Sen John Kennedy

Senator Tries to Ensure That at Least 14,000 Feds Have Their Pay Frozen Next Year

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As the Senate began debate Monday on another minibus spending bill, one Republican lawmaker renewed his push to freeze federal employees’ pay, albeit on a much smaller scale than President Trump has proposed.

Last week, Sen. John Kennedy, R-La., introduced an amendment to the fiscal 2019 appropriations bill for the Defense, Labor, Education, and Health and Human Services departments (H.R. 6157) that would freeze the pay of the more than 14,000 employees at the Labor Department next year, unless the department devises a plan to reduce “improper payments.”

In June, Kennedy unsuccessfully attempted to insert a pay freeze for all federal civilian employees in the fiscal 2019 Financial Services and General Government appropriations bill, an effort that was voted down by the Senate Appropriations Committee 29-2. The committee instead approved a 1.9 percent pay hike for federal civilians in 2019, setting up a fight with the House, which backed President Trump’s proposed pay freeze for federal employees.

A spokesperson for Kennedy declined to comment on what payments from the Labor Department were “improper,” and directed inquiries on his amendment to a June 28 statement issued following the failure of his governmentwide pay freeze proposal.

“Washington is on a spending spree, and it’s time for some change around here,” Kennedy said at the time. “My amendment would have saved hundreds of millions of taxpayer dollars in a payroll that tops $270 billion annually. We could have used the savings to pay down the national debt and invest in our children’s futures. It may have only gotten two votes, but at least I tried. And I’ll keep fighting to curtail government spending.”

It is unclear whether the Senate will allow the Labor Department pay freeze proposal to come to the floor for a vote.

When the House returns from its August recess after Labor Day, it is expected to go to conference with the Senate to hash out the differences between the two chambers’ versions of the fiscal 2019 spending bill that includes Financial Services and General Government funding. Among other differences, the negotiators will decide whether to keep the 1.9 percent raise for civilians governmentwide that is in the Senate’s bill.

It’s always good to get all of the facts, especially when you are closer to retirement.  We offer free Federal Retirement Reviews for all Federal Employees working within the Federal Government, just fill out the simple Contact Us Form for your free review.

USPS Mail Truck

Arbitrator Overturns USPS Ban On Politically Motivated Leave

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The U.S. Postal Service must rescind a recent policy that its employees cannot take union official leave without pay to undertake “partisan political activity,” third party arbitrator Stephen B. Goldberg ruled August 6.

The Postal service instituted the change to the Employee and Labor Relations Manual (ELM) after a July 2017 Office of Special Counsel investigation called for the removal of such leave practices as they constituted a “systemic violation of the Hatch Act,” which restricts political campaign activities by federal employees.

But the American Postal Workers Union argued that the change violated rules preventing the Postal Service from making mid-term changes to leave policies and from making unilateral changes affecting wages, hours and other terms and conditions of employment without notice and consultation with the union.

The arbitrator ruled in the union’s favor, stating that the OSC did not have the authority to determine whether a violation of the Hatch Act has occurred, as that authority rests with the Merit Systems Protection Board. The Postal Service was therefore under no obligation to change its leave policies without consulting the union.

“To be sure, ignoring an OSC opinion or allegation creates the risk that OSC will institute proceedings before the MSPB. The possibility that it will do so does not, however, lead to the conclusion that the Postal Service need not abide by its contractual commitment to arbitrate,” Goldberg wrote in his award.

“I have found that the Postal Service violated Article 10.2, Article 5, and Article 19 in the changes it made to ELM Exhibit 514.4 and Postal Service Form 3971, and will, as the Union requests, direct the Postal Service to rescind those changes. I shall also direct the Postal Service to make whole any employees disciplined or whose LWOP requests were denied because they indicated they were requesting ‘union official’ LWOP to engage in partisan political activity.”

According to an APWU news release on the award, this means that its members can still continue to volunteer in political campaigns under LWOP.

“This is what workers in a union do – make management respect their legal rights,” said APWU President Mark Diamondstein. “Process matters, and we earn process and have a real voice when we come together, both in bargaining and in politics.”

Ever wonder where you stand within the Federal Service and your retirement?  Reach out for your free Federal Retirement Review that way you know how much longer until you can retire.

Most Asked Question Going Into Retirement – Medicare

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Are you unsure about whether you should enroll in Medicare after you’re retired if you’re also covered under the Federal Employees Health Benefits Program? If so, you’re not alone. The number one query I get in my email inbox starts something like this: “I have a simple question for you. I’m about to turn 65 and I’m not sure what to do about Medicare enrollment.”

