Author: Sonny Dothard

Can Working During Retirement Hamper Your Social Security Benefits?

It’s often said that retirement is not a destination, it’s a journey. Some retirees find the journey includes a return to part-time work. A few of the common reasons for reentering the workplace include a lack of retirement savings, pursuing a second career, rising health insurance costs or even boredom. For many retirees, simply having a job that they enjoy is a good reason to get up in the morning. Let’s also not underestimate the impact that boredom can have on your mental and physical health. In fact, the healthier you are, the less you are likely to spend on health care costs during retirement. If you are planning to work during retirement, even if only part-time, here’s how this decision could impact your Social Security benefit and taxes situation.

social security

Does it Make Sense to Work and Collect Social Security?

The simple answer is that it depends on your age. Determining, however, if it makes financial sense for you to work and collect Social Security at the same time is a more complicated assessment. It depends on how much you earn and when you begin taking Social Security benefit. While it can seem tempting to take your Social Security benefit as soon as you’re eligible at age 62, it can be a costly decision. Starting Social Security at age 62 can mean a 25% reduction in your monthly benefit versus waiting until what the government considers your “full retirement age” or FRA. Furthermore, recent changes to Social Security mean that age 65 is no longer the milestone for FRA. Depending upon the month and year in which you were born, FRA now ranges from age 66 to 67.

A Paycheck Can Affect your Social Security Check

Aaron Steele, a financial planner with Steele Capital Management in Olympia, Wash. points out that if you’re counting on a certain level of Social Security income to supplement your part-time job, it’s important to be aware of how your paycheck can affect your benefit check. There is a limit to how much you can earn and still receive your full Social Security benefit if you are younger than your FRA. The income limit is scheduled to increase each year, but for 2017 you can earn up to $16,920 ($1,410 per month). For every $2 you earn over the $16,920 limit (in 2017) Social Security deducts $1 from your benefit.

“Social Security will only allow you to earn $16,920 this year (2017) before you start seeing your benefit check reduced by a $1 for every $2 you earn at work,” says Steele. “For my clients that have returned to part-time work post-retirement, I work closely with them to incorporate Social Security planning into their overall financial plan. Ongoing monitoring of their financial situation helps ensure that they don’t encounter an income shortfall by losing benefit dollars to withholding.”

In the short-term, this reduction can appear to be significant for those that claim their Social Security benefit before FRA and continue to work.  The good news is that if Social Security does withhold a portion of your benefit, some of those dollars will be returned to you by way of a higher monthly benefit once you reach FRA. Additionally, if your most recent year of earnings turns out to be one of your highest income years, Social Security will recalculate your benefit based on the higher earnings.

If you reach your FRA in 2017 and will celebrate your birthday in the fall or winter then you need to plan carefully. Between January and the month of your birthday, you can earn up to $44,880 (in 2017) without any benefit withholding. If you earn more than $44,880 (in 2017), Social Security will deduct $1 for every $3 you earn over the limit. Once your birthday passes, the income limit no longer applies.

In determining your earnings, Social Security will include not only your wages but also commissions, bonuses and vacation pay. Income from annuities, pensions, interest, IRAs, investment earnings, federal employee or civil service retirement benefits and capital gains are not included in the calculation.  The Social Security Administration provides an Estimated Retirement Calculator on their website that can help you estimate how your earnings could affect your benefit.

Taxes and the Good Old Days

The first person that uttered the words “the good old days are gone” must have been referring to a time when Social Security was completely tax-free income for every recipient. It still holds true that your Social Security benefit won’t be subject to income tax if that’s the only income you receive during the year. However, if you have income from other sources such as a part-time job or a retirement plan such as a Thrift Savings Plan (TSP), 401(k) or pension then a portion of your benefit may become taxable. The worksheet contained in IRS Publication 915 is a good starting point to determine if a portion of your Social Security benefit is subject to income taxes.  For more complex tax situations you may benefit from consulting a qualified tax professional.

