Ask The Experts: Retirement

By Reg Jones

RIF and special retirement supplement

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Q. I am a FERS employee, age 59, and have over 28 years in the Postal Service. Our facility is going through an accelerated transfer of function to a facility more than 100 miles away. If they cannot offer me a position in my same craft and I am given a notice to separate voluntarily or involuntarily, can I retire and receive an unreduced annuity and the special retirement supplement until age 62? If I retire, should I elect a discontinued service retirement or optional retirement since this is an organizational change involving reduction in force, transfer of function. Could I also receive separation pay?

A. Yes, you can retire on an annuity that wouldn’t be subject to an age penalty and entitled to the special retirement supplement. Since you would be eligible for either an optional or discontinued service retirement, you can decide which you prefer. If you elect optional retirement and later return to work for the federal government, the salary of your new position would be offset by the amount of your annuity. If you elect a DSR, your annuity would be terminated, and you would once more be a regular employee.

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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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Switching from Blue Cross/Blue Shield to Medicare Part B

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Q. 1. Can someone switch from Blue Cross/Blue Shield to Medicare Part B at age 71?

2. Should it be done?

3. If yes, how can it be done, and what are the costs?

I am 71 and self-employed (since 2011), covered under my wife’s federal Blue Cross/Blue Shield plan. My wife has been retired for a few years and she also turned 71 in 2012.

My wife was just operated for a brain tumor and is being scheduled for radiation therapy and chemotherapy.

A. While your wife could disenroll from the Federal Employees Health Benefits program and both of you enroll in Medicare Part B, what she gained by no longer having to pay premiums for the former would likely be offset by the premiums you’d both have to pay for the latter. Although each of you would have to pay $99 per month in 2013, the fact that neither of you enrolled when you were first eligible would mean that those premiums would be increased by 10 percent for every year you failed to do so.

Further, the benefits you both now receive from Blue Cross/Blue Shield are substantial. While adding Part B would increase that coverage, dropping the FEHB coverage would adversely affect it. Further, if she dropped her FEHB enrollment, she would never be able to re-enroll.

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Wait before re-employment

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Q. I plan to retire this year under CSRS. I am interested in obtaining a seasonal position with the Internal Revenue Service. I will not receive a buyout. How long do I need to wait to be re-employed by the federal government?

A. You would have to be off the rolls for three days. FYI: If you take a federal job after retiring, the salary of your new position may be offset by the amount of your annuity. Before taking a seasonal job with the IRS, you’ll need to check with their personnel office to see if that rule will apply to you.

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FERS-RAE

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Q. I recently read that beginning Jan. 1, 2013, all new federal employees will be covered under FERS-Revised Annuity Employee, which basically means they will have to pay an additional 2.3 percent into FERS. However, per the Office of Personnel Management memo, “There are three exceptions to this general rule and the date Dec. 31, 2012, is a key date for each of those exceptions. An individual will be excluded from FERS-RAE coverage if any of these exceptions apply:

1. The individual on Dec. 31, 2012, was covered under FERS;

OR 2. The individual on Dec. 31, 2012, was performing civilian service which is creditable or potentially creditable service under FERS.

OR 3. The individual on Dec. 31, 2012, was not covered under FERS and was not performing civilian service which is creditable or potentially creditable service under FERS, as of Dec. 31, 2012, had performed at least five years of civilian service creditable or potentially creditable under FERS, including service subject to CSRS or CSRS Offset.

I am serving on active duty in the Air Force with more than five years in service (August 2007) and considering separating and seeking federal employment. Under Rule 3 above, does this count as five years of “potentially creditable service under FERS,” meaning that I will not be subject to FERS-RAE?

A. No. Under the law, you would have to have five years of civilian service to avoid the higher FERS-RAE payroll deduction amount.

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Military and federal retirement

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Q. I just started getting my military retirement (at age 60) and I am receiving a federal disability retirement. Does the military income from the retirement offset the federal retirement amount?

A. No.

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In CSRS by mistake for 30 years?

