Ask The Experts: Retirement

By Reg Jones

Locality pay

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Q. Is there a minimum number of days per pay period that an employee must work at his assigned duty station (duty station as it appears on the SF-52) to qualify for locality pay in that area? I live in one state, and my wife in another (long story). I try to get home once a month by taking a combination of a few days of annual leave and a few telework days. I have heard that to qualify for locality pay, a person must work in that area a minimum of two days per pay period (which seems more than reasonable, and even lenient).

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High-3 and locality pay

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Q. I am a FERS GS-11 step 10 employee planning to retire at 66 with 25 years of federal service in 2016. Pensions are based on the high-3. Is the high-3 based on base pay for the grade and step or base plus locality percentage? The 2012 GS Base table shows 11 step 10 as $65,371. Base plus locality equals $77,138, or an addition of 14.16 percent or $11,767 over base.

There is a large difference when calculating retirement figures using $65,371 versus $77,137.

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Pay increases

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Q. Can you tell me how Executive Level IV pay, which limits the maximum pay of GS scale employees, is calculated? What is the formula? In searching, I can find the pay rate but not the rules. In other words, will GS-15 Step 9s and Step 10s who have hit that ceiling ever see that ceiling rise?

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High-3

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Q. I am a CSRS Offset employee who plans to retire when I turn 60, when I will have approximately 21 years and a few months of federal service. I work in the U.S. and have a high-three salary which includes locality pay of approximately 25 percent. If I were to accept a position overseas (I realize the new salary will not include locality pay) at a salary that is lower than my current one, will my high-3 still be based on the high-3 I have already attained? I read several postings on your site and one seems to suggest that if you are working overseas, but return to the U.S. to retire, your annuity will be calculated on the salary that was earned overseas.  Another posting indicated that the high-3 are your highest three years no matter where or when in your career you attained them.

A. Your high-3 is based on your highest three consecutive years of average basic pay, no matter when they occur in your career. Basic pay is the amount from which retirement deductions are taken.

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Locality pay

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Q. I could be the only VA employee who lives in one of a handful of towns in the southern tip of Maine that are grouped in with the high locality pay percent (24.8 percent) of Boston et al.: Boston-Worcester-Manchester, Mass.-N.H. Combined Statistical Area, plus the Providence-New Bedford-Fall River, R.I.-Mass. Metropolitan Statistical Area, Barnstable County, Mass., and Berwick, Eliot, Kittery, South Berwick and York towns in York County, Maine; but I’m not paid at that rate! Nevertheless, I am one of the statistics used to determine the justification for the higher rate, i.e., federal employees that commute from one of the above areas. I am not getting the Boston locality pay rate (24.8 percent); I am instead getting the rate for the rest of the U.S. (14.16 percent), and I think I should be getting the higher locality pay rate.

To whom can I go to argue my case? And do you think I am in the right?

A. While you could complain about it and even write you member of Congress, only your agency is in a position to argue that you and others in your facility should be included in the higher-paid locality area. In the long run, the Federal Salary Council, which is made up of agency and labor representatives and compensation experts, will be the one that submits recommendations to the President’s Pay Agent on the setting of boundary lines, using criteria that include local labor markets, commuting patterns and the practices of other employers.

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Locality pay and annuity

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Q. If you work in an area that receives extra locality pay, retire and move to another area without locality pay, will your retirement pay be affected?

A. No. Where you live does not affect your annuity.

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SF 52

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Q. I have been reassigned to a position in Atlanta from Albuquerque, N.M. This move is permanent. Do I need a SF 52 prepared to change my duty station and locality pay? Do I need a SF 52 to change my taxes and health insurance? This position is considered virtual.

A. All personnel actions must be documented with a Standard Form 52. It will record where you are now, your new duty station and the rate of pay at each. There is no place on the SF 52 to record changes in taxes or health insurance. When your official personnel folder is transferred to your new duty station, whatever you have already designated as your tax deductions and FEHB plan coverage will continue as is. Any change in your tax deductions will have to be made through your new payroll office. Your FEHB enrollment can be changed during the open season, if you want to do that.