In addition to the federal government potentially taxing a portion of your Social Security, 13 states also tax benefits. As of the date of this publication, Connecticut, Colorado, Kansas, Nebraska, New Mexico, Minnesota, Missouri, Rhode Island, Utah, Vermont, Montana, North Dakota and West Virginia all have the potential to tax a portion of benefits for its residents. Many of these states only tax a very small percentage of the population due to rather generous income exemptions. However, four of the states follow the federal government schedule of no exemptions. These states are Minnesota, North Dakota, Vermont and West Virginia. Based on the potential bite that taxes can take out of your Social Security benefit, it’s easy to see that where you retire matters.

Conclusion

Throughout your working years, you have probably viewed your retirement as a destination. The professionals at Public Sector Retirement, LLC (PSR) want to change your perception to one that retirement is simply a milestone on your journey. Your life will continue to evolve and that may include a return to the workplace. If your vision of retirement potentially includes working part-time, it’s important to carefully plan when to begin your Social Security   If you are planning to work during retirement, even if only part-time, here’s how this decision could impact your Social Security benefit and taxes situation.  It is quite clear that when you choose the best date to retire, you should also think of whether you plan to work in retirement because if you do, you may need to pay heavy taxes on retirement benefits savings or you may get less social security benefits than you expected.

Trump’s Budget Targets a Reduction in Federal Retirement Benefits

The 2018 fiscal budget proposed by the Trump Administration, titled “The New Foundation for American Greatness,” is seeking a major reduction in federal retirement benefits. The proposed changes could decrease an employee’s take-home pay with higher annuity contributions. The plan also calls to eradicate cost-of-living adjustments (COLA) for current and future Federal Employee Retirement System (FERS) retirees.

While many federal employee union groups have vowed to fight to the proposed changes, Public Sector Retirement Specialists are still concerned by the possible elimination of COLA and increasing employee contributions. The combination of these two proposals has the potential to greatly impact when employees are financially ready to retire.

retirement benefits

Charging More and Providing Less in Return

If approved, over the next 10 years the reduction in federal retirement benefits would save the government approximately $3.6 trillion. Changes to federal benefit plans alone could save more than $4.1 billion in 2018 and an estimated $149 billion by the year 2028. The Trump plan would, however, result in federal employees being required to contribute far more of their income towards their federal retirement benefits while reducing the benefit that the employee receives during retirement.

The budget proposes an increase in employee contributions to FERS by 1 percentage each year until they match the government’s contribution. On average, this increase would take six years to accomplish and result in an overall out-of-paycheck increase of approximately 6 percent. Federal employees hired after 2013 would realize the smallest increase as they are already required to contribute more than those hired prior to 2013.  Additionally, this increase would only apply under FERS as Civil Service Retirement System (CSRS) employees are already seen as contributing a share equal to the government match.  It’s important to note, however, that most Financial Planners will recommend a retirement savings rate of at least 10 percent in order to prevent an income shortfall during retirement.

Another key change would completely dissolve the inflation-protection that both current and future FERS retirees receive. Starting at age 62 FERS retirees now receive a cost-of-living adjustment (COLA) if the Consumer Price Index (CPI) is 2 percent. If the CPI is between 2 and 3 percent, a 2 percent COLA is applied. Should the CPI climb above 3 percent, they receive the CPI increase minus 1 percent. A reduction of 0.5 percentage points off the COLA for CSRS retirees is also indicated. The proposed plan will alter how many federal and civil service employees envision spending their retirement years and result in difficult budgeting decisions as the purchasing power of their federal annuity decreases.

The Good News

For nearly 2 million civilian federal employees there is a reason to applaud the proposed budget. The plan includes a 1.9 percent pay raise in 2018 for civil servants. Although this figure is slightly less than the 2.1 percent raise that employees received this year, it’s still more than the 1.6 percent increase Obama had proposed. The proposed budget also includes the introduction of a six-week paid parental leave program that would be extended to both new mothers and fathers, as well as adoptive parents. As many are aware, the President’s daughter, Ivanka Trump, has been a vocal advocate for paid parental leave and likely heavily influenced the proposed child care plan.

An Uphill Battle

The proposed reductions to FERS benefits have been met with fierce opposition from Democrats and union leaders alike. Some have dismissed the cuts as nothing more than punishment for those who have contributed to their country through federal service. Even those that supported President Trump for office now believe that he has broken his campaign promise to protect the retirement benefits of government employees.

