Monthly Archives

July 2018

Federal Sick Leave and Annual Leave

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Sick Leave and Annual Leave in Retirement

Sick leave is one of the most valuable benefits provided to federal employees. Here’s why:

Earning leave

Sick leave is earned at a constant rate — 4 hours per each biweekly pay period for all full-time employees — no matter how long you work for federal government. (Part-time employees earn 1 hour for each 20 hours in a pay status.)

Accumulating leave

Unlike annual leave, there are no limits on the amount of sick leave you may accumulate. Accumulating it early in a career is especially important because the federal government has no short-term disability program.

Using sick leave

Sick leave may be used for a wide variety of purposes. First, for your own medical needs, including being incapacitated for the performance of your duties because of physical or mental illness, injury, pregnancy or childbirth.

Second, it may be used for family care or bereavement purposes. It may also be used to make arrangements required by the death of a family member or to attend the funeral of a family member.

Finally, your agency may advance you up to 30 days of sick leave for adoption-related purposes.

Advanced sick leave

If you have a medical emergency or are engaged in the adoption of a child and don’t have enough sick leave to cover the situation, your agency — in its discretion — may advance you a maximum of 30 days. A maximum of five days may be advanced for family care or bereavement purposes.

Donated leave

If you have exhausted all of your sick and annual leave, employees can donate annual leave directly to you without limit However, any unused donated annual leave must be returned to the leave donor(s) when the medical emergency ends.

Sick leave and retirement

Annual leave and retirement
When you retire, your remaining annual leave will be paid out to you, but be aware of what your limits are with your position. You may lose some of these excess hours.
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Retirement Backlog Creeps Up More Last Month

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The number of pending federal employee retirement claims ticked up slightly last month, as the Office of Personnel Management increased its processing to meet the higher demand.

According to statistics released last week, the retirement backlog increased by less than 200 claims in June to 18,198, up from 18,024. But the number of new claims received jumped from 7,625 in May to 9,397 last month.

That total marks a significant increase over the same period in 2017, when OPM received only 6,141 new retirement requests. Last month, the agency processed 9,223 claims, up from 7,090 in May.

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Although OPM mostly kept pace with demand, the influx of new claims has increased the agency’s monthly average processing time from 58 days in May to 65 last month.

Retirement Backlog Creeps Up More Last Month

By | Benefits, Retirement | No Comments

The number of pending federal employee retirement claims ticked up slightly last month, as the Office of Personnel Management increased its processing to meet the higher demand.

According to statistics released last week, the retirement backlog increased by less than 200 claims in June to 18,198, up from 18,024. But the number of new claims received jumped from 7,625 in May to 9,397 last month.

That total marks a significant increase over the same period in 2017, when OPM received only 6,141 new retirement requests. Last month, the agency processed 9,223 claims, up from 7,090 in May.

» Get your free Federal Retirement Review here. Contact us Today

Although OPM mostly kept pace with demand, the influx of new claims has increased the agency’s monthly average processing time from 58 days in May to 65 last month.

New Labor Contract Will Give 200K Postal Workers a Raise, but Trim Their Benefits

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More than 200,000 U.S. Postal Service employees will soon receive a pay raise but face a slight decrease in health benefits under a new labor contract formally agreed to this week.

The National Association of Letter Carriers, which represents 213,000 city mailmen and women across the country, ratified an agreement it had struck with USPS management to avoid binding arbitration. NALC members voted overwhelmingly — 94 percent to 6 percent — to accept the contract, following the union’s executive council unanimously recommending its members do so.

The agreement will take effect retroactively to May 21, 2016, and continue through Sept. 20, 2019. All city letter carriers will receive a 1.2 percent pay raise retroactive to Nov. 26, 2016, and a 1.3 percent increase effective Nov. 25 of this year. Employees on the second level of the two-grade pay scale will receive a 2.1 percent raise in 2018.

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On top of those general wage increases, employees will also receive a series of seven cost-of-living adjustments throughout the life of the contract.

Non-career employees represented by NALC will see an additional boost under the tentative agreement, as the contract will establish new step increases for career carrier assistants. The substitute carriers will receive payments adding up to a dollar per hour over the course of their first year at the mailing agency. They will also earn more generous wage increases than their career counterparts. USPS will now convert non-career employees at the agency for at least 30 months to career positions en masse.

Employees working as letter carriers for at least six years are now exempt from any potential layoffs for the duration of the contract, which also extends prohibitions on outsourcing their work.

In a setback for employees, the Postal Service is lowering its contribution toward employees’ health care plans by 3 percent through 2019. Still, even by the end of the contract USPS will pay for a maximum of 76 percent of any given plan, while the top contribution for the rest of the government caps out at 75 percent.

Darlene Casey, a Postal Service spokeswoman, last month when the agreement was first announced called it a win for all parties.

The contract “addresses important financial and operational considerations of the Postal Service, serves the interests of the American public and is fair to our employees,” Casey said.

Retirement plans

Observations on OPM’s Recommended Adjustments to Federal Employee Benefits

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A letter to Congress or talking points in a speech do not make any changes official. Congress is surrounded by people with vested interests in implementing, or blocking the implementation of, such letters and policy papers.

Immediately upon release of the letter to the public, the AFGE was out with a statement, as one would expect, denouncing the policy and actually arguing for the opposite direction with federal employee benefits.

Changes to benefits have been discussed for years and the considerations in this letter; removal of the annuity supplement, lowering or removing of cost of living adjustments, higher employee contribution to pension, and movement to a high-5 calculation are some of the most common discussion points.

When, likely not if, legislation is one day approved it will probably contain some of these provisions. There isn’t much one can do to prevent eventual changes, but perhaps getting involved with your local NARFE or AFGE chapter or writing your representative would make your voice heard.

