Ask The Experts: Retirement

By Reg Jones

TSP and taxes

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Q. I intend to make a lump-sum payment this year to pay off the balance owed to recapture my military service for inclusion of this time toward my FERS retirement. I am paying it with after-tax dollars I have saved. Can this amount be claimed as a tax credit or claimed as a tax deduction? Which document says what can be claimed or that neither can be claimed?

A. No. It can neither be claimed as a tax credit nor a tax deduction.

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SRS and earnings limit

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Q. I can retire in June 2014 at 60 with 26 years in FERS. As it will be in June, I will have made more than the $15,000-plus earnings limit. If I max out my TSP contribution (approximately $11,000 for six months), my net working income will drop so I can get under the $15,000-plus earnings limit; will my special retirement supplement the following year be unreduced?

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Rehired annuitant looking to add to retirement

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Q. I retired as a CSRS employee Nov. 30, 2006, and am a rehired annuitant. I have been working in my current position with the Air Force for the last 22 months, receiving both my annuity and the full salary of my new position. I want to find another way to add to my retirement before this overseas job ends.

What additional retirement program options do I have? I was told by Air Force personnel management that I do not qualify for supplementing/contributing to my CSRS annuity. TSP also is closed for me to invest in since I started to withdraw from my account.

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FERS combined employment time

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Q. I left civil service with just shy of 21 years of combined time (bought back 14 years of military) in November 2011 at age 44 (1967).

I did not withdraw any money from FERS, but I moved my TSP to an annuity. My intent was to just apply for a deferred retirement at age 62 to avoid penalties.

However, if I returned to Civil Service before 62, how many years would I have to work to be eligible for full health benefits under FERS? I also assume that if I returned by age 47 and worked until 56, I would have 30 years and could retire with an immediate annuity at my MRA, correct?

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Leave of absence, retirement and high-3

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Q. I’m going to be doing charity work for several months in 2014. I’m considering requesting a leave of absence for it (I understand such leaves are at the discretion of management). If I’m not granted the LOA and I resign, how will a few months (seven to eight total) affect my retirement? I plan to rejoin federal service after the charity event. I’ve consulted my local HR department and OPM, but I’ve received conflicting information.

If I’m granted the LOA, is my high-3 affected by such an absence? Then, assuming I’m not granted the LOA and I resign, can I rejoin federal service with the high-3 intact? Lastly, do I lose my high-3 if I withdraw funds from TSP just before the LOA or resignation? That is the big one for me — some people tell me if I touch my TSP, I lose my high-3.

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Switching back to CSRS

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Q. I switched to FERS from CSRS. Do you know of anyone who has been permitted to return to CSRS from FERS? At first, CSRS folks were not allowed the Thrift Savings Plan option, and later they were. I think I would have opted to stay with CSRS had I known that. Is there any way to go back?

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Step increases during disability

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Q. I am a veteran of the armed forces and a civilian federal firefighter of Hawaii and have about 13 years government time under FERS.

While on duty in 2010, we were in route in the fire engine and an oncoming vehicle lost control and collided with the fire engine, causing substantial injuries to myself and the crew. The majority of the kinetic energy was absorbed by me because the point of impact was where I was seated.

I sustained injuries to my lumbar area in my lower back and injuries to my left limb, for which I’ve undergone a major back surgery, countless doctors’ visits and therapies, etc. I am still recovering from the injuries and presently on modified light duty at four hours a day, five days a week. I was on total disability for about 2 years and noticed that my retirement investment into my Thrift Savings Plan was at a freeze or standstill, where an injured employee could not invest into their TSP while on leave without pay. I also noticed that while on total disability, an injured employee goes into LWOP status, which human resources said affects your within-grade increases to where you are not entitled to move up in step increases.

Is there a new law that helps with retirement benefits for workers hurt on the job? After intensive research, I stumbled across an article by Stephen Barr dated Oct. 10, 2003, informing that President Bush signed legislation that will help make up any shortfall in retirement benefits for federal employees who are disabled or injured while on the job. It mentions the new law will change the way a federal employee’s benefits are calculated during a disability by increasing the pension benefit provided under FERS to cover any shortfall.

Is there also any new law or standard act that helps with entitlements for step increases for workers hurt on the job? Ever since I was injured on the job in 2010, and because of the injuries I sustained I was on total disability in LWOP status not by choice, the opportunity to move up in step increase passed me over twice. As co-workers who were hired the same day as me moved up in step increase, I was denied. Can you advise?