Unfortunately, this is not a simple question to answer. First of all, Medicare has four parts: A (hospital Insurance), B (outpatient or doctor’s coverage), C (Medicare Advantage) and D (prescription drug coverage). Each part provides benefits that are largely duplicated by FEHBP coverage. In addition, you will continue to be covered by your FEHBP plan even if you choose not to enroll in Medicare. Despite both of these facts, the majority of federal retirees choose to enroll in Medicare Part A and Part B. Let’s explore why.

Most people will have paid the Medicare hospital insurance tax (1.45 percent payroll tax) during their careers and will automatically be entitled to Medicare Part A without paying a premium. This coverage, when combined with most FEHBP plans, will generally cover 100 percent of hospital room and board and other inpatient expenses when Medicare Part A is the primary payer. (Generally, Medicare pays first once your FEHBP premiums are being deducted from a federal retirement check rather than from you or your spouse’s paycheck.)

Most federal employees and retirees do not choose to enroll in Medicare C or D. Medicare C can be used instead of FEHBP. It includes Medicare A and B along with additional benefits that may include dental, vision, hearing and prescription drug coverage. Part D provides additional prescription drug coverage for retirees who may not have prescription benefits that meet the Centers for Medicare and Medicaid Services minimum coverage standards. Generally, this does not include federal retirees covered by an FEHBP plan.

That leaves Part B. In 2016, the Congressional Research Service reported that 86 percent of federal retirees 65 and older who were enrolled in a fee-for-service FEHBP plan (such as Blue Cross/Blue Shield, GEHA or NALC) had also signed up for Medicare parts A and B. And 56 percent of retirees who were enrolled in an HMO (such as Kaiser Permanente or United Healthcare) were also enrolled in parts A and B. The report said that in the previous 20 years, the percentage of retirees enrolled in in a fee-for-service FEHBP plan and Medicare A and B had dropped by 6 percent. The percentage of retirees enrolled in an FEHBP HMO plan and parts A and B had declined by more than 10 percent.

This drop in Medicare enrollment can be attributed largely to the rising cost of Part B coverage. The standard 2018 premium is $134 per month per individual enrolled. So for a married couple, the cost would be $3,216 per year. In addition, an income-related monthly adjustment amount can raise the cost considerably higher.

About 70 percent of Medicare enrollees are covered by a “hold harmless” provision that prevents the annual increase in their premiums from exceeding the cost-of-living increase in Social Security benefits if the premiums are automatically deducted from their Social Security payments. This applies to about 70 percent of Medicare enrollees. Some 42 percent of Part B enrollees who are subject to this provision for 2018 pay the full $134 standard rate because the 2018 increase in Social Security was adequate to cover the additional cost of Medicare Part B.

People who are 65 or older and covered by a health plan based on current employment can delay enrollment in Medicare Part B without penalty. They will have a special enrollment period that will follow their retirement by eight months. Those who aren’t covered by health insurance based on current employment will incur a permanent 10 percent surcharge on the Part B premium for every 12-month period that enrollment is delayed.

So why might you want to add Part B to your FEHBP coverage when you’re over 65 and retired? I recently was talking to a federal retiree who requires physical therapy to treat knee problems stemming from years of pounding the pavement as a runner. Her out of pocket expense for the therapy is $100 per visit. She is entitled to a generous federal retirement benefit and has a substantial balance in her TSP account, but she limits her therapy visits to less than those prescribed by her doctor because of the  out of pocket expense. If she were enrolled in Medicare Part B, her FEHBP plan would waive the out of pocket expense because Medicare would be her primary payer. Medicare would pay 80 percent of the Medicare-approved amount and her FEHBP plan would only have to cover 20 percent. If her provider participates in Medicare and accepts the Medicare allowance as payment in full, then she would have no out of pocket expense.

Although having Medicare Part B would save her the coinsurance to receive her physical therapy as prescribed by her doctor, she would still be required to pay the additional Part B premium every month whether or not she was receiving therapy. To control the cost of FEHBP premiums in addition to the cost of Part B, she could opt to reevaluate her FEHBP plan enrollment.

Here are some other tips about enrolling in Part B:

  • If you’re eligible, use TRICARE for Life and suspend FEHBP during retirement. TFL provides “wraparound” coverage when combined with Medicare A and B and also includes a generous prescription drug benefit.
  • Check to see if your FEHBP plan offers a health fund or a Medicare reimbursement account. Some plans provide payments to help offset the cost of Part B.
  • Keep in mind that the majority of your lifetime health care needs may lie ahead of you. It’s more likely you’ll need expensive care in your later years.

FEHBP open season is coming soon. This year’s dates are Nov. 12 to Dec. 10. Open season provides an opportunity to evaluate your health insurance needs and make the best choice of coverage for you and your family.

