Ask The Experts: Retirement

By Reg Jones

WEP and disability retirement

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Q. I am a 57-year-old federal employee with 11 years creditable service under FERS. Earlier in life, I became disabled as a result of a line-of-service duty incident after 15 years as a California law enforcement officer. I receive a lifetime industrial disability retirement (tax-free) from the California Public Employees’ Retirement System.

I intend on retiring in five years, at 62½. Will I be subject to the windfall elimination provision due to my law enforcement employment outside of the Social Security system? Does my disability retirement play any role in reducing my Social Security entitlement? By my calculations, I will have 26 years of  substantial earnings under Social Security.

Also, I’m still trying to figure out the meaning of “bend point.”

A. The windfall elimination provision will apply if you have fewer than 30 years of substantial earnings under Social Security. I’m not aware that your disability retirement benefit will have any effect pro or con on your Social Security benefit.

Social Security benefits are weighted in favor of low-income workers. The bend points you referred to are the points at which the percentages used in the benefit computation change. In 2013, the first $791 of a beneficiary’s average indexed monthly earnings (AIME) would be multiplied by .90, over $791 but less than $4,768 by .32 percent, and everything over $4,768 by .15 percent.

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Mandatory retirement age

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Q. What is the mandatory retirement age to retire from the federal government? I just turned 52 years old and will have 28 years of federal service in June. How many years can I work to reach the mandatory retirement age? What happens when I reach the mandatory retirement age and I decide not to retire at that time?

A. With the exception of special category employees, such as law enforcement officers, firefighters and air traffic controllers, there is no mandatory retirement age for federal employees.

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Voluntary vs. mandatory retirement

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Q. I am eligible for retirement March 21 as a law enforcement officer under FERS. I will have 20 years of law enforcement experience and am age 56. Because I turn 57 in October (seven months later), I will be forced to retire Oct. 31.

Aside from the extra approximately $8.56 per month I will get in my annuity for each month I stay after March and the benefit of having a full salaried job for seven more months, is there any advantage to me retiring under mandatory retirement age versus voluntary?

The combination of my projected annuity and special retirement supplement provides me with a net of approximately $500 per month less than what I currently take home.

My intention is to get a part-time job to bridge the $500 gap not to exceed the maximum allowed wage of $14,640 so as not to affect my Social Security.

Also, I heard from a retirement counselor who said if you wait until you are forced out, you might qualify for unemployment benefits depending on your state.

A. While the final decision is up to your state, it’s unlikely that you’d be eligible for unemployment benefits.

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Mandatory retirement

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Q. As a federal agent with 6c coverage, do I have to achieve 20 years of service *on* the day I turn 57, or can I achieve 20 years of service *during* the year I turn 57? For example, could I achieve 20 years of service in the sixth month of the year I turn 57, so long as I retire during my 57th year of age with 20 years of service? Everything I see says I have to achieve 20 years at age 57.

A. You appear to be asking about the rules for mandatory retirement. If you have completed 20 years of service, you must be separated on the last day of the month in which you reach age 57. If you have reached age 57 and haven’t completed the required 20 years of service, you must be separated on the last day of the month in which you complete 20 years of service.

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Mandatory retirement

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Q. I am facing mandatory retirement from a covered law enforcement position after 25 years. I would like to take a noncovered position in a different job series that’s nonlaw enforcement. Can I collect my full retirement? How would my retirement be affected?

A. You could either retire and begin working in another position or transfer to another position and continue working. In the first case, the salary of your new position would, in most cases, be offset by the amount of your law enforcement officer annuity. In the second, you would continue to be a salaried employee. You could retire from that position at any time and begin receiving your LEO annuity. Depending on how long you worked, you might be entitled to a supplemental annuity or a redetermined annuity.

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Law enforcement retirement

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Q. I am a federal employee with law enforcement status. My mandatory retirement date is calculated as the end of the month in which I turn 57 years of age (March 31, 2014). However, I have determined that retiring at the end of the 2013 leave year, which is Jan. 11, 2014, is the best date for me to retire so that I may: 1) take advantage of the 100 percent sick leave credit now available to FERS employees, and 2) permit the maximum annual leave lump-sum payment available to me at that time. I can’t see any benefit to waiting until my maximum mandatory other than a few dollars in monthly annuity for service time between Jan 11 and March 31, 2014, as I would lose the extra annual leave accrual available to me if I retire Jan. 11. Do you see any errors in my analysis that would stick out as far as waiting to retire at my maximum mandatory date? Are there any other factors that I am not seeing?

A. Your analysis appears to make sense. To increase your confidence, you might want to have a financial analyst run the numbers to see which date makes the best sense.

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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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Non-law enforcement positions

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Q. I worked for 13 years as a 6(c) covered federal law enforcement officer. I switched career paths and now work in a “support non-law enforcement position.” In the law enforcement retirement, they take 1.7 percent for the first 20 years and then 1 percent each year after until you retire, with 57 being the max. Regular positions take 1 percent for each year you work, with no age limit.

