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The Omaha Area Local Chapter of Retirees, founded in 2000, is dedicated to the assistance of Retirees in a variety of issues, including retirement planning and information, developing programs and initiatives to involve Retirees in assisting the Local and Auxiliary, becoming active in legislative issues and providing a network and avenue for Retiree fellowship.

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Articles on this page

 

What impact will taking leave without pay (LWOP) have on your retirement pension?

 

When is the Best Date to Retire | The Villainous WEP and GPO | Buying Back Military Time

 

The Differences in Disability Retirement | The Spouse Equity Act | Keeping Your FEHB in Retirement

 

Where does a federal retiree go for help with retirement issues?

 

 

What impact will taking leave without pay have on your retirement pension?


What will taking leave without pay prior to retirement do to your federal benefits package?

By Reg Jones

 A frequently asked question is this: What effect will my taking, or having taken, leave without pay have on my federal benefits? Will it mess up my retirement? My health and life insurance benefits? Or my sick and annual leave accrual? And how about my TSP account?

Fortunately, the answers are straightforward and the treatment of such leave is often quite generous. Let's go through the effects one by one.

Retirement benefits: A total of six months of LWOP in any calendar year is considered to be creditable service. In other words, for calculating your length of service, it is treated as if you had never been on leave. Further, your coverage continues at no cost to you. Therefore, you don't have to make a deposit to get credit for that time.

Health benefits: Your enrollment in an FEHB plan will continue for up to 365 days. The government's contribution to the premiums will continue during that period. It will also cover your share of the premiums. However, you must either pay that portion directly to your agency on a current basis or let the premium debt accumulate and have the amount withheld from your pay when you return to work.

Life insurance: The treatment of life insurance coverage is even more generous than that for health insurance. The coverage continues for up to 12 consecutive months you are in a nonpay status without cost to you or your agency.

Annual and sick leave: If you are a full-time employee who is on LWOP for 80 hours during a pay period, you will not earn and annual or sick leave during that period. At that point, the clock is reset and you will begin earning both annual and sick leave credit until you again accumulate 80 hours of LWOP, at which point no credit will be given for the preceding pay period. Note: Up to six months of LWOP in a calendar year is considered creditable service for setting annual leave accrual rates, i.e., determining when you are eligible to move from four hours per pay period to six or from six to eight. The treatment of part-timers is proportional to their tour of duty.

Thrift Savings Plan: The government is less generous when it comes to your TSP account. Unless you are on active military duty when on LWOP, neither you nor your agency may make contributions to your TSP account if you are in a nonpay status for one or more pay periods. Nor is their any opportunity to catch up when you return to work.

These are the areas that are of most concern to federal employees. However, I'd be remiss if I didn't at least mention a few others where the government treats LWOPers rather well. Here are two very generous ones. First, if you are on military duty or on workers' compensation, that time is treated as a continuation of federal employment for all purposes when you return to duty. Second, any LWOP is considered to be creditable service for meeting time-in-grade requirements for promotion consideration.

Moving down the scale, nonpay status time is fully creditable for the12-month continuous employment period needed to qualify for severance pay. However, for purposes of computing your actual severance payment, any time on LWOP not creditable for leave accrual purposes is excluded from your creditable service.

Finally, if a reduction-in force (RIF) comes your way, up to six months of a calendar year spent on LWOP will be considered to be creditable service. That will help you to keep your place in line for up to half a year.

 

Fortunately, the answers are straightforward and the treatment of such leave is often quite generous. Let's go through the effects one by one.

Retirement benefits: A total of six months of LWOP in any calendar year is considered to be creditable service. In other words, for calculating your length of service, it is treated as if you had never been on leave. Further, your coverage continues at no cost to you. Therefore, you don't have to make a deposit to get credit for that time.

Health benefits: Your enrollment in an FEHB plan will continue for up to 365 days. The government's contribution to the premiums will continue during that period. It will also cover your share of the premiums. However, you must either pay that portion directly to your agency on a current basis or let the premium debt accumulate and have the amount withheld from your pay when you return to work.

Life insurance: The treatment of life insurance coverage is even more generous than that for health insurance. The coverage continues for up to 12 consecutive months you are in a nonpay status without cost to you or your agency.

Annual and sick leave: If you are a full-time employee who is on LWOP for 80 hours during a pay period, you will not earn and annual or sick leave during that period. At that point, the clock is reset and you will begin earning both annual and sick leave credit until you again accumulate 80 hours of LWOP, at which point no credit will be given for the preceding pay period. Note: Up to six months of LWOP in a calendar year is considered creditable service for setting annual leave accrual rates, i.e., determining when you are eligible to move from four hours per pay period to six or from six to eight. The treatment of part-timers is proportional to their tour of duty.

Thrift Savings Plan: The government is less generous when it comes to your TSP account. Unless you are on active military duty when on LWOP, neither you nor your agency may make contributions to your TSP account if you are in a nonpay status for one or more pay periods. Nor is their any opportunity to catch up when you return to work.

These are the areas that are of most concern to federal employees. However, I'd be remiss if I didn't at least mention a few others where the government treats LWOPers rather well. Here are two very generous ones. First, if you are on military duty or on workers' compensation, that time is treated as a continuation of federal employment for all purposes when you return to duty. Second, any LWOP is considered to be creditable service for meeting time-in-grade requirements for promotion consideration.

Moving down the scale, nonpay status time is fully creditable for the12-month continuous employment period needed to qualify for severance pay. However, for purposes of computing your actual severance payment, any time on LWOP not creditable for leave accrual purposes is excluded from your creditable service.

Finally, if a reduction-in force (RIF) comes your way, up to six months of a calendar year spent on LWOP will be considered to be creditable service. That will help you to keep your place in line for up to half a year.

 

When is the Best Date to Retire
posted  April 17, 2004

By Reg Jones

Let's talk about dates. No, not the kind found on palm trees or the times when you take someone out. I mean dates on the calendar. More than we like to think, our lives are affected by them. I need only mention birthdays, weddings, anniversaries, and the IRS to prove my point. However, only one of these is a date I want to talk about. It and a few others will determine how you'll be treated when you retire.