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Break in service and vested time

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Q. I am a 29-year-old federal employee and I may have to move at some point in next few years because of my husband’s work or if I go back to school. I have been working for 2½ years and I am starting to build up my Thrift Savings Plan (all L2050; if I leave, I am hoping to return to a job in the federal government at some point). I am wondering how vesting works for both TSP and my FERS annuity. Will I have to work a consecutive five years to keep both before I can leave, or do I bank that time if I decide to come back? For example, if I work for 3½ years then leave and come back two years later and work for 30+ years, will I keep what was put into the TSP and my annuity during my first 3½ years when I come back?

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Re-employed annuitant

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Q. I am 55 years old and took an early retirement offer with an incentive from the Postal Service in August of last year. I had 26 years of full service. I am considering an opportunity to become re-employed part time with the U.S. Forest Service as a GS4 information receptionist at the local visitor center. This is a seasonal position lasting six months a year. How will this affect my Thrift Savings Plan withdrawals and my special retirement supplement when I turn 56? I retired as an EAS-18 postmaster.

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Resignation and pension

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Q. I am 45 years old with 13 years of service under FERS and will be resigning this month to pursue other activities. I understand that I would eligible for a full pension (computed on my high-3) at age 62. That is 17 years away and, in the meantime, my defined benefit pension would remain static and thus be seriously eroded by inflation. Is there a way to protect myself against this within the pension system, or can I take a lump sum on separation and roll that into an IRA? If I take the lump sum, must I do it as of my separation, how is it computed, and does it represent only my contributions to the basic pension, or also those of the government? I have a separate Thrift Savings Plan, which I plan to roll into an IRA.

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12 questions on VERA

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Q. I am a letter carrier, age 52, started in 1985 and have 28 years of creditable service.

If I understand what I’ve gleaned from the posts here and the Postal Service were to offer me a Voluntary Early Retirement Authority this year,

1.  Would I begin my annuity immediately?

2.  Would I have no reductions in calculations of my annuity? (average high-3 x 1 percent x 28)

3.  Would I receive credit for half of my sick leave and all of my annual leave? (How are these applied?)

4.  Would I receive the special retirement supplement beginning at age 56 (my minimum retirement age), and receive it until I reach age 62?

5. Would I be able to continue carrying my current health and life insurance at non-USPS rates? (I couldn’t find how long these could be carried. Until death?)

6.  Could I begin receiving Social Security as early as age 62?

7. Any withdrawal from my Thrift Savings Plan prior to age 59½ would be penalized 10 percent as per Internal Revenue Service regulations? (Can I continue to contribute to TSP after retirement?)

8. As a FERS annuitant, is there no limit to what I can earn after separation from the Postal Service as it pertains to my annuity payment?

9. At age 56 (my MRA), the special retirement supplement from Social Security would begin and would be subject to yearly income limits. Would supplement payments be reduced by approximately $1 for every $2 I earned above that year’s Social Security income limit?

10. At age 65, I’d be eligible for Medicare parts A and B? (Would this affect my health insurance coverage through Federal Employees Health Benefits?)

11.  Would there be cost-of-living increases at any point for my annuity?

12.  Is there a date during the year that maximizes the benefits of retirement?

Did I get this right, and are there any other things I should know before considering a VERA if it is offered?

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Early retirement, penalty, SRS and TSP

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Q. I have 27½ years in the Postal Service and I am 52½ years of age. If an early-out comes in the next few months, will I get a penalty for leaving? Do I get my special retirement supplement, or do I have to wait for that? Also, do I get to take my Thrift Savings Plan now, or do I wait for that?

A. Reg: If you were offered an opportunity to retire early, you have the age and service needed to accept it. If you did, you wouldn’t be subject to the age penalty and you’d be entitled to the special retirement supplement when you reach your minimum retirement age, which is 56.

Mike: The early-out has no effect on the Internal Revenue Service early withdrawal penalty. You will be subject to the penalty until you reach age 59½ unless you qualify for one of the exceptions listed on Page 7 of this notice: https://www.tsp.gov/PDF/formspubs/tsp-536.pdf

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Annuity

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Q. I spent 22 years with the Postal Service and quit in 2010 to take another career. I was under FERS. Do I get a pension from the Postal Service, or is that what the Thrift Savings Plan is? And can I collect it at 55?

A. Reg: If you didn’t take a refund of your retirement contributions when you left, you can apply to the Office of Personnel Management for a deferred annuity at age 60.

Mike: If you left FERS service before the calendar year in which you reach age 55, you will be subject to the early withdrawal penalty rules.

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FERS loan

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Q. I am new to taking a active role in my retirement, as I have been working a government job under FERS and TSP for about 3½ years. I would like to take care of a few small bills. Can I take out a loan against my FERS account and not my TSP? My TSP was set at the minimum to build up enough to borrow what I would like against it.

A. No, you cannot take out a loan against your FERS account.

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VSIP and re-employment

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Q. I worked for the federal government for over 28 years. I retired last year under Voluntary Separation Incentive Pay provisions June 30, 2012.

