Ask The Experts: Retirement

By Reg Jones

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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Retirement conversion and offsets

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Q. In February 2014, my FERS and Social Security disability retirements will convert to regular retirements. Will my Social Security retirement be reduced by any offsets?

A. According to the Social Security Administration, “If you receive workers’ compensation or other public disability benefits and Social Security disability benefits, the total amount of these benefits cannot exceed 80 percent of your average current earnings before you became disabled.” You’ll have to do the math to find out if this limitation will affect you.

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Drawing from CSRS, Social Security retirements

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Q. I will be 62 this year and I am already on my CSRS retirement from the Postal Service. I have also qualified for Social Security. Can I draw from both, or will one be lessened?

A. Because you were a CSRS employee, your Social Security benefit will be subject to the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who receives an annuity from a retirement system where he didn’t pay Social Security taxes and has fewer than 30 years of substantial earnings under Social Security.

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Leave without pay, disability retirement and creditable service

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Q. I started a position with a federal agency in October 2010 and worked through July 2011 (about nine months) when I was diagnosed with advanced stage cancer and had to go on leave without pay. I was on LWOP for all of 2012. I am still on LWOP and a colleague suggested I apply for disability retirement. I started collecting Social Security disability in January 2012. Do I have enough creditable hours to meet the 18 months under the FERS disability retirement? Does collecting Social Security disability when I did affect my creditable-hours calculation? I also received several hundred hours in donated annual leave in 2012. Do the donated leave hours have any effect on the creditable-hours calculation?

A. You’ll have to talk to a specialist in your personnel office to learn if you have the 18 months of creditable service needed to apply for FERS disability retirement. Donated annual leave would be included in that tally, while any LWOP that exceeded six months in a calendar year would not.

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Social Security without enough quarters

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Q. I retired from the USPS on a regular retirement of 36 years of service 10 years ago. I have worked a few jobs since and was recently in a car wreck, and I am now disabled. I was working when I got disabled.

I am 65 and have not paid in enough to draw Social Security, but since I am now disabled and am like four quarters short of my required amount to draw Social Security, can I get Social Security disability along with my federal retirement?

A. No.

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FERS disability and retirement

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Q. My spouse is older than 60 and has become disabled. My spouse has 28-plus years of service in FERS.

Is is true that my spouse would get less on disability than normal retirement since my spouse would get no Social Security bridge? I know about the annuity recomputation at 62.

A. When your spouse applies for a FERS disability annuity, your spouse will also have to apply for Social Security disability benefits. If your spouse was approved for a disability annuity, it would be calculated as follows:

— For the first 12 months: 60 percent of your spouse’s high-3, minus any Social Security disability benefit to which your spouse would be entitled.

— After the first 12 months, 40 percent of your spouse’s high-3 minus 60 percent of any disability annuity.

— At age 62, your spouse’s disability annuity would be recalculated to include the time your spouse spent on the disability roll. Those years and full months of service would be multiplied by .01 percent and then by your spouse’s high-3 on the day your spouse went on disability, increased by any intervening cost-of-living adjustments.

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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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Social Security disability and special retirement supplement

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Q. I retired from the Postal Service with 27 years on Jan. 31. Due to a medical condition, I applied for Social Security disability in October and was approved in December for benefits to begin this month. I am 61 and will be 62 in August. Will I still be eligible to receive the special retirement supplement for seven months under FERS? If so, will it affect my disability payments? One is paid from the Office of Personnel Management and the other from Social Security.

A. According to OPM, you will be eligible for the special retirement supplement even though you will also be receiving a Social Security disability benefit. That wouldn’t be true if you were receiving a disability annuity under FERS. FERS disability retirees aren’t eligible for the special retirement supplement.

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CSRS Offset and WEP

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Q. I am a CSRS Offset GS14/10 employee who left Veterans Affairs Department employment in 1985 after 11+ years and returned to VA employment in 1991. I will be 66 years old in July and am considering retiring Jan. 3, 2014. At that point, I will have 24 years of offset employment, 30 years of Social Security contributions (including the 24 offset years) and 37 years of service (including sick leave).

My wife is in a similar CSRS Offset situation and is also considering retirement Jan. 3, 2014, at age 61. She will not take Social Security benefits until age 66. She will have 18 years of offset employment, 19 years of Social Security contributions (including the 18 offset years) and 32 years of service.

What impact will offset and the windfall elimination provision have on my VA pension and Social Security benefits?

A. Your CSRS annuity will be reduced by the amount of Social Security benefit you earned while a CSRS Offset employee. The same is true for your wife. Both of you would also be subject to the windfall elimination provision if you had fewer than 30 years of substantial earnings under Social Security. Note: While someone would have only needed to earn $4,520 in 2012 to earn four Social Security credits, he or she would have had to earn $20,475 for it to be considered substantial earnings. For more information about the WEP, go to http://ssa.gov.pubs/10045.html.

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Jan. 1, 1983

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Q. I am reading in a Blue Cross/Blue Shield brochure that you have to be a federal employee as of Jan. 1, 1983, to get free Medicare Part A. I joined in March 1983 and do not have Social Security eligibility. Will I get Part A for free or not? What is the significance of Jan. 1, 1983?

A. Here’s the scoop from the Social Security Administration: “Federal employees are required to contribute to the Medicare Trust Fund and are therefore eligible for Medicare. This provision is referred to as the Medicare Qualified Government Employees (MQGE) provision.

“All wages paid to Federal employees after Dec. 31, 1982, are taxed for health insurance, and through payment of this tax, employees earn Government Employment Quarters of Coverage (GEQCs). GEQCs can be used only for Medicare purposes. These GEQCs are counted toward Medicare coverage only and do not count toward entitlement to Social Security benefits.

“Federal employees need the same number of total QCs to qualify for Medicare as they need to qualify for Social Security insured status.

“However, under a transitional provision in the law, any Federal employee who was an employee at any time during January 1983 and was employed before Jan. 1, 1983, may be granted GEQCs for Federal service prior to January 1983.”

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FERS disability and taxes

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Q. My wife has a disability retirement from the Postal Service. She is deemed permanently and totally disabled by the Social Security Administration and receives the SSA disability benefit. She also receives a FERS disability annuity benefit. Is the FERS disability annuity federally taxable? If not, can you direct me to the IRS document that outlines how to file?

A. It is taxable unless the Internal Revenue Service determines that she is totally disabled. You can call them at 1-800-829-4933.

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