Ask The Experts: Retirement

By Reg Jones

Age limit for life insurance?

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Q. When I retire from the Postal Service (under FERS), can I continue paying for life insurance for my husband and me when we are over the age of 80 or 90? Or does the Office of Personnel Management not allow me to continue paying for life insurance when I reach a certain age?

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12 questions on VERA

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Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service.

If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year,

1.  Would I begin my annuity immediately?

2.  Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28)

3.  Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?)

4.  Would I receive the special retirement supplement beginning at age 56 (my minimum retirement age), and receive it until I reach age 62?

5. Would I be able to continue carrying my current health and life insurance at non-USPS rates? (I couldn’t find how long these could be carried. Until death?)

6.  Could I begin receiving Social Security as early as age 62?

7. Any withdrawal from my Thrift Savings Plan prior to age 59½ would be penalized 10 percent as per Internal Revenue Service regulations? (Can I continue to contribute to TSP after retirement?)

8. As a FERS annuitant, is there no limit to what I can earn after separation from the Postal Service as it pertains to my annuity payment?

9. At age 56 (my MRA), the special retirement supplement from Social Security would begin and would be subject to yearly income limits. Would supplement payments be reduced by approximately $1 for every $2 I earned above that year’s Social Security income limit?

10. At age 65, I’d be eligible for Medicare parts A and B? (Would this affect my health insurance coverage through Federal Employees Health Benefits?)

11.  Would there be cost-of-living increases at any point for my annuity?

12.  Is there a date during the year that maximizes the benefits of retirement?

Did I get this right, and are there any other things I should know before considering a VERA if it is offered?

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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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Disability retirement and terminal illness

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Q. My friend, a co-worker, was diagnosed with cancer about a year ago. She is at the point where she may have to go into hospice. She is looking into applying for disability retirement, but is there another option if an individual may not live long enough to receive all of her retirement pension? Can she withdraw her total retirement and not be penalized for federal taxes? Will her creditors take her life insurance?

A. If she were to resign from the government, she could request a refund of her retirement contributions. Because she already paid taxes on those contributions while she was working, they would be tax-free. However, any interest she received would be taxable. If she were to be approved for disability retirement, any unexpended contributions she made to the retirement fund would be paid to her estate.

Not being an attorney, I can’t tell you what would happen to any monies paid into her estate after her death. What I can tell you is that her creditors could not get their hands on her life insurance before she died.

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Resignation vs. retirement

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Q. The person who processes retirements at my agency told me that I could not retire with 32 years at 51 years. I am an offset employee under CSRS. I thought the Office of Personnel Management indicated that if you retire before 55 years of age, you are penalized 1/6 (no more than 2 percent for the first year and 2 percent for every after for being under 55.

So, I resigned. It’s only been a few days. The agency person said I could only retire at this age if they were offering a buyout. That seems right because I was offered a buyout about 15 years ago.

Can I file for retirement, get my benefits and health care, dental and vision care.  I think this person has it wrong. Can you explain to me?

My start date was January 1979 and I had a break of one year in 1983, but I had already worked more than four years when they put me in CSRS Offset.

Can I change my resignation from this agency to file formal retirement to Boyers, Pa.?

A. You could only retire before age 55 if you were offered either early retirement or a buyout. Anyone offered early retirement may do so if he is age 50 and has 20 years of service or at any age with 25. The annuity of that employee would, as you pointed out, be reduced by 1/6 percent for every year he was under age 55.

Any employee who is offered a buyout can accept it, regardless of whether he is eligible to retire. If he qualifies under the early retirement age and service requirements, he can do so. If he doesn’t, he can simply take the money and resign.

Because you resigned before being eligible to retire and had at least 20 years of service, you could apply for a deferred retirement at age 60. For the present, you would be able to continue your health and life insurance for 31 days at no cost to you. After that, you could continue your health insurance coverage under the temporary continuation of coverage provision for 18 month by paying 100 percent of the premium cost plus 2 percent.