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Q. I am a federal employee approaching 30 years of service (in November). I am age 48. While recently researching my retirement plan, I was informed by the personnel office that a mistake was made close to 30 years ago and that I should not have been put in CSRS. My entire career and all of my records and data from the government have indicated CSRS for 30 years. I have made life and career decisions based on CSRS. I was given the choice back in the early 1980s to go FERS or CSRS, and of course, I chose CSRS. During this research, personnel just figured out that I did not meet a five-year rule of service by December 1986. My start date was June 1982, and service date was adjusted to November 1982, due to leave without pay status as co-op student. So I am told I missed by six months, apparently.

My service was not severed as I progressed from intern to co-op to full time. I am now being told I will be offered FERS or CSRS Offset and cannot stay CSRS. Also, I have not contributed to Social Security in these 30 years, nor have I been able to take advantage of the full/matching Thrift Savings Plan that was offered to FERS electees.

Can the government really do this to me now? I have not been informed of this in writing yet, and I am considering litigation if necessary. What recourse do I have? And what negative effect will there be if I am forced to go FERS or CSRS Offset, which is what I am now being told are the only options I have? I plan to retire between the ages of 53 and 55, most likely.

A. If your agency is correct, the law requires that you be placed in FERS. Litigation would cost you money but not change that. When you receive your formal notice, it will include a detailed explanation of how your benefits will be affected and how you can minimize any potential problems. Unless you are offered an opportunity to retire early, you wouldn’t be able to retire between 53 and 55. As a FERS employee, the earliest you could retire would be 56.

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Survivor annuity

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Q. My husband worked for the federal government for about 40 years under CSRS, and he is now receiving a generous monthly pension. I worked various part-time jobs over the years, and I currently work for the federal government. When I retire, I will have worked less than 20 years under FERS, so I will be entitled to a small federal pension, and Social Security. Our primary source of income is my husband’s CSRS retirement.

If my husband should predecease me, I know I will receive a widow’s pension of approximately 55 percent of what he is currently receiving. Would there be any offset? In other words, let us say that I am entitled to receive $4,000 a month from CSRS widow’s benefit + $1,000 a month from my FERS retirement + $1,000 a month in Social Security benefits. Since my husband is under CSRS, would there be any government offset, or would I be entitled to the entire $6,000 per month?

A. You would be entitled to the entire amount.

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CSRS Offset

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Q. I was employed under CSRS from 1970 to 1983. I had a break in service from 1983 to 1985. In 1985, I returned to government service and was placed in the regular CSRS. After retiring in 2005, the Office of Personnel Management apparently discovered that for many years, I was placed in the wrong retirement system. It then classified me as a CSRS Offset retiree.
I received correspondence from OPM indicating they are reducing my annuity for Social Security benefits received. Since I never paid any Social Security during my civil service employment, is it right that I be penalized for benefits from Social Security? CSRS Pamphlet Retirement Facts 13 states, “Your annuity will not be reduced by any portion of your Social Security benefit that is based on service other than CSRS Offset employment.” I never paid Social Security under CSRS Offset during those years. Is it correct that I receive CSRS Offset for Social Security benefits?

A. OPM was required by law to change your coverage from CSRS to CSRS Offset, notify the Social Security Administration of the error, and transfer to them the amount of deductions that would have been withheld had you been in the right system. Then at age 62, OPM would be required to reduce your CSRS annuity by the amount of Social Security benefit you were now entitled to based on that period of CSRS Offset service. You would get the same amount of money, but it would come from two different places: OPM and the Social Security Administration.

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Survivor annuity

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Q. I retired in 1997 at age 62 under both CSRS and FERS and accumulated 40 credits with private sector and FERS. I was eligible to receive a small benefit from Social Security and a small amount of my husband’s Social Security benefits. If my husband dies before me, will I continue to receive that small benefit from his Social Security, or will the offset wipe it out?

A. If he were to die, you would get the larger of your own Social Security benefit or the survivor benefit. Since you have already reached full Social Security retirement age, your survivor benefit would be 100 percent of his principal insurance amount.

