Ask The Experts: Retirement

By Reg Jones

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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CSRS annuity

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Q. I am planning to retire Aug. 15 with 37 years, two months and 12 days under CSRS. I will be 60 years old. I know if I stay more than 40 years, I will get 80 percent of my salary. What I don’t understand, according to my retirement estimates, is that after age 62, I will be getting less of an annuity each year. How can this be?

A. It can’t be. Something is wrong with either the estimator you are using or the data you are putting into it. Part of the problem may be that you misunderstand how long you have to work to receive an annuity that equals 80 percent of your high-3. It isn’t 40 years; it’s 41 years and 11 months.

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Employment after CSRS retirement

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Q. I am a 39-year SES employee in CSRS.

What rules are in place for post-retirement employment? As long as I do not work on items related to my agency, can I seek work with a contractor? Also, will I be able to get my full annuity while earning a salary with a contractor? Are there any cautions?

A. You can seek employment with a contractor. However, whether it would be considered a breach of ethics to do so would depend on the extent to which you were using knowledge obtained while a government employee in your new position. You’ll find the guidelines at www.oge.gov/Topics/Post-Government-Employment/Post-Government-Employment.

As long as you are not directly receiving pay from the government, in most cases you would be able to continue to receive your full annuity.

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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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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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Rehire, job loss and annuity

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Q. I had 24.9 years of government civil service with the Navy. We were BRACed, and I retired. Then I got hired as a contractor for the government for less than a year. Now I work for the Air Force at a decrease in pay and grade. I may lose my job again because of the budget cuts in the government. How will all this affect my annuity, which I’m still receiving, if I lose this job?

A. If you received both your annuity and the unreduced salary of your new position, you wouldn’t receive any credit for that period of employment and your annuity would remain the same when you left. If your salary was reduced by the mount of your annuity and you worked for at least one year (or the part-time equivalent), you’d be entitled to your original annuity plus a supplemental annuity based solely on that new period of employment.

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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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Rehire offered lower salary

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Q. I was asked to return to my previous position as a rehire annuitant. I pursued the offer by applying for the announced position. I was then selected for the job but only offered a Step 1 in my retirement grade level. At the time of my retirement, I was a Step 6. The hiring official tried hard to convince the third line manager to approve my special qualifications with no avail. In the end, I was offered a lower salary than I had at the time of my retirement. Fair? Any rights?

A. As a re-employed annuitant, you at an “at will” employee. The agency that hires you isn’t required to match your previous grade and/or pay. You, in turn, can either accept or reject their offer.

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Terminally ill — survivor benefit

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Q. My wife, who is terminally ill, is covered by FERS and is an employee of the Postal Service. She is running out of sick and annual leave. If she goes on leave without pay and passes away while on leave without pay, will I, as her current husband (25 years +) still be eligible for the basic employee death benefit (50 percent of final salary plus $15,000)?

A. If your wife had more than 18 months service but less than 10 years, you’d receive a lump-sum payment of $31,316.46 plus a lump-sum of the higher of 50 percent on her annual basic pay at the time of her death or 50 percent of her high-3 average salary, plus any Social Security benefit that may be payable, plus any Thrift Savings Plan death benefits. If she had 10 or more years of service, you’d receive all of the above plus a survivor annuity equal to 50 percent of her basic annuity under FERS.

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High-3

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Q. I just retired under CSRS and my last day at work was Jan. 3. For purposes of the high-3, how is the three-year period defined? Three true calendar years? Three calendar years limited to 365 days each? A total of 1,095 calendar days (three 365-day periods)?

My salaries were:

1/4/10 to 1/30/10 = $92,992

1/31/10 to 1/28/12 = $99,239

1/29/12 to 1/3/13 = $102,074

Specifically, Feb. 29, 2012, was a leap year’s extra day and, being at my highest salary, my working that day should benefit the high-3 figure.

If Feb. 29, 2012, did not exist (or does not exist in the mind of the Office of Personnel Management), it appears my high-3 would be $99,965.24.

If OPM takes into account that extra day and goes back a total of 365 x 3, my starting point of computation would instead become Jan. 5, 2010. If OPM takes into account that extra day but still goes back to Jan. 4, 2010, as a starting point, they’d use a total of 365, 365 and 366 days in 2010, 2011 and 2012, respectively.  In either of these latter two scenarios, my high-3 would increase.

A. Seventy-eight consecutive pay periods.

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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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Unused sick leave

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Q. When I retire at the end of this school year, I will have 43 years of service with the Department of Defense Education Activity and 130 days of unused sick leave. I have been informed that my sick leave can be used to add additional service time. Does that apply when I have already reached 80 percent of my salary for retirement?

A. Yes. Unused sick leave isn’t subject to the 80 percent limit.

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High-3 and pretax FEHB premiums

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Q. I was just told by my human resources specialist that when pretax Federal Employees Health Benefits premiums reduce my taxable income, they also reduce my salary for the computation of high-3 average salary for retirement. Is this true? It doesn’t sound right to me, and I’ve never heard such a thing.

A. You haven’t heard such a thing because it isn’t true. Your high-3 is based on your highest average pay rates during any three consecutive years before any deductions are taken from that pay.

