Ask The Experts: Retirement

By Reg Jones

Involuntary separation and pay

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Q. I’m 49, with 26 years in the NAF retirement program. I won’t be accepting a transfer of function outside my commuting area, so I’ll be involuntary separated. Based on everything I’ve read in AR215-3 3-25, I should be eligible for both discontinued service retirement and severance pay.

Severance pay would be authorized in my case since my immediate annuity will be reduced 12 percent based on my age (2 percent for every year I’m away from 55).

I’m now hearing that the following paragraph would prevent me from receiving severance pay: AR215-3 3-25 h. “Exclusions from severance pay. Severance pay will not be paid when the employee — (4) Is entitled to an immediate annuity that is not reduced because of the employee’s age at the time of retirement.”

Is this correct, or will I be authorized both DSR and Severance pay?

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Forced retirement?

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Q. I am 62 years old with more than 10 years of service. I am on a Schedule A excepted service term appointment that is soon to expire. I came to this appointment from a competitive service, permanent position at the request of my agency, but the funds for the program are now, unexpectedly, about to run out.

I am told that I am not eligible for severance pay because I am eligible for an immediate FERS annuity (age 62 and five years of service), but I do not wish to voluntarily retire. Can my department make me retire without offering me another job first? If so, what’s that called and why? If I refuse to voluntarily retire, to preserve any right to complain, will I lose any FERS medical survivors benefits?

A. No, your agency can’t make you retire. However, they can separate you when they no longer have the money to support your position. Further, as a term employee, there is no requirement that you be offered another job. Because you are eligible to retire, you aren’t entitled to severance pay.

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Severance pay and deferred annuity

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Q. If a FERS employee is eligible for a deferred retirement (30 years qualifying service but not yet at minimum retirement age) but is involuntarily separated (instead of resigning) and receives severance pay upon separation, can he still file for and receive a deferred retirement later upon attaining his MRA?

Also, is it true that a deferred annuity is not subject to reduction if applied for at MRA when the employee had at least 30 years of service?

A. Yes and yes.

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Benefits following RIF

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Q. I have 36 years of creditable service under CSRS, and I am 56 years of age. In a reduction-in-force situation, assuming I was not placed in another government position, would I be entitled to both 52 weeks severance pay and an immediate annuity?

A. Because you’d be eligible for an annuity, you wouldn’t be eligible for severance pay.

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Directed reassignment

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Q. I am 46 with 22 years of service, and have been told that I will soon receive a letter of directed reassignment to a job in my same grade far outside my commuting area. When the letter arrives, if I should decline to move to the new position, what are my options for drawing retirement? How about insurance? Severance pay? What about my 401(k) in the Thrift Savings Plan? My performance ratings are not an issue.

A. Reg: Because you wouldn’t meet the age and service requirements to retire, you’d only have one option. If you didn’t take a refund of your retirement contributions, you could apply for a deferred annuity at age 60.

You would be entitled to severance pay only if you lost your job through no fault of your own. However, if you were to resign or decline a reasonable offer, you wouldn’t. A reasonable offer is defined as one that is in the same agency, in the same commuting area, of the same tenure and work schedule, and not more than two grades or pay levels below your current position. Note: If you are covered by a mobility agreement, the reasonable offer exception wouldn’t apply.

You would be given a month of free Federal Employees Group Life Insurance and Federal Employees Health Benefits insurance coverage. At the end of that period, you could elect private life insurance coverage at your own expense. You could also elect to continue your health insurance coverage for up to 18 months under the temporary continuation of coverage provision. For that coverage you would pay 100 percent of the premiums, plus 2 percent for administrative expenses.

Mike: Your circumstances will not affect the usual rules that apply to your TSP account. As long as you remain employed, you will be subject to the in-service withdrawal rules described at https://www.tsp.gov/planparticipation/inservicewithdrawals/basics.shtml. If you separate from service, the rules described at https://www.tsp.gov/planparticipation/withdrawals/accountOptions.shtml will apply. If you separate from service before the calendar year in which you reach age 55, you will be subject to the Internal Revenue Service’s early withdrawal penalty unless you meet one of the exceptions specified on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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Annuity and severance pay

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Q. I am a National Guard technician being medically disqualified from my military position, which is causing me to lose my civilian position. I have educated myself I think pretty well on my overall retirement package. OPM regulations state that if I am medically disqualified from my civilian job, I am entitled to severance pay. I called my local human resources office and was told that because I am getting an annuity, I do not qualify for this. That office has told me many things that are not true, so I do not believe that.

I was also told that when I am medically retired, I can file for severance through OPM. If I do get it, would this cause a problem with my above 80 percent for that very first year?

A. You cannot receive both an annuity and severance pay.

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Want to retire this year

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Q. Current age: 56

Entered U.S. Navy active duty: May 1978

Active-duty military time: 11 years, four months

Retired reservist after 26 years as an O-5

Entered civil service: November 1997

Current paygrade: GS-9, Step 8

Received a $30,000 severance pay when released from active duty in January 1989

Points accumulated, active and reserve, for retirement: 5,245

What do I need to do to retire at the end of this year? I know you can’t tell me what I should do, but if you could give me guidance as to what I need to do so I can make an informed decision I would greatly appreciate it.

A. Here’s the deal. Because you have already reached your minimum retirement age and have at least 10 years of service, you can retire under the MRA+10 provision. If you do, your annuity would be calculated using the following formula: 0.01 x your highest three consecutive years of average salary (your high-3) x your years and full months of creditable service. However, that annuity would be reduced by 5/12 percent for every month you were under than age 62. You could reduce or eliminate that penalty by postponing the receipt of your annuity to a later date. Now all you have to do is put pencil to paper and see what your annuity would be under different scenarios.

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Pension eligibility

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Q. I worked for the Ammunition Procurement and Supply Agency in Joliet, Ill., from 1966 to 1973. They closed and moved and I did not move with them. Would I qualify for a federal pension now that I am 64? I remember receiving a severance pay at the time.

A. If you left your contributions in the retirement fund when you left, you’d be eligible for a deferred annuity at age 62. If you didn’t, you wouldn’t be eligible for anything.

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Severance pay

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Q. I am 59 with 23 years of civilian service under FERS. My organization gave me a management-directed reassignment outside this area (from Virginia to Kansas). I was given 10 calendar days to agree to move or be involuntarily separated through no fault of my own. Am I eligible for severance pay?

A. Yes.

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