Your life insurance would expire unless you decided to convert to an individual policy. Deferred retirees may not re-enroll in the health or life insurance programs.

Since you weren’t eligible to retire, you may want to approach your agency and ask if they would be willing to reinstate you.

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FERS annuity and VA disability payments

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Q. I’m receiving FERS Retirement Annuity payments (with survivor/spouse payments).

I paid the deposit to have my military years (four years) added to my FERS annuity calculations. I may start receiving VA disability payments due to a service-related injury. Can I collect my FERS annuity payments and my VA disability payments concurrently? Will my benefits (health insurance, survivor payments, etc.) continue after the VA disability payments are received? If I receive both FERS and VA disability, are there any changes in FERS annuity payments, federal health coverage, etc., that would affect my wife’s medical coverage, survivor payments or FERS life insurance? I’ve looked in the questions and answers but can’t find this exact situation answered.

A. Yes, you can receive VA disability payments and a FERS annuity with no reduction in either. Doing so will not affect your or your wife’s other benefits.

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FERS appointment, unemployment and retirement

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Q. I am 67 and have six years of FERS service. My term appointment will expire in two weeks. I want to collect unemployment for the rest of this year following my separation. Do I have to take a FERS retirement right away, or can I wait until unemployment runs out? I am willing to lose my health and life insurance coverage when I separate from this appointment.

A. Possibly; however, you’ll have to check with your state employment office to get a definitive answer.

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Early retirement for spouse’s illness

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Q. I am a FERS employee with 27 years of service at 56 years old. Because my spouse is ill, I will have to retire early (sometime this year) to take care of him. Do I get penalized the 5 percent? Do I get to keep health and life insurance? And do I receive the Social Security supplement?

A. Because you would be retiring under the MRA+10 provision, your annuity would be reduced by 5 percent for every year you were under age 62 and you wouldn’t be eligible for the special retirement supplement. On the other hand, you would be able to continue your Federal Employees Health Benefits coverage if you were enrolled (or covered by) the program for the five consecutive years before your retired.

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Life insurance vs. survivor annuity

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Q. I am a postal worker under CSRS. I am 47 years old with 28 years in the Postal Service. I was told it would be wise not to take the survivor annuity for my wife and instead take out a life insurance policy on myself. In order to keep her covered under health insurance in the event of my death, I was told I must elect some kind of reduced annuity for her. What is the minimum annuity I can elect for her that will keep her health-insured if I die before she does? Is it a good idea to go with a life insurance policy instead of a full survivor annuity?

A. Let’s get one thing straight. It isn’t your decision to make. By law, you are required to elect a full survivor annuity for your wife unless she agrees in writing to a lesser amount or none at all. Because you are a CSRS employee, with her approval you could elect any amount from $1 a year up. If the amount you agreed to didn’t cover the Federal Employees Health Benefits premiums, she could pay the difference directly to the Office of Personnel Management. However, before the two of you agree to less than a full survivor annuity, consider what my Federal Times colleague Mike Miles has frequently pointed out: Taking out an insurance policy instead of electing a survivor annuity is a bad idea. Any cost-benefit analysis you can do will reveal that nothing matches the long-term value of a survivor annuity, with its annual adjustments to keep pace with inflation.

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CSRS Offset, re-employment and beneficiaries

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Q. I worked for the federal government from January 1981 to November 1990. I pulled my money from CSRS retirement and worked in the private sector until September 2010. Upon returning to federal service in September 2010, I paid Social Security and put money into my 401(k), which I have rolled into my Thrift Savings Plan. I am in CSRS Offset, I declined the FERS option and stayed with CSRS. I am trying to find out whether to pay back the CSRS money I pulled in 1990?

I also recently got married, so how will my benefits be paid once I pass away? For TSP, I have my husband at 20 percent, and both my kids at 40 percent each. I want my husband to get whatever benefits he can, and my kids to get most life insurance.

