Ask The Experts: Retirement

By Reg Jones

Part-time re-employment and annuity

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Q. I will be 64 this year and am considering retirement as a Senate employee. If I retire and begin my annuity from FERS, can I be employed part time and not lose any of my annuity or benefits if I earn less than the earnings limit set by Social Security?

A. With rare exception, if you retire and are re-employed by the federal government, the salary of your new position will be reduced by the amount of your annuity. So, before you accept another position, you’ll need to find out if it is exempted from this basic provision of law. If it is, you’ll be able to receive both your annuity and the full salary of that position. However, you’ll get no credit for that period of service when you leave it. In other words, you won’t be eligible for either a supplemental or a redetermined annuity.

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Re-employment, benefits and sick leave

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Q. I retired from FERS on Dec. 31, 2006, and returned to work on May 10, 2009. I am receiving both my salary and my full annuity. Both Medicare and Social Security are being deducted from my paychecks, which is fine.  I am receiving my full entitlements from Medicare and Social Security. I am 70 years old. Will my benefits be re-evaluated when I return to retirement status, which will be on or around May 10, 2014?

Also, as a retired annuitant, will my sick leave be adjusted to my time in service, and will I be able to draw a lump sum of any leave occurred that I have not used? I plan on having 360 hours of leave to cash in.

A. Because you are receiving both your full salary and your annuity, when you leave government again, you’ll receive a lump-sum payment for your unused annual leave; however, by law, you won’t get any credit either for the time you were re-employed or any unused sick leave. Your annuity will be unchanged. Except for the salary you received and that lump-sum leave payment, it will be as though you had never returned to work.

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Best time to retire

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Q. I am a FERS employee who is trying to figure out the best possible time to retire. I have 30 years of service but am only 59. I want to take full advantage of my accrued sick leave of over 2,000 hours. I was considering January 2014, but I’m not sure that is the smart thing to do, when I could also wait until I reach age 62 in April 2015.

A. Only you can answer your question. And you have already thought of some of the things to consider that can help you do that. For example, you’ve figured out that by retiring after Dec. 31, 2013, you’d get full credit for your unused sick leave in the computation of your annuity. As for the age at which you retire, if you did so before reaching age 62, you’d receive the special retirement supplement, which approximates the Social Security benefit you earned while a FERS employee. If you did so at age 62, you could immediately apply for a Social Security benefit.

Not included in your email are other factors that might influence your decision. For example, the longer you were employed, the more salary you’d receive and, when you retire, the larger your annuity would be. As someone who has at least 20 years of service and retires at age 62 or later, your annuity would be computed using the enhanced multiplier: 1.1 percent instead of 1 percent.

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Lower-graded job for health reasons

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Q. I am a 50-year-old, 25-year U.S. Fish and Wildlife employee hoping to get to full retirement in several years. I have developed Parkinson’s disease, however, and may be unable to successfully fulfill my current role as a biologist. If I take a lesser-grade job available, will my pay stay the same or will it drop? Also, if I go out on disability through this original job, can I get a random nonfederal job at a local business to keep active?

A. If you take a lower-graded job, your pay would only remain the same if your current salary fell within the pay range of the new job and you were placed in a step that was closest to it. If you applied for FERS disability retirement, you would also have to apply for Social Security disability benefits. If your application for disability retirement was approved, you could continue to work if what you did didn’t prove that you had recovered from your disability and your earnings didn’t exceed 80 percent of the current rate of pay for the position you left. If you were also approved for Social Security disability benefits, those benefits would end if you were able to engage in substantially gainful work.

