Ask The Experts: Retirement

By Reg Jones

CSRS pension, Social Security and employment

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Q. I retired from the Social Security Administration in 2002 with 32 years of service under CSRS. I didn’t work long enough in the private sector to qualify for Social Security at age 62. I’m 63 now and would like to work part-time. Am I still subject to possible offset of my pension if I qualify for Social Security, and are there limits to how much I’m allowed to earn?

A. Going to work would not affect your annuity, regardless of how much you earned.

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Social Security reduction

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Q. I am a 66-year-old federal retiree. My Social Security statement says my benefit at 66 is $1,004 per month, and I have less than 25 years of substantial earnings.

Because of my federal retirement, I know my benefit will be reduced, but by how much? Some Social Security information seems to say it will be reduced by about 50 percent; other information leads me to believe the maximum reduction is $362 per month.

A. Go to http://ssa.gov/estimator and use the benefits calculator provided by the Social Security Administration.

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Resignation and FERS benefits

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Q. My son David is a federal employee under FERS who recently suffered severe mental health problems.

1. If David resigns his federal position, will he be eligible to apply for a medical disability retirement after the date of submitting his resignation?

2. Is there any waiver(s) for the requirement of applying for Social Security Insurance prior to submitting an application for a medical retirement?

A. 1. Yes, he can file for disability retirement after he resigns. However, it would be better if he began the application process before that, because his agency has a role to fulfill which would be harder to do after he left.

2. No, the Office of Personnel Management won’t review his application for disability retirement unless he has filed for Social Security disability benefits.

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Sequestration and unused annual leave

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Q. As a FERS employee retiring at the end of March after 27+ years at age 65. How will the sequestration and continuing resolution affect when I will get my check for unused annual leave? Will there be any effect on the delivery of my first annuity and Social Security checks?

A. There shouldn’t be any delay in the delivery of your annuity and Social Security checks. Whether there would be a delay in your lump-sum annual leave payment is something that only your agency can answer.

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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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Disability retirement

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Q. I am a FERS employee with serious medical issues. If I apply for a disability retirement, I will be required to submit an application for immediate retirement. According to the instructions on this application, most annuities begin the first day of the month after separation. How does this work if my request needs to be approved by Social Security? If it were denied by Social Security, then what would happen to my annuity?

A. Because you are a FERS employee, if you apply for disability retirement, you must also apply for a Social Security disability benefit. Your receipt of a FERS disability annuity isn’t contingent on your receiving a Social Security disability benefit. If you are approved for the disability annuity and not the disability benefit, you’ll continue to receive the disability annuity.

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VSIP and Social Security

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Q. I am a FERS employee with 23+ years of federal service and 62 years old. My agency is offering Voluntary Separation Incentive Pay to eligible employees, including those who are retirement-eligible. Would the incentive reduce the amount of Social Security I can draw this year?

A. VSIPs are considered earned income. To find out if accepting one would affect your Social Security benefit, go to www.socialsecurity.gov/retire2/rule.htm and see how the “first year rule” would apply to your situation.

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First-year rule

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Q. In 2012, what were the limitations for self-employment income for the first year of retirement, which was also the first year I received Social Security benefits?

A. You’ll find what you’re looking for at www.socialsecurity.gov/retire2/rule.htm.

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Leaving federal service early

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Q. I am 51 years old and have 16 years of 6c time in federal law enforcement. I am also a veteran and bought back 11 years of active-duty time, bringing my total federal time to 27 years. I am considering leaving the government for a position with a private company. I want to make sure I understand what I would give up before I leave, and it is my understanding that my benefits would be based on a straight 1.0 percent per year vice 1.7 percent since I will not have completed 20 years of 6c time. I am not concerned about Social Security since I would be working anyway. Also, I will need to defer my benefits until age 60, with 26 years of service. I have also retired from the reserves, so I am not concerned about health insurance. So, by my estimates, I would be giving up 45 percent for 26 percent. Do I have this correct, or am I missing something?

A. Yes, you are correct. Note: If you had 27 years of service, you’d be giving up an annuity worth 41 percent (0.17 x your high-3 x 20 years of service = 34 percent) + 0.01 x your high-3 x 7 years of service = 7 percent) for one worth 27 percent (0.01 x your high-3 x 27 years of service = 27 percent).

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Retirement eligibility

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Q. I am 52 years old and have 22 years of federal employment. Can I retire? If so, how soon can I receive monthly payments, and how much would they be reduced by?  How would this affect my Social Security benefits later? Also, how would this affect my medical insurance?

A. Unless you are a special category employee, such as a law enforcement officer or a firefighter, you don’t meet the age and service requirements to retire.

For FERS employees, these are: age 62 with five years of service, 60 with 20, at your minimum retirement age (MRA) with 30, and at your MRA+10, but with a 5 percent-per-year age penalty for every year you are under age 62. Your MRA is 56.

There is an option. Because you have at least 20 years of service, you could resign and apply for a deferred annuity at age 60. After 31 days of free health benefits coverage, you’d be able to continue it for up to 18 months under the temporary continuation of coverage provision of law. However, you’d have to pay the entire premium plus 2 percent.

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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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Social Security reduction?

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Q. I worked for a little more than five years as a full-time federal employee under FERS. I paid FICA taxes. I became entitled to a small pension under FERS. Will my Social Security benefit be reduced because of this pension entitlement?