First in line is your birthday, which defines the date on which you will be eligible to retire, at least as far as age is concerned. What you probably don't know is that you will be eligible on the day before your birthday - not on your birthday. That's because you will have completed a full year on that day. Your birthday is the first day of the next year.

Next is the date on which you will have enough years of service to retire. Assuming that you haven't had a break in service along the way, you will have completed the time needed on the day before the one on which you were first employed.

Those two dates are personal to you. The next dates I want to talk about came out of the legislative sky but can have a profound impact on how you are treated. I won't try to capture them all, just the ones that will be of concern to most of you. I'll start with military service.

If you served in the military before December 31, 1956, you won't have to make a deposit to the civil service retirement system to receive credit for that time in determining your eligibility to retire or your annuity computation. If you served in the military after that date, what happens to that time depends on when you were first employed in the federal government. If it was on or after October 1, 1982, you will receive credit for that time only if you make a deposit before you retire. If you were first employed before that date, you have two options. You can make a deposit for that time or you can take your chances. If you retire and won't be eligible for a Social Security benefit at age 62 (or at retirement if you retire after age 62), nothing will happen. On the other hand, if you will be eligible for a benefit, those years of military service will be eliminated and your annuity recomputed downward.

That date also affects the creditability of any deposit you may owe to the retirement fund. However, the rules are slightly different. If you worked for the federal government on or after October 1, 1982, in a position from which retirement deductions were not taken, you will receive credit for the time in determining your eligibility to retire but the time won't be used in the computation of your annuity unless you make a deposit to the retirement fund before you retire.

A different date controls what happens if you left the government and took a refund of your retirement contributions. If you received a refund that covers a period of service that ended before October 1, 1990, you won't have to pay the redeposit to receive credit for that service when you retire. Instead you'll receive full credit for that time but your annuity will be actuarially reduced based on you age and the amount of the redeposit you owe, plus interest.

On the other hand, if the refund was received on or after October 1, 1990, you'll receive credit for the time in determining your eligibility to retire but the time will not be included in your annuity computation unless you make a deposit for that time before you retire. Note: FERS employees who take a refund of their FERS contributions may not make a redeposit to recover that time. As far as retirement credit is concerned, it is lost forever.

 

posted 4/7/04

The Villainous WEP and GPO


By Reg Jones CSRS employees approaching retirement are almost always in a good mood until they learn about two provisions of law that can reduce their expected retirement benefits. While these provisions won't reduce their CSRS annuity, they always reduce - and sometimes eliminate - any Social Security benefit to which they may otherwise be entitled. The villains are the Windfall Elimination Provision and the Government Pension Offset. Just call them the WEP and the GPO.

The WEP
The WEP reduces the Social Security benefit payable to nearly all CSRS employees who will be receiving an annuity from a retirement system where they didn't pay Social Security taxes. As a result, they'll have a modified formula used to compute their Social Security benefit. Only those with 30 or more years of "substantial" earnings under Social Security will receive a full benefit. The rest will receive a smaller amount, usually much smaller.

To see how you might be affected, let's look at the formula used to compute the benefits of employees who aren't affected by the WEP. For example, if you are a CSRS Offset or FERS employee who turned 62 in 2004, the formula would look like this:

  • Your first of average indexed monthly earnings (AIME) would be multiplied by 90 percent;
  • Everything from to ,689 of the AIME would be multiplied by 32 percent;
  • AIME above ,689 would be multiplied by15 percent.

The total of these three multiplications when adjusted by your total years of Social Security coverage would be your monthly pension from Social Security.

However, if you are a CSRS employee, the WEP will reduce that 90 percent factor by 5 percentage points for each year of substantial earnings fewer than 30. Fortunately, the reduction bottoms out at 40 percent for those who have 20 or fewer years of substantial earnings, otherwise CSRS employees with limited Social Security coverage would get nothing. As it is, the maximum reduction works out to be just above a month.

To meet the substantial earnings criterion, you must have earned a lot more per year than the amount needed to earn Social Security credits. For example, in 2003 you'd only have to earn ,600 to get a full year's credit (four quarters) from Social Security. However, to receive credit for substantial earnings, you'd have to make ,275.

The GPO
The GPO only hits those who will receive an annuity from CSRS and have a spouse who will receive one from Social Security. In most cases, the Social Security benefit to which they would be entitled will be reduced or eliminated. If you are a CSRS employee - not CSRS Offset or FERS - the GPO will reduce your Social Security spousal benefit by for every you receive in your CSRS annuity.

So, if you are eligible for a monthly CSRS annuity of $1,800, two-thirds of that - $1,200 - will be used to offset your monthly Social Security spousal benefit. If that benefit was $1,300, you would receive only a month from Social Security. That's because $1,000 subtracted from $1,100 leaves a positive balance of only .

The larger your CSRS annuity, the less you'll receive from your spousal benefit. For example, if you had a monthly CSRS annuity of ,400 and a monthly spousal benefit of $1,200, you wouldn't get anything from Social Security. Two-thirds of ,400 is $1,600. Subtracting that from $1,100 leaves you with zip. Because CSRS annuities are usually much greater than Social Security spousal annuity benefits, the GPO usually wipes out the latter benefit.

The Future
While there have been moves in Congress to completely eliminate the WEP and the GPO, that's highly unlikely. However, there is always a chance that they may be modified. Keep a good thought.

 

The WEP
The WEP reduces the Social Security benefit payable to nearly all CSRS employees who will be receiving an annuity from a retirement system where they didn't pay Social Security taxes. As a result, they'll have a modified formula used to compute their Social Security benefit. Only those with 30 or more years of "substantial" earnings under Social Security will receive a full benefit. The rest will receive a smaller amount, usually much smaller.

To see how you might be affected, let's look at the formula used to compute the benefits of employees who aren't affected by the WEP. For example, if you are a CSRS Offset or FERS employee who turned 62 in 2004, the formula would look like this:

  • Your first of average indexed monthly earnings (AIME) would be multiplied by 90 percent;
  • Everything from to ,689 of the AIME would be multiplied by 32 percent;
  • AIME above ,689 would be multiplied by15 percent.

The total of these three multiplications when adjusted by your total years of Social Security coverage would be your monthly pension from Social Security.