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MRA+10

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Q. I am a FERS employee and will reach my minimum retirement age, 56, soon. I am thinking of retiring and taking an immediate annuity to keep health benefits. If I went back to work for the federal government in two or three years, would the 5 percent-per-year penalty remain in force when I stopped work again, or is there a way to negate this penalty? Is it set in stone because those were the conditions under which I retired? Am I correct that this would not apply if I left under a Voluntary Early Retirement Authority, even though I would be eligible for retirement?

A. If you retired under the MRA+10 provision, your annuity would be reduced by 5 percent for every year you were younger than 62. If you retired under a VERA, there would be no age reduction in your annuity. Whether you retired under the MRA+10 provision or a VERA, if you went back to work for the federal government, your annuity would remain unchanged. And, as a rule, the salary of your new position would be offset by the amount of your annuity. If you worked for at least one year, full-time, you’d be entitled to a supplemental annuity. If you worked for five or more years, when you retired again, you’d be entitled to a re-determined annuity. In other words, you’d receive an annuity based on your total years of service.

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Military buyback and annuity reduction

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Q. My husband was in the Naval Reserve from June 1971 to June 1976. He was not called to active duty, although I believe the two weeks of training every year and six months of boot camp/school may be classified as active duty. If that’s correct, he had about 36 weeks of active duty subject to buyback. For his six years in the reserve, he was paid a grand total of $2,165.45, according to military records he has in his file.

He was under CSRS but had a brief break in service in 1987 and came back into the federal government as a CSRS Offset employee. He retired from the Department of Energy in 2005 as a GS-14, with about 30½ years offset credit plus a year of sick leave. As he was requested to do, in July 2005, he paid $576.49 to the Defense Finance and Accounting Service to pay his military service deposit computation. He has the letter instructing him where to send the check, as well as the endorsed and canceled check.

He turned 62 in December 2011 and has received notice that his annuity will be reduced by $509.36, an amount that should now come from Social Security upon his application for those benefits. This was expected as part of the Offset retirement system.

What is unexpected is the Office of Personnel Management telling him his annuity will be reduced by an additional $609 a month because he has not made a deposit for his military service. They don’t have a record of the amount paid to the Defense Department in 2005. He was in the reserve, so there was little active-duty time. He bought that time. Even if he hadn’t bought the military time, how can a $609-a-month reduction for the rest of his life possibly be logical for 36 weeks of active duty.

Of course, he will follow the appeal process and send documentation of what OPM doesn’t seem to have regarding his military service. But I’m wondering if you can offer an opinion as to how $2,165.45 in Naval Reserve compensation translates into a $609 monthly reduction in a federal annuity for the rest of his life? Is there any scenario where the math on this situation makes any sense, or is there some major human or computer error we must address?

A. If an employee receives credit for any periods of active duty service on or after Jan. 1, 1956, he would need to make a deposit for that time. Otherwise, if he retired before age 62 and was eligible for a Social Security benefit at age 62 (or when he retired, if it was after reaching age 62) any periods of active duty service for which he got credit would be eliminated and his annuity recomputed downward. That deposit would be based on the basic pay he received for that active-duty service, including accrued interest. Prior to Jan. 1, 1984, the interest rate was 3 percent; thereafter, a variable interest rate was charged. When you see the interest rates that were charged you’ll see how even a small owed deposit can mushroom into a large one: 1985 – 13%, 1986 – 11.125%, 1987 – 9%, 1988 – 8.375%, 1989 – 9.125%, 1990 – 8.75%, 1991 – 8.625%, 1992 – 8.125%, 1993 – 7.125%, 1994 – 7%, 1996 – 6.875%, 1997 – 6.875%, 1998 – 6.75%, 1999 – 5.75%, 2000 – 5.875%, 2001 – 6.375%, 2002 – 5.5%, 2003 – 5%, 2004 – 3.875%, 2005 – 4.375%, 2006 – 4.125%, 2007 – 4.875%, 2008 – 4.75%, 2009 – 3.875%, 2010 – 3.125%, 2011 – 2.75%.