A. No.

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Health benefits after retirement

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Q. I am a 51-year-old FERS employee whose minimum retirement age is 56. I will have over 30 years of service when I reach the minimum retirement age.  A couple of years ago, I went under my wife’s health plan.  We incorrectly assumed that she needed five years to become vested and that we could just stay under her plan when we retired (as with FERS). However, she is a Non-Appropriated Funds Defense Department employee and would need 15 years.

I am picking up my Federal Employees Health Benefits insurance again so that I will have five years under the plan when I reach the MRA. If I were to retire at 56, my understanding is that I can (a) begin receiving a reduced annuity immediately or (b) defer receiving my annuity until I reach 62. I was told that if I begin immediately receiving a reduced annuity, I can keep my FEHB and still benefit from the government contribution.

What happens if I defer the annuity until I am 62? Will I need to pay the whole premium, plus 2 percent, for the years between 56 and 62? My wife will likely work until I am 62, so could I go under her health insurance between 56 and 62 and then pick up my FEHB again when I begin collecting my annuity?  Under either of those scenarios, could I change my coverage from self-only to self and family to add my wife to my coverage when I am 62?

A. I think you are suffering from a misunderstanding, which I hope to clear up. If you will have 30 years of service when you reach your MRA, you could retire on an immediate unreduced annuity. And you would also be entitled to the special retirement supplement, which approximates the Social Security benefit you earned while a FERS employee. If you had five years of continuous enrollment in the FEHB, you could carry that coverage into retirement and, unless you are a Postal Service employee, the premiums you’d pay as a retiree would be the same as those you have been paying as an employee.

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Social Security eligibility

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Q. I am 67 years old, employed as a federal civil servant with 35 years of service this year.  Can I collect Social Security benefits? What effect will that have on my retirement? I was under CSRS until FERS came into existence. I switched to FERS, believing I would not stay in civil service and wanted to pay Social Security taxes. It worked out that I did stay in the government, so I should have a portion of CSRS (about eight years) and the rest under FERS when I retire.

A. Because you have reached full Social Security retirement age, you can continue working and receive a Social Security benefit. However, that benefit will be affected by the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who receives an annuity — in whole or part — from a retirement system, such as CSRS, where he didn’t pay Social Security taxes and has fewer than 30 years of substantial earnings under Social Security.

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High-3 and deductions

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Q. You have stated that to calculate the high-3, OPM will consider only salaries from which the government has deducted retirement contributions.

For which items will they not deduct the contributions? Social Security taxes? Medicare taxes? Medical, dental and vision insurance payments? Thrift plan payments?

I think it is fraud when everywhere it is stated “average of three highest salaries” and the actual amount is way low. Nobody told me that’s how it is calculated.

I was a title 38 physician and have retired under FERS, but I also have CSRS component.

A. First, let’s clear the deck. There isn’t any fraud. A high-3 is based on an employee’s highest three consecutive years of average basic pay, not salary. Second, basic pay is the amount you receive before any deductions are taken out for Social Security, Medicare, medical, dental and vision insurance, the TSP, etc.

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Social Security and CSRS annuity

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Q. I retired from the federal government after 30 years of service at the age of 58½. I am CSRS Offset. I have earned the credits necessary for Social Security. However, I think I have to wait until I am 66 to receive the most of my benefits (I am 62), even though I have not worked since leaving service. Am I correct? Or does it matter, since I am not working at all?

A. Your CSRS annuity will be reduced automatically by the amount of Social Security benefit you earned while covered by CSRS Offset. If you want to continue receiving the same amount of income, you’ll need to apply for a Social Security benefit.

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Questions on optional retirement

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Q. I’m a 59-year-old FERS employee with 27½ years of service. If I go on optional retirement at age 60, will I suffer a penalty, and will I receive the special retirement supplement till age 62, when Social Security kicks in?

A. No, you won’t suffer a penalty because you’ll be retiring at age 60 with at least 20 years of service. And, yes, you’ll receive the special retirement supplement until you reach age 62.

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Retirement calculation

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Q. My Social Security statement shows that at age 62, I will receive $1,500 per month. I have 22 years of FERS service. I’m receiving a $705-per-month supplement. Shouldn’t this be 0.055 times $1,500, which equals $825 per month?

A. The formula used to accurately calculate the special retirement supplement is complex and cannot be reduced to a simple formula, like the one you used. To see what actually goes into that calculation, go to www.opm.gov/retire/pubs/handbook/C051.pdf.

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FERS SSI Medicare

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Q. I am on a disability retirement and am 57 years old. I am blind (since age 7) and was denied Supplemental Security Income benefits because I do not have enough Social Security credits to qualify (of course I have enough for Medicare when I turn 65). I wanted SSI so I could join a Medicare HMO and receive primary care at home (I live in a group home). It seems since I paid into FERS and not SS, I fall through the cracks. Is there anything you can suggest?

A. Let me first clear up a misconception. The fact that you were a FERS employee means that you did pay into Social Security. The reason that you may not be eligible for SSI is that it is only available to people with low income and few resources. For more information about what is required to be eligible for SSI, go to www.ssa.gov/pubs/11015.html.

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Survivor annuity

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Q. I am in CSRS. My husband has never worked for the government. I have 37 years working at the Defense Department, and I am going to retire Dec 31. Can my husband draw on my retirement rather than Social Security now? Does he have to wait until he is 65? Or do I have to die before he can draw this?

A. Assuming you elect a survivor annuity for him when you retire, he will only receive that benefit if you die. P.S. You have to elect a full survivor annuity for your husband unless he agrees in a notarized statement to a lesser amount or none at all.

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