Financial Planning

What can be done though is consider these proposals from a personal finance perspective. What would happen to your retirement plans if this proposal was converted into a bill and became law tomorrow?

Each proposal option and how it affects one’s planning can be explored independently starting with the annuity supplement. Let’s look at each in some more detail.

Eliminate FERS Annuity Supplement

The current proposal is to fully eliminate this payment, which is an extra pension-like income FERS beneficiaries receive if they meet certain qualifications. Currently the qualifications to receive the annuity supplement are:

  • Retire on an immediate annuity – upon reaching MRA or minimum retirement age
  • Choosing not to work longer to accumulate more money and retirement benefits
  • Not being a CSRS employee
  • Choosing not to work in a new position (above a very minimum level) between MRA and age 62 (the supplement stops after age 62 whether the retiree chooses to elect Social Security or not)

Clearly, from this list the percentage of federal workers this affects is minimal. Implied in these qualifications is likely a healthy FERS pension as being able to retire on an immediate annuity at MRA requires at least 10 years of service, but in many cases workers have much more.

If the plan was to retire by one’s MRA and not work, then the removal of this benefit means the loss of approximately $1,000 a month from that date to age 62. $1,000 a month is by no means small, but the options to replace this income are pretty straightforward. They are either to assess cash flow to see if retirement looks all right even if this income is missing, work a year or more longer to both increase the TSP balance for later withdrawals and increase the size of the FERS pension itself, or finally choose to work in some capacity so as to earn about $1,000 a month or more.

Reduction or Elimination of COLAs

The next proposed adjustment is either the removal or minimization of cost of living adjustments (COLA) to one’s pension as they receive income over time. This means for those currently receiving pensions, or possibly only for those retiring in the future, there may be either no increase or limited increases to your income as you progress through retirement.

Any loss of income is significant, but let’s take a look at examples of figures for some context of how this could play out.

An Example

First we need a starting pension value and a retirement age, so we will use $30,000 and age 62. Currently there is a formula for FERS recipients to calculate their cost of living adjustment (COLA) and it’s based on the Consumer Price Index (CPI) which is a measure of the increase in cost of goods annually.

The CPI can vary from year to year, but for our example, let’s say the increase in the CPI causes FERS recipients, under current rules, to receive an average 2% increase in their pension annually. That would mean if they start at $30,000 annually at age 62, by the time they reached age 72 their annual income would be approximately $36,569, and by age 82 their income would be approximately $44,578.

It’s worth noting that in this scenario the figure only represents their FERS pension, not any Social Security they likely would also be receiving which also receives cost of living adjustments, withdrawals from TSP savings, and any assets or income a spouse may have earned.

The proposal would either remove or reduce these increases over time. If they remove them altogether, we can easily assess the reduction in income this person would have over time. They would still be receiving $30,000 annually just as they did their first year of retirement.

If on the other hand the COLA were set at a formula that now caused the increases to average 1% for example, we could compare the figure’s growth. Starting from $30,000, it would become $33,138 10 years later, instead of the $36,569, and after 20 years would be $36,605 instead of the $44,578.

Clearly these are noticeable differences in income, but knowing one’s long term circumstances allows planning.

In all of these scenarios, the person’s income in the first several years of retirement is practically the same which still allows them to perhaps have a successful standard of living at the outset. Longer term steps like budgeting, relying on deferred assets, and planned downsizing are all considerations.

While it is impossible to know what changes, if any, will come out of Congress in the near future, taking control of your financial planning for retirement in the areas that you can control will help you have a more secure future despite whatever changes may come along.

Stay informed and join our mailing list to be notified of any upcoming changes towards your benefits.

 

Thousands of Feds Would Get Raises Under OPM’s Locality Pay Proposal

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Around 62,000 federal employees could see a pay raise next year, thanks to proposed regulations from the Office of Personnel Management.

On Friday, OPM Director Jeff Pon published a proposal in the Federal Register to add four regions to its list of locality pay areas for 2019: Birmingham-Hoover-Talladega, Ala.; Burlington-South Burlington, Vt.; San Antonio-New Braunfels-Pearsall, Texas; and Virginia Beach, Va.

The proposed rule would mark the first implementation of recommendations from the Federal Salary Council since President Trump took office. The council had recommended the four regions be added in 2016 and 2017, but last December, the President’s Pay Agent delayed action on those proposals until 2019.

Earlier this year, the Federal Salary Council also proposed locality pay areas for Corpus Christi, Texas, and Omaha, Nebraska, and recommended a review of how it determines whether to add new regions to the list of locality pay areas. OPM’s proposed regulations do not act on either of these proposals.

Federal workers who live or work within locality pay areas receive additional compensation on top of their base General Schedule wage, typically in regions with elevated costs of living and higher average wages for private sector workers.

“Based on its review, the Federal Salary Council recommended new locality pay areas be established for four metropolitan areas with pay gaps averaging more than 10 percentage points above that for the ‘Rest of U.S.’ locality pay area over an extended period,” Pon wrote.

Also included in the proposed rule are some minor changes to existing locality pay areas. The Albuquerque-Santa Fe-Las Vegas, N.M., region would be expanded to include McKinley County, N.M., impacting approximately 1,600 G.S. workers. And San Luis Obispo County, Calif., would be added to the existing Los Angeles-Long Beach, Calif., region, adding about 100 federal employees.

Although the proposed rules establish the new locality pay areas, it does not stipulate the actual pay rates, which will be “set by the president” after the regulations go into effect. President Trump has proposed a pay freeze for all federal civilian employees in 2019, although a Senate panel recently pushed back against that effort, including a 1.9 percent raise for federal workers in a fiscal 2019 appropriations bill.

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