Federal Employees Continue to Retire in Greater Numbers Than in Previous Years

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Federal employees continue to file for retirement at an increased pace compared with recent years, continuing a trend that began more than a year ago.

According to statistics from the Office of Personnel Management, 7,510 federal workers filed for retirement in November. That figure is a 34 percent increase over the same month in 2017, when 5,572 employees retired.

In October, the number of retirement requests increased as well, although only slightly. That month, 9,012 federal employees filed for retirement, compared with 8,850 for the same period last year.

Statistics for the last two months suggest a continuation of the trend where increasing numbers of workers are leaving the civil service. Over the course of fiscal 2018, which ended on Sept. 30, retirements were up 24 percent from the previous year.

Federal workforce observers have long predicted a retirement wave. Currently, 14 percent of federal workers are eligible to retire, according to a July report, and that number is expected to increase to 30 percent within five years.

Despite the rising retirement numbers, OPM has for the most part kept the backlog of pending claims in check. Last month, the agency processed far more claims (8,077) than it did the previous November (5,138) or the previous month (6,911).

The existing backlog at the end of November was 19,162, a decrease from 19,729 in October. That is also below the total of 19,294 a year ago.

Now, the agency will prepare for the annual spike of retirements that occurs in January. At the beginning of 2018, OPM received 14,590 new claims, and the backlog peaked at 24,225 pending claims the following month.

If you are in need of assistance, let us help you prepare your retirement package for you after a complete Federal Retirement Review.  Contact Us Today.

Expanding Veterans Preference

On the policy front, OPM on Thursday published a rule in the Federal Register that expands who is eligible to be hired by the federal government under veterans’ preference standards.

The rule implements a provision of the 2015 Gold Star Fathers Act, which allows parents of a veteran who died overseas or is permanently disabled to be eligible for veterans’ preference hiring standards at federal agencies, provided the parent is unmarried, separated from their spouse, or if their spouse is also permanently disabled.

This measure permanently implements an interim rule issued by OPM in December 2016, although the language of that rule was partially altered to refer to parents, rather than “mothers.”

Some Secrets To A Financially Secure Retirement

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What is the best way to ensure a comfortable and enjoyable retirement? This week, I thought I’d share some observations I’ve made over the years about employees who end up with the same (and sometimes even greater) income during their retirement years than while they were employed.

These folks have been planning for retirement throughout the beginning, middle and pre-retirement stages of the federal careers. I sometimes meet employees who tell me they remember me from a retirement planning class they attended 20 years ago.

For those covered under the Federal Employees Retirement System, the Thrift Savings Plan has played an important role. These people have learned how to invest for the long term and what it means to diversify their investments among the G, C, F, S, and I Funds—or used the L Funds to automatically shift their investments as their careers progress. They have learned to tolerate a certain level of risk in order to obtain maximum results by not reacting emotionally to swings in market conditions.

FERS employees who have successfully leveraged their TSP accounts tend to have several things in common:

  • Those in higher income brackets are saving the maximum in their TSP accounts. The maximum employee contribution for 2019 is $19,000 plus an additional $6,000 in catch-up contributions if you’re turning 50 or are already older than 50.
  • Those in lower income brackets are living with little or no consumer debt and have saved a minimum of 5 percent of their salary in the TSP.
  • In general, they haven’t borrowed from their TSP account—or if they have, they didn’t stop contributing while repaying their loan balance.

The TSP was designed to be an integral part of FERS, but many employees under the Civil Service Retirement System also have taken advantage of participating in the plan and putting away savings on a pre-tax basis. They now have a significant nest egg for retirement.

Successful planners who are married have considered the “what-if” situations about the future. For example:

  • They weigh the value and cost of the spousal survivor benefit election. This causes a reduction in your CSRS or FERS retirement of about 10 percent, but it can mean the difference between financial security and uncertainty for a surviving spouse.
  • They consider that a delay in claiming Social Security may be more important to a future surviving spouse than to a couple’s short-term need for income. You may have other options than taking Social Security as soon as you can: delaying retirement, taking larger TSP distributions while waiting to claim Social Security, or embarking on a second career for a few years after your retirement from government. The difference between claiming at age 62 and waiting until age 70 is a benefit that is about 75 percent larger for the rest of your life and possibly later to the life of your surviving spouse.
  • They’re wary of using life insurance as a substitute for a survivor benefit. Life insurance is very expensive to continue as a substitute for a survivor’s annuity. Life insurance also doesn’t carry a cost of living adjustment or a guaranteed lifetime payment stream. And life insurance is not protected under the spouse equity provisions of the law, so it can be canceled without spousal consent.

Single people who have successfully planned for retirement have considered the amount of income they will need for a retirement that could potentially last longer than their career. This means both adequate retirement savings and thinking about such considerations as the potential need for long-term care.

If you’re a single woman, you may have a longer life expectancy than your male counterparts, and you also may have had lower lifetime earnings. This could translate into a need to save diligently for retirement and become a savvy investor. You need to put yourself first to ensure your financial independence before helping others.

Those who have successfully managed the retirement preparation process have another thing in common: They’re realistic. They, may, for example, limit the financial assistance they provide to their children in retirement to protect their savings. And some of them find that working a little longer than they anticipated eases the future financial strain. Sometimes following the path to a comfortable retirement involves some hard choices.

Which ever category you may fall in, its always best to ask a Federal Benefits Consultant how you are doing and let us help guide you to make sure you are maximizing all of your resources properly. Request your Free Consultation today. 

TSP Finally Unveils Plans for Expanding TSP Withdrawal Options

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The Thrift Savings Plan has until November to implement the 2017 TSP Modernization Act. That law will allow federal employees and retirees to make multiple age-based withdrawals from their TSP accounts and remain eligible for partial withdrawals after they leave government. Additionally, those who have left government would be able to make multiple partial post-separation withdrawals, and retirees will be able to change the amount and frequency of their annuity at any time, instead of only once per year.

Tanner Nohe, a project manager for the TSP, said the agency plans to have the law fully implemented by mid-September 2019. The project has caused officials to go beyond simply adding the functionality needed to implement the new law and instead “make some fundamental changes” to how withdrawals work, he said.

Under the new system, participants will no longer be forced to make a full withdrawal election—a choice between setting up annuity payments, taking a partial lump sum withdrawal, or a full lump sum payment—when they reach 70 and a half years old. That change will be retroactive, officials said.

“People on installment payments now, and [next year] they can come back and say, ‘I want to stop taking installments for a while,’” said Tee Ramos, director of participant services.

Nohe said his team is coming up with three new forms to help participants make use of the new flexibilities, including one that allows participants to change the amount and frequency of their annuity payments at any time. The agency is also doing away with a policy that suspends a participants’ contributions to their TSP accounts for six months if they take a hardship withdrawal.

“You can change your monthly installment payments currently only during [a fall open season period],” Nohe said. “But in the future, you can choose between monthly, quarterly and annual installment payments, and changes can be made to that at any time during the year.”