However, if you are a CSRS employee, the WEP will reduce that 90 percent factor by 5 percentage points for each year of substantial earnings fewer than 30. Fortunately, the reduction bottoms out at 40 percent for those who have 20 or fewer years of substantial earnings, otherwise CSRS employees with limited Social Security coverage would get nothing. As it is, the maximum reduction works out to be just above a month.

To meet the substantial earnings criterion, you must have earned a lot more per year than the amount needed to earn Social Security credits. For example, in 2003 you'd only have to earn ,600 to get a full year's credit (four quarters) from Social Security. However, to receive credit for substantial earnings, you'd have to make ,275.

The GPO
The GPO only hits those who will receive an annuity from CSRS and have a spouse who will receive one from Social Security. In most cases, the Social Security benefit to which they would be entitled will be reduced or eliminated. If you are a CSRS employee - not CSRS Offset or FERS - the GPO will reduce your Social Security spousal benefit by for every you receive in your CSRS annuity.

So, if you are eligible for a monthly CSRS annuity of $1,800, two-thirds of that - $1,200 - will be used to offset your monthly Social Security spousal benefit. If that benefit was $1,300, you would receive only a month from Social Security. That's because $1,000 subtracted from $1,100 leaves a positive balance of only .

The larger your CSRS annuity, the less you'll receive from your spousal benefit. For example, if you had a monthly CSRS annuity of ,400 and a monthly spousal benefit of $1,200, you wouldn't get anything from Social Security. Two-thirds of ,400 is $1,600. Subtracting that from $1,100 leaves you with zip. Because CSRS annuities are usually much greater than Social Security spousal annuity benefits, the GPO usually wipes out the latter benefit.

The Future
While there have been moves in Congress to completely eliminate the WEP and the GPO, that's highly unlikely. However, there is always a chance that they may be modified. Keep a good thought.

 

posted 3/20/04
Where does a federal retiree go for help with retirement issues?

By Reg Jones

Life is full of changes, and those changes can complicate your retirement and insurance benefits. As an active employee, you had your agency's personnel office to help you with those changes. So as a retiree, where do you turn when "stuff" happens? The Office of Personnel Management. If you're a retiree, OPM is your personnel office.

One of the most common changes for a retiree is a move. You'll need to let OPM know your new address so they can send your annuity checks, open season health benefits material, and 1099Rs to the right address. The same goes for "direct deposit" transfers if you'll be changing banks. If you are enrolled in a health benefits plan that serves a limited geographic area, you may need to change plans. And if you have been having state income tax withheld and are leaving that state, you'll need to stop the withholding. If you're moving to one of another state that is participating in the state tax withholding program, you'll have to make arrangements to start it up there.

If you get married, or divorced, have a baby, acquire a stepchild or foster child, or if your spouse dies, these events may trigger a need to change your health benefits coverage, either from "self only" to "self and family" or vice versa. In addition, you may want to change your designations of beneficiary for life insurance or retirement. You might also want to change your federal and/or state income tax withholding.

Or suppose your child reaches age 22 and is no longer eligible for health benefits under your plan (unless disabled). How can you arrange to temporarily continue their coverage until they get a job that provides them with their own health benefits? And what if you reach age 65 and become eligible for Medicare and don't need as expensive a plan as the one you're enrolled in now?

To make the changes you need to make without losing your mind, call OPM's Retirement Information Office at 1-888-767-6738 (202-606-0500 if you live in the Washington, DC area). The TDD numbers are 1-800-878-5707 or 202-606-0551.

Many of the transactions you may want to make can be completed (or at least initiated) through a phone call to OPM's Retirement Information Office. That office is staffed with customer service specialists trained to provide information and assistance to you in a wide variety of situations.

When you call, you will be greeted by an automatic answering system. It will guide you through a menu listing the most frequently asked about topics and allow you to record a number of requests for services (such as asking for the forms you need, changing tax withholding, or reporting a death -- features that are available 24 hours a day). All of them will require that you provide your claim number (CSA or CSF followed by seven digits), your date of birth, Social Security number and a telephone number where you can be reached. Some of them will require that you use a PIN number. These are provided to all retirees and survivors. Remember to keep your in a safe and easily accessible place.

If you want to speak with a customer service specialist, call between 7:30 a.m. and 7:45 p.m. (Eastern Time), Monday through Friday. Not surprisingly, OPM's phone lines can get very busy at certain times of the month and at certain hours during the day.

 

Buying Back Military Time

by Reg Jones

One of the questions that some federal employees face when they start thinking about retirement is this: Should I make a deposit for my years of post-1956 military service. Well, it all depends.

CSRS
If you were first employed under CSRS before October 1, 1982, you have a choice. You can make a deposit or not make a deposit. Either way you will receive credit for your military time both for entitlement purposes and in the computation of your annuity. However, if you don't make a deposit, retire, and become eligible for a Social Security benefit at age 62, those years of service will be eliminated and your annuity will be recomputed downward. The same is true if you retire after age 62 and are eligible for a Social Security benefit on the date you retire. If you are sure that you won't be eligible for a Social Security benefit at either of those checkpoints, you can forget about making a deposit.

If you were first hired under CSRS after September 30, 1982, you'll get credit for your post-1956 only if you make a deposit for that time.

The amount of the deposit is 7 percent of your basic pay for periods of active duty service prior to January 1, 1999 and after December 31, 2000, 7.25 percent for service in 1999 and 7.40 in 2000, plus any interest due.

FERS
The rules for those covered by FERS are the same as those for CSRS employees hired after September 30, 1982. The only way you can receive credit for your post-1956 military service is to make a deposit. However, the amount of the deposit is less than that for CSRS employees. It's 3 percent of your basic pay for periods of active duty service prior to January 1, 1999 and after December 31, 2000, 3.25 percent for service in 1999 and 3.40 in 2000, plus any interest due.

FERS with a CSRS Component
If you transferred to FERS and will have a CSRS component in your annuity, the rules on making a deposit will be the same as those for CSRS employees unless the military service was performed after transferring to FERS.