The Trump administration has defended the proposed reductions in FERS benefits as being in line with the president’s goal to rein in federal government spending and to bring federal retirement benefits more in line with the private sector.

It’s Just a Proposal

While the White House has requested the changes take effect as of the fiscal year 2018, which begins October 1st, it’s important to remember that the president’s budget proposal is just that, a proposal. The budget is still in congressional appropriations committee review, and ultimately Congress controls what bills it sends for the president’s signature. If nothing else, the proposed budget should be viewed as a statement of the Trump administration’s priorities. Furthermore, similar federal retirement benefit cuts have been proposed by past administrations, most have died or been drastically altered by Congress. The potential for a reduction in federal retirement benefits should, however, urge federal employees to begin saving more than the 5 percent Thrift Savings Plan (TSP) agency match and likely plan on working until age 62 or later.

 

 

Medicare Begins Replacing Social Security Numbers on Medicare ID Cards

Identity theft is an ever-increasing concern, especially for seniors. An easily lost or misplaced source of personal information that can have a devastating impact on your credit is your Medicare card. This one card carries a vital piece of personal information that can be used to steal your tax refund or even open credit lines in your name. That piece of information is your full Social Security number (SSN).

Medicare
Medicare Replaces Social Security Numbers with ID numbers

Currently, Medicare cards reflect your health insurance claim number (HICN) which is the same as your SSN. While the Social Security Administration (SSA) warns Americans to not carry their Social Security card with them, Medicare instructs beneficiaries to carry their card at all times.

Change is rapidly approaching as Medicare prepares to issue new Medicare ID cards without SSNs in order to comply with the Medicare Access and CHIP Reauthorization Act of 2015. By April 2019, all Medicare recipients should receive a new card that reflects a Medicare Beneficiary Identifier (MBI) number that will be used for billing, eligibility verifications and claim status.

Timeline for Replacement

Officials have recently stated that the replacement of Medicare ID cards is on track and it will be able to meet the 2019 deadline. While a final prototype of the new card has not been revealed to the public yet. It is believed that the MBI will have 11 characters which will have a combination of randomly generated upper-case letters and numbers. In April of 2018, the agency plans to start mailing the new cards to all current Medicare beneficiaries. Beneficiaries will be instructed to safely and securely destroy their current Medicare cards and keep the new MBI confidential.

It’s Not the First Complicated Health Care Transition

Though changing the numbers on Medicare ID cards presents a few challenges, it’s not the first of its kind. Much has been learned from the massive launch of “Obamacare” and the Medicare drug program rollout, neither of which were without difficulty. Many people will remember that the Healthcare Marketplace computer systems were plagued with issues when they first launched to the public. You may also recall that millions of low-income Medicare drug program beneficiaries were not able to get their prescriptions filled initially.

Aim of a Seamless Transition

The replacement of SSNs with a randomly generated MBI extends far beyond the nearly 57 million elderly and disabled Medicare beneficiaries. It also requires that the health care provider community prepares their systems for the change. However, many providers were dedicated to the Social Security Removal Initiative (SSNRI) long before legislation mandating the removal was signed into law. Many are already prepared for a seamless transition to the MBI number system.

In a statement made recently, Seema Verma who serves as Medicare Chief stated that the Trump administration is aiming for a seamless transition over a 21-month period which will involve coordination with hospitals, doctors, beneficiaries, family members, state government, insurance companies and pharmacies.

Conclusion

While long overdue, the removal of Social Security numbers from Medicare cards should help lessen the chances of identity fraud for Medicare beneficiaries. In the meantime, Medicare Beneficiaries are still at risk for identity theft so it’s important to carry your card safely and be vigilant about who has access to this important piece of personal identification.

Less Strict Thrift Savings Plan Rules Encourage Transfers

Thrift Savings Plan or TSP has always been a great tool for increasing federal employee federal retirement benefits. But many people prefer to transfer their funds out of the plan and shift them to other qualified plans or IRAs. But a new legislation has been introduced recently that could encourage federal employees to keep their savings in TSP.

thrift savings plan tsp

Details of Legislation Suggest Lawmakers Believe Current Thrift Savings Plan Rules Encourage Transfers

U.S. Sen. Rob Portman (R-OH) believes the current TSP platform encourages Thrift Savings Plan participants to transfer their retirement savings.  The recent legislation he proposed is aimed at stopping feds from transferring the savings to other retirement benefits accounts.