A. Because you took a refund of your retirement contribution s before March 1, 1991, you can either redeposit that money, or decline to do so and have your CSRS annuity actuarially reduced at retirement based on the amount you owe, including accrued interest. In either case, you’d get credit for the time in determining your total years of service.

By law, you are required to provide a full survivor annuity for your husband when you retire, unless he agrees in writing to a lesser amount or none at all. A full survivor annuity would be 55 percent of your unreduced annuity. No children’s benefits are available unless a child is unmarried and under age 18 (22, if a full time student) or incapable of self support because of a disability that began before age 18.

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Reduced life insurance

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Q. I turned 65 and am not paying premiums on basic life insurance as I selected the 75 percent reduction. My life insurance was $54,000. What is it now worth, and how do you calculate what it will be worth once I reach the 25 percent?

A. Because you accepted the 75 percent reduction, the value of your insurance will decline by 2 percent each month until it reaches 25 percent of what it was when you retired. At that point, your $54,000 basic insurance will be worth $13,500.

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Retiree life insurance

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Q. My dad retired from working as janitor at the post office. Recently, we have discovered he has not been paying any insurance. He has been diagnosed with Alzheimer’s. Is there a retiree life insurance policy?

A. You’ll have to call the Office of Personnel Management’s Retirement Information Office at 1-888-767-6738 to find out what coverage your father took into retirement. You’ll need to provide the specialist with his full name, date of birth, Social Security number and CSA number. You’ll find the latter on any copy of the 1099-R form he used to file his federal income tax.

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Survivor annuity vs. life insurance

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Q. I’m retiring from the Postal Service soon and have come to the stumbling block of getting the survivor benefit plan or forgoing it for a form of life insurance (whole or permanent). I’m a CSRS 56-year-old male with a 44-year-old wife who works as a teacher. I have been under her medical plan, not the Federal Employees Health Benefits plan, for the past five years.

SBP would cost me $271 a month. Taking a 30-year term life policy would mean I’d better die within that time or I screwed my wife out of what I consider her entitlement to my retirement. So I decided to take a whole life/permanent type instead. Since I’m 12 years older than she, I figure she’ll get maybe 20 years of SBP, or roughly $400,000 over that time period. Would $271 a month going toward a life insurance policy be a better play than the SBP?

A. If by survivor benefit plan, you mean a CSRS survivor annuity, then you don’t have a choice. You are required by law to provide her with a full survivor benefit, unless she agrees in writing, notarized, to a lesser amount or none at all.

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VERA and postponing annuity

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Q. My retirement eligibility service computation date is June 6, 1985. I’m under FERS and am 48 years old.  I’d like to take the Voluntary Early Retirement Authority this year if offered. If I retire at 48 under VERA and I postpone my FERS annuity until age 56 (my normal minimum retirement age), will the annuity amount be the same as it would have been if I actually retired at 56 rather than 48, or is it reduced? Is this amount changed if I take the FERS annuity at 56 rather than 48?  If I postpone FERS annuity, will the government still contribute toward health insurance benefits and life insurance from age 48 to 56?

A. Because you have at least 25 years of service, if you were offered a VERA, you’d be eligible for an immediate annuity, That annuity would be based on your high-3 and total creditable service on the day you retired. Postponing its receipt wouldn’t change that. In other words, if your annuity was $30,000 on the day you retired, it would still be $30,000 eight years later. The special retirement supplement would be based on your total period of FERS service and wouldn’t be payable until you reached your minimum retirement age. As for your health benefits and life insurance premiums, if you retired on an immediate annuity, the government contributions to your health and life insurance premiums would continue. If you postponed the receipt of your annuity, both benefits would be suspended until your annuity began.

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Death of retiree

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Q. My father was a retired (1979) federal employee receiving monthly retirement payments via direct deposit. He died last week.

1. What do I need to do?

2. Who do I notify to stop his monthly retired pay and to initiate the process for obtaining his government life insurance?

A. You need to call the Office of Personnel Management’s Retirement Information Office at 888-767-6738. Make sure to have your father’s full name, Social Security number, date of birth and Civil Service Annuity number at hand when you do that. The benefits specialist will send you the paperwork you need to close out his account.