TSP officials said they plan not only to provide new flexibilities to participants, but make it easier to make use of those flexibilities. Nohe touted the fact that there will be four new “wizards” on the TSP website to help federal employees and retirees go through the various new processes.

“Right now, our wizards are just form fillers, but [next year], they will be more dynamic,” he said. “It can tell what’s in your account, and ask if you want to take [withdrawals] out of your Roth distribution or your traditional account. It’ll understand what you have so it can suggest what distribution you can take . . . It will take you from start to finish in your withdrawal.”

The first phase of implementation, focused on installment payment maintenance and removal of the withdrawal selection deadline, is slated to go into testing within the next two weeks, Nohe said. The public rollout of the new features is slated to occur on Sept. 15, although TSP officials will begin communicating with participants about the coming changes next February.

»To get the best federal retirement assistance and ideas about your benefits, request your free Federal Retirement Review.

Choices You Have During Open Enrollment Season

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There are a few ways to simplify the open season chore so it doesn’t become an overwhelming task. There are tools on the Office of Personnel Management website you can use to understand your options, identify your needs and narrow your choices to the best plan at the best price for you and your family. These include both an OPM-generated plan comparison tool and a link to the Consumer’s Checkbook Guide to Health Plans for Federal Employees. Many agencies pay for employees to have access to this tool.

To make the best use of any of these tools, it helps to know the meaning of key terms in the health insurance world. Let’s look at some of the most important.

Deductible: The amount you must pay before your insurance plan will pay a claim. In most cases, when you use network providers, you will not have to pay a deductible for preventive care services.

Copayment: The amount you’ll pay for your share of health care services or prescription drugs.

Coinsurance: The percentage amount you’ll pay for covered health care services or prescription drugs.

Catastrophic Limit: The most you will pay out of pocket for covered health care services and prescription drugs. Most plans have a higher catastrophic limit when you use out of network providers or facilities. Not all expenses are included in this limit.

Preferred Provider Organization: A network made up of health care providers who have agreed to provide covered services at reduced cost. You can find a provider list on your plan’s website. PPO networks are more extensive in some areas than in others.

Participating Providers: To complicate matters, some local plans also contract with other providers that are not in their PPO network. They are referred to as participating providers or member facilities. They have agreed to accept a different negotiated amount than PPO providers as payment in full. They will also generally file your claims for you.

Fee-for-Service Plans: Also known as indemnity plans, all of these in the Federal Employees Health Benefits Program have PPO networks. When you visit a PPO you usually won’t have to file claims or paperwork. When you use non-PPO providers, you may have to file your claims with your plan. The plan will then pay the benefits to you and you must pay the provider. When you need medical attention, you visit the doctor or hospital of your choice. This approach may be more expensive for you and require extra paperwork. To choose the best FFS plan for you and your family, it is a good idea to pay attention to the PPO network providers and facilities to make sure they are located conveniently for you and your family members.

Health Maintenance Organization: Members of an HMO are required to choose a primary care physician to take care of most of their health care needs. With many HMO plans, you will need a referral to see a specialist unless the plan offers open access. There are many HMO plans in FEHBP that offer a wide range of health care services through a network of regional providers who agree to supply services to members. The drawback to most HMO plans is you have no coverage for services when you use out of network providers. HMOs have the reputation of being more restrictive than traditional fee for service plans, but don’t rule out an HMO as an option. Many have qualities that make them more flexible and operate more like fee for service plans than you might imagine.

Point-of-Service Benefits: This refers to covered services you can receive from an out-of-network provider. But beware: You might have higher out-of-pocket costs than you would from in-network providers.

Consumer Driven Health Plan: These plans offer a savings account to pay your initial health care costs before you incur out of pocket expenses. They have a higher deductible than a typical FFS or HMO plan. These plans allow you to establish separate flexible spending accounts to cover your deductibles, copayments and coinsurance costs once you have exhausted the money in your health fund. They generally have lower premiums and can be a wise choice for those in good health.

High Deductible Health Plan: This is a type of a CDHP that has a high deductible and includes either a health savings account or a health reimbursement account to help cover your out of pocket expenses. HDHPs in FEHBP provide a “premium pass through,” meaning the plan will contribute a portion of the premium to your HSA or credit your HRA account. This is similar to the health fund or medical account associated with CDHPs, but if you choose not to use the money in the account, it can stay there for use in future years.

Health Savings Account: This is a place to put away money for health care expenses under an HDHP. You can contribute tax-free dollars to your HSA in addition to receiving contributions from your health plan through a premium pass through.

Health Reimbursement Arrangement: Like an HSA, an HRA is an employer-funded tax-sheltered fund to reimburse allowable medical expenses for those enrolled in an HDHP. But you can’t contribute additional tax-free dollars to an HRA. OPM has additional information on how HRAs work.

Flexible Spending Account: A Health Care FSA is used to pay for eligible medical, dental, and vision care expenses that aren’t covered by your health plan or elsewhere. A Dependent Care FSA is used to pay for eligible dependent care services. The money you contribute to an FSA is not subject to payroll taxes. Retirees are not eligible for FSAs.

Limited Expense Flexible Spending Account: If you’re enrolled in a high-deductible health plan and have an HSA, you’re eligible for this type of account, which can be used to cover eligible out of pocket dental and vision expenses.

Dental and Vision Plans: If you think you are paying to much for your Dental and Vision plan, you probably are.  On the average most will spend anywhere from $450-$600 per month for a dental/vision plan, but did you know their are some plans out there that would cost you $185-$229 per year for some really great benefits?

To request more information about any of the topics we talked about or to help you plan for retirement, please Contact us today to schedule your free consultation.

CSRS Offset and Social Security Calculating Your Pension

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Over the last few years, I have been getting more and more questions about CSRS Offset and its relationship to certain Social Security rules, such as the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). This uptick in questions is likely because those who fall under CSRS Offset are at the cusp of retirement.

This article is written for those who fall under the CSRS Offset system. Others may find it interesting, if not applicable to their specific situation.

A person is covered under CSRS Offset if they:

  • Had five or more years of creditable civilian service as of 12/31/1986 (the day before FERS).
  • Had a break in service of over 365 days.
  • Were rehired following a break in service at any time after 12/31/1983 (the day before all newly hired federal employees must have been covered by Social Security).

Individuals under CSRS who fit the above definition should have been given a choice of electing FERS or choosing CSRS Offset upon their return to federal service. CSRS Offset employees, like FERS employees, must have Social Security taken out of their federal salary. When a CSRS Offset person retires, they get a regular CSRS pension until they reach the age of 62. At age 62, their CSRS pension is reduced (offset) by the value of the Social Security that they earned while covered under CSRS Offset. If they retire at age 62 or over, the offset takes place immediately upon their retirement.

The offset will take place even if they choose not to apply for their Social Security.

The reduction is determined in all but a few situations by dividing the number of years of CSRS Offset service by 40 and applying the resulting fraction to one’s age 62 Social Security benefit.

