Ask The Experts: Retirement

By Reg Jones

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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Retirement and health benefits premiums

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Q. I plan to retire at age 60 in 2014 with 20 years’ FERS and four years’ buyback (for which I have made the deposit). My federal service is a combination of IHS and VA (if that’s relevant). It has been my experience speaking with retirees that the deductions from annuity for FEHB after retirement (in many cases) is drastically different from the payroll deduction before retirement — so drastic that it cannot be attributed to the monthly conversion factor.

One retiree told me he was eventually told that, before retirement, total premium payments were made by three sources: employee payroll deduction, OPM (government contribution) and agency contribution, and that after retirement, the agency no longer pays into the FEHB premium and the difference is made up by the former employee via an additional annuity deduction. Is this true? I cannot seem to get a straight reply to this query from my agency’s HR department, other than the standard reply that “there is no change in the insurance premium,” which of course is true but does not address the issue of retiree out-of-pocket contribution post retirement.

A. Unless the folks you were talking to worked for the U.S. Postal Service, what they told you was nonsense. The premiums are deducted bi-weekly for employees and monthly for retirees. Using Blue Cross & Blue Shield, Standard option as an example, an employee enrolled in the Self Only option pays $85.58 every two weeks. During a 26-week year, that amounts to $2,225.08. A retiree pays $185.42 per month. That amounts to $2225.04, a difference of only 4 cents. For an employee enrolled in the Self and Family option, the premiums are $198.48 bi-weekly or $5,160.48 per year. A retiree pays $430.04 per month or $5,160.48. That’s the same amount to the penny.

Going back to my opening sentence, if any of the retirees you talked to worked for the Postal Service, what they said is true. As a result of union negotiations, postal service employees pay less for their FEHB coverage. However, when they retire, they pay exactly the same premiums as all other employees and retirees.

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