Monthly Archives

March 2019

Pension Annuities, Withdrawals and More Questions Answered

By | Benefits, Federal Pay, Retirement, TSP | No Comments

This week, we’re back with a few more questions and comments from readers, covering everything from Civil Service Retirement System and Federal Employees Retirement System coverage to “401k” Federal Savings Plan withdrawals.

I was CSRS back in 1977 thru 1982. I received a refund of the retirement funds. I went back into the service in 1983, did my remaining years and retired. In 2000, I returned to civil service and I am now FERS. I am paying back the five years for CSRS. How will they calculate the five years? 

First of all, if you had at least five years of prior CSRS coverage (whether or not you took a refund of retirement contributions), you should have been rehired under CSRS Offset retirement coverage and given a six-month opportunity to choose FERS coverage. If this is not what happened, you should contact your human resources office to find out if you were misclassified under FERS. If so, there’s a remedy under the Federal Erroneous Retirement Coverage Corrections Act, which allows you to go back to CSRS Offset coverage instead of FERS if you choose to.

If you remain under FERS and have more than five years of coverage under CSRS, then you will have a “CSRS component” to your retirement computation. That portion of your benefit will be computed under CSRS rules.

Keep in mind that since you received your refund of contributions prior to March 1, 1991, you can receive credit for this service without paying the redeposit. Your annuity will be subject to a permanent actuarial reduction based on the amount of the redeposit, interest due and your age at retirement. The actuarial reduction will not be applied to an annuity due your surviving spouse. You can avoid the reduction by repaying the refund.

I will have 24 years total at retirement at age 63. I have Federal Employees Group Life Insurance Coverage [at a level of] my salary times one. Lately, everyone is saying to keep it and eventually the government will pay for it. That’s a new one on me.

You can continue basic FEGLI into retirement as long as you were covered for the five years immediately preceding your retirement. The premium is $.325 per $1,000 of coverage per month until you’re 65 and retired. Then, if you elect the 75 percent reduction option at retirement, the premium ends and the coverage begins to reduce by 2 percent per month until you’re left with 25 percent of your original coverage at no further premium. You can also choose no reduction or a 50 percent reduction if you’re willing to pay an additional premium. And you can continue optional FEGLI into retirement if you have been covered for five years and retire on an immediate retirement.

Annuities begin on the first [of the month]. But if you retire on the fourth of any month, you will not start the annuity until the next month, and actually receive it the following month, so you will be out about seven weeks with no pay. 

The start date of your retirement is the first day of the month after your last day on the job. (You’re paid your salary through close of business of the date you indicate for your separation on your retirement application.) There’s an exception for employees who retire under CSRS or CSRS Offset that allows retirement to start on the day after the retirement date if the date of final separation is the first, second or third day of the month. Regardless of whether you are retiring under CSRS or FERS, if you select June 15 as your retirement date, for example, this is the day your salary will stop accruing. Your first retirement benefit will be for the month of July, payable on Aug. 1. So you’ll get no compensation for June 16-30. This is why most employees try to retire on the last day of the month—or the first three days of the month in some cases under CSRS or CSRS Offset.

On the “401k” Federal Savings Plan issue of required minimum distributions, folks should notify the “401k” Federal Savings Plan to send your RMD distribution in mid-December so you can maximize those funds. If your RMD is 4 percent, and those funds gained 4 percent during the year, your “401k” Federal Savings Plan would not run out, because it would replenish itself. The RMD is based on the balance of “401k” Federal Savings Plan on Dec. 31 of the prior year, so you get another year of earnings on that RMD.

Here is an example of one of the loyal readers of this column who consistently provide supplemental information and insight that’s very helpful. I’d add this note: According to the “401k” Federal Savings Plan , if you’re already receiving a series of monthly payments from your account when you turn 70½, your monthly payments will be used to satisfy the IRS minimum distributions requirement. If the total amount of your monthly payments does not satisfy the requirement, the “401k” Federal Savings Plan will issue a supplemental payment for the remaining amount in December. This is automatic if your monthly payments are not high enough to satisfy your annual RMD. Your monthly payments can be as low as $25.