Making a Deposit
To find out how much you owe, ask you personnel office for a copy of RI-20-97, Estimated Earnings During Military Service. Fill out the form and send it to your military finance center with a copy of your DD Form 214, Report of Transfer or Discharge. When you get your estimated earnings statement, take it to your personnel office and ask them to determine the amount of deposit needed, including interest. All deposits for post-1956 military service must be made to you agency, and they must be completed before you retire. Payments need not be in a lump sum but may be paid over time. Your payroll office can help you to set up a payment schedule.

The Spouse Equity Act
Wednesday, October 29, 2003

By Reg Jones

Are you are separated or divorced? Do you expect to be? If so, you need to know about the "Spouse Equity Act." The same is true if your marriage was - or will be - annulled. The reason you need to know about this law is that a court order related to any of these situations can have a profound impact on your future benefits.

A court order can divide your retirement annuity, block or divide a refund of your retirement contributions, and provide for a survivor annuity if you die. In addition, it can allow a former spouse to continue coverage under the FEHB program, require you to assign your FEGLI benefits to that former spouse or your children, and even lay claim to some of the money in your Thrift Saving Plan (TSP) account.

The document that makes some or all of these things happen is called a Qualified Domestic Relations Order (QDRO). However, it is only binding if it conforms to the requirements set down in laws that apply to CSRS and FERS. That's because CSRS and FERS are exempt from the Employee Retirement Income Security Act (ERISA), which applies to everyone else. (As always, the federal government had to be different.)

Because of those differences, the U.S. Office of Personnel Management (OPM) has published a handbook for attorneys, RI 38-116, which you can download from www.opm.gov/asd/pdf/ri83-116.pdf. Regardless of whether you are on the initiating or receiving end of a separation, divorce or annulment proceeding, your attorney needs to have a copy of this essential document in order to protect your interests.

If you'd like a short course on the subject, OPM has published RI 84-1, a non-technical booklet titled Court-ordered Benefits for Former Spouses. Copies are available in many personnel offices or you can download it at www.opm.gov/retire/html/library/ri84-1/index.asp.

 

The Differences in Disability Retirement
Wednesday, November 05, 2003

By Reg Jones

It's unfortunate but every year there are some federal employees who end up with a disabling mental or physical condition that makes it impossible for them to continue in their current job. If their condition is verified and is expected to last for at least one year, these employees are eligible to apply for disability retirement. If the disability is determined to be permanent, that's that. If it isn't, periodic medical evaluations will be required until age 60.

Under both CSRS and FERS disability benefits are payable if you have become so disabled that you are prevented from performing useful and efficient service in your current position. The length of service requirement for being eligible to apply for disability retirement is different for CSRS and FERS employees. A FERS employee only needs to have competed 18 months of creditable civilian service while a CSRS employee must have completed at least five years. Considering that CSRS was closed to new hires years ago and that anyone returning to the workforce as a CSRS Offset employee will already have five years under his belt, the latter rule is now meaningless.

If you want to apply for a disability retirement, you must send the paperwork to the U.S. Office of Personnel Management (OPM). Your agency can help you do this. At the same time, your agency must certify that it is unable to accommodate you in your present position or any vacant position in your commuting area that is at the same grade and pay. Note: Collective bargaining agreements prevent the reassignment of a disabled Postal Service employee to a position in a different craft.

CSRS Offset or FERS employees also will have to apply to the Social Security Administration (SSA) for disability retirement. SSA has different and much higher standard for determining if you are disabled. Under their rules, you must be so severely disabled that you cannot perform any substantially gainful employment.

If you are judged to be disabled, how much of a benefit will you receive? If you are a CSRS employee, you will receive either 40 percent of your "high-3" years of average salary or an amount that results from increasing your actual service from the date the disability retirement is approved to age 60. In effect, the 40 percent calculation is the guaranteed minimum you will get. If your service credit calculation entitles you to more, you will get that amount.

If you are a FERS employee who is under age 62, you will receive 60 percent of your "high-3" average salary - minus 100 percent of any Social Security disability benefit - for the first 12 months. After that, the figure is reduced to 40 percent minus 60 percent of the Social Security benefit.

Whether you are CSRS or FERS employee, if your earned benefit based on years of service is greater than these figures, you will get the higher amount. At age 62, your whole benefit will be recalculated as you had worked from the onset of the disability to age 62.

 

Keeping Your FEHB in Retirement
Wednesday, November 12, 2003

By Reg Jones

When you get ready to retire, you should give some thought to your Federal Employees Health Benefits (FEHB) coverage. And the first question you should ask is this: Will I be able to carry my health benefits coverage into retirement? As a rule, you may keep your FEHB coverage only if you are currently enrolled and have been enrolled for at least five years or from your earliest opportunity to enroll. While OPM has been given authority to grant waivers, they have little wiggle room.

If you aren't eligible to carry your FEHB coverage into retirement, you will be given a 31-day extension of coverage at no cost to you. After that you may drop your coverage, covert to an individual contract, or ask for a Temporary Continuation of Coverage (TCC). The later will allow you to keep your FEHB coverage for up to 18 months. However, you will have to pay the full premium plus 2 percent to cover administrative costs.

The second question you should ask is this: Will I need the same level of coverage that I had as an employee? The simple answer to that question is probably yes, at least until you reach age 65 and become eligible for Medicare Part A (hospital insurance). At that time you will have to consider your options. If you are enrolled in a fee-for-service plan, such as Blue Cross-Blue Shield, you may want to consider enrolling in Medicare Part B (medical insurance). That way, nearly all of your medical expenses will be covered. On the other hand, if you are enrolled in an HMO, which already covers most of your medical expenses, you may decide not to enroll in Part B. The best time to make that decision is when you are approaching age 65.

One last question that is surely on your mind by now is this: How much will I have to pay for my FEHB coverage after I retire? Unless you are a postal worker, you'll pay the same premiums as an employee would. The Postal Service pays a higher percentage of the premiums for its employees. However, when they retire, they begin paying the same premiums as federal employees and retirees. In either case, premiums will be paid on a monthly, rather than a biweekly basis.


RETIREMENT NO-NO'S

In terms of pre-retirement planning, you could be making a huge mistake if you're:

*A CSRS-covered worker and assuming that, after working 30 years of creditable service, it will be simple to live on an annuity totaling 56.25% of your high-3 average pay and nothing else.

