Ask The Experts: Retirement

By Reg Jones

Earnings limit

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Q. I’m getting close to my FERS retirement, and I have a second job that I love. If I refuse my special retirement supplement from the Office of Personnel Management, will I still be financially penalized from my FERS retirement for making too much money from my second job? If so, how can I still continue to work without being penalized?

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RIF, VERA, penalty and SRS

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Q. I was born in 1966 and my organization may undergo a reduction in force. I anticipate that I will have the 50 years of age and 20 years of service by the time they may offer the Voluntary Early Retirement Authority/Voluntary Separation Incentive Pay. Please let me know if the minimum retirement age counts during a RIF if I am a FERS employee because my MRA is 56½, of which I will only be 50 years of age, so I need to know if I will be penalized 5 percent each year under MRA. Hoping that the 50/20 rule is an exception to being penalized.

Also, how can I find out more about the special retirement supplement?

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RIF, special retirement supplement and penalty

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Q. If I retire at 59 years and five months with 28+ years of service, under a reduction in force, would I qualify for the special retirement supplement and only be penalized until I reach 60?

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Deferred annuity

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Q. My husband resigned from a Defense Department agency (non-civil service) after 29 years to work in the private sector. He was under CSRS, never converting to FERS. Before his resignation 10 years ago, he spoke to the agency’s personnel retirement representatives and was told he would still be able to collect retirement but only after he reached the age of 62. They told him that he should start the retirement paperwork six months from his 62nd birthday. Is this information correct? Does he lose the 2 percent for each year under the age of 62 he was when he resigned? He’s within a couple of months of that six-month target.

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Early retirement, penalty, SRS and TSP

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Q. I have 27½ years in the Postal Service and I am 52½ years of age. If an early-out comes in the next few months, will I get a penalty for leaving? Do I get my special retirement supplement, or do I have to wait for that? Also, do I get to take my Thrift Savings Plan now, or do I wait for that?

A. Reg: If you were offered an opportunity to retire early, you have the age and service needed to accept it. If you did, you wouldn’t be subject to the age penalty and you’d be entitled to the special retirement supplement when you reach your minimum retirement age, which is 56.

Mike: The early-out has no effect on the Internal Revenue Service early withdrawal penalty. You will be subject to the penalty until you reach age 59½ unless you qualify for one of the exceptions listed on Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf

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Turning down Medicare Part B but taking it later

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Q. I am 65 years old and am employed full time by the federal government. I will continue my federal employment for several years. I am covered under Federal Employees Health Benefits and pay for Blue Cross/Blue Shield insurance. If I decline Part B now and decide to take it later, will I be subject to the Medicare Premium penalty?

A. Yes, you can decline Part B while you are still employed without penalty. When you are no longer employed, you’ll have an eight-month window in which to enroll, penalty-free, which begins the first full month after you retire.

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Taxes

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Q. How does my dad change the amount of taxes to be taken out on his civil service retirement check? He is not taking out enough and is getting penalized.

A. Have him call the Office of Personnel Management at 1-888-767-6738 or 724-794-2005 and talk to one of the benefits specialists.

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Early retirement and age penalty

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Q. I am a FERS employee with 25 years of service (21 Postal Service, four military, which I bought back). I am 45 years old. As a FERS employee, will I be penalized 2 percent or 5 percent a year for accepting an early-out offer? If so, what other penalties will I face?

A. If you accept an offer of early retirement, you won’t be subject to the age penalty. And there aren’t any other penalties that would apply.

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RIF and health benefits

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Q. I’m 53 with 27 years and 10 months. I could get six months of military service for Army Reserve full-time training credit. I’m in a term position. If I’m given a reduction in force, what are my options? Can I defer my retirement until my minimum retirement age of 56? If so, would I lose my health and insurance benefits? If I’m RIF’ed and do not defer, does that means I lost health benefits?

A. If you receive a RIF notice, you have two choices. You can either sit tight and see if you are going to be separated, or you can take early retirement. If you are going to be involuntarily separated, you can still retire. Whether your retirement was voluntary or involuntary, the age penalty would be waived. Therefore, there wouldn’t be any point in retiring and postponing the receipt of your annuity to a later date. As for your Federal Employees Health Benefits coverage, as long as you were enrolled in the program before the RIF was announced, you could carry it into retirement.

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Medicare Part B penalty

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Q. I am 59 years old and covered under Federal Employees Health Benefits as the spouse of a CSRS annuitant. Due to a covered disability, I have been receiving Social Security Disability Benefits for the past 18 months and was just advised that I will be eligible for Medicare Parts A and B in June. If I decline Part B and decide to take it later, will I be subject to the Medicare Premium penalty?

A. Yes.

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Annuity reduction?

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Q. I can start drawing Social Security this year, but I am retired from the federal government under CSRS. I had eight years in the Marine Corps, which I got credit for at retirement, and I didn’t pay the deposit of 7 percent for those years. Will my government retirement check go down? I read that I am already being penalized 10 percent each year because I didn’t pay the deposit.

A. If you are eligible for a Social Security benefit at age 62, those eight years for which you didn’t make a deposit will be eliminated and your annuity recomputed downward.

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Deferred retirement eligibility

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Q. I have 26 years of federal service under FERS. I am 51 years old.  I would like to leave federal government.  Am I eligible to apply for a deferred retirement? If so, how is my penalty calculated?

A. Because you have at least 20 years of service, you could resign and apply for a deferred retirement at age 60. Your annuity would be calculated using the standard formula: 0.01 x your high-3 x your years and full months of service. Your high-3 would be determined by your highest three consecutive years of average salary on the day you left.