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GS pay

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Q. I was a term employee for one year and my term expired on Dec. 19. I was a GS-6 Step 7. I got an offer for a temporary position Jan. 11, but it comes with a $7,000 reduction in pay, and I was informed that it was management’s choice on whether to honor my previous salary. Can they do this? I am doing the same job that I was doing before, just for a different organization on the installation. My biggest concern is that I am disabled veteran over 30 percent, as well as on the spousal priority placement program, so if I decline this temp position, I knock myself out of the running for a permanent position.

A. There is no requirement that an agency match your previous salary level. You can negotiate with them to see if the amount they originally offered could be increased. Just as they have the option of setting the pay for that temporary appointment, you have the option of accepting or rejecting their offer.

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High-3

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Q. I have just returned to federal civil service after being away for 4½ years. I have made a lump-sum deposit for those 4½ years. If I retire tomorrow, how will my high-3 salary be calculated? Would it reflect the salary tables for 2008 to 2012 — the years I was away — or would my actual salary from 2004 to 2007 be used?

A. Your high-3 would be based on the average of the highest three consecutive years of basic pay you actually received, not what you would have received if you’d been at work.

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Annuity calculation

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Q. How many years of federal service does one have to work before retiring and receiving the exact amount of pay they are getting while working? Someone said you had to work until 35 years of service to receive your full retirement pay.

A. Regardless of which retirement system you are in, it would be impossible to retire and receive an annuity that equaled what you were earning as an employee. Under FERS, even if you worked for 50 years, your annuity would only equal 55 percent of your highest three years of average salary (.011 x your high-3 x 50). Under CSRS, you would receive the maximum earned annuity of 80 percent when you completed 41 years and 11 months of service. Of course, under both retirement systems, unused sick leave would be added and allow you to receive additional annuity. And if you were a CSRS employee who continued working after 41 years and 11 months of service, you could use your excess retirement contributions to purchase additional annuity, just as you could if you had participated in the Voluntary Contributions Program. However, it’s unlikely that they would get you close to the exact amount you were earning when you retired.

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VERA and special retirement supplement

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Q. I’m a Postal Service employee under FERS, eligible for the Voluntary Early Retirement Authority. If I take the early-out, I’ll have 26 years and nine months of service and I’ll be 55 years of age at the time of last day of service.  I’ll be 56 in June.

I understand that if I take the early-out, I don’t have to have 30 years of service to get a percentage of the special retirement supplement, based on 26 years of service (that would put me at about 65 percent of what I would get from Social Security at age 62, if I don’t work another job until then).

1. Because I would be turning 56 four months after retirement, wouldn’t my postal salary of $54,257 from my last year of service eliminate my getting any of the special retirement supplement for another six months?

2. I understand that because I’d be 55 years old at the time of retirement, I’d be able to take out all of my Thrift Savings Plan money without the 10 percent penalty for early withdrawal (I would just be taxed on it), but would that lump sum be considered earned income and come under the special retirement supplement/Social Security earning cap?

A. You would be entitled to the special retirement supplement as soon as you reach your minimum retirement age, regardless of the amount of money you earned before retiring.

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Rehired annuity

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Q. I am a GS-14 federal retiree, having retired in October. I worked continuously (no break in service) for 34½ years. My period of employment was entirely competitive service. I was classified as exempt from the federal Fair Labor Standards Act. I am interested in knowing how I would be paid if I decided to apply as a rehired federal annuitant. Is there a table that you can point me to with a step-by-step decision tree as well as examples of how a salary would be determined?

A. Nope. There aren’t any tables or decision trees. It would be up to you to find a job and negotiate with your potential employer to set a rate of pay within the pay scale for that grade. In most cases, your salary would be offset by the amount of your annuity. If you worked for a year full time, you’d be entitled to a supplemental annuity. If you worked for five years full time, you’d be entitled to a redetermined annuity.

Note: If you were hired into a position that allowed you to receive both your annuity and the full salary of your position, you wouldn’t be entitled to either a supplemental or a redetermined annuity. When you left, your salary would simply stop and your annuity would continue.

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Re-employment and sick leave carryover

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Q. My husband was a temporary federal employee for the Defense Department for five years. He was laid off in August. He had two years of military service, which he bought that time back, so in essence he has seven years of federal service. He is 60 years old. He put 10 percent of his salary in the Thrift Savings Plan. Should he leave that money in TSP or put it in another vehicle?

Also, when he reaches retirement age (62), will he receive a pension for the seven years of federal service? He left DoD with a sick leave balance — his annual leave he was paid for. Is it true, if he receives another government position within three years, his remaining sick leave will carry over?

A. Reg: He would be eligible for an annuity at age 62 if he had five years of full-time service from which retirement deductions were taken and he didn’t take a refund of those deductions when he left. The unused sick leave he had to his credit when he left wouldn’t be included when his annuity was computed. On the other hand, if he returned to work for the federal government, his sick leave would be restored.

Mike: He should leave his money in the TSP for as long as possible, and manage it there. Its costs and investment options are superior to those he’ll find anywhere else.

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Annuity calculation

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Q. I began federal employment at age 55. I hope to reach age 70 with 15 years of service. My goal is to add federal retirement with Social Security for maximum retirement. Could I potentially earn $1,666 per month, or 30 percent, with a base salary of $65,000?

A. Your FERS annuity would be 15 percent of your high-3 (.01 x your highest three years of average salary x your years and full months of service). To get an estimate of your Social Security benefit, go to http://ssa.gov/planners/benefitcalculators.htm and click on Quick Calculator.

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