*A FERS-covered worker and assuming that, after 30 years of creditable service and no (or limited) TSP contributions, it will be simple or easy to live on an annuity totaling 30% of your high-3 average.

*Assuming that your personnel file is accurate and contains all the creditable service you have accumulated.

*Thinking that anyone can continue FEHBP coverage into retirement, with the government still paying its share of the premiums.

*Planning on canceling your FEHBP coverage because it is not necessary after you qualify for Medicare.

*Viewing estate planning as a process valuable only for elderly people.

*Consider retirement planning as largely a waste of time because "there are too many variables."

*Thinking that "I can work forever."

*Assuming that the amount of your Social Security benefit is going to be based solely on the number of credits (or coverage quarters) you have accumulated.

*Thinking that the soonest you can access money in your TSP account is at age 59 1/2 or older.

COMMON QUESTIONS

Should I provide a survivor benefit at retirement for my spouse?

Answer: In most cases, yes, unless your spouse has sufficient assets of his/her own to continue with a comfortable lifestyle in the event of your post-retirement death. The answer to this question cannot be fully addressed without projecting assumptions about you and your spouse following your retirement. You give up a certain percentage portion of your annuity to provide a "survivor benefit" at retirement for your spouse. In some cases, private life insurance bought before retirement with a "solid" insurance company may be a better way to provide a "survivor benefit". Always remember, however, that you must provide at least some survivor benefit at retirement to ensure that your spouse can continue your FEHBP coverage if you die first.

What are my Thrift Savings Plan "withdrawal" options at retirement?

Answer: You have numerous "withdrawal" options from your TSP both before retirement and in retirement.

While you are still working:

Loans can be made from funds you currently have on deposit in the TSP. The interest rate is reasonable (i.e., the G Fund interest rate) and amounts can be borrowed for any purpose. These loans must be paid back at retirement.


If you become disabled, you may make a total or partial withdrawal. There will be no 10% penalty, but there will be taxes due on the amount withdrawn.


Withdrawals are allowed for hardship purposes.


An age-based in-service withdrawal option was made available in 1997 to both CSRS and FERS participants. If you are 59½ or older and are still working for the government, you are allowed a one-time full or partial withdrawal from your TSP before retirement. There would be no 10% penalty, but there would be taxes owed on the amount withdrawn, unless you roll your withdrawal over to an IRA. You can continue working for the government and if you are a FERS participant, the government will continue to match your TSP contributions.


At retirement or later:

At age 55 or older, you can begin making withdrawals from your TSP account with no 10% penalty but with taxes due on the amount withdrawn. Your basic withdrawal options include:

Lump sum
Periodic payments
Total or partial rollover to IRA (no taxes or penalties)
Annuity
IRS calculation
At age 50 or older, you can make a withdrawal with no 10% penalty but taxes due on the amount withdrawn. Your option here is:

An annuity


Can I withdraw from my TSP before retirement?

Answer: See above.

Should I make a deposit for temporary time (non-career appointment)?

Answer: For CSRS participants, if no deposit is made, non-deduction service prior to 10/1/82 can be used for eligibility purposes; however, your annuity computation will be reduced by 10% of the deposit due. Similarly, if no deposit is made, non-deduction service after 10/1/82 can be used for eligibility; however, the time is not credited to your annuity computation. The deposit is 7% of basic pay plus interest.

For FERS participants, if no deposit is made, non-deduction service prior to 1/1/89 cannot be used unless a deposit is made. The deposit is 1.3% of basic pay, plus a variable market interest rate. However, FERS participants are not allowed to make deposits for non-deduction service after 1-1-89.

Before you decide whether or not to make a deposit (where allowed by OPM), you need to go to your personnel office and request a computer printout that will show your annuity gain if you make the deposit or loss if you do not.

Should I make a redeposit if I left the government and took my contributions out?

Answer: For both CSRS and FERS participants, if contributions were never taken out, you can use those years for eligibility and your annuity calculation.

If you are covered by CSRS and took your contributions out, if you redeposit them plus interest, you can use those years for purposes of both eligibility and the annuity calculation (the amount of the redeposit would be the contributions you took out plus interest). If you do not redeposit these contributions and they applied to refunded service that ended before 10-1-90 and did not involve disability retirement or death in service, you will get credit for eligibility; however, your annuity will be actuarially reduced (based on your life expectancy). For a period of no-deposit refunded service after 9-30-90 that does not involve disability retirement or death in service, you will get credit for eligibility; however, you will not receive credit towards your annuity calculation.

FERS participants cannot get credit for FERS-contribution refunds they have received since redeposits of such refunds are not allowed after they are rehired as a FERS.

Will my CSRS (not CSRS Offset) annuity be reduced by any Social Security benefit if I am eligible for social security at retirement?

Answer: Only a CSRS Offset annuity would be reduced by the Social Security benefit earned as a federal employee at age 62 (if eligible for Social Security)

Should I continue my FEHBP coverage after I sign up for Medicare?

Answer: Medicare generally pays less than 50% of your bills once you are eligible at age 65. In most situations, people need a "supplement" to Medicare. Many individuals view their FEHBP coverage as a good "supplement" option, since they have the same choice of "carriers" in retirement as non-retirees, and the government (if they meet the qualification standards) pays the same premium percentage as it would if they were still employed.

Can I enroll my present spouse under my FEHBP plan after I have retired?

Answer: No, she/he must be enrolled before you retire.

Do I need government life insurance coverage (FEGLI) after retirement?

Answer: This is part of "financial" planning. Your need for life insurance, in retirement, is based on a systematic projection of what your spouse or loved ones might need if you die during retirement. If you do have insurance needs and you are insurable, keep in mind that FEGLI is relatively expensive coverage. You might consider buying private life insurance way before retirement.

I am a CSRS (or CSRS Offset) participant and have never heard of the Voluntary Contribution Program. What is it?

Answer: It is a retirement-savings program available through OPM, which provides an additional retirement-income opportunity to those offered through the TSP and your CSRS (or Offset) annuity.

