Security and CSRS

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Q. I was employed by the Navy as a contracting officer. After 41 years with the government, I officially retired and was drawing a monthly annuity check from OPM from my CSRS retirement plan. My former Navy employer offered me a contracting position, and I returned to the Navy as a Department of Defense re-employed annuitant, which means I still collected my CSRS annuity check monthly and was paid by the Navy.

As a re-employed annuitant, I was told I had to pay into FICA (Social Security) and was not allowed to pay into CSRS because I had officially retired. I asked why any retirement funds had to be taken out at all since (1) I was officially retired and wasn’t allowed to pay bi-weekly into CSRS or FERS, and (2) if I paid into SS, I would never be able to draw SS due to my salary.

Can I can get the money I paid into SS, or should I even have paid into SS knowing I would have not be eligible to correct SS?

A. By law, no retiree re-employed in a position that allows him to receive both his annuity and his full salary can receive retirement credit for that service. He is also required by law to have Social Security deductions taken from his salary and can’t receive a refund of those contributions even if he isn’t eligible for a Social Security benefit.

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Service credit

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Q. I worked from 1992 to 1995 as resident in VA. Human resources states that because it was after 1989 and  I was covered under FICA, I cannot pay back to get credit under FERS. Is that true?

A. Yes, it’s true. That’s because nondeduction service performed after Jan. 1, 1989, isn’t creditable. And a deposit can’t be made to make it so.

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FERS retirement

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Q. I recently sent out a 3108 form to see if my time in the federal government can be repaid. I worked for the Defense Intelligence Agency from 1983 to 1984 and the U.S. Postal Service from 1985 to 1988. Since most of that time was spent in the old CSRS Retirement System,  I was told by Human Resources that this would count toward my annuity if I buy back my time and if I had in fact paid FICA during the times in question. Is this true?

A. If retirement deductions were taken from your pay during those years, you would automatically receive credit for it; however, if only Social Security deductions were taken out, you’d have to make a deposit to the retirement system for that period of service to get credit for it.

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FICA limit

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Q. As a CSRS Offset employee, I understand that once the FICA limit is reached, my retirement contribution will increase as the FICA withholding is decreased as discussed in the following paragraph:

CSRS Offset employees contribute 0.8 percent (.008) of their after-taxed wages to the CSRS Retirement and Disability Fund, and 6.2 percent of their wages is subject to the FICA tax up to the maximum Social Security wage base ($106,800 in 2009). If a CSRS Offset employee earns more than the maximum wage base, then FICA taxes will stop being withheld until the end of the calendar year. CSRS deductions will then increase to the full CSRS rate for the remainder of the calendar year (7 percent during 2009). The FICA tax withholding will resume at the start of the new calendar year and the CSRS deduction will decrease to the offset amount, until the employee again reaches the maximum taxable wage base for that year. The FICA tax is also imposed on some types of wages such as overtime and awards that are not subject to the CSRS retirement contribution rate of 7 percent. This means that an employee’s FICA deduction may stop before the employee’s CSRS deduction reverts to the full amount.
 
A. You’ll have to check with your payroll office to find out how the calculation was done.

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Help with Medicare

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Q: I will be retiring when I am 62 and my wife is 64. Currently my health care works fine but I am lost when it comes to Medicare. When we hit 65 are we required to get Medicare parts A and B? And if we do have to get Medicare, which one will be our primary?

A: If you have had Federal Insurance Contributions Act (FICA) deductions taken from your pay, you will be eligible for Medicare Part A. If you are retired, you won’t have to pay any premiums for this benefit. On the other hand, with Medicare Part B you have a choice. You can either enroll or not enroll. If you enroll, you will have to pay the monthly premiums for that coverage. If you are retired, Medicare will be primary; if you are still employed, it will be secondary.

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Social Security credits and the WEP

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Q: I am a federal employee and I am also receiving Social Security benefits. I understand that when I retire and start receiving my civil service annuity, my monthly Social Security benefits will be recalculated because of the windfall elimination provision. At the time I started receiving Social Security, my number of years of substantial earnings for WEP purposes was 23. Because I am a Federal Employees Retirement System transferee, my current salary is subject to FICA. Will the years subsequent to the initial receipt of Social Security will be added to my 23 years? In other words, if I work and pay into FICA for five years after I started receiving Social Security, will my number of years of substantial earning for WEP purposes be 28?

A: It doesn’t matter where or when your Social Security credits were earned, only that you have to have 30 years (120 credits) of substantial earnings under Social Security to avoid the windfall elimination provision. The WEP applies to anyone who is receiving an annuity, in whole or part, from a retirement system, such as the Civil Service Retirement System, into which he didn’t pay Social Security taxes. To see what each year of earnings would have to be to qualify as substantial, read this WEP fact sheet.

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Firefighter retirement codes

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Q: I got hired in the Defense Department fire service as a GS 0099 student trainee (firefighter) in 2006. When I started I was scheduled to work a full 72-hour work week and was not restricted from any duties. All my retirement codes were “M” for special retirement. In 2009, most of the 0099 SF 50 codes were changed to “K,” but not all of them: Four of my SF 50s are still “M.” Does it matter the series number for special retirement? I need to know the proper code.

A: It makes a tremendous difference. “M” is the code for law enforcement officers and firefighters who are covered by the Federal Employees Retirement System and Federal Insurance Contributions Act-Special: In other words, special-category employees who are entitled to the more generous retirement benefits. “K” applies to everyone else covered by FERS and FICA who will be entitled to regular retirement benefits. Any period of service which is classified as “K” isn’t covered service for law enforcement or firefighter retirement purposes.

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Change in retirement code

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Q: I’ve been a Federal Employees Retirement System employee of the Veterans Affairs Department since 1986. Human Resources changed my retirement code from 2 to C — but I have not requested any changes. It is almost impossible to see the retirement representative from HR, yet I’m trying to make an appointment with HR to get an explanation. Can you explain?

A: I can tell you what but not why. Retirement code 2 is FICA. It means that “you are covered by the Federal Insurance Contributions Act – Social Security only. You are not covered by a retirement system for your current position.” Retirement code C is Civil Service Retirement System Offset. It states that “employees vested in CSRS who had over a 365-day break in service and returned 1/1/84 or after are covered by CSRS and FICA.”

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