Debbie is a CSRS Offset retiree who, when she retired, had 20 years of CSRS Offset service. She is receiving a CSRS pension of $60,000 per year. Her Social Security benefit at age 62 will be $12,000 per year. Here is how the offset to her pension will be calculated:

  • The 20 years of CSRS Offset service is divided by 40, giving a fraction of ½ (50%).
  • The reduction to Debbie’s CSRS pension is 50% of her Social Security benefit, or $6,000 per year. This reduces her pension to $54,000 per year.
  • Assuming Debbie applies for her Social Security at age 62, she will receive the entire $12,000 per year Social Security benefit.
  • Debbie’s benefit will consist of her reduced CSRS pension ($54,000 per year) and her Social Security ($12,000 per year) for a total of $66,000 per year.
  • Debbie, like most CSRS Offset retirees will receive more money at age 62 if she applies for her Social Security

In the example above, Debbie had 20 years of CSRS Offset service where Social Security was being taken out of her federal salary. This fact may result in her Social Security being subject to a reduction from the Windfall Elimination Provision.

The Social Security System has a need-related twist in the computation formula that is designed to replace a much greater portion of a low wage earner’s income than that of the high wage earner.

CSRS employees, and others who have earned a retirement benefit based on work that was not covered by Social Security, are likely to have many years in their Social Security earnings record where they had little or no employment covered by Social Security. They would look like a low wage earner to the Social Security system, even though they had been working at a good job and earning a pension the entire time.

Debbie, in our previous example, had at least ten years of CSRS coverage where she was not having Social Security taken from her federal salary. Unless she has at least 30 years of “substantial earnings” in Social Security covered employment, her Social Security benefit will be reduced by the WEP.

Social Security benefits are based on your lifetime earnings. The following is how they are computed in 2016.

  • Your lifetime earnings are indexed for inflation.
  • The highest 35 inflation indexed years are added together.
  • The total is divided by 420 (the number of months in 35 years) to arrive at average indexed monthly earnings (AIME)
  • AIME is multiplied by:
    • 90% x the first $856
    • 32% x $857 to $5157
    • 15% of the amount over $5157

If you are affected by the WEP, the multiplication factor for the first “bend point” above will be less than 90%. How much it is reduced depends on how many years of substantial earnings you have under Social Security. If you have 20 or fewer years of substantial earnings (like Karen) your benefit will be computed using a 40% factor. For years over 20, the factor increases by 5% a year until it reaches the full 90% after 30 years. This Social Security Factsheet on the WEP has a chart on what constitutes substantial earnings.

At the time this article was written, Social Security had not updated the publication for 2016. Due to the fact that there was no COLA on Social Security benefits for 2016, there was no increase in the amount that is considered substantial earnings.

Your Social Security Statement does not take the WEP into account. There is a WEP calculator on the Social Security website that can be used to determine how (or if) the WEP affects your Social Security.

Back to Debbie and her situation. We’ll assume that the 20 years of CSRS Offset service she has are her only years of substantial earnings under Social Security and that she is fully affected by the WEP. The $12,000 per year estimated age 62 benefit from her Social Security Statement will not be what she is entitled to receive because of the effect of the WEP. The maximum reduction that the WEP can cause is $5,136 per year. As Debbie will, unfortunately, be subject to the maximum reduction, her annual Social Security benefit will be reduced to $6,864 per year. In calculating her Offset (under the CSRS Offset retirement system) the WEP is applied first and then the Offset is applied. Here’s a re-calculation of her benefits using a Social Security benefit that is reduced by the application of the WEP.

  • The 20 years of CSRS Offset service is divided by 40, giving a fraction of ½ (50%).
  • The reduction to Debbie’s CSRS pension is 50% of her Social Security benefit, or $3,432 per year. This reduces her pension to $56,568 per year.
  • Assuming Debbie applies for her Social Security at age 62, she will receive the entire $6,864 per year Social Security benefit.
  • Debbie’s benefit will consist of her reduced CSRS pension ($56,568 per year) and her Social Security ($6,864 per year) for a total of $63,432 per year.
  • She still comes out ahead.

It is unlikely that the Government Pension Offset will affect Debbie (or most CSRS Offset employees for that matter). The GPO reduces (usually eliminates) any Social Security benefits to which you would be entitled based on the earnings of another (i. e., spousal or survivor benefits). CSRS Offset retirees are exempt from the GPO once they have spent five years covered by CSRS Offset.

TSP Funds Took a Nosedive in October

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Nearly all of the funds in the federal government’s 401(k)-style retirement savings program tumbled last month, mirroring a month of volatility in the financial markets.

The Thrift Savings Plan’s G Fund, which is made up of government securities, was the only portfolio in the black in October, gaining 0.26 percent. That brings its total 2018 earnings to 2.38 percent.

The S Fund, composed of small- and mid-size businesses, lost the most value last month, falling 10.06 percent. That brought the portfolio 0.30 percent into the negative since January. The international stocks of the I Fund fell 7.94 percent in October, bringing its 2018 losses to 8.92 percent.

The common stocks of the C Fund lost 6.84 percent last month, although the fund remains 2.98 percent in the black for 2018. And the fixed income (F) Fund fell 0.78 percent in October, bringing its losses so far this year to 2.26 percent.

All of the lifecycle (L) funds, which shift investments into more stable portfolios as participants get closer to retirement, lost value last month. The L Income Fund, for those who have already started withdrawing money, lost 1.40 percent; L 2020, 2.24 percent; L 2030, 4.60 percent; L 2040, 5.54 percent; and L 2050, 6.35 percent.

Since January, the L Income Fund has grown 1.52 percent; L 2020, 1.21 percent; and L 2030, 0.12 percent. The L 2040 Fund has fallen 0.35 percent this year, and the L 2050 is down 0.74 percent.

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Federal Officers Association Asks OPM to Roll Back 2016 Annuity Change

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A group representing the federal law enforcement community last week sent a letter to acting OPM Director Margaret Weichert asking her to roll back an Obama administration decision to change how payments to divorced retirees are distributed to them and their former spouses.

The Federal Law Enforcement Officers Association, which represents more than 27,000 federal law enforcement professionals across 65 agencies, blasted a 2016 OPM decision to grant a “marital share” of the Federal Employees Retirement System Retiree Annuity Supplement to a retiree’s ex-spouse if the retiree is subject to a state divorce decree. Before that decision, the agency would only grant that share based on the basic annuity.

The retiree annuity supplement is the money that is paid to retirees who are not yet eligible for Social Security, which kicks in at age 62. Many law enforcement positions force officers to retire at 57. For decades, the supplement was not subject to a court-ordered marital share because OPM considered it to be a Social Security-type benefit, and thus not part of a divorce agreement.

“This policy change constituted an unwarranted reinterpretation of a 30-year old provision of the FERS statute and, more importantly, has caused real financial harm to federal law enforcement and other retirees for the more than two years that it has been enforced by the agency,” wrote association National President Nathan Catura.