Under the VCP plan, you are allowed (if you do not owe a deposit for a period of non-career appointment or a redeposit) to contribute up to 10% of your "after tax" pay dollars into a special fund set up by OPM. All the interest you earn on your VCP contributions grows on a "tax deferred" basis. Your gains are taxed when you withdraw money from your VCP account. At age 55, for every (interest and contributions) that you have in the fund, you will be eligible for an increase in your annuity of .00 a year. The VCPs interest rate for 2000 is 5.875%.

I am a FERS participant and will not be eligible for Social Security retirement benefits until age 62. What will I receive prior to age 62 as a substitute for social security?

Answer: OPM has created a "special retirement supplement" which is available to most FERS participants who retire before age 62, including FERS-covered employees who retire: at the minimum retirement age (MRA) with 30 or more years, at age 60 with 20 or more years, or through an "involuntary" retirement when they reach the MRA. This retirement supplement is calculated on the Social Security benefit you earned as a government employee. At age 62, when you become eligible for Social Security, this "supplement" ends. Like Social Security benefits, this supplement is subject to an earnings test. Law enforcement officers, firefighters, and air traffic controllers do not have an "earnings test" applied to their special supplement until they reach the MRA.

Do I need to make a deposit for "post-56" military service as a CSRS participant to use the time as Creditable Service?

Answer: If you are covered by CSRS and were hired before 10-1-82, and become eligible for Social Security benefits at age 62, and if there is no deposit made, the military years may be used for eligibility and annuity computation until age 62, then the military years are dropped from the annuity calculation from age 62 on.

Should I apply for my Social Security benefit at age 62 or wait until age 65?

Answer: If your "full Social Security retirement age is age 65, you will receive a 20% lower benefit if you apply for it at age 62. This is a permanent reduction. Wisely or unwisely, some people prefer to take a reduced benefit at age 62 and then by various schemes, such as investing in the "market," they hope to make up the reduction, plus more.

As a FERS participant, should I plan on making a deposit for my military service to use that time as creditable service?

Answer: In most cases, it behooves FERS participants to "buy back" military time for their civilian service annuity. (However, be careful about "waiving" military retirement pay in order to "buy back" military service, since it is important to calculate the trade-offs first.)

Can a CSRS (or CSRS Offset) participant use unused sick leave to become eligible for retirement?

Answer: No, CSRS and CSRS Offset workers cannot use unused sick leave to meet the length of service requirement for becoming eligible for retirement. However, at the point they retire, they can use an unlimited amount of accrued sick leave in the calculation of their retirement annuity.

Will I pay taxes on my annuity?

Answer: Yes, both CSRS and FERS participants must pay taxes on most of their annuity payments. Determining the proper amount of taxes is a complicated calculation, the basic requirements of which are outlined in IRS Publication 721.

Do I need a will if I am young and in the early stages of my career?

Answer: Possibly, because you may want to name a guardian for your minor children or make sure your assets pass to the right people.

How much income will I "need" at retirement?

Answer: A "rule of thumb" might be:

If you retire and are still paying on your mortgage, you may need approximately 80% of the "gross" income you were living on before retirement.


If you retire with "no" debt, you may need approximately 60% of the "gross" income you were living on before retirement.


How do I find a good consultant in my area, to help me with my retirement planning?

Answer: The best way is referrals (e.g., asking your co-workers).

Are CSRS participants eligible for any Social Security retirement benefits at age 62?

Answer: It depends on their employment record. If you have 40 coverage quarters (credits), you will receive a social security retirement benefit at age 62. However, it may be reduced by the Windfall Elimination Provision, unless you also have 30 years of "substantial earnings" under Social Security.

I've been reading the 47th Annual Edition of the Federal Employee's Almanac. My goal is 41 years and 11 months to max my retirement annuity. I'm a CSRS employee, 40 years of service as of 11-07-00 with 2,788 hours of accumulated sick leave. Do I understand from the Almanac 2000 (page 99, unused sick leave, CSRS Credit) that I can count my unused sick leave toward my retirement annuity and I would actually have 41 years and 4 months of retirement eligibility, leaving roughly 7 months to go?

Answer: Yes, you correctly read in the 47th Annual Edition of the Federal Employees Almanac the section explaining unused sick leave and CSRS credit. In general, for those employees covered under the Civil Service Retirement System, any unused sick leave is credited for pension annuity computation purposes. The accumulated sick leave cannot be used, however, to compute an employee's average salary or to meet the minimum length of service for retirement eligibility.

More retirement information:

http://www.lunewsviews.com/postalretirement.htm

 

The Office of Personnel and Management (OPM) administers both USPS retirement programs - the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS). The CSRS generally applies to employees who received a career appointment before January 1, 1984 while the FERS applies to employees whose initial career appointment was January 1, 1984 or later, and CSRS employees that elected to transfer to FERS. Both systems have the same purposes, however, both operate under a unique set of guidelines and rules.

The following Web sites also have information about your retirement benefits:

Handbooks

Forms
The following forms can be found at the Office of Personnel and Management Web site:

  • (SF 2803) Application to Make Deposit or Redeposit
  • (SF 3102) Designation of Beneficiary (FERS)
  • (SF 3106) Application for Refund or Retirement Deductions
  • (SF 3109) FERS Election of Coverage
  • (SF 3110) Former Spouse's Consent to FERS Election
  • (SF 3111) Request for Waiver, Extension, or Search in Connection with Election of FERS Coverage, FERS

More Retirement Information:

Minimum Retirement Age
The minimum retirement age (MRA) is determined by an individual’s year of birth, as follows:

Year of Birth - MRA:

Before 1948 - 55 Years
1948 - 55 Years and 2 Months
1949 - 55 Years and 4 Months
1950 - 55 Years and 6 Months
1951 - 55 Years and 8 Months
1952 - 55 Years and 10 Months
1953-1964 - 56 Years
1965 - 56 Years and 2 Months
1966 - 56 Years and 4 Months
1967 - 56 Years and 6 Months
1968 - 56 Years and 8 Months
1969 - 56 Years and 10 Months
1970 and After - 57 Years

 

Don’t Believe Your SS Benefits Statement
Author and Source: Mike Causey's Federal Report
http://www.federalnewsradio.com

For most workers the annual earnings-and-benefits statements from Social Security are a blessing.