Request your retirement review with a Federal Retirent Consultant today  

 

Three Percent Retiree COLA Remains Elusive

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Federal, military and Social Security retirees hoping for a minimum 3 percent cost-of-living adjustment in January will have to wait until at least next month to find out if they hit what for many has been the magic mark. That’s because the official inflation rate actually dropped slightly in July.

With two months to go in the inflation-catch-up countdown, the tens of millions who receive civil service benefits, military retired pay or Social Security are currently at the 2.71 percent level. That’s based on the Consumer Price Index-W for the month of July. The June CPI-W was at 2.72 percent.

The slight decrease in living costs from June to July was measured by the Bureau of Labor Statistics, which takes the nation’s inflation and deflation pulse. The actual size of the January 2019 COLA will be based on the rise in living costs from the current third quarter (July, August and September) over the CPI for the same period last year.

People who receive Social Security, military retired pay and those under the old Civil Service Retirement System get the full COLA based on the CPI. The vast majority of current federal retirees are under the old CSRS system.

People under the Federal Employees Retirement System receive diet-COLAs. That is a full increase up to 2 percent, then a reduced increase on anything over that amount.

The White House has proposed that COLAs be eliminated for FERS retirees and reduced slightly for people under the CSRS program. Congress has not acted on that proposal and may not get to it this year.

Retiree COLAs were once set by Congress. But starting in 1975 they were linked to the CPI-W. Many critics think the index doesn’t take into account the higher costs that retirees often incur for medical and health bills.

In January 2018 retirees got a 2 percent COLA. They received only 0.3 percent in 2016; 0 in 2015; 1.7 percent in 2014; 1.5 percent in 2013 and 1.7 percent in 2012. The biggest COLA in recent times came in at 3.6 percent in 2011.

During the high inflation period from the mid-1970s through 1982 retirees received 8 percent in 1975, 6.4 percent the next year, 5.9 percent in 1977; 6.5 percent in 1978; 9.9 percent in 1979; and 14.3 percent in 1981 and 11.2 percent in 1982.

The exact amount of the 2019 retiree COLA won’t be known until mid-October.

USDA

Hundreds of USDA Employees Face a Decision to Relocate or Take a Buyout

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The Agriculture Department has announced it will relocate two major components outside of the Washington, D.C., area, and bring one—the Economic Research Service—directly under the purview of Secretary Sonny Perdue’s office.

The changes will affect most of the 700 employees at the research service and the National Institute of Food and Agriculture. USDA vowed not to involuntarily separate any employee, though most of them will have to relocate to a yet-to-be-determined area. The department will provide relocation assistance and the same base pay to affected workers, though employees could receive a pay cut if the new locality rate is lower than what they currently receive.

Employees who choose not to relocate may receive some financial assistance: USDA is requesting authority from the Office of Personnel Management to offer early retirement or buyouts to those opting not to take a job in the new location.

The department is looking to make the shift relatively quickly, saying it will complete the moves by the end of 2019. It has already issued a “sources sought” solicitation, seeking outside consultants to help select sites. The appropriate vendor will have experience in choosing new locations and transferring “corporate operations to new sites,” the department said. It requested information on the expected timeline for such a relocation, vendors’ prior experiences with similar moves and the typical costs for the consulting services.

USDA cited recent “significant turnover” at the components as necessitating the relocations, as new recruits often come from land-grant universities.

“It has been difficult to recruit employees to the Washington, D.C., area, particularly given the high cost of living and long commutes,” the department said in a statement.

It added that most of USDA’s stakeholders live and work far from the nation’s capital, and the moves would enable employees to work closer to those the department serves. USDA also said the moves would save money, trimming spending on rent, employee compensation and recruiting efforts.

“In our administration, we have looked critically at the way we do business, with the ultimate goal of ensuring the best service possible for our customers, and for the taxpayers of the United States,” Perdue said. “In some cases, this has meant realigning some of our offices and functions, or even relocating them, in order to make more logical sense or provide more streamlined and efficient services.”

He added the moves were in no way a negative reflection on the components’ workforces.

“These changes are more steps down the path to better service to our customers, and will help us fulfill our informal motto to ‘Do right and feed everyone,’ ” the secretary said.

Questioning the Move

In addition to relocating, the Economic Research Service will move to the Office of the Chief Economist within the secretary’s office. The two separated in 1994 as part of USDA reorganization. The research service engages in more general analysis of trends and emerging issues, while the Office of the Chief Economist directly reports to the secretary to investigate the economic impacts of the department’s policies and programs.

The transition has raised eyebrows in the agriculture and statistics communities, with some experts questioning the Trump administration’s motives. The White House proposed slashing the Economic Research Service budget nearly in half in the president’s fiscal 2019 budget. It proposed cutting the National Institute of Food and Agriculture budget a comparatively modest 8 percent.