In addition, the association said that OPM has applied the policy retroactively, leading to many officers suddenly owing money to the government to send to former spouses.

“[In] the more than two years since it implemented this revised policy, OPM has applied its reinterpretation retroactively and with little to no regard for the financial harm it has inflicted on retirees,” Catura wrote. “It has created individual retiree debts due to the federal government of as much as $28,389.96 (that we are aware of)—debts for which OPM has sought repayment in the form of prospective and retrospective assessments from annuitants’ retirement benefits.”

The decision to apply marital share to the annuity supplement has drawn criticism from both Congress and an agency watchdog. Sen. James Lankford, R-Okla., wrote in May that the policy change could constitute a violation of the Administrative Procedures Act, and the OPM Inspector General issued a report in February questioning the manner in which the policy was changed outside of the traditional rule-making process.

“OPM did not provide any public notice that it now considers the annuity supplement to be allocable and that, as a result, OPM will now apply the state court-ordered marital share to the annuity supplement, even when the state court order refers to the basic annuity only,” the IG wrote. “[OPM’s] new policy has been causing immediate financial disruption to annuitants. Moreover, OPM’s new policy improperly changes previously litigated final state court orders without notice to annuitants.”

OPM did not respond to a request for comment, but it disagreed with each of the findings of the IG report and suggested the report could jeopardize pending cases before the Merit Systems Protections Board. In April, the MSPB overturned a decision in which OPM sought to collect $24,000 in debt from a retired air traffic controller related to the policy change.

“As Sen. Lankford, the OIG, and MSPB have concluded, this policy change was implemented in a clandestine fashion without any regard for the court-ordered and previously-litigated provisions of the specific divorce settlements of affected retirees,” Catura wrote. “Instead, retirees and their former spouses only learned of OPM’s actions when their annuity payments changed, in some cases years after the parties had divorced and a state court had ordered a former spouse’s marital share.”

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Federal Retirees to Receive BIGGEST COLA Boost in Years

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Federal retirees will receive a cost-of-living adjustment of 2.8 percent in their benefits next year, the largest increase in more than a decade.

The boost—which applies more broadly to recipients of Social Security benefits—comes on top of a 2 percent boost in 2018. That increase came after a couple of years of very low percentage COLAs. The 2017 increase was only 0.3 percent.

The annual COLA is based on the percentage increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year over the average CPI-W for the third quarter of the last year in which a COLA became effective.

The 2.8 percent increase applies to retirees under the Civil Service Retirement System. Those under the Federal Employees Retirement System will receive 2 percent. FERS employees only receive the full percentage increase if it is less than 2 percent. If the change is 2 percent to 3 percent, FERS retirees get 2 percent. And if the increase is 3 percent or higher, FERS retirees receive 1 percentage point less than the full increase.

“CSRS retirees and Social Security recipients will be pleased to see their benefits increase by 2.8 percent in 2019, the largest increase since 2012,” said Richard Thissen, president of the National Active and Retired Federal Employees Association. “Unfortunately, hundreds of thousands of FERS retirees will be wondering why they are only receiving a 2 percent COLA when the relevant measure of consumer prices increased by 2.8 percent.”

“It is past time for Congress to ensure FERS retirees receive a full COLA each year,” Thissen added.

Tony Reardon, president of the National Treasury Employees Union, said, “As retired federal employees welcome the increase in their monthly pensions in 2019, it’s a good time to remind them and all future retirees that such routine cost-of-living adjustments cannot be taken for granted. The administration has not given up its plan to eliminate COLAs for federal employees who retire through the Federal Employee Retirement System, and severely cut them for those in the Civil Service Retirement System.”

The new COLAs will take effect starting with federal retirees’ December 2018 benefits.

Now for those wanting to retire soon and take advantage of this full COLA for 2019, must be retired by October 31, 2018.  Give us a call Today, or contact us and learn more about this and how we will help you.  You may still have time.

THE USPS Announces New Changes for 2019

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The Postal Service has just announced price changes to take effect next year.

The USPS governors approved the proposed changes, which will be reviewed by the Postal Regulatory Commission (PRC) before they take effect Jan. 27. The governors believe these new rates will keep the Postal Service competitive while providing the agency with needed revenue.

The changes, if approved by the PRC, include a 5-cent increase in the price of a First-Class Mail Forever stamp from 50 cents to 55 cents.

The single-piece additional ounce price will be reduced to 15 cents, so a 2-ounce stamped letter, such as a typical wedding invitation, will cost less to mail, decreasing from 71 cents to 70 cents.

The changes include adjustments to other Mailing Services products, as well as Shipping Services products.

Here are the current and proposed prices:

  • First-Class Mail letters (1 ounce): 50 cents (current), 55 cents (proposed)
  • First-Class Mail letters (additional ounces): 21 cents (current), 15 cents (proposed)
  • First-Class Mail letters (metered 1 ounce): 47 cents (current), 50 cents (proposed)
  • First-Class Mail outbound international letters (1 ounce): $1.15 (no change from current price)
  • First-Class Mail domestic postcard stamps: 35 cents (no change from current price)
  • Priority Mail small flat-rate box: $7.20 (current), $7.90 (proposed)
  • Priority Mail medium flat-rate box: $13.65 (current), $14.35 (proposed)
  • Priority Mail large flat-rate box: $18.90 (current), $19.95 (proposed)
  • Priority Mail Army/Air Post Office and Fleet Post Office large flat-rate box: $17.40 (current), $18.45 (proposed)
  • Priority Mail regular flat-rate envelope: $6.70 (current), $7.35 (proposed)
  • Priority Mail legal flat-rate envelope: $7 (current), $7.65 (proposed)
  • Priority Mail padded flat-rate envelope: $7.25 (current), $8 (proposed)

Overall, the proposed prices would raise Mailing Services product prices by approximately 2.5 percent.

Shipping Services price increases vary by product. For example, Priority Mail Express prices will increase 3.9 percent, while Priority Mail prices will increase 5.9 percent.

Although Mailing Services price increases are based on the consumer price index, Shipping Services prices are primarily adjusted according to market conditions.

USPS filed the proposals with the PRC Oct. 10. The complete price filings are available on the PRC’s site under the Daily Listings section, and price change tables will be available on the Postal Explorer site.

The Postal Service’s news release has more information.

How Attempts at Fixing the Civil Service System Have Made It Worse Off

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Federal human resources officials on Wednesday said that congressional efforts to fix an outdated civil service system have complicated it as much as they have improved it.

Lawmakers have repeatedly taken a piecemeal approach to providing relief to laws governing the federal workforce that date back to the 19th century and were last updated on a wholesale basis in 1978, but federal officials said those agency-by-agency and job-by-job laws have created an overly layered and disparate series of special authorities. The HR professionals made their comments at a panel discussion in downtown Washington, D.C., hosted by Government Executive.

“Over the years we’ve seen special authorities, special regulations solve specific problems,” said Mary Pletcher, the Agriculture Department’s chief human capital officer. “But what it’s also done is create a very complicated system.”