The statements, which usually arrive a couple of months before your birthday, tell you how long you've paid into Social Security, the amount, the number of quarters credit you have (it takes 40 to qualify for a minimum benefit and 160 or more to qualify for the maximum) and estimates the size of your Social Security check when you start collecting benefits.

As a retirement tool the Social Security statements are invaluable. Social Security represents the primary and often the only retirement benefit for about half of all Americans.

But for federal workers, especially the hundreds of thousands still under the old Civil Service Retirement System, the statements are worthless.

Actually worse than worthless. Reason? They are misleading. They tell you that you will qualify for a benefit that in fact you will never see. Why? Because the statements don't take into account that because you are a fed under the CSRS system you are subject to the so-called "Windfall Elimination Provision", known as WEP or Windfall.

The Windfall formula was devised by Congress years ago because many high-paid feds were fiddling with the system. They were qualifying for substantial civil service retirement benefits based on their high salaries and long service, and also benefiting from the "welfare tilt" in Social Security. It rewards people who worked and paid into Social Security for a short-time, or with a low salary, with a higher benefit return. Some of the government executives were collecting higher Social Security benefits based on work they had done as teenagers or in low-paying jobs they had before coming into government. A few were caught in back-scratching deals. Meaning, two feds "hired" each other to work perhaps doing yard or house work for minimum pay and minimum Social Security tax. Eventually, they qualified for a higher benefit based on their low-income, short-service work history.

Congress lowered the boom and the "windfall" formula was born. In essence it said that people who didn't pay into Social Security for a full 30 years, who qualified for an annuity or pension based on non-covered employment would have their Social Security benefit reduced.

The maximum reduction for someone retiring this year is $300 per month, because of the windfall formula. Many feds -- especially those who don't understand its history -- find it outrageous. Since it also affects many school teachers, a growing number of House and Senate members want windfall and its evil twin, the so-called "Offset formula", modified or repealed. Windfall hits the Social Security benefit earned by a fed. Offset can wipe out the Social Security spousal or survivor benefit of a fed who gets his or her own civil service retirement.

Even though they seemed like a good idea at the time, many people think windfall and offset have outlived their usefulness and now punish people unfairly. Federal, postal and retiree groups made an all-out drive during the Easter/Passover recess to get co-sponsors for bills to modify or repeal offset and windfall. They are getting close to the magic number that would guarantee passage. What they haven't gotten yet is a promise of hearings before the House and Senate committees that deal with Social Security and taxation matters.

Until windfall and offset are modified (to exempt a portion of combined federal and Social Security monthly benefits from the formula) or are repealed outright, don't make any financial plans based on the benefit statement you get from Social Security.

22 RETIREMENT TIPS
Many thanks to the APWU OF FLORIDA STATE RETIREE CHAPTER for this information.


  1. ANNUAL LEAVE

  2. BENEFICIARIES

  3. COUNSELING SEMINARS

  4. DATE OF RETIREMENT  (CSRS)

  5. DATE OF RETIREMENT  (FERS)

  6. GOVERNMENT PENSION OFFSET

  7. HEALTH INSURANCE

  8. HIGH THREE AVERAGE EARNINGS PAY

  9. INCOME PROJECTION

  10. INTERIM OPM PAYMENTS

  11. LIFE INSURANCE

  12. LWOP

  13. OFFICIAL PERSONNEL FOLDER (OPF)

  14. SICK LEAVE (CSRS)

  15. SICK LEAVE (FERS)

  16. SOCIAL SECURITY BENEFITS      

  17. SPOUSAL OPM BENEFITS

  18. SURVIVORS BOOKLET

  19. THRIFT SAVINGS PLAN (TSP)

  20. VERIFICATION OF RECORDS

  21. WINDFALL ELIMINATION PROVISION (WEP)

  22. YEARS OF SERVICE OPM MAXIMUM P

ANNUAL LEAVE:  At the time you retire, the Postal Service will pay you for up to a maximum of only 440 hours of earned annual leave.  You will lose any amount over 55 days of annual leave (55 days x 8 hours daily= 440 hours maximum).  It should be on your next scheduled USPS paycheck.

BENEFICIARIES:  Check the information on beneficiaries you have previously chosen for your Government Life Insurance, Civil Service Retirement System (CSRS), Federal Employee Retirement System (FERS), earned annual leave, and earned compensation.  There is a separate form for each benefit. The order of beneficiaries is your designated beneficiaries or if the order is not designated, then the order is spouse, child/children in equal shares, parents, executor or estate administrator, brothers and sisters, or next of kin in that order.

COUNSELING SEMINARS: You need to attend a pre-retirement counseling seminar, if one is available at your USPS agency, at least five (5) or more years before your retirement.  Many postal agencies only offer one pre-retirement individual counseling session within in a three (3) year period after you become eligible for retirement due to age and years of service.  It’s a crying shame, but that’s the way things happen. Better yet, you should attend a National APWU Retirees Department Retirement class hosted by the APWU Region, State and/or Area Local/Local or enroll in a three (3) day National APWU Retirees Department Counseling Seminar which is being scheduled in each region.  This way you may become an APWU Retirement Counselor in your APWU Area Local/Local, State or Region.

DATE OF RETIREMENT (CSRS):  For voluntary retirements, CSRS annuities should begin on the 1st, 2nd, or 3rd day of the month.  If you retire on one of the first three days of the month, your first OPM annuity check is payable the first day of the following month. If you retire on any other day of the month, your first OPM annuity check is payable the first day of the second month which follows.  If you retire the 4th day through the last day of any month, for example, August 4th through August 31, then your first OPM annuity check is payable October 1st.  Waiting one extra day will cost you one additional month of OPM annuity pay!

DATE OF RETIREMENT (FERS):  In the Federal Employee Retirement System (FERS), voluntary retirements begin only on the first day of a month.  FERS employees should retire on the last three (3) days of the month, if possible.  For example, if you retire on August 31 under FERS, your first OPM annuity check is payable October 1st.  Under FERS, retiring on other days earlier in the month will cost you extra days of additional OPM annuity pay.