I am being told that I have forfeited the extra 0.7 percent since I did not complete the 20 years in the 6(c) coverage. How can they keep that extra money when I contributed toward that, which I estimate would equal 9.1 percent of my retirement? Do I have any recourse?

A. No. That’s the law.

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Law enforcement retirement

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Q. I have just under eight years as law enforcement at the Bureau of Prisons, and I am now working for DoDDS in Germany. If I retire from DoDDS, do I still get the 1.7 times each year credit for the law enforcement?

A. No.

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VERA and covered law enforcement work

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Q. I am a federal law enforcement officer with more than 30 years of CSRS service. I do not have 20 years of federal law enforcement coverage, a main reason I remain on duty. Would I be eligible for VERA or VSIP, and by participating, would I receive the 18 months I need to attain 20 years in a covered position? Twenty years of law enforcement coverage computes to 50 percent of my high-3 plus the remaining years. I need 18 months of additional law enforcement time on duty to be eligible for a law enforcement retirement calculation. Does VERA provide an opportunity to accrue that time without having to remain on duty?

A. No.

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Working in law enforcement, then working outside law enforcement

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Q. I have 20 years of FERS law enforcement coverage, with approximately four years in nonlaw enforcement coverage. I am only 51. We don’t get administrative overtime, so if I could find a nonlaw enforcement position that paid the same grade, that would be nice. If I obtain such a position, what happens to my 20 years of law enforcement coverage? It is safe, right? My understanding is that my basic annuity is calculated at 1.7 percent of my high-3 times 20 plus 1 percent of my high-3 average times years of additional creditable service. Further, my understanding of the high-3 rule is it doesn’t have to be my highest law enforcement salary — my high-3 could be after I left a law enforcement position.

So I could have 20 years’ law enforcement coverage and put in another 10 to 20 years of nonlaw enforcement work, depending on how I felt about it. I understand I can’t retire and take the nonlaw enforcement position. It would have to be a transfer, with no break in service. The advantages of this seem to be that I would get a higher retirement, plus the benefit of making close to my current salary for longer, plus my leave benefits would still be there. I just need confirmation, as I am starting to look at other positions.

A. Your law enforcement retirement benefit is locked in. Based on your age and service, you can retire at any time. You can also transfer without a break in service to a noncovered position and work as long as you want. When you retire, your high-3 will be the highest three consecutive years of average pay, regardless of when they occur in your career. As you noted, your 20 years of law enforcement coverage would be computed at 1.7 percent and each additional years at 1 percent.

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Law enforcement annuity

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Q. For a law enforcement officer with 35 years of CSRS service with an expected annuity of 80 percent of salary, would the LEO continue to have the CSRS retirement payments deducted from salary if he continued working beyond the 35 years? If so, would those CSRS payments be refunded after retirement?

A. If you work beyond the point where your annuity would be 80 percent, retirement contributions would continue to be deducted from your pay. When you retired, you’d receive a refund of those contributions and offered the option of keeping that money or using it to purchase additional annuity not subject to the 80 percent limit.

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LEO retirement

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Q. I am a GS-1811 law enforcement officer in FERS who is scheduled for mandatory retirement in December 2013. If I retire then or, say, retire before 62 (in the event I get another federal position), is there an earnings test on the Social Security supplement payable to me before I reach 62?

A. If you retire before your minimum retirement age (not age 62), you’ll be able to earn as much as you want without it affecting your special retirement supplement. However, as soon as you reach your MRA, the earnings test will apply. MRAs range between 55 and 57 depending on your year of birth. In 2012, the earnings limit is $14,640.

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Law enforcement officer retirement

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Q. I am employed with the federal prison system, which gets law enforcement officer coverage. With five years of civilian service and eight of military paid for, I will have 13 years of total service. I’m only 34 now, but if I leave to pursue other employment, will I qualify for an MRA+10 annuity at 57 or deferred annuity at 62? Also, what will be used to compute my annuity —1.7 percent or 1.0?

A. If you left, you’d be eligible for either an MRA+10 annuity at age 57 or a deferred annuity at age 62. If you elected to retire at your MRA, your annuity would be reduced by 5 percent for every year (5/12 of 1 percent per month) that you were under age 62. In either case, your annuity would be computed under the standard 1.0 percent formula.

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Federal retirement contributions

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Q. I am recently separated from federal service as a law enforcement officer after nine years and 11 months. I am making the necessary arrangements to have my TSP transferred, but no one can tell me what amount is in the regular retirement fund, which I believe is the FERS one. I am electing to have that one paid directly to me and be subject to the taxes and penalties.

Am I eligible to receive the federal contributions to that as well as my own over the last almost 10 years?

A. The amount of your FERS contributions is posted on each of your biweekly pay slips. While you will receive a refund of that money, with interest, you won’t receive any of the money contributed by your agency.