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FERS transfer, Social Security and spousal benefits

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Q. I am a retired federal worker who worked from 1972 to 1987 under CSRS then transferred to FERS in 1987.  I left the federal government in 1995 with enough quarters to qualify for Social Security but with much less than 30 years of substantial earnings. In 2010, at age 60, I began getting my government annuity, part based on CSRS and part on FERS. This year at age 62, I am eligible to receive Social Security benefits. As I understand it, FERS transfers are not affected by the offset program but are affected by the windfall elimination provision. How would spousal benefits be affected, and would I still be able to take the higher of the two (mine or my husband’s)? When my husband dies, do I get half of his with no offset/WEP? Finally, when I apply online, is the spousal benefit considered and the higher of the two then provided?

A. Because you transferred to FERS, you aren’t subject to the government pension offset provision of law; however, as you noted, you are subject to the windfall elimination provision if you have fewer than 30 years of substantial earnings under Social Security.

You will be able to receive the higher of either your own or your husband’s Social Security benefit. If your husband were to die, your benefit amount would depend on your age and on the amount your deceased husband was entitled to when he died. If he was receiving reduced benefits, your survivor benefit would be based on that amount. When you apply online, the information you provide to the Social Security Administration will allow them to calculate and give you the higher of the two benefits.

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CSRS Offset

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Q. I am 63 and plan to retire this year. I was covered for 13 years by CSRS and left the government. When I came back a year later, I was covered by CSRS Offset. After listening to the Office of Personnel Management retirement seminars online, I learned that when you retire at 62, your CSRS check would be reduced based on Social Security. I had planned to wait until I was 66 to file for Social Security. How does this work? Does my CSRS check reduce at 62 regardless of when I start to draw Social Security? Will I need to offset this reduction by another income until I start to draw Social Security?

A. Because you are already eligible for a Social Security benefit, when you retire, your CSRS annuity will be reduced by the portion of that benefit which you earned while a CSRS Offset employee. This reduction is required by law and is automatic. When you apply for a Social Security benefit is up to you.

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Rehire and WEP

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Q. I worked for federal government for 20 years under CSRS, then resigned in 1997 and left my retirement contributions in CSRS, understanding that I could start to receive an annuity at age 62.  Since that time, I have worked for 15 years for state government, paying into Social Security. If I were to return to federal service, into which retirement system would I be placed? What would the benefits be to returning to federal service as far as retirement benefits concerning CSRS and Social Security?

A. Because you left your contributions in the retirement fund, you would be eligible for a deferred annuity at age 60, not 62. If you returned to work for the government, you would automatically be placed in CSRS Offset (CSRS and Social Security) with the option of transferring to FERS. If you stayed in CSRS Offset, your annuity would be computed under CSRS rules, which are more generous than FERS, but your annuity would be offset by the amount of Social Security benefit you earned while covered by CSRS Offset.

Further, because you’d be receiving an annuity, in whole or part, from a retirement system where you didn’t pay Social Security taxes, your Social Security benefit would be subject to the windfall elimination provision. It reduces the Social Security benefit of anyone who has fewer than 30 years of substantial earnings under Social Security. If you elected to covered by FERS, there wouldn’t be any offset to your annuity; however, the WEP would still apply.

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Workers’ comp vs. FERS annuity

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Q. I am 62 and have been with the Postal Service for 26 years. I am hoping to retire this summer. I have a job-related permanent disability and have qualified for workers’ compensation. I have not yet started receiving compensation, but my payout figure on workers’ comp is significantly higher than my FERS pension and is also significantly higher than my Social Security pension, which will also begin this year. Are there any “offsets” to either my FERS pension or Social Security pension if I take the workers’ comp payment? Am I correct in understanding that I am entitled to all three figures, and is it true that workers’ compensation is nontaxable?

A. Yes, there are offsets. First. you must choose between a FERS annuity and workers’ compensation. You can’t receive both. Second, although you may be eligible for a Social Security benefit, when combined with your workers’ compensation, the total of the two can’t exceed 80 percent of the average current salary of the position you occupied before you became disabled. Workers’ comp benefits are fully nontaxable as long as you remain unemployed.