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Col. Gregory Johnson, chief of the Army’s Functional Management Division, Integrated Personnel and Pay System, said the military maintains 300 different pay systems. Those have piled up over the course of several decades, he said, and are now posing problems for the Defense Department.

“How do you understand soldiers’ talent in the military, how do you manage 1.1 million people when you have that many systems that are disparate, where the data is fractured?” he asked. “How do you do that?”

Johnson said the Army is seeking to address that question by creating an Integrated Personnel and Pay System, a project he is spearheading. The goal is to centralize all the data from all the different systems into one place, clean it up and use it to evaluate the workforce. This will enable a whole new personnel management system, he explained, and allow the Army to better evaluate each soldier’s talents to better match them to the service’s needs.

The Army is unveiling the system in phases, starting with the National Guard next year. By 2020, it will fold all Reserve and active-duty personnel into the integrated system. Johnson said those initiatives will help change the overall ethos at the Army.

“We’ve been around for a long time and culture change is hard,” he said. “So as we take a look at our current personnel processes and try to drive a talent management process, the system will help us change.”

While the military is moving the ball forward on HR simplification and consolidation, Pletcher said the civil service laws and regulations applying to civilian employees have become so complicated that very few people in government actually understand all of them. Meanwhile, she explained, lengthy hiring times and career ladder climbing have remained rigid. That has all added up to agencies losing out on top talent.

“All of the special legislative authorities, the pilot authorities…the intent is to solve specific problems, but they create even more complexity because we still haven’t changed the underlying system,” Pletcher said.

Agencies do have flexibilities, she said, but they struggle to educate their managers on what they are, how they work and whether they are legally applicable in certain situations.

“The amount of knowledge that’s required to navigate all of those different flexibilities, all of the different ways to make the system work more, while they may exist, they add a lot of complexity,” Pletcher said. “And some human capital officers say they have too many authorities right now.”

That has complicated things not just for HR professionals but for hiring managers as well, some of whom only bring on a few employees each year and struggle to keep track of all the latest authorities. Pletcher estimated USDA will hire 8,000 permanent employees and 15,000 seasonal workers next year, and each job category will come with its own recruiting challenge.

Johnson explained in blunt terms the dichotomy between what soldiers currently face in their day-to-day jobs versus what they deal with when making broader career decisions.

“We ask soldiers to go in and make life and death decisions,” Johnson said, “but we don’t really tell them what their personnel actions are.”

Not The Best Day in the Markets Today

By | Benefits, TSP | No Comments

Stocks sank today, Wednesday as a steep decline in tech shares and worries of rapidly rising rates sent Wall Street through its worst day in months.

The Dow closed 831 points lower as Intel and Microsoft fell more than 3.5 percent each. The Nasdaq plummeted more than 4 percent.

The S&P 500 dropped 3.3 percent, with the tech sector underperforming. The broad index also posted a five-day losing streak — its longest since November 2016 — and fell below its 50-day and 100-day moving averages, widely followed technical levels.

Both the Dow and S&P 500 posted their biggest one-day drops since early February, while the Nasdaq notched its largest single day sell-off since June 24, 2016.

Stocks have fallen sharply this month. For October, the S&P 500 and the Dow are down more than 4.4 percent and 3.3 percent, respectively. The Nasdaq has lost more than 7.5 percent.

Rising rate fears and a pivot out of technology stocks have made it a rough last few days. The Dow has dropped in four of the past five sessions, losing nearly 900 points over that span.

Why is this important?  Some are saying that the Bull run could be ending.  So should you keep your TSP in the Risky investments, or move it over to the G Fund.  Better yet, let us help explain

alternative to the Thrift Savings Plans.  We know it would put your mind at ease knowing you could still have safety of principal, but still with upside potential.  If that is something you would like

to learn more about, please request your Free Retirement Review today.

health premiums

OPM Announces Lowest Federal Employee Health Care Premium Increase in Two Decades

By | Benefits, Retirement | No Comments

The Office of Personnel Management announced Wednesday that federal employees will see the cost of their health insurance increase by 1.5 percent in 2019, the smallest hike in more than 20 years.

Enrollees in the Federal Employees Health Benefits Program with coverage only for themselves will on average pay an additional $1.53 each bi-weekly pay period next year. Those on full family plans will pay $2.55 more per pay period, while people in self-plus-one coverage will pay an additional $3.06.

The average increase in the government’s contribution to FEHBP premiums in 2019 will be 1.2 percent. OPM contributes roughly 72 percent toward premiums, which is based on a weighted average of the plans that enrollees choose.

The overall increase in premiums, including both employee and government contributions, will be 1.3 percent next year. That marks the slowest growth in health care costs since 1996, and the smallest increase in enrollees’ share since 1995, said Alan Spielman, director of health care and insurance at OPM.

“We still encourage enrollees to shop around for coverage and evaluate alternatives,” Spielman said in a call with reporters. “Even if you are only seeing a modest increase [in your current plan premiums] or a decrease, you might be able to find better value if you evaluate your needs and the choices available.”

Spielman said there could be a number of factors driving down price increases, including a regulatory change that allows all insurers to provide up to three plans of any type.

“There are a number of dynamics at play here,” he said. “Certainly, OPM and all of the carriers have been focused on quality improvement and achieving more affordable programs here . . . and there are a number of trends along those lines. They also include things like renegotiating provider contracts, and introducing programs like pharmacy management and chronic care management.”

Spielman said that next year, there is a moratorium on the Affordable Care Act’s health insurer provider fees.

Exact changes to premiums will vary based on the plans enrollees choose, and some will even decrease. For instance, for the Blue Cross and Blue Shield Standard Option—the most popular plan—self-only enrollees will pay $0.93 less per pay period, enrollees in family coverage will pay $3.74 less per pay period, and self-plus-one enrollees will pay $1.27 less each pay period.

For the Federal Employees Dental and Vision Insurance Program, where there is no government contribution, dental plan premiums will increase 1.2 percent on average in 2019, while vision plans will drop in price by 2.8 percent. This marks the first year that uniformed service retirees and their families can enroll in FEDVIP dental plans—the equivalent TRICARE plan will stop at the end of 2018—and the first year that active duty service members’ families can enroll in vision plans.

Open season for selecting or changing plans in the Federal Employees Health Benefits Program will run from Nov. 12 until Dec. 10.

Get the Federal Retirement and Benefits Review today.  Request one here.

Best Dates To Retire in 2019

By | Benefits, Federal Pay, Retirement | 7 Comments

It’s time for our annual look ahead at the best dates to retire in the next year. As always, your retirement coverage under the Civil Service Retirement System (including CSRS Offset) or the Federal Employees Retirement System (including transfers to FERS) will be an important factor in choosing the best date.

CSRS

Some of the best dates to retire for CSRS employees occur when the end of the month (or one of the first three days of the month) coincides with the end of a leave period. This allows a final leave accrual (remember, annual leave is paid in a lump sum after you separate) and also ensures that the day after your separation is the first day you begin accruing CSRS retirement benefits.