Forcing employees to choose to relocate or take a buyout could potentially shrink the agencies, and the ERS-OCE merger could also politicize a nonpartisan, statistical enterprise, some fear.

Ricardo Salvador, the director of the Food and Environment Program at the Union of Concerned Scientists, said ERS should not be brought under a political umbrella. The 1994 reorganization, he said, was designed specifically to use the USDA’s chief scientist as a “firewall” against political influence. Employees whose research demonstrates an argument an administration had been putting forward was incorrect, he explained, would be making a “bad career move” to show their findings to a political boss. He noted that political influence over ERS’ predecessor is what led Congress to create the separate agency in 1961.

Outside groups working on agriculture issues have come to rely on ERS employees as a “set of independent, objective analysts,” Salvador said. That status could be jeopardized under the new arrangement.

Steve Lenkart, executive director of the National Federation of Federal Employees, which represents workers in other parts of USDA, called the moved “suspicious.”

“Typically, when a research or scientific function is separated it’s so they can have autonomy in the research that they’re doing,” Lenkart said. USDA is “taking two scientific functions and moving them closer to a political function.” He added the changes amounted to a one-two punch, as moving the economists out of Washington would give them “less visibility.”

Joseph Glauber, however, who served as USDA’s chief economist from 2007 through 2014, said there is merit to bringing the Economic Research Service within the OCE purview.

“It is really important to maintain that independence,” he said, but, “I don’t think the independence is compromised by reporting to a chief economist.” He explained that any secretary he worked with would confirm his office, led by a career employee, provided “objective analysis” and the shift would make ERS employees more responsive to “day-to-day issues.” He cited examples of instances when he presented research to the secretary and the secretary confirmed the accuracy of the data but said he had other factors to consider. Glauber found that process to be executed exactly as it should be executed.

What did not hold up, he said, was the decision to move the department outside of Washington. He agreed the relocation could help long-term recruiting, but argued that it would first raise significant, immediate problems.

“My fear is it will just result in a big loss of personnel,” Glauber said. He added if he were still at USDA, he would “want my economists close by.” ERS employees would miss out on key meetings, he said, and it “just doesn’t make a lot of sense” for future chief economists to have to travel hundreds of miles to visit their new employees.

Salvador agreed, saying USDA was “disincentivizing employees from remaining in ERS.” Coming to Washington is a point of attraction for agriculture scientists and economists, he said, as it enables them access to decision makers. Other USDA offices, such as the Natural Resources Conservation Service and Agricultural Marketing Service, have legitimate reasons to be spread across the country in more rural areas. Economists, statisticians and NIFA employees deciding grant awards benefit from not maintaining “cozy relationship” with department stakeholders, Salvador said.

The announcement marked the second USDA reorganization in the Trump administration. Last year, Perdue announced he was creating a new undersecretary for trade and foreign agricultural affairs and another to focus on farm production and conservation. That shake-up also involved concentrating the secretary’s power, as it eliminated the department’s rural development agencies’ undersecretary and moved those agencies into Perdue’s office.

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Federal Retirement Claims Up Nearly 16 Percent

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The number of federal workers who filed retirement claims with the Office of Personnel Management from January to July is 15.6 percent higher than it was over the same period last year, according to statistics released by the agency Monday.

Between January and July 2017, 59,987 federal employees had filed retirement paperwork with OPM. But over the same period this year, that number increased to 69,340.

Claims may be starting to drop off again. Last month, 8,281 federal workers filed for retirement with OPM, down from 10,070 in July 2017. July typically is one of the busiest months for retirement processing, behind January and February. At the end of July, the backlog of retirement claims climbed to 18,334, an increase of about 130 claims from June and nearly 1,250 over July 2017.

The news of the overall increase in claims for 2018 comes after recent reports that about one in seven federal workers is eligible to retire today, a rate that reaches as high as one in five at a few agencies.

Topping the list of agencies with the highest proportion of feds eligible to retire are the Housing and Urban Development Department, the Environmental Protection Agency and NASA.

Officials at those agencies said they are actively working on succession planning to cope with a potential retirement wave, both focusing on recruitment of new civil servants and retention of employees who are at or nearing retirement age.

At HUD, where nearly one quarter of employees are currently eligible to retire, Secretary Ben Carson has “directed everyone [in leadership] to make the vibrancy and the succession planning of their workforce not only top of mind, but to start really thinking and cooperating together and working very carefully together to make that a reality,” said Suzanne Tufts, assistant secretary of administration, in an interview with Government Executive.

