Ask The Experts: Retirement

By Reg Jones

VSIP and re-employment

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Q. I worked for the federal government for over 28 years. I retired last year under Voluntary Separation Incentive Pay provisions June 30, 2012.

I am considering re-employing/reinstating. Am I eligible to return to work on July 1, one year after retiring? Can I repay the VSIP in cash or in payments?

I read once that you can make payments for up to 36 months upon re-employment but am not sure whether this is correct. I understand the VSIP must be paid back before I return to work.

Upon re-employing with the government, will I be able to contribute to FERS and the Thrift Savings Plan?

I noticed on the USAJobs website that some Navy notices state you can’t contribute to the retirement or TSP if your a re-employing annuitant. Yet others I read from other government agencies remain silent on this issue.

A. Reg: You can return to work for the government at any time after you accept a VSIP. However, if you accept employment for compensation with the government of the U.S. within five years of the date of the separation on which the VSIP is based, including work under a personal services contract or other direct contract, you must repay the entire amount of the VSIP to the agency that paid it before your first day of re-employment.

Both things you read about re-employment are true. As a rule, your salary would be offset by the amount of your annuity and you would be able to contribute to the retirement fund. If you worked for a full year, you’d receive a supplemental annuity; if you worked for five years, you’d receive a redetermined annuity. On the other hand, there are certain limited authorities that would allow you to return to work and receive both your full annuity and the full salary of your new position. However, you would not be permitted to contribute to the retirement fund and, when you retired again, you wouldn’t be eligible for any additional retirement benefits.

Mike: From published Office of Personnel Management materials: “If a re-employed annuitant is performing service covered by FERS or CSRS (i.e., the appointment is made pursuant to 5 U.S.C. § 8468 or § 8344(a), respectively), the re-employed annuitant is eligible to participate in the TSP.

Agency contributions for a FERS re-employed annuitant must begin with the effective date of the reappointment to the FERS position as discussed in Section VI (A) of this bulletin. The re-employed annuitant may make contribution elections as discussed in Section III of this bulletin.

If a re-employed annuitant is not performing covered service (e.g., a FERS annuitant who is re-employed on an intermittent basis or an annuitant authorized to receive full salary and full annuity under P.L. 101-509 or the National Defense Authorization Act of 2004), the re-employed annuitant is not eligible to participate in the TSP.

Generally, re-employed annuitants are performing covered service. In most cases, if the annuitant indicator on the Standard Form (SF)-50, Nature of Action, is coded “1,” “4,” or “5,” the re-employed annuitant is eligible to participate in the TSP. In the case of a FERS re-employed annuitant, this will be reflected in the retirement code (which indicates FERS) because the annuitant is required to have FERS deductions taken from pay.

In the case of a CSRS re-employed annuitant, however, this may not be reflected in the retirement code because the annuitant may not be required to have CSRS retirement deductions taken from pay. Consequently, the retirement code of a CSRS re-employed annuitant may be “4” (i.e., none), though the annuitant is performing service covered by CSRS and is therefore eligible to participate in the TSP.”

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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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Primary vs. secondary insurance

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Q. I have been covered by my wife’s GEHA plan for the past 10 years, and I continue to be covered under her policy (as do our two kids; we are in a self and family plan). Two new variables are coming into play for my health care: 1) I will be eligible for Medicare coverage in two months; and  2) I just started receiving a federal annuity. (Note: I am eligible to receive Social Security but have not yet signed up).

I have two related questions:

1) If I continue to remain under my wife’s Federal Employees Health Benefits policy (assuming that I can), what happens if I sign up for Medicare? Which is the primary insurance, and is it more beneficial to have FEHB or Medicare as the primary insurance?

2) If I were to register for Medicare coverage (and if I am still under FEHB coverage via my wife), does it make sense to register for both Part A and Part B, or just Part A of Medicare? Insurance?

A. Because you are retired, Medicare would be primary and your FEHB coverage secondary. It doesn’t make any sense not to sign up for Medicare Part A because you’ve already paid for that benefit through payroll deductions. Whether you need to sign up for Part B is decision you’ll have to make. To get a better understanding of the relationship between the FEHB and Medicare, go to www.opm.gov/insure/health/medicare/index.asp

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Payroll deductions after maxing out

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Q. I am a under CSRS. I maxed out (41 years, 11 months) in January. I am aware that CSRS deductions will continue and will be returned to me with interest upon my retirement. However, my leave and earnings statement does not indicate how much is being put into this account. The L & E statement also indicates that the government is also still contributing. Is this normal, or should I be seeing how much is in this account?

A. Nothing changes when you reach the number of years and full months of service that would produce the maximum earned CSRS annuity. Your agency will continue to deduct the same amount of retirement contributions from your salary as it did before you reached that level. Only after you retire will you find out exactly how much money will be refunded to you and the interest that has accrued.

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Military buyback and VSIP

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Q. I am a 53-year-old FERS employee who requested to buy back my military service time through payroll deductions. The intent was to retire at 62 from federal service, at which time the years of military service would have been completely bought back. Now, my agency is offering Voluntary Separation Incentive Payments. I am tempted to accept one and opt for a delayed retirement. I don’t believe the VSIP would affect my projected future retirement benefits (please verify that). However, must I continue to make monthly payments to the Office of Personnel Management to complete the buyback prior to age 62? Or can I wait until I have enough funds to pay the amount off all at once in the future before age 62? Or, lastly, can I essentially do nothing and request retirement at age 62 and the original amount of my payroll deductions would be deducted from my retirement annuity?

A. You would have to have completed the deposit no later than the date on which OPM completes the adjudication of your retirement application. If you don’t, you won’t receive any credit for that time and the money you already paid in will be refunded to you.

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Payroll tax

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Q: I just received my Dec. 29 payroll statement. My first payment in 2011 shows the same Old Age, Survivors, and Disability Insurance (OASDI) deduction I had in 2010. Is this because my employer did not have the chance yet to use the new 4.2 percent rate? Will I get the difference back retroactively?

A: Pay statements tell you what you earned and what was deducted during the previous two weeks. Therefore, you haven’t received a payment in 2011. If you are like most employees, you won’t receive a pay statement that will reflect the new rate until the first pay period in 2011 ends on Jan. 15.

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Lump-sum payout deductions, limits

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Q: In previous responses, you indicated that when a lump-sum base closure and realignment payment is made, federal and state income taxes, as well as Medicare deductions, will come out of the payment. You also indicated Social Security deductions can be taken out. As a Civil Service Retirement System employee, I do not pay into Social Security. Does that mean that no CSRS retirement payments will be taken out? Also, the lump sum will be close to $80,000 and should be paid in my last paycheck; are there any limitations on payouts?

A: Social Security deductions would only be made for those who are covered by Social Security, such as CSRS Offset or Federal Employees Retirement System workers. Neither CSRS nor FERS contributions to the retirement system will be taken out of the lump-sum payment, and there is no dollar limitation on the amount of such a payment.

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