The best dates for CSRS in 2019 that will allow a retirement at the end of the month (or within the first three days of a month) and also at or near the end of a leave period will be Jan. 3, Feb. 1, March 1, March 30, Aug. 2, and Aug. 31. Jan. 3, 2020, would also work, because it’s within the 2019 leave year.

The following dates would also work for CSRS, but would not earn a final leave accrual since they are not at the end of a pay period: May 3, May 31, June 30, July 3, Sept. 3, Oct. 3, Oct. 31, Nov. 1, Nov. 30, and Dec. 3.

FERS

All immediate, optional FERS retirement benefits start the first day following the month of retirement. This means, for example, that regardless of whether you retire on Oct. 1, 2, 15, or 31, your first FERS retirement benefit will be paid on Dec. 1 for the month of November. Your salary will cease on the last day of your federal employment. If your goal is to have your retirement benefit begin in October, then Sept. 30 would be the best date for you. FERS employees should focus on choosing a date at the end of the month, even if it is a Saturday or a Sunday, since these days can be included in the computation of service credit.

Retiring at the end of a leave period can be good, even though your salary will stop on that date and your retirement won’t start until the first day of the following month. This is because you will be paid your salary for the days that you worked during that last month, which could be more valuable than the retirement benefit you would forfeit. Because the benefit is computed very differently under FERS than CSRS, be sure to consider the tradeoff of salary for retirement benefit when you are choosing an end-of-leave-period retirement date that isn’t near the end of the month.

Also, remember that your payroll office pays your salary two weeks behind and the Office of Personnel Management may take a few months to process your retirement application. So your first retirement payment may not arrive on the first day of the month. You may receive several interim retirement payments from OPM until your claim is finalized and monthly payments begin.

Leave Considerations

Is it important to you to receive a large lump sum payout of your annual leave? If the answer is yes, the end of the leave year is the time to plan your departure. FERS employees who have a substantial amount of creditable service would benefit from a Dec. 31, 2018 or Dec. 31, 2019 departure and CSRS employees might choose Jan. 3, 2019 or Jan. 3, 2020. Although this won’t be the end of the leave year, it will allow 25 leave accruals and receipt of your first retirement benefit for the month of January (payable on Feb. 1).

If maximizing your lump sum annual leave payout is not that important to you, then remember you will be paid for your accumulated and accrued annual leave regardless of the exact date you retire.

Are you ready to explore some specific dates in 2019? Request your Free Retirement Review Today and we will also e-mail you the Best Dates To Retire Calendar. 

Could Your TSP Portfolio Withstand a Bear Market

By | Benefits, Retirement, TSP | No Comments

According to J.P. Morgan Asset Management, Guide to the Markets and Since March of 2009, the S&P 500 has gained over 300%.  Unfortunately, when long-run bull markets end, the decline can be dramatic.  In fact, the average bear market return is -45%.  Are you one of those that are still in the Risky Funds within your TSP? Can you afford for your $100,000 invested balance to become $55,000?  Better yet your $250,000 invested balance to become $137,500?

Plus, it can take a significant return to recover from the loss.  If today’s bull market turns bear, and you are nearing retirement, do you have time to make up for a large loss?

First, what is a bear market?  A bear market is defined as a 20% or more decline from the previous market high.  The bear return is the from the peak down to where it starts to return gains again.  You can lose thousands in just a short amount of time, but takes months or sometimes years to gain it back.

During your Federal Retirement Review with one of our Consultants, make sure you ask them how you can help Protect your Thrift Savings Plans, while still have a reasonable rate of return, and I’m sure you will be happy with what they tell you.

To Schedule your Personalized Federal Retirement Review – Contact us Today.

 

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.

» Want to see where you stand as far as YOUR Federal Retirement. Request Your Retirement Review here.

 

When Is The Best Time Of The Year To Take RMD’s

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

One of the most common questions federal retirees over age 70.5 ask is: What is the best time of the year to take a required minimum distribution (RMD) from the Thrift Savings Plan (TSP) and, if applicable, from a traditional IRA?

There is in reality no right or wrong answer to this question. The answer depends mainly on one’s financial and personal situation. This column presents some factors that traditional IRA owners and TSP participants over age 70 should consider when making the decision as to what time of the year to take their RMD.

Reason to take the RMD early in the year

RMDs must be taken by the end of the year for which they are being taken in order to be considered timely. For example, an 2018 RMD must be taken by Dec. 31, 2018 to be considered timely for the year 2018. The exception to this rule is for the first year an individual is required to take an RMD, the year in which the individual becomes age 70.5. In that case, the individual has until April 1  following the year the individual becomes age 70.5 to take his or her first RMD. For example, any individual born between July 1, 1947 and June 30, 1948 will become age 70.5 during calendar year 2018. That individual has until April 1, 2019 to take his or her first RMD for 2018. Another exception is for TSP participants who continue to work in federal service after they reach age 70. These TSP participants are not required to take their first TSP RMD until April 1 following the year  they retire from Federal service. But these TSP participants over age 70 are still required to take their traditional IRA RMDs and other qualified retirement plan (like 401(k) plans) they had previously participated in.

Although Dec. 31, 2018 is less than four months away, it is advisable for any individual having to take an RMD during calendar year 2018 to take the RMD now to avoid any potential error. It is not uncommon for people to hold off taking their traditional IRA RMD until later in the year, only to forget, become ill, or otherwise preoccupied, leading to a missed deadline. There are so many issues to worry about in retirement, but by taking the RMD early in the year, a 50 percent IRS penalty resulting from not taking the traditional IRA and qualified retirement plan RMD does not have to be one of them.

A retired TSP participant over age 70.5 need not worry about forgetting to take the TSP RMD by the end of the year. This is because the TSP Service Office will automatically send the TSP participant the TSP RMD in December if the TSP participant has not requested his or her TSP RMD by December.

Traditional IRA owners should not leave beneficiaries with a tight deadline

If a traditional IRA owner is subject to RMDs in 2018 and passes away before Dec. 31, 2018, then the individual’s beneficiaries are required to take the individual’s RMD before Dec. 31, 2018. In order to avoid a 50 percent IRS penalty, the beneficiaries must take the RMD before Dec. 31, 2018. The longer an individual waits to take his or her RMD and the later in the year the individual dies, the more difficult it becomes for the individual’s beneficiaries to take the RMD if the individual died before taking it.

After the RMD is taken, the remainder of the traditional IRA account can be converted or rolled over

RMDs are considered the first money to be distributed out of a traditional IRA owner’s account each year. Furthermore, a traditional IRA RMD is not eligible to be rolled over or converted to a Roth IRA . Putting those two rules together, before any rollover or Roth IRA conversion may be performed, an individual required to take a traditional IRA RMD must first take the RMD for the year. In other words, unless an individual over age 70.5 has already take his or her RMD for the year, the traditional IRA owner cannot make a Roth IRA conversion or complete a 60 day rollover.