The increase in the number of new retirees from federal service also comes on the heels of a number of agency efforts to offer buyouts and early retirement to workers. Although most of those offered buyouts would have left the government payroll in 2017, a few extended into this year, like those at the Education Department.

July also marked the third straight month where OPM’s backlog of retirement claims has increased. OPM’s goal for pending requests is 13,000, but at 18,334, it is at its highest point since March. In one bright spot, the monthly average processing time for a retirement claim ticked down last month, from 65 days at the end of June to 57 last month.

Before you decide to take a buyout, you should speak to a retirement consultant to make sure it might be right for you.  Schedule to speak with a consultant today.

Who Decides When You Can Afford To Retire?

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What is or should be the deciding factor in when and if you retire?

Are you leaving at the first opportunity? Or are you planning to work extra because you like the job or your coworkers and want to build your annuity? Are you planning a December or January departure to get the best tax break and carry over the maximum amount of annual leave? Does your departure date depend on your spouse, your health or college bills?

Or you may be one of a growing number of nervous-in-the-civil-service folks who plan to beat a hasty retreat and retire before politicians change the rules surrounding the Civil Service Retirement System and Federal Employees Retirement System plans.

For each of the past five to seven years Congress, and now the White House, have presented plans to change the retirement package. Dozens of proposals have come and gone. Last year it appeared at least one, maybe two changes would hit the FERS program. But Congress ran out of steam and did nothing.

There have been so many proposed changes, some of them decades old, that it is hard for people who care to keep track. There is the “high-5” — basing annuities on the employees highest five-year salary average instead of the current “high-3” formula. If enacted most feds would have to work longer to get the same starting annuity.

Other proposals range from using a different index that would reduce future cost of living adjustments for retirees, thus forcing FERS workers to pay an additional 6 percent for benefits that would be reduced when they retired. There is also the plan to eliminate all future COLAs for FERS retirees and to reduce them slightly for people under the FERS program.

Threats to the retirement system have left some people numb or immune to worry. Others worry a lot, and say their Departure day is based on getting out before any changes are made — if that would do any good.

Typical is this email from a reader who describes himself as a federal employee looking to retire this year. The question is whether that will happen Sept. 30 or Dec. 30:

“I would like to know if the president’s plan to change the retirement system from the high-3 to the high-5 formula … is in the fiscal 2019 budget? And if so, is it likely to pass? This information will help me decide which date I should pick.

“Unfortunately, nothing in Washington is easy. Remember Mike, the high-3 to high-5 proposal has been around forever and it hasn’t happened yet. Also it is probably the least financially harmful of all the other proposals.” — Mike S.

So we punted and asked Jessica Klement, the top lobbyist for the National Active and Retired Federal Employees. Most of NARFE’s members are retirees, so protecting the CSRS and FERS programs is at the top of its agenda. So far, working with a coalition of federal and postal unions, and groups representing supervisors, managers and career executives — to good!

Her first suggestion to Mike S., not surprisingly, was to urge him to join NARFE in order to “get answers to these and more questions for the low membership fee of $40 a year.” Then she pointed out that “a change in the retirement calculation will require congressional action” because the president cannot do so unilaterally.

“We recommend that people do not change their retirement plans based on something Congress might do” she said.

So before you decide speak to one of our retirement consultants today.  Schedule your retirement review today!

Senate Passes Pay Raise For Federal Employees

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The Senate passed a package of appropriations for FY19 August 1 that included a 1.9 percent pay increase for federal employees, commensurate with the increase feds received in 2018.

The increase includes a 1.4 percent bump to basic pay, plus another .5 percent boost in locality pay.

The package passed near unanimously on a vote of 92 to 6.

According to National Active and Retired Federal Employees Association President Richard G. Thissen, the Senate bill marks an important step in preventing a federal pay freeze proposed by the Trump administration for 2019.

“Approval of a 1.9 percent pay raise for federal employees begins the process of countering the Administration’s proposed federal pay freeze in 2019. Without Congressional action, federal pay will be kept stagnant by the Trump administration, which has clearly stated its intention to freeze federal pay for calendar year 2019. To keep federal pay at a standstill while the economy and private-sector wages continue to grow is a direct show of contempt for our nation’s middle-class, career civil servants,” said Thissen.

“This pay raise is important to keep federal pay from falling even farther behind that of the private sector. Now, more than ever, competitive federal salaries are sorely needed to confront hiring needs as 40 percent of the current workforce is eligible to retire in the next three years.”

This bill would mark the sixth consecutive pay raise since federal employee compensation was frozen between 2010 and 2013.

The bill will now move into reconciliation with the House appropriations bill, where the two bodies will iron out differences between the two versions before it can be sent to the president for signature.