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LWOP and life insurance

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Q. My sister has been on leave without pay with the Postal Service for over three years and is receiving payments from the Office of Workers’ Compensation Programs due to a work-related injury incurred some years back. Recently, she received a bill for her life insurance for $400 a month. It has been our understanding that she would pay her portion for health insurance only, and that life insurance is covered under workers’ comp. Please advise.

A. You are only partly right. For the full story, go to www.opm.gov/insure/life/faq/faqs-5.asp and scroll down through the Q&As.

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Career status and temporary position

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Q. I am considering taking a State Department full-time temporary excepted appointment NTE 13 months with no re-employment benefits. I am a career-status employee with the federal government. State requires a four-day break between my current position and beginning service with them. How does this affect my retirement benefits and my career status? Will I not be considered career status when I apply for new jobs after my temporary position comes to an end?

A. When you separate from the government, if you are covered by the Federal Employees Health Benefits and/or Federal Employees Group Life Insurance programs, you will receive a 31-day extension of coverage at no cost to you. You will then have the option of enrolling in a health benefits plan under the temporary continuation of coverage provision for up to 18 months. For that coverage, you’d pay the full premiums plus 2 percent. You could also elect to have private life insurance coverage, for which you’d pay the full cost.

As long as you didn’t take a refund of your retirement contributions when you left, you’d be eligible for a deferred annuity at either age 60 or 62, depending on your total years of service.

As a rule, if you returned to work for the government, you would be considered a career employee and would get credit for your prior service in determining your eligibility to retire and in your annuity computation.

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Life insurance after retirement

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Q. I elected the 75 percent reduction after retiring. I understand that, at age 65, the coverage declines 2 percent per month until it reaches 25 percent of its face value. How can I find out what the “face value” is? Is it the salary at retirement? What if I had the 2X salary? Does that have any bearing? I have been told by some retirees that the final amount is $2,000, and by others that it’s anywhere from $8,000 to $10,000.

A. When you retired, the amount of your basic insurance was equal to your basic pay plus $2,000. Since you elected the 75 percent reduction, beginning at age 65, you will no longer have to pay any premiums, and the value of that coverage will decrease by 2 percent per month until it reaches 25 percent of the original amount; for example, if the face value was $100,000, it would decrease to $25,000 and stay there until you die. If you had Option B coverage, you could have elected coverage up to five times your basic pay rounded up to the next $1,000. Unless you opted to continue that coverage after reaching age 65, for which you would have to continue paying the premiums, it would automatically decline at a rate of 2 percent per month until it reached zero after 50 months.

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Survivor annuity

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Q. I  have a service-connected disability and will be retiring soon under  CSRS. Would my wife receive money from my service-connected disability and from my civil service with a survivor annuity of 75 percent?

A. If you elected a full survivor annuity for her, she would receive 55 percent of  the amount of your annuity before it was reduced to provide for that annuity, increased by any subsequent cost-of-living adjustments that you received after you retired. She would also receive the proceeds of your Federal Employees’ Group Life Insurance. Because this is a site dedicated to answering civilian benefit questions, I don’t know what benefits she would be entitled to based on your service connected disability. You’ll have to check with your former branch of service.

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Life insurance in retirement

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Q.  If I choose no reduction for Basic, can I change my multiples in option B to reduce coverage at any time during retirement?  I would like to lower by one multiplier at each five-year interval beginning with five at age 55.

A. According to OPM, “Unless you have assigned your insurance, you may cancel it at any time. If you cancel your Basic life insurance, you are canceling all your Optional insurance as well. If you elected 50 percent or No Reduction for your Basic life insurance, you may cancel this additional coverage at any time. If you have Option A – Standard insurance, you may cancel it at any time. You may reduce (or cancel) the amount of your Option B – Additional and Option C – Family insurance at any time.” To find out how to do that, go to www.opm.gov/insure/life/reference/76-12/fegli9.asp.

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