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Locality pay

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Q. I want to apply for an unreduced annuity at age 60. Is locality pay factored in with the base pay in the computation for monthly annuity payments under FERS?

A. Yes, locality pay is considered part of base pay.

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Locality pay

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Q. I recently accepted a job in my civilian pay series at another Air Force base. My pay has decreased more than $8 an hour due to the locality pay. I am at a wg9 salary, so that really hit the pocket book very hard. Is there a provision to ease the pain of such a decrease in salary?

A. No. By law, locality pay reflects the cost of living in each area.

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Locality pay

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Q. You answered a question and said locality pay is in calculations for a FERS retirement. Is it also included for annuity calculation for a CSRS retirement? Also, I’ve seen confusing explanations about whether Social Security is reduced if a person receives a federal pension. I paid Social Security taxes during 11.5 years’ active military service and almost 15 years of National Guard and Army Reserve service. Will I be eligible for full Social Security benefits, or will there be reductions because I will get a CSRS retirement annuity?

A. Locality pay is included when computing the annuities of both CSRS and FERS retirees. Because you’ll be receiving an annuity from CSRS, a retirement system where you didn’t pay Social Security taxes, your annuity will be reduced if you have fewer than 30 years of substantial earnings under Social Security. Note: Substantial earnings aren’t the same as the amount of earnings needed to get a Social Security credit. For more information about the windfall elimination provision and how it might affect you, go to www.socialsecurity.gov/retire2/wep.htm.

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High-3 and law enforcement

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Q. I will be retiring next week from federal law enforcement. I live and work in the San Francisco area. I was initially provided with a calculation based on an average high-3 salary of $145,250 and was told I would receive a net of $6,050 per month. However, when I visited Employee Express this morning, I saw that the agency is now listing my high-3 average as $116,000 and my expected net monthly annuity payment would be around $5,000. I pulled my W-2s for the past three years and confirmed that my top average 3-year salary is $145,250. I’m awaiting a response from my employer to determine why they are now listing my high-3 average $29,250 lower than originally reported to me. I receive 25 percent availability pay as well as my base pay and locality pay. It’s my understanding that all three of these factor into my retirement annuity.

A. The amount of a high-3 is based on three consecutive years of average pay from which retirement contributions were deducted. Any pay you received from which retirement contributions weren’t taken won’t be included. You’ll need to check with your payroll office to find out if there’s a difference between your gross income and your retirement deductions.

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Overseas salary misunderstanding

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Q. I am a civilian employee who accepted a permanent Defense Department GS-07 Target 09 position overseas. The salary in the letter of offer/acceptance that I signed was $66,941 per year, which is the salary I was receiving from my former command, Edwards Air Force Base, Calif. The $66,941-per-year salary included the cost-of-living adjustment. Because the position is an emergency essential (EE), it took me several months to complete all the requirements. Three days after my household goods were picked up and two days before my original flight schedule, I received an email from the human resources specialist notifying me the change of my pay to $52,642 per year. Nothing further was required from me — not even my signature. I am now in the Middle East, and I just got my first leave and earnings statement with a salary of 52,642 per year. What course of action should I take so I can get the salary I signed for?

A. Employees don’t receive COLAs, so a portion of your $66,941 annual salary may actually be locality pay. Locality pay isn’t included when setting a salary rate for an overseas assignment. Rather, you are paid the RUS (rest of U.S.) rate for your grade and step. Check with your personnel office to see if what I am surmising is correct. Also ask them what allowances and differentials you may now be entitled to while stationed overseas.

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Hawaii/Alaska locality pay

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Q: How will the 2012 final year of conversion to locality pay affect federal employees who are paid at “agency discretion” under a statute which caps their pay at EX-IV, such as those in the U.S. Attorney’s Offices. Some employees’ basic pay was under the cap when the three-year conversion began.  However, in 2012, their pay would exceed the pay cap if the full amount of COLA is converted to locality pay. On the other hand, if the cap is applied, such employees will experience a reduction in gross pay, inconsistent with Congressional intent to protect employees’ pay.  See 1915(a) of NAREAA. Will the employees be treated the same as “special rate” employees?