To learn more of how this pay raise could affect your pension, high-three average, FEGLI Life Insurance Cost, Request your retirement Review today to learn more.

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.
Need more information, Visit our Contact Us page to request your free retirement review.

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

By | Benefits, Retirement | One Comment

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.

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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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1.9 Percent Civilian Pay Raise Survives Committee Vote, Now Heading to Full Senate

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The Senate Appropriations Committee on Thursday unanimously advanced a fiscal 2019 spending bill that contains a 1.9 percent pay raise for civilian federal employees, going against President Trump’s proposed pay freeze for next year.

Committee members voted down 29-2 a Republican amendment to strip the pay increase from the Financial Services and General Government Appropriations bill, which will now head to the full Senate. Ranking member Sen. Chris Van Hollen, D-Md., applauded the panel for preserving the small raise.

“Our federal workforce protects our nation, ensures the safety of our food and medicine, delivers Social Security and veterans’ benefits, and carries out countless other responsibilities on behalf of our citizens. Yet instead of treating them like the dedicated and hardworking professionals that they are, the Trump Administration constantly attacks them,” Van Hollen said in a statement. “I was proud to work with my colleagues on both sides of the aisle to secure this modest raise, and I will keep fighting to ensure our federal employees receive the compensation and respect they deserve.”

The House Appropriations Committee did not include any provisions on federal employee pay in its version of the general government spending bill, which effectively endorses the White House plan for a freeze released as part of President Trump’s 2019 budget request. Neither House nor Senate appropriators have acted to advance the Trump administration’s proposed $1 billion interagency workforce fund, pitched by officials at the Office of Management and Budget and the Office of Personnel Management as a way to fund pilot programs that institute pay for performance.

The proposal to raise civilian pay by 1.9 percent falls short of the White House’s pay recommendation for members of the military, which sits at 2.4 percent in 2019. Members of Congress traditionally have pushed for parity in compensation increases for the civilian and military workforces, although they were unsuccessful in enacting pay parity last year.

Some members of Congress also signed onto a bill earlier this year that would provide a 3 percent across-the-board raise for civilian federal employees. Van Hollen said he supports that measure as well.

Now some other key information on how this would affect your pension if you would retire by the end of October.  Schedule your Personalized Federal Retirement Review so that we can explain how this will impact you.

White House Plan for the United States Postal Service – Fix It Then Make It Private

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The Trump administration on Thursday called for the privatization of the U.S. Postal Service, an agency with 600,000 federal employees and whose creation was codified by the Constitution.

The White House made the proposal in its wide-ranging plan to reorganize the federal government. Privatizing the postal service was among 32 distinct ideas it said would help agencies run more efficiently. It first called for reforms to the Postal Service that would create a more sustainable business model, but those changes would be made only for leverage to then sell the entire agency to the private sector. The proposal comes as a task force created by President Trump is working on a series of reforms to put USPS on firmer financial footing, which it will deliver in a report by Aug. 10.

USPS is continuing to expand its delivery network despite a significant decline in mail volume, the administration said, and can “no longer support he obligations created by its enormous infrastructure and personnel requirements.” The mailing agency is required by law to offer its services to every address in the country and has reported losses of more than $1 billion for 11 consecutive years.

“A privatized Postal Service would have a substantially lower cost structure, be able to adapt to changing customer needs and make business decisions free from political interference, and have access to private capital markets to fund operational improvements without burdening taxpayers,” the White House said. “The private operation would be incentivized to innovate and improve services to Americans in every community.”

USPS is caught between its requirement to operate like a business with “the expenses and political oversight of a public agency,” the administration said. Major savings would stem from not just reducing services and more pricing flexibility, but by freeing the agency to “more fully negotiate pay and benefits.” The Postal Service currently negotiates pay and cost-sharing of benefits with labor unions, but is required to participate in federal health care and retirement programs. Its prices are capped and approved by an oversight body, the Postal Regulatory Commission, which the White House suggested could still exist under a privatization model.

Another advantage of a private postal system, the administration said, would be access to private capital. The Postal Service does not currently receive any federal appropriations, aside from money the government spends for specific services.

Privatization could occur either through an initial public offering or a sale to an existing company, the White House said.

It said the reforms proposed by the task force Trump created would be implemented to stabilize the agency and better prepare it for its defederalization. That group has been meeting with stakeholders throughout the postal community for the last several weeks as it readies its recommendations.

The proposal is unlikely to gain any traction in Congress, which is currently working through its own reform packages to help the cash-strapped agency. Lawmakers on both sides of the aisle have spoken to the importance of preserving a federal mailing system to ensure delivery to all Americans, even to areas that the private sector has decided is not profitable to service. Members of Congress representing rural areas have particularly pushed not just the preservation of the Postal Service but an expansion of its offerings.