I am considering re-employing/reinstating. Am I eligible to return to work on July 1, one year after retiring? Can I repay the VSIP in cash or in payments?

I read once that you can make payments for up to 36 months upon re-employment but am not sure whether this is correct. I understand the VSIP must be paid back before I return to work.

Upon re-employing with the government, will I be able to contribute to FERS and the Thrift Savings Plan?

I noticed on the USAJobs website that some Navy notices state you can’t contribute to the retirement or TSP if your a re-employing annuitant. Yet others I read from other government agencies remain silent on this issue.

A. Reg: You can return to work for the government at any time after you accept a VSIP. However, if you accept employment for compensation with the government of the U.S. within five years of the date of the separation on which the VSIP is based, including work under a personal services contract or other direct contract, you must repay the entire amount of the VSIP to the agency that paid it before your first day of re-employment.

Both things you read about re-employment are true. As a rule, your salary would be offset by the amount of your annuity and you would be able to contribute to the retirement fund. If you worked for a full year, you’d receive a supplemental annuity; if you worked for five years, you’d receive a redetermined annuity. On the other hand, there are certain limited authorities that would allow you to return to work and receive both your full annuity and the full salary of your new position. However, you would not be permitted to contribute to the retirement fund and, when you retired again, you wouldn’t be eligible for any additional retirement benefits.

Mike: From published Office of Personnel Management materials: “If a re-employed annuitant is performing service covered by FERS or CSRS (i.e., the appointment is made pursuant to 5 U.S.C. § 8468 or § 8344(a), respectively), the re-employed annuitant is eligible to participate in the TSP.

Agency contributions for a FERS re-employed annuitant must begin with the effective date of the reappointment to the FERS position as discussed in Section VI (A) of this bulletin. The re-employed annuitant may make contribution elections as discussed in Section III of this bulletin.

If a re-employed annuitant is not performing covered service (e.g., a FERS annuitant who is re-employed on an intermittent basis or an annuitant authorized to receive full salary and full annuity under P.L. 101-509 or the National Defense Authorization Act of 2004), the re-employed annuitant is not eligible to participate in the TSP.

Generally, re-employed annuitants are performing covered service. In most cases, if the annuitant indicator on the Standard Form (SF)-50, Nature of Action, is coded “1,” “4,” or “5,” the re-employed annuitant is eligible to participate in the TSP. In the case of a FERS re-employed annuitant, this will be reflected in the retirement code (which indicates FERS) because the annuitant is required to have FERS deductions taken from pay.

In the case of a CSRS re-employed annuitant, however, this may not be reflected in the retirement code because the annuitant may not be required to have CSRS retirement deductions taken from pay. Consequently, the retirement code of a CSRS re-employed annuitant may be “4” (i.e., none), though the annuitant is performing service covered by CSRS and is therefore eligible to participate in the TSP.”

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VERAs and sick leave

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Q. If I have met the requirements for a Voluntary Early Retirement Authority being offered in 2014 (over 25 years and any age — in my case, 27 years and age 46), would I get credit in my retirement benefit calculation for sick leave. I know after Dec. 31, 2013, the full amount can be used. However, I wasn’t sure if you have to retire under “normal” circumstances and whether it was still applicable in a VERA situation. After meeting the requirement for a VERA, I know you can collect your retirement annuity immediately. Does the same hold true for the Thrift Savings Plan? Are there penalties for being under the minimum retirement age?

A. Yes, any unused sick leave would be used in your annuity computation.

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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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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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Survivor annuity

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Q. I am my sister’s only surviving relative. I have filled out and submitted the required paperwork to FERS. How long will it be before I receive payment from FERS? I have received payment from the Thrift Savings Plan.

A. Only the Office of Personnel Management can answer your question. Call them at 888-767-6738 or 724-794-2005.

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FERS firefighter retirement

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Q. I am a federal firefighter and a FERS employee. In 2022, I will have 21 years of creditable service and four years of bought-back active military time and be 48 years old.

1. Will I be able to retire under the provisions of 25 years of service at any age?

2. Will I receive the special category retirement percentages (1.7 x high-3 x creditable service, etc.)?

3. Will I receive the special retirement supplement until 62?

4. Will I not be able to withdraw any Thrift Savings Plan annuities until 62?

A. Reg: 1. No, you won’t be able to retire. Only actual service as a firefighter — not active duty for which you’ve made a deposit — counts toward the 25-year requirement.

2. When you are eligible for retirement and do so, your annuity would be computed using the special category percentage for the first 20 years; the remaining time would be computed using the standard multiplier.

3. When you retire, you would receive the special retirement supplement, regardless of your age, until you reach age 62.

Mike: 4. You will have access to your TSP assets, for withdrawal or to purchase an annuity, as soon as you retire.

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