How Much Money is Shifted from Thrift Savings Plan or TSP Every Year?

If one needs to know how much money is shifted from Thrift Savings Plan or TSP every year, you should know that about $9 billion is transferred from TSP retirement account each year.  The TSP is, what is called, a defined-contribution plan, similar to 401(k) plans offered in the private sector.  Federal employees can access similar retirement benefits by rolling over their TSP funds into a 401(k) of a future employer or an IRA when they retire or as they reach TSP minimum age requirements for an in-service distribution.

Why Easing of Thrift Savings Plan or TSP Rules is Necessary?

Senator Portman believes there is a need to ease the Thrift Savings Plan or TSP rules as a recent survey revealed that the strict withdrawal rules of Thrift Savings Plan or TSP are the main reason why federal employees are switching to outside retirement accounts.  This transfer happens despite the TSP having relatively low fees.

The TSP Modernization Act

Portman’s legislation, the TSP Modernization Act will change the current rules which restrict employees separating from the federal workforce to only two post-separation withdrawals. It would let multiple post-separation withdrawals so that the feds can meet individual needs over time.

While introducing the bill, Portman stated that TSP had played an instrumental role in assisting federal employees to maximize their retirement security and to mark the 30th anniversary of this vital savings vehicle, this bills takes several important steps to modernize the system so that it continues to benefit them in the future as well. He also urged his Senate colleagues to support the bipartisan legislation.

The Benefits

There are multiple benefits of the bill. Primarily, the bill would allow multiple Age-based withdrawals for the current federal employees who are older than 59.5. Secondly, it would encourage TSP plan participation by allowing quarterly or annual payments. It will also permit periodic withdrawals that can be changed anytime during a year.

Supporters’ Speak

U.S. Sen. Tom Carper (D-RI) was the one who introduced the TSP Modernization Act along with Portman. He also mentioned the benefits offered by the bill. He said that making smart choices to prepare for retirement can be a difficult task, but every person deserves to have the financial stability when their career is at an end.

Carper also stated that Thrift Savings Plan or TSP is a useful tool and the hardworking federal employees depend on it while they plan their futures. But there is a need to make it work better for the users. He was pleased to have worked with Senator Portman on a bipartisan effort with an aim to do just that.

Greg Long who serves as the Executive Director of the Federal Retirement Thrift Investment Board also shared his views on the matter by stating that the efforts of Senators Portman and Carper are appreciative. He added that the enactment of said legislation would improve the ability of TSP participants to access their retirement savings in a responsible manner.

Conclusion

It is quite evident that the legislation that plans to ease the Thrift Savings Plan or TSP rules would make things easier for the federal employees who find it hard to withdraw their federal retirement benefits swiftly and are forced to switch to other and more expensive retirement benefits accounts.

Federal Employee Benefits in Government Shutdown?

Lawmakers are on the brink of deciding whether they would approve a spending measure to avert a government shutdown or let it happen. If the shutdown does take place, federal employees’ benefits would take a hit. Apart from the retirement benefits, all other income sources may get restricted or even stopped for a particular timeframe. Here we try to explain what will happen to which federal employee benefits if the government shuts down so that the federal employees and retirees can do their financial planning for upcoming months in advance.

 

federal employee benefits during government shutdown
What will happen to federal employee benefits during a government shutdown?

How Federal Employee Benefits Are Impacted in a Government Shutdown?

Before we talk about the impact of government shutdown on federal employees’ benefits, let’s have a look at the current situation. The lawmakers must approve a spending measure because if they don’t, the government shutdown will begin on April 29, 2017. It is not clear whether the White House and Congress can come to an agreement on a continuing resolution to fund the government in a timely manner or if the lawmakers would allow appropriations to lapse.

Impact on Federal Employees’ Benefits

What is the impact on Federal Employee Benefits during a government shutdown?

Salaries of Federal Employees: Employees who are deemed essential or are exempt from the shutdown need to be paid by the agencies but the money won’t arrive until the government reopens. There is no guarantee that Furloughed