Lawmakers have not shown an appetite for reducing postal services, let alone privatizing the agency, intervening on a bipartisan basis in recent efforts by the agency to reduce the number of post offices, cut the number of delivery days and consolidate processing plants. The opposition to the proposal was broad and swift.

The National Association of Letter Carriers said the proposal has rendered Trump’s task force effectively moot and ignores the interests of every postal stakeholder aside from private shippers. NALC, along with the other major postal unions, has met with the task force and submitted its ideas for putting USPS on a better path.

“Now that we know that this administration and its Task Force will make recommendations on reforms to achieve OMB’s privatization goals, NALC will work tirelessly with other stakeholders and Congress to oppose this faulty privatization plan every step of the way to preserve this public service,” said NALC President Fredric Rolando.

Art Sackler, who heads the Coalition for a 21st Century Postal Service, a group of large-scale mailers such as Amazon, eBay and the Parcel Shippers Association, said his members were “very, very concerned about the Trump administration’s proposal.

“From our standpoint, privatization is not the answer,” Sackler said. Such a move would “sow confusion” and actually make matters worse for the Postal Service, he explained, by leading to further declines in mail volume. He added that rural communities would be particularly harmed: “No private company is going to want to undertake the level of commitment financially and other ways to really service those areas in the way the Postal Service serves them now as a vital link to the rest of the country.”

The coalition has signed onto legislative efforts underway in Congress, different iterations of which have bipartisan support in both chambers. Sackler called the White House’s efforts to deviate from those compromise plans “frustrating, but not surprising.”

Mark Dimondstein, president of the American Postal Workers Union, said the plan was marked by misinformation.

“Privatizing the Postal Service is not in the public interest and would be nothing more than a raid by corporate pirates on a national treasure,” Dimondstein said.

Unions Seek Court Action to Block Trump Orders

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Unions Seek Court Action to Block Trump Orders

On May 25, 2018, President Trump signed three executive orders on federal employee disciplinary and labor-management policies. In the aftermath of the signing, there was a huge uproar from every nook of the federal employment sector. This week, two employee unions, NTEU and AFGE, went to court to challenge the first two orders.

The first executive order came as no big surprise as The Trump administration has always made it a priority to make it easier for federal agencies to fire underperforming employees. More specifically, the order would significantly reduce the time a worker under investigation for underperformance or misconduct could spend on probation.

The second order slaps unions right in the face. It looks to limit official time use on union matters such as negotiating contracts, settling disputes, and whatnot. In essence, the order states that a federal worker should spend at least 75% of his or her official time doing government work. Currently, Civil Service Reform Act (CSRA) of 1978 offers protection on the use of official time.

According to the Act, the official time use is often up to the negotiations between the relevant agency and unions. That’s where the third executive order comes in. It looks to place the responsibility of renegotiation of official time use with OMB office within the White House.

Challenging the Orders

In what could be the onset on a long-standing court battle, American Federation of Government Employees (AFGE) and National Treasury Employee Union (NTEU) have filed suits against the first two orders in separate federal courts.

Both NTEU and AFGE want the courts to block The Trump’s administration plan to limit the use of official time on conducting union roles to a minimum of 25 percent. In the order, the federal agencies would target in negotiations to permit only one hour per bargaining unit employee per year. And to make matters worse, the use of official time would be subject to the approval of Office of Management and Budget.

National Treasury Employee Union, on its own, filed another suit in the federal district court against the first executive order on federal employee disciplinary process. In its statement, NTEU asserts that limiting the amount of time for an employee to show improvement to no more than 30 days denies every employee the “[fair] opportunity” to demonstrate “acceptable performance” that is guaranteed under the Civil Service Reform Act of 1978.

Whether they’ll overturn the orders remains to be seen. What’s surefire, however, is that it’ll be a lengthy, rocky lawsuit.

OPM Lays Out Proposed Cuts to Federal Retirement Benefits

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Office of Personnel Management (OPM) Lays Out Proposed Cuts to Federal Retirement Benefits

In the wake of Office of Personnel Management Director Jeff Pon has proposed changes to federal employees’ retirement benefits to more align them with that of the private sector.

In a letter to House Speaker Paul Ryan (R-Wis.), Pon proposed four main changes to federal employee retirement benefits that will affect 2.6 million federal retirees and survivors who receive monthly annuity payments:

1) Eliminate the Federal Employees’ Retirement System annuity supplements for new retirees and survivor annuitants;

2) Increase the Civil Service Retirement System and FERS average pay period to five years from three years;

3) Increase FERS employees’ contribution to their retirement to one percent each year until they reach 7.25 percent of basic pay; and

4) Reduce or eliminate retirement cost-of-living adjustments.