GOVERNMENT PENSION OFFSET (GPO):  You may also be entitled to benefits based on the Social Security covered earnings of your spouse or former spouse.  However, this benefit may be affected by the Government Pension Offset (GPO), another provision of the Social Security law.  For more information, see Congress & Legislative link and scroll down to the Legislative Fact Sheet on Government Pension Offset (GPO).  We urge you to contact your Congress and ask them to Co-sponsor and support the legislative bills already introduced in the 108th Congress to repeal this unfair law.

HEALTH INSURANCE:  You must be enrolled in your Federal Employees Health Insurance Benefits (FEHB) Plan program for a five (5) year period prior to your date of retirement to continue your health insurance coverage as a retiree.  After you retire, you pay approximately thirty (30) percent of your health insurance premium and USPS pays about seventy (70) percent. This is a big change in the formula you enjoyed before you retired when USPS paid approximately eighty-three (83) percent and you paid about seventeen (17) percent due to the USPS/APWU collective bargaining agreement.    Welcome to the real world!

HIGH THREE AVERAGE EARNINGS PAY:  Your high three average earnings pay is figured on thirty-six (36) months of continuous base pay only.  It does not include overtime, night differential, Sunday pay, or lump sum payments.

INCOME PROJECTION:  If you will have any housing cost (mortgage or rent) or other significant loans/credit card debts after retiring, you will need approximately eighty (80) percent of your current USPS salary to retire comfortably.  If you have no rent/mortgage or other substantial loans/credit card debts after retiring, sixty (60) percent of your salary will probably suffice.

INTERIM PAYMENTS:  Generally, as soon as the Office of Personnel Management (OPM) gets all your retirement records from USPS, OPM will provide interim payments averaging more than eighty-five (85) percent of your final retirement benefit.  Usually, the next month’s check will be your regular annuity amount plus a make-up of the remaining amount due from your first payment.  The third OPM annuity check you receive, if not sooner, should be your regular monthly annuity amount. OPM will withhold deductions for federal income taxes, health and life insurance coverage, and your $2.00 monthly APWU retiree union dues, provided you have completed the APWU Retired member Form 1187 and mailed it back to the National APWU Retirees Dept.

LIFE INSURANCE:  To keep your Federal Employees Government Life Insurance (FEGLI) group policy coverage, you must have been enrolled in the program for the five (5) years of service immediately preceding your retirement date or for all service since your first opportunity to enroll in the program.

LWOP:  The only way LWOP can delay your postal retirement by reducing your years of service credits is if you take over six (6) months of LWOP in a calendar year.

OFFICIAL PERSONNEL FOLDER (OPF):  Get a copy of your Official Personnel Folder (OPF) from USPS Personnel or Human Resources office at once, including all military records.  Your retirement is based on the Form 50’s in your folder.  Check your Personnel folder and files each and every year of your employment. Your retirement is determined by the highest three years of your consecutive yearly base pay.  There is approximately a twenty (20) percent error in USPS record keeping.  Your expenses of copying the personnel records in your folder will save you beg bucks down the road!

SICK LEAVE (CSRS):  In CSRS, for every 22 days of sick leave, you are credited for one month of service.  2080 hours of sick leave equals one year of credit for CSRS employees only.  Accumulated sick leave can be used for additional monthly and years of service for retirement.

SICK LEAVE (FERS):  If you are in FERS, you get no credit for accumulated sick leave for extra monthly and years of service to retire.

SOCIAL SECURITY BENEFITS:  Telephone the Social Security Administration 1-800-772-1213 or go on line to their web site www.ssa.gov to ask for a “Request for Earnings and Benefit Statement” on you to get a record of your earnings under Social Security, and if you will be eligible, an estimate of the payment you may receive. Remember, the estimate you receive may not include reductions to your Social Security benefits due to the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP).  You should schedule an appointment with your local Social Security office to personally get an estimate of your benefits, including any reductions which may be caused by the GPO and/or WEP provisions.

SPOUSAL OPM BENEFITS:  In compliance with the Spousal Equity Act of 1984, your spouse must agree and sign a notarized paper for you not to make your spouse a beneficiary of your OPM annuity.  If the spouse chooses not to be a beneficiary and the annuitant dies, the spouse cannot get health insurance benefits coverage!

SURVIVOR’S BOOKLET:  Every potential APWU retiree member should purchase the APWU Survivors Booklet costing only $3.00 from the National APWU.  This treasure chest publication allows for personal information to be stored in one place for your use and your spouse/family.  If you pass away, the information in this booklet is especially important to you, but also to your survivor or loved ones.

THRIFT SAVINGS PLAN (TSP):  You are urged to contribute a maximum deduction to your Thrift Savings Plan (TSP) to realize a higher income return on retirement.  Retirement for FERS employees is like a three-legged stool, that is, FERS, Social Security, and TSP.  You cannot usually afford to retire if you don’t build up your Thrift Savings Plan account to the maximum.

VERIFICATION OF RECORDS:  All periods of civilian and military service should be verified in your Official Personnel Folder (OPF) files.  You must take the initiative on your own to request copies of all your personnel records and keep these copies in a safe place where you know where they are located.  Request copies each and every year to update your files for retirement some day!  I bet you can’t wait to get started!

WINDFALL ELIMINATION PROVISION (WEP): Any Social Security Administration estimate of the payment you may receive is not adjusted for the Windfall Elimination Provision (WEP), which is a provision of the Social Security law after 1984 that reduces the Social Security covered benefits of many former Federal and Postal employees. For more information, go to the Congress & Legislative link on this web site and scroll down to Priority Legislation and Legislative Fact Sheets to read about how the Windfall Elimination Provision may affect your retirement. We urge you to contact your Congress and ask for their Co-sponsorship and support for legislative bills already introduced in the 108th Congress calling for the repeal of the Windfall Elimination Provision (WEP).  We think these bills have a good chance of getting out of Committees and going to the floor for serious debate and passage this time around the horn!

YEARS OF SERVICE OPM MAXIMUM PAY:  If you have forty-one (41) years and eleven (11) months of combined service at the time you retire, you will be paid eighty (80) percent of your high three continuous years of service.  For CSRS employees, sick leave can increase your OPM annuity over the 80 percent maximum.  FERS employees do not get any credit for accumulated sick leave in figuring their retirement!