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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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High-3 and law enforcement

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Q. I will be retiring next week from federal law enforcement. I live and work in the San Francisco area. I was initially provided with a calculation based on an average high-3 salary of $145,250 and was told I would receive a net of $6,050 per month. However, when I visited Employee Express this morning, I saw that the agency is now listing my high-3 average as $116,000 and my expected net monthly annuity payment would be around $5,000. I pulled my W-2s for the past three years and confirmed that my top average 3-year salary is $145,250. I’m awaiting a response from my employer to determine why they are now listing my high-3 average $29,250 lower than originally reported to me. I receive 25 percent availability pay as well as my base pay and locality pay. It’s my understanding that all three of these factor into my retirement annuity.

A. The amount of a high-3 is based on three consecutive years of average pay from which retirement contributions were deducted. Any pay you received from which retirement contributions weren’t taken won’t be included. You’ll need to check with your payroll office to find out if there’s a difference between your gross income and your retirement deductions.

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Annuity calculation

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Q. I have been working with the federal government for eight years. I am vested in a retirement program. I earn $69,000 a year. How much will my retirement income be after I retire?

A. FERS employees can retire when they meet one of the following age and service combination: age 62 with five years of service; 60 with 20; at their minimum retirement age with 30; and at their MRA+10 (at least 10 years of service but fewer than 30) with a reduction of 5 percent for every year they are under age 62. MRAs range from 55 to 57, depending on your year of birth.

Now I’ll give you the formula and you can use the above options plus estimates of your highest three years of average salary and length of service to come up with some possible outcomes: 0.01 x high-3 x years and full months of service (use 0.011 if you retire at age 62 with at least 20 years of service). Obviously, the further you are from retirement, the less reliable the outcome.

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Re-employment and high-3

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Q. I worked for a member of Congress for a little more than six years ending 12 years ago. Because he lost the next election, I became vested and eligible to receive a small pension but no health insurance (less than 10 years of service). Although I am over 62, I have never requested of collected any retirement benefits. Now I have an opportunity to go back to work for a federal agency at the GS-15 level. I assume that the benefits and time would be additive in some way, but how long would I have to work for my high-3 to be based on the higher salary? I have heard it could take five years. At what point would the retirement health insurance be locked in?

A. Your high-3 is always the highest three consecutive years of average salary. Because you are already 62 and can retire with as little as five years of service, which you already have, you would only need to work for three years to establish a new, higher high-3.

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Survivor annuity for dual-federal couple

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Q. I am retiring under CSRS with 34 years of service. My spouse will still be working as a federal employee and retire in eight years with a 20-year full pension under FERS. Is there any advantage to taking the survivor benefit for my spouse, or is it better to elect not to take the survivor benefit? If I pass away, would it be considered double-dipping for my spouse to collect the survivor benefit from my retirement?

A. Let me clear up two points. First, federal employees are required by law to provide a full survivor annuity for their spouses. They can only provide a lesser amount (or none at all) with their spouse’s written consent. Second, spouses can receive a survivor annuity and the salary of their position or a survivor annuity and their own annuity. Now that you know what the rules are, you and your spouse should be able to make an informed decision.

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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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Downgrade and high-3

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Q. I took a downgrade when I moved to another state. My high-3 was at a GS-9 Step 6 in 2006. Will my high-3 calculation be based on what I made for three consecutive years at the salary I was getting in 2006, or will it be based on GS-9 Step 6 the year I retire? In other words, will the cost-of-living raises be included in the retirement calculation?

A. Your high-3 will be based on your highest three consecutive years of average pay, regardless of when that occurs in your career.

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Temporary NTE and “sold” leave

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Q. I’m a full-time FERS employee with 21 years of service and over 60 years in age. I am on a temporary promotion that is to “Not to Exceed 12/31/2012”. I am planning on retiring Nov. 30, a month before the temporary promotion expires. I am also planning on “selling” my 100 hours of unused annual leave at retirement. Will my leave be sold at my temporary promotion salary (GS-14) or at my permanent grade (GS-13)?

A. Since your agency has the right to return you to your official position of record before you separate, the amount of your lump-sum payment will depend on which position you are occupying when you retire.