Failure to take a traditional IRA RMD before completing a rollover or making a Roth IRA conversion often leads to serious tax issues. The RMD that was erroneously rolled over or converted is considered to be an “excess” contribution and subject to an IRS six percent excess contribution penalty each year until the rollover or conversion is corrected. By taking one’s RMD “sooner than later” before making a rollover or a Roth IRA conversion, one can eliminate this potential error and IRS penalty .

Reasons to wait until later in the year to take one’s RMD

When it comes to traditional IRAs and qualified retirement plans, tax deferral is one major benefit. The longer the money stays in a traditional IRA, the longer any earnings are shielded from taxes. That is why it is important to make contributions to a traditional IRA as early in the year as possible, and why it makes sense to delay taking RMDs until later in the year.

By waiting until the end of the year to take one’s RMD instead of early in the  year, one is earning additional tax deferral on earnings on the RMD. Any interest, dividends, capital gains, etc. that are earned on the RMD between now and the time the RMD is taken will occur inside the IRA. These earnings will not be subject to income tax unless distributed from the IRA in addition to the RMD. This may not seem very significant, but over time delaying one’s RMD until later in the year can have a beneficial impact on the size of one’s remaining traditional IRA and TSP retirement nest eggs.

A 2019 Pay Raise Appears Likely To Happen, But Not A Done Deal Yet

By | Benefits, Federal Pay, Retirement | No Comments

As congressional negotiators on Thursday discussed their progress in coming to an agreement on a $154.2 billion spending package, no lawmakers mentioned the dispute between the House and Senate over whether to give federal civilian employees a 1.9 percent pay raise next year.

But the prospects of a pay hike for federal workers are looking strong. After announcing a bipartisan deal to avert a government shutdown next month, congressional conferees suggested that most of the key outstanding issues in the appropriations “minibus” that would contain the pay raise involve so-called policy riders attached to the vehicle and not the raise itself.

The bill also includes appropriations for the Interior Department; the Environmental Protection Agency; financial services; the Agriculture, Transportation, and Housing and Urban Development departments; and other agencies.

Although the Senate included a 1.9 percent pay increase for federal employees in its version of the spending bill, the House included no language on federal compensation in its legislation, which effectively endorsed Trump’s pay freeze plan. Trump has recently both formalized his plan to freeze federal compensation, and suggested he may reverse course.

Last weekend, Rep. Barbara Comstock, R-Va., issued a statement saying that she secured support for the Senate pay raise proposal from the leadership of the House Appropriations Committee.

“I worked with [Appropriations Committee Chairman Rodney Frelinghuysen, R-N.J.] and [Subcommittee Chairman Tom Graves, R-Ga.,] to make sure that our appropriations process this month will maintain the pay raise,” Comstock said. “I am pleased to report that they are supportive of maintaining the pay raise also.”

After the conference committee meeting Thursday, Frelinghuysen declined to say the House conference had assented to the pay raise, describing it as something that is “still under negotiations.” But he also seemed to confirm Comstock’s comments.

“That’s something that is still under negotiations,” Frelinghuysen said. “I certainly would be supportive of it.”

A Government Executive analysis of the conferees’ voting record and statements regarding a 2019 pay increase suggested that odds could favor feds hoping for a raise.

All Senate conferees voted for the minibus containing a 1.9 percent pay raise. In the House, all six Democrats are supportive of a pay raise, and Rep. Tom Cole, R-Okla., has thrown his support behind the measure as well. If Frelinghuysen ultimately supports a pay raise, that would amount to a majority of House conferees, enough to approve a compromise bill.

Conferees have indicated that they remain divided on a number of other provisions of the minibus, however, and that Congress likely would maintain funding for the agencies covered by the bill as part of a continuing resolution running through Dec. 7.

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Thrift Savings Plan

Catching Up With The TSP Thrift Savings Plan

By | Benefits, Federal Pay, Retirement, TSP | One Comment

Are you part of the majority of federal civilian employees in the Federal Employee Retirement System? Or maybe you are a member of the uniformed services. If so, you probably have access to the Thrift Savings Plan, one of the workplace benefits that people receive as United States government employees.

The Thrift Savings Plan (TSP) is a 401(k) like plan for federal workers. It allows you to contribute to your retirement fund and receive a matching contribution from your federal agency.

According to recent statistics, over 5 million people participate in the TSP, which has more than $500 billion in assets under management.

One common issue for many federal employees is they don’t understand their TSP accounts and what it can offer them. If you find it hard to navigate, no sweat. Here’s a quick rundown of some must-know facts about your Thrift Savings Plan account that can be of benefit.

Thrift Savings Plan Basics

Just like with a 401(k), the Thrift Savings Plan is a defined-contribution plan. In this sort of plan, employees contribute money to their accounts. Contributions are from earned income.

Federal employees have six different investment options within the Thrift Savings Plan. In your TSP account, you choose how your money will be invested. Your retirement funds grow tax-deferred inside the account. And when you withdraw money, income tax will be due on the balance.

The future benefits of your TSP account will depend on how much money is put into it, how the money is invested, and how well it performs.

Traditional vs. Roth TSP Options

Like with many 401(k)s, you likely won’t be limited to just a traditional TSP account as your only retirement savings plan. In fact, your TSA likely offers both traditional and Roth options. You may even find some similarities between your options here and those of a traditional versus Roth IRA.

When you choose the traditional TSP, you contribute to your account with pre-tax dollars, paying tax on withdrawals in retirement. With the Roth option, the taxation is in reverse. You contribute post-tax income. In exchange, you won’t pay taxes on money you withdraw when you are retired.

Your annual contribution limit for 2018 is $18,500. Employees age 50 or older can make an additional $6,000 catch-up contribution annually.

FERS or CSRS: How Does It Affect the TSP?

For federal civilian employees, there are two retirement systems. If you were hired by the federal government prior to January 1, 1984, you fall under the Civil Service Retirement System (CSRS).

The TSP doesn’t come ‘automatically’ as part of CSRS employee benefits, but it is an optional supplement. Your primary retirement benefit will be a pension annuity, to which you may contribute up to 8% of pay.

If you so choose, you may also contribute part of your pay toward the TSP as well. Your TSP account won’t come with an agency match. It will be established by your agency after you have made your contribution election.

If your hire date was January 1, 1984 or later, you fall under FERS. Those hired after July 31, 2010, are automatically enrolled in the TSP. Unless you modify or halt your contributions, 3% of your pay is deposited into your TSP.

If you are a FERS employee hired before August 1, 2010, your TSP account receives a 1% contribution from your agency. You may also contribute another 4% for up to a 5% match based on your pay.

It’s important to note that if you are covered by CSRS, or you are a member of the uniformed services, the TSP becomes a supplemental benefit to your CSRS annuity or military retired pay.

What about Those Who Leave for Private-Sector Jobs?