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Part-time federal job after retirement

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Q. I have a question that follows up on a question and answer from Nov. 19, 2012. Could you explain in a bit more detail what is meant by the following statement?: “There are limited opportunities for a retiree to go back to work for the government either full time or part time while receiving both his annuity and the full salary of his position.”

Do you mean, for example, that, in most cases, the law prohibits a retiree of one federal agency from working part time for another federal agency, or imposes a negative consequence upon such a retiree who works part time for another federal agency?

I’m currently a FERS-transfer employee of the Defense Department. I’m wondering whether I could retire from a DoD position and work part time for the National Park Service while getting a full retirement annuity from the DoD job, and, if I could, whether I would nevertheless be penalized in some way.

A. What I meant is that there are only a few appointing authorities that would allow a retiree to receive both his annuity and the full salary of his new position. Further, agencies may only use such an authority under limited circumstances. For example, DoD’s authority is confined to hard-to-fill positions; when the position is critical to the accomplishment of the agency’s mission or to complete a project; or where the candidate has unique or specialized skills. The same is true of the FBI and the intelligence community.

On the other hand, most agencies, with OPM approval, can hire someone on a case-by-case basis, where there is an emergency or a severe recruiting difficulty. Further, there are limited-time appointments under Section 1122 of Public Law 111-84, when certain criteria are met.

To the best of my knowledge, the use of these authorities has been limited because the criteria are hard to meet. Instead, where agencies are re-employing an annuitant, they are doing so by offsetting the salaries of his new position by the amount he is receiving in his annuity. Note: If you should be hired into a position that allows you to receive both your annuity and the full salary of the position, the time spent there wouldn’t be creditable for either a supplemental or redetermined annuity.

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Earnings limit

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Q. I retired from federal government Dec. 31 2011; signed up for Social Security on Jan. 24, 2012; and started drawing benefits in February 2012. I did not go back to work until July 2012 and worked until December. In some of those months, I exceeded the $1,200 threshold. Does Social Security average the 11 months, or will they penalize me for each month separately?

A. The earnings test is applied when you earn more than the annual limit during a calendar year. In 2012 that limit was $14,640.

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Medicare Part B penalty

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Q. I am retired under CSRS with survivor benefits for my spouse. I have Medicare Part A and Federal Employees Health Benefits Blue Cross/Blue Shield family plan. My spouse has just become Medicare eligible. Since there is a penalty (140 percent) for me to pick up Part B, we are contemplating continuing with the Medicare Part A and FEHB. The adviser at Social Security questioned our health insurance coverage after I die, noting the penalty in picking up Part B later. I assume that FEHB coverage will continue with the survivor benefits. Also, will the cost of the FEHB become the self-only rate?

A. If you are enrolled in the self and family option and have elected a survivor benefit for your wife, she would be able to continue that coverage and could convert to the self-only option.

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Medicare Part B penalty

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Q. I am 68 years old and signed up for Medicare Part A before my 66th birthday. I have not signed up for Part B for several reasons.

1. My husband is 60 years old and we have insurance coverage with Federal Employee Plan Blue Cross/Blue Shield.

2. We are posted out of the country, in the Czech Republic.

3. I have no occasion here to use Medicare or incur its costs.

Health costs are self-paid upfront in full and then partially reimbursed by our insurance company.

I believe individuals are penalized 10 percent per year for not signing up for Medicare when they are 66.

It will have been five years past that stipulation when we return to the U.S. and I am 70. My husband swore an oath of availability for worldwide service when he joined the State Department.

Why will I be penalized up to 50 percent for not acquiring Part B, a service that I don’t need and cannot use?

A. Because you were either enrolled in or covered by a group health plan when you first became eligible to get Medicare Part B, there won’t be any penalty. Under special enrollment period rules, you may enroll during any month that you are covered by a group plan or during the eight-month period that begins the first full month that you are no longer covered under that plan based on current employment. Whether you decide to enroll in Part B or not is up to you. Just check with your plan to find out how your decision will affect your plan benefits.

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MRA+10 and special retirement supplement

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Q. I plan to retire from the Postal Service at the end of February, when I reach my minimum retirement age of 56. I will have 21½ years of service and will be retiring under the MRA+10 provision. I plan to start taking my annuity payments at that time. Will I also be entitled to the special retirement supplement?

A. No one who retires under the MRA+10 provision is eligible for the special retirement supplement. You also need to be aware that when you retire, your annuity will be reduced by 5 percent for every year (5/12 percent per month) that you are under age 60.  You can reduce that age penalty by postponing the receipt of your annuity to a later date.

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Military buyback and leave accrual

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Q. I’m retired from the Navy with 21 years of service (December 1984 to December 2005). I just started a job with the Veterans Affairs Department in a civilian GS position. I’m listed in Leave Group 1. Because I am retired, I have to start from the beginning in Leave Group 1. Other service members who did not retire start off in Leave Group 2. It feels like I’m getting penalized for being retired. They say some of the campaigns I served in may count. Is this true? If so, how does it work?

A. You’ll find what you’re looking for in the Office of Personnel Management’s VetGuide. Go to www.opm.gov/StaffingPortal/vetguide.asp and scroll down to Service Credit for Leave Rate Accrual and Retirement.

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VERA and age penalty

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Q. I’m 58 and have worked under FERS for 20 years. If I take an early-out, do I get any penalties? What would my retirement benefit be?

A. If you retired under the Voluntary Early Retirement Authority, you wouldn’t be subject to an age penalty. Your annuity would be computed using the standard formula: .01 x your high-3 x your years and full months of service.

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Early retirement and penalties

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Q. I am 56 years old with 27 years of employment at the Postal Service, all FERS years with no military. Contemplating taking the offer but confused about penalties for early retirement.

A. Because you would be accepting an offer of retirement, there wouldn’t be any age penalty.

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