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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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Discontinued service retiree

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Q. I retired (not by choice) with 31 years under CSRS as a discontinued service retiree from Aug. 2, 2011, through Dec. 17, 2011.

I was placed on priority placement program since I declined my transfer of work to Fort Lee, Va., and subsequently was rehired into the federal workforce Dec. 19, 2011, as a GS-09 (I was a GS-11 at retirement). Therefore, I am losing about $500 per month. I am beginning to think I would have been better off staying a DSR.

How does my CSRS annuity work now? I want to know how long it will be before I can fully retire if I decide to do so. I am age 48 with 31 years of service.

I assume I am starting over again or just have the four-month break in service with the annuity recalculated.

A. As a discontinued service retiree who was involuntarily separated from the government, when you were rehired, your annuity should have stopped. From that point forward, you would be treated no differently than any other employee. As a result, you wouldn’t be able to retire again until you met the age and service requirements. On the other hand, if you were hired into a position that allowed you to keep both your annuity and the salary of your new position, you would continue to receive your annuity; however, when you left, you would get no retirement credit for that period of employment. As such, you wouldn’t be entitled to a supplemental or re-determined annuity.

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Postal Service annuity

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Q. Approximately how much does a CSRS letter carrier from Kansas receive (pension) after 40 years of service? Never promoted beyond letter carrier.

A. You’ll have to figure it out yourself, using the following formula:

0.015 x your highest three years of average salary (your high-3) x five years of service, plus

0.0175 x your high-3 x five years of service, plus

0.02 x your high-3 x all remaining years of service.

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Part time after retirement

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Q. When I retire from my GS position, I plan to take a part-time position at a lower pay scale. Would I start out in the Step 1 position, or would it be at a higher step?

A. Because there is no requirement that you be hired above Step 1, it’s up to the agency that is hiring you to determine if there is any basis for placing you at a higher step. FYI, unless you are being hired into a position that allows you to receive both your full annuity and the full salary of your new position, your salary will be offset by the amount of your annuity. If it will be offset, you could end up working for next to nothing.

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Gross salary

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Q. I am on workers’ compensation, and I am interested in starting my disability retirement benefits. I talked with a lady at the Office of Personnel Management, and she informed me that I could go back to work someday and still collect disability retirement benefits, but my gross salary could not be more than 80 percent of my Postal Service salary. If I were to sell a house and make a profit, is that considered gross salary, like a job would be?

A. No, it isn’t. The 80 percent limit applies only to earnings from wages and self-employment, not other sources of income.

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Retire and rehire

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Q. I am biological research technician retiring from the Veterans Affairs Department on May 31. My boss wants to stay involved with the laboratory training new students in molecular biology. He wants to rehire me two days per week after I retire. Is this possible without affecting my annuity?

A. Unless you can be appointed under either an exceptional needs authority or on a limited time appointment, the salary of your new position would be offset by the amount of your annuity. Your boss can only propose that; only your agency can decide if that’s appropriate.

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Early-outs

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Q. I will have 25 years of service soon but will only be 48. If the government offers early-outs, what will I be eligible for? Pension at one-quarter of my salary for the last three years? Health insurance? What if I get a part-time job? Will this affect my pension or annuity? Also, if I do an annuity on my Thrift Savings Plan, can I start that now? Will there be a penalty? Do I get this same amount for the rest of my life, or does it stop after a certain number of years?

A. Reg Jones: Because you have at least 25 years of service, you could retire at any age. Your annuity would be based on the standard FERS formula: 0.01 percent x your highest three consecutive years of average salary x your years and full months of service. If you were to return to work for the government either full or part time, as a rule, the salary of your new position would be reduced by the amount of your annuity. If you worked anywhere else, either full or part time, it wouldn’t have any effect on your annuity.

Mike Miles: You may use your TSP money to buy a life annuity once you separate from service. Life annuity payments are excepted from the early withdrawal penalty. As the name implies, life annuity payments are guaranteed to last for life.

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