Certain conditions may apply if you were part of CSRS at one point, then took a job in the private sector, and later came back to work for the U.S. government. Depending on your situation, your federal rehire may qualify you for enrollment in FERS and, by extension, the Thrift Savings Plan.

A federal employee benefits consultant can help you determine which system you belong to, if you are unsure based on your employment history.

What About Members of the Military?

Starting in 2018, the Blended Retirement System was implemented to offer more retirement benefit versatility. Beforehand, you had to remain in the military for at least 20 years to receive a pension. Now, you can choose a pension, a TSP account, or both if you want.

The best option for you will depend on your years of service. Consider consulting with a federal benefits-knowledgeable financial professional to explore your options. However, anyone entering the military now is automatically enrolled into the Blended Retirement System. That means their benefits will include a TSP and an annuity (if your period of service is 20 years or longer), albeit a reduced one.

As for the TSP, 1% of your base pay is automatically put toward your account. You may also put away another 4% for up to a 5% total match.

Distribution Options from the Thrift Savings Plan

So, we have covered quite a bit of ground on contributions and savings options with the TSP. What about the backend, when you are retired? What sort of choices do you have with the “distribution” of your TSP assets?

Even if you are a long-time contributor, you may not realize you have choices on how your assets are invested and distributed. In retirement, the balance you have built up in your Thrift Savings Plan will likely be some of your income.

Current Distribution Options Hold, But Changes Coming in 2019

But before you begin to withdraw money from your account, you need to know the TSP rules and regulations. Understanding them will help you avoid actions that can affect your options for accessing your money in the future.

Legislation passed back in November 2017 is slowly changing the flexibility of your distribution options for you and other federal employees. New rules will, among other things, permit more withdrawals in retirement by federal employees. However, these new rules of withdrawal won’t be fully effective until November 2019. In the meantime, current rules hold.

After you leave federal service, or after you turn 59.5 years old, your TSP gives you two withdrawal options for your money: a partial withdrawal or a full withdrawal. Not only that, two age milestones matter for how they apply in the TSP withdrawal rules: age 59.5 and age 70.5. Let’s go over your withdrawal options in more detail.

The Basics of Partial Withdrawals

The TSP permits only one partial withdrawal. Thereafter, you must leave your remaining money in your account for a later date. Reasons for taking a partial withdrawal may include high-cost “one-time” expenses: a roof replacement or a costly appliance purchase, for example.

You must meet these requirements to qualify for making a partial withdrawal:

  • A prior partial withdrawal can’t have been made. Nor can you have one pending.
  • You can’t have made an age-based, in-service withdrawal while in federal civilian or military employment.
  • Your request must be for a minimum of $1,000 or more.

In-service withdrawals are subject to several rules. Among married FERS employees and uniformed services members, a spouse must give their consent to the in-service withdrawal.

By contrast, married CSRS employees’ spouses need only to receive notice of the in-service withdrawal. Learn more about TSP account in-service withdrawals and their particulars by visiting here.

The Basics of Full Withdrawals

When you have chosen to take all money from your account — a lump sum withdrawal — you have a number of income options or “government distribution options.” You can choose to:

  • take a full lump-sum
  • receive monthly payments over time
  • buy an annuity that will give you lifetime payments
  • combine any of these income options

Because the income tax implications can be substantial, it’s prudent to consider alternatives to cashing in your entire balance.

With a “systematic withdrawal,” you receive monthly payments over a period of time. You may receive a specific monthly amount. Or you can base the monthly amount on your life expectancy, which would be determined with actuarial tables from the IRS.

The TSP will adjust how much you receive monthly according to your life expectancy. Both options will begin drawing down your TSP account balance until depletion. Keep in mind that systematic withdrawals may offer only limited flexibility.

Basics of a Life Annuity, the Third Option

As a third option, you can take part or all of your TSP account balance as a life annuity, giving you monthly benefits for the rest of your life. You must purchase an annuity priced at a minimum of $3,500.

You get to choose your annuity amount over $3,500 because, as mentioned above, you have the freedom to combine income options. You may not want to put all your funds into the TSP life annuity, which your plan purchases from MetLife, the plan provider. Depending on the annuitization option you choose, the insurer may keep your balance once you pass away. But beware, this could cost your beneficiaries thousands if chosen incorrectly!!

This reinforces the importance of investigating and evaluating your options.

Consult a Federal-Benefits Consultant

Because the TSP is multi-faceted and offers you many options, you should reach out to one of our Chartered Federal Employee Benefits Consultants who are designated experts in federal employee retirement strategies. To request your free Consultations with one for a Chartered Federal Employee Benefits Consultants of your unique account, retirement goals, and ideal options to help you maximize the potential of your TSP account.

If you are looking for guidance,  request your free consultant with a financial professionals at My Federal Retirement Help today.  

Have You Had a Paycheck Checkup Lately?

By | Benefits, Federal Pay, Retirement | One Comment

The Internal Revenue Service (IRS) wants USPS and other employees to review their federal income tax withholding.

Several tax law changes took effect this year. By checking your withholding now, you can avoid an unexpected bill or penalty at tax time.

The IRS offers an online withholding calculator that can help you determine if you should submit a new Form W-4 to the Postal Service.

You should have your most recent pay stub and federal tax return on hand. The calculator’s results are only as accurate as the information you enter.

According to the IRS, it’s especially important to check your withholding if you:

  • Are a two-income family
  • Have two or more jobs at the same time
  • Work a seasonal job or only work part of the year
  • Claim credits like the child tax credit
  • Have dependents age 17 or older
  • Itemized your deductions on your 2017 return
  • Have high income or a complex tax return
  • Had a large tax refund or tax bill for 2017

You can use PostalEASE to make changes to your Form W-4.

If you have questions, request one of our Free Federal Benefits Review and Retirement planning calls to help you maximize all of your benefits going into retirement.

A Pay Freeze Is In Doubt and Back Pay for Fired VA Employees

By | Benefits, Federal Pay, Retirement | No Comments

As Congress last week prepared to negotiate whether to provide federal civilian employees with a 1.9 percent pay increase next year, President Trump introduced additional uncertainty to the conversation.

Just one day after following up on his fiscal 2019 budget plan with a formal proposal to freeze federal workers’ pay, the president suggested he would “study” the issue.

“I’m going to be studying, you know, the federal workers in Washington that you’ve been reading so much about,” Trump said at a ceremony marking the signing of an executive order on retirement savings. “People don’t want to give them any increase. They haven’t had one in a long time. I said, ‘I’m going to study that over the weekend.’ It’s a good time to study it—Labor Day. Let’s see how they do next week. But a lot of people were against it.”

The “lot of people” who have been against a pay raise are primarily employees of the White House and the Office of Management and Budget. And Trump last Saturday retweeted Corey Stewart, the conservative Republican running against Sen. Tim Kaine, D-Va., for a Senate seat, criticizing Trump’s pay freeze plan.

Request your Free Federal Benefits and Retirement review today!  Contact Us Today.