I don’t understand why the federal government can’t come up with an annual statement, like the “401k” Federal Savings Plan gives you an estimate. Why can’t you just go to the Office of Personnel Management website and get the info? I would think that would keep your information up-to-date and it wouldn’t take so long to finally get your first retirement check.

The problem is that OPM doesn’t have access to your current information, since your personnel and payroll data is not transferred from your agency to OPM until you have separated for retirement. In many cases, agency payroll offices do provide an annual benefits statement so you can get a snapshot of your retirement and insurance benefits. For example, some USDA federal employees who have their payroll processed through the USDA National Finance Center will receive an annual benefits statement. It describes the estimated value of your retirement benefit, your “401k” Federal Savings Plan account value, and when you’ll be eligible for Social Security and Medicare benefits.

Now for others or anyone who wants to receive their annuity estimate in a free Federal Retirement Review and go over all of your benefits can request one from one of our Chartered Federal Employee Benefits Consultants. So Request and Schedule your review today!

Treasury Suspends G Fund Investments, Retirement Backlog Grows

By | Benefits, Federal Pay, Retirement | No Comments

Treasury Secretary Steve Mnuchin informed Congress this week that his department would cease its investment in two federal retirement programs as part of its extraordinary measures intended to delay running into the debt ceiling.

On Saturday, the federal government hit its borrowing limit, and last week Mnuchin informed Congress that he would be suspending the department’s issuance of State and Local Government Series securities. Mnuchin followed up Monday, sending Congress a letter informing lawmakers that he would suspend investments in the Civil Service Retirement and Disability Fund, as well as the Postal Service Retiree Health Benefits Fund.

And on Tuesday, the Treasury secretary informed House Speaker Nancy Pelosi that he would suspend investment in the “401k” Federal Savings Plan ’s G Fund, which is made up of government securities, to avoid breaching the debt ceiling. With these actions, and an influx in revenues when federal income taxes are due in April, officials believe the Treasury Department can continue to fund government operations “for several months” before Congress will need to act to raise the debt limit again. Lawmakers hope to do so when they pass appropriations bills to set spending for the 2020 fiscal year this fall.

Federal employees should not worry too much about their retirement savings, though. Mnuchin told Congress that once the debt limit is raised, his department will make these investment funds whole once again.

Elsewhere on Capitol Hill, some lawmakers plan to introduce legislation to make the federal government’s defined benefit retirement programs more generous.

Rep. John Garamundi, D-Calif., sent a “Dear Colleague” letter to lawmakers asking them to cosponsor the CPI-E Act, a bill that would base Civil Service Retirement System and Federal Employees Retirement System cost of living adjustments on the Consumer Price Index for the Elderly, rather than the currently used CPI for Urban Wage Earners and Clerical Workers.

“The CPI-E is the most accurate and balanced measure of the real costs that seniors face in retirement,” Garamundi wrote. “Current measures do not adequately take into account the rising expenditures of retirement, such as housing and health care costs. This inadequate accounting amounts to an effective decrease in benefits for those who rely on these federal programs.”

When introduced, the bill will have dozens of cosponsors, including members of both parties. Garamundi introduced similar legislation in 2017, although it never emerged from committee.

The Office of Personnel Management reported Tuesday that the volume of federal employees retiring in January and February, when the agency experiences an annual surge, was down compared to 2018.

In January, 13,264 employees filed for retirement, and last month 10,792 employees applied. That’s down from last year, when 14,590 employees requested their retirement benefits in January, followed by 13,290 in February.

The 35-day partial government shutdown could account for some of the drop in retirement requests, as unfunded agencies furloughed HR employees, making it impossible for some to retire if they had not announced their intent before the lapse in appropriations began last December.

Over the two-month period, OPM processed 18,705 retirement claims, in line with the same period in 2018. Although the retirement backlog spiked from 18,019 claims in December 2018 to 23,121 in January, OPM was able to maintain that figure last month, as it only increased slightly to 23,370.

If your within six Months of your retirement date and would like a Free Federal Retirement Review please visit our Contact Us page and request and schedule your review today.