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Military buyback

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Q. I spent 20 years in the Navy and am currently receiving my pension from the Defense Finance and Accounting Service and a 30 percent disability pension from the Veterans Affairs Department. In 1991, I began my employment with federal government under FERS. In 2009, I applied for disability due to my health condition.

I spent 18½ years in federal service.  In June 2009, I began receiving my disability pay from the Office of Personnel Management, computed based on 60 percent of my high-3 for the first 12 months and 40 percent thereafter until I reached age 62.

I will turn 62 in October, and my disability annuity will be converted to regular annuity effective the following November.

Can I still buy back my military time and waive my military pension before October? I was under the impression that I am not considered retired from the service until I reach 62 because if there is a possibility of recovery, my employer has the option of hiring me back.

Also, I don’t have enough time to buy back my military time because I received the approval of my disability application 10 days before the effective date of disability retirement.

What is considered the date of retirement? The effective date they approved my disability, or the date they converted my disability to regular annuity? I was advised by OPM that the buyback should had been done before disability retirement (May 2009).

My Social Security disability was recently approved, and I have to pay the OPM back for the overpayment due to the offset rules. In my estimate, I need to pay around $18,000 to buy back 20 years of service. In return, my pension will increase by $440 a month.

A. No, you cannot make a deposit for your active-duty service. That had to be done before your application for retirement was finalized. The rule applies to both disability and regular retirements.

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Law enforcement and the FERS supplement

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Q. I retired (federal law enforcement) on Feb. 29 at the age of 55. My total law enforcement time was 20 years with an additional seven years of federal service. I am receiving a partial annuity until the Office of Personnel Management has the time to finish it, which may be six or seven months. I received a lump-sum payment upon my retirement for my annual leave. I would like to take a job as a reinstatement employee with federal service. Do I lose my entire annuity if I do this? I understand that retirement deductions will be held, but I need to know if I can keep my annuity that I am receiving if I accept a federal position as a reinstatement employee.

Also, if I make more than the $14,500 limit, it’s my understanding that the additional supplement under FERS will be reduced by $1 for every $2 I make. Is this applicable at my age (55), or does this apply when I reach another age? I thought I could make as much money until I was 57 before the supplement was reduced.

A. Unless you are hired into a position that allows you to keep your annuity and the full salary of your new position, your salary will be offset by the amount of your annuity. You may earn as much as you want before you reach your minimum retirement age, which, in your case, is 56. After that, you’ll be subject to the Social Security earnings limit. In 2012 that limit is $14,640.

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CSRS recalculation

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Q. After 30 years of federal service, I retired in 2002. I was re-employed by the Department of Health and Human Services in April 2010, full-time permanent under the same CSRS plan from which I originally retired. At that time, my salary was offset by the amount of my annuity. How long will I need to work without a break in federal service to qualify for a recalculation of my original CSRS annuity? I contribute to CSRS retirement, and I participate in the Thrift Savings Program. I expect to work for six additional years, when I will have reached my 71st birthday.

A. If you work full time for a least one year, you will be entitled to a supplemental annuity based solely on that period of service. If you work for at least five years, your annuity will be recalculated as though you were retiring for the first time. The same formula that was used to calculate your original annuity will be used to calculate your re-determined annuity.

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Redeposit

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Q. I was an employee under CSRS for 15 years and nine months. I took a Voluntary Separation Incentive Payment and withdrew my retirement pay. I am recently rehired and will go under the CSRS Offset.  How can I determine what the repayment would be with interest?

A. There’s only one way to find out how much you owe. Download a copy of Standard Form 2803, Application to Make Deposit or Redeposit, fill it out and send it to the Office of Personnel Management, Retirement Services and Management Group, P.O. Box 45, Boyers, PA 16017-0045. When they’ve told you how much you owe, take that information to your payroll office. They can tell you how much you’d have to pay in total, which would include accrued interest. If you decide to make a redeposit, they can work out a repayment schedule.

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