The agency expects to save an estimated $143 billion over ten years if all four proposes are enacted.

“The Office of Management and Budget (OMB) has advised there is no objection to the transmittal of these legislative proposals to the Congress and that their enactment would be in accord with the program of the president,” Pon said in the letter.

He asked that Congress give “prompt and favorable” consideration of the proposals.

To learn more, please schedule your free retirement review or contact us today.

Why Going Fed Was Possibly the Best Decision You’ve Ever Made

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You’d be forgiven if you wish you could ditch the feds for the private sector. After all, you have seen how those executives, hedge fund managers, big-time lawyers, and lobbyists live it large with their stately homes in leafy suburbs. Perhaps you are wishing had you switched careers, that could be you.

The chances are that you have heard about your college mates having it good. Talk about big end-year bonuses, stock options, and profit-sharing deals. After all, you are no different. You went to the same college, took similar courses, and graduated the same year.

You are probably wondering: “with my drive, talent, and skills, I could be better off in the private sector.” The truth of the matter is that you are probably not.

That’s right. If you thought you’d do much better outside of the federal sector, think again. At least, that’s what a recent study by the FRB (Federal Reserve Board) has confirmed. What’s more interesting is that more than 12,000 non-fed American employees took part in the study involving a series of surveys and polls.

An incisive look at the study shows that life outside of federal sector isn’t a bed rose:
Approximately 30 percent of adults surveyed indicated that they don’t have a steady income every month. What’s more worrying is that most of them claim that they cannot cover their monthly expenses with their paycheck. Still think your paycheck and federal retirement benefits are not good enough?

Nearly 37 percent of adults responding to the polls said that they don’t have any retirement benefit plan such as IRA, 401K, etc. What a wake-up call, right? As a fed, you can always count on your federal retirement benefits to take care of you in your retirement.

A further 25 percent of participants said that they have neglected medical care because they simply could not afford dental care for their children.

40 percent of those polled indicated that they don’t have sufficient money reserve in their bank accounts or elsewhere. That means 40 percent of Americans working in the private sector don’t have enough cash to pay for emergencies like car repair bill, sudden medical expenses, etc.

Think for a second. With robust federal retirement benefits, the TSP’s 5% match, health coverage when you’re in service and retired, and more, staying in the fed fold is perhaps the best decision you have ever made.

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Will You Make It On A Flatline Pension

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Will You Make it on a Flatline Pension?

Let’s get one thing straight right off the bat, the average life expectancy among American fed retirees is now at a historic high. Thanks to tremendous advancement in health & personal care services, federal retirement benefits, and investment in medical research, it’s not surprising that most of them will live well beyond their mid-80s, if not their 90s. In fact, according to a recent study from School of Gerontology at USC Leonard Davis, if you retire at 65, you can expect to live until the age of 86+.

Interestingly, another study shows that some of the retired Americans today spend more time in retirement than they did in their employment years. So, no matter how you look at it, the chances are that you’ll live longer than your parents or grandparents. That in and of itself can be a blessing or a curse to you depending on your federal retirement benefits. If your income stays steady with inflation over time, that’s well and good. If it doesn’t, you are in for long, bumpy ride.

Trump’s Flatline Retirement

For a long time, FERS retirees have had it good. They’ve lived reasonably comfy lives after giving their best years to serving Uncle Sam. Thanks to Cost of Living Adjustment (COLA) program, the feds retiring would establish a standard of living and make sure it keeps up with year-over-year inflation.

You see, with inflation catch-ups, fed retirees can comfortably make do with income from their federal retirement benefits, especially during periods of high inflations. But, that’s about to change – for the worst! Just recently, President Trump signed a set of three orders, one of which will see the elimination of COLA for ongoing and future feds retiring under FERS.

What does that mean for current federal workers? That means no inflation protection. If you go into retirement on a $1,560/month take-home in 2018, you’d still expect to receive $1,560 every month in 2028. That’s the pinch of a flat-lined retirement you’re looking at if The Trump administration’s proposed legislation goes into effect.

Unlike folks under FERS, those retiring under CSRS would still get cost of living adjustments. However, their COLAs will be set at 0.5% below the actual inflation rise. That means the value of the Civil Service Retirement System annuity will shrink every other year.

Elimination of FERS Supplement

And that isn’t the only bad news contained in the White House’s plan. If you are also planning to retire before the age of 62, you can kiss goodbye to your take-home pay. The elimination of the so-called FERS supplement will deal a massive blow to fed workers such as the police, firefighters, and air traffic controllers who are required by the law to retire by 57.

To learn more about your Federal Retirement Benefits, please request your personalized retirement review today.