A: Yes, they will. LIke special rate employees, their pay will be capped at Executive Level IV.

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Change in locality pay

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Q: I am a 62-year-old FERS employee. I am in a 27 percent locality pay area and have been for many years. There is discussion at my base about transferring our work to another base that has a much lower locality pay. I heard that if I transfer to the other base and then retire, my FERS annuity high-3 would be based on the lower locality pay. Since my pay is topped out, locality pay is the only thing that will change much. Is this “lower” high-3 calculation correct?

A: Your annuity will be based on your highest three consecutive years of average pay, regardless of when they occur in your career.

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Locality pay and high-3

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Q. Is locality pay included in a high 3 for someone who works abroad and retires in the states?

A.  No. Locality pay is only included in determining an employee’s high-3 if he is receiving it in the U.S. Those working overseas don’t receive locality pay. They get allowances and differentials, which aren’t included.

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Locality pay buyback

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Q. I work in Honolulu and will be retiring at the end of 2011. Is there a form to fill in to buy back my locality pay so I can get credit for it in my annuity?

A. Public Law 111-84 provided for a phased-in conversion from nonforeign area cost-of-living allowances to locality pay over a three-year period beginning in 2010. If you want to get credit for a portion of your COLA as basic pay, you’ll have to complete either a Standard Form 2803 (Civil Service Retirement System) or 3108 (Federal Employees Retirement System), show the dates of the period for which you want to make a deposit (no earlier than Jan. 3, 2010, and no later than the date you’ve set for retirement), and add the following statement: “I elect to pay the deposit necessary to obtain credit for the full locality pay rate under NAREA in computing my retirement benefits. I understand that the entire deposit must be paid to my agency at separation for retirement and if I do not complete the deposit at that time, the full locality rate will not be used to compute my annuity.” Submit the application to your agency and then pay the deposit when they tell you how much you owe.

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Annuity calculation

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Q: When calculating your FERS annuity as a GS employee, do you use the base schedule or is locality pay included?

A: Locality pay is included when computing a high-3.

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Locality pay

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Q: I live in Hawaii where the phase-in for locality pay is taking place. If I leave for one year (for 2011), return and retire on Dec. 31, 2012, can I still buy in to year 2010 for my high-3 computation as part of the buy-in program for anyone retiring by Dec. 31, 2012?

A: Only your agency can answer that, with the help of OPM if they are uncertain.

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Retirement Equity Assurance Act of 2009

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Q: I have been retired from CSRS for five years. I just saw some briefing slides on “Non-Foreign Area Retirement Equity Assurance Act of 2009.” It mentioned phasing in locality pay over three years (2011-2012). I am a math analyst, and I like taxes, but still can’t understand the slides. Looks like an advantage, but I’m still trying to understand. Please help explain this.

A: The purpose of the act is to phase in the conversion of non-foreign area cost-of-living adjustments — which aren’t included in the computation of an annuity — to locality pay, which is included.

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Locality pay

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Q: I understand that my FERS law enforcement retirement annuity will be determined by my consecutive high-3. How long do I have to work in a high locality pay area before I am eligible to receive that locality pay during my retirement? For example if I am a GS-13/Step 10 in a “Rest of US” locality pay area for two years, transfer to high locality pay area such as San Francisco (N/CA) as a GS-13/Step 10 for one year and then retire, will my high-3 be calculated as three years as a GS-13/Step 10 from the high locality pay area or will it instead be calculated as two years as a GS-13/Step 10 from a “Rest of US” area and one year as a GS-13/Step 10 from the high locality pay area? Does locality pay even come into the picture when determining retirement annuities or are annuities based solely on high three salaries regardless of locality pay involved?

A: Your annuity will be based on your highest three consecutive years of average basic pay, which includes locality pay.

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