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Special retirement supplement

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Q. I am a recently retired special agent from the Defense Criminal Investigative Service; I was a GS-1811 for almost 29 years. I have not been able to receive a definitive answer to the following question:

Will the Social Security supplement that is part of my FERS retirement be eliminated when I reach the mandatory retirement age of 57 for 1811s, or will it continue until my 62nd birthday, when I am eligible to receive Social Security?

A. For special category employees, such as law enforcement officers, the special retirement supplement begins immediately and continues to age 62, when they become eligible for a Social Security benefit. The SRS can be reduced or eliminated if they exceed the annual Social Security limit from wages or self-employment after reaching their minimum retirement age. In 2012, that limit is $14,640.

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Disability retirement

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Q. I am 51 (I turn 52 in April) and have been a law enforcement officer for 23 years, plus four years of military time that I bought back. Because of torn retinas, I have lost all depth perception permanently and have been placed on light duty pending further medical review. I will likely be ruled unable to perform in a law enforcement position and unfit for duty. I wasn’t planning on retiring, but now it might be forced on me with a FERS disability retirement. If that is the case, what is better — to just retire voluntary, before they rule on me, or wait and go out on a disability retirement? I’m also confused on the SS supplement, unless you lose that because you’ll get SS benefits too.

A. Retiring voluntarily is a certain thing. Applying for disability retirement isn’t. There’s more paperwork involved, a longer wait for a determination and uncertainty about whether your application will be approved.

Assuming that either way would result in your retirement, you can check the math to find out which one makes better financial sense. As a regular retiree, you’d receive 34 percent of your high-3, plus the special retirement supplement once you reached your minimum retirement age. As a disability retiree, during the first 12 months you’d receive 60 percent of your high-3 minus 100 percent of any Social Security disability benefit you were entitled to. From that point forward, you’d receive 40 percent of your high-3 minus 60 percent of any Social Security disability benefit.

You wouldn’t be entitled to the special retirement supplement, even if you weren’t approved for a Social Security disability benefit.

Note: The standards for a Social Security disability benefit are much higher than those for FERS disability retirement. In the latter case, you only have to be sufficiently disabled that you can’t perform useful and efficient service in your own job or one of similar grade and/or pay. In the former, you have to be completely disabled for all gainful employment.

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Transferring to noncovered position after 20 years

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Q. I’m 54 with more than 20 years in a FERS 6c law enforcement officer covered position and am considering a transfer to a noncovered position as a Department of Defense civilian. This will allow me to continue federal service beyond the age 57 mandatory retirement for LEOs. Can I expect the transfer between agencies to be smooth? Are there any transfer pitfalls I should be aware of? Will an agency transfer adversely affect my LEO retirement?

A. While there is no guarantee, there’s also no reason to think your transfer to another agency wouldn’t be smooth. Because you already have 20 years of covered service under your belt, transferring to a noncovered position will not affect your entitlement to have those 20 years calculated using the more generous formula for law enforcement officers when you finally retire.

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Phased retirement

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Q. Who is eligible for phased retirement under the bill that Congress passed that will allow retirement-eligible federal employees to work part time?

A. The law applies to anyone who has met the age and service requirements to retire on an unreduced annuity except for law enforcement officers — including Customs and Border Protection, Capitol Police and Supreme Court officers — firefighters, nuclear materials couriers and air traffic controllers, all of whom face a mandatory retirement age. However, the decision on whether to use the new authority rests solely with the employee’s agency.

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Military buyback

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Q. I left the active-duty Army with 15 years of service to take a federal law enforcement position (6c). I’ve bought back all 15 years of service, and now I have the opportunity to go back on active duty with the Army (I’ve been in the Reserve) and complete five years for an active-duty retirement. What happens to the buyback time and money when I return to my federal job if I complete the active-duty retirement after I’ve finished the military buyback payments and I have an updated service computation date?

What if I finished the federal retirement first with the military buyback years, then went on to finish my active-duty retirement? Would I lose the federal time and money from the military buyback?

A. If you were called to active duty, meaning that you had no option but to go, and returned to your former covered position, that service would be credited toward your eligibility to retire under the more generous law enforcement officer formula but only if you made a deposit to the retirement system. If you volunteered to go on active duty and returned, you’d still have to make a deposit to get credit for that time, but it wouldn’t count as covered service. Note: The active-duty service for which you have already made a deposit isn’t creditable toward a law enforcement retirement. It, like the voluntary service I referred to above, would be treated as regular service and computed accordingly.

If you retired and then went on active duty, the outcome would depend on whether you were eligible for military or reserve retired pay. If you were retired from the Reserve, receiving that pay would have no effect on your civilian annuity. However, if you retired as an active-duty member of the military, you would have to waive your military retired pay to get credit for the 15 years of earlier active-duty service. If you didn’t, those years would be deducted from your civilian annuity and you’d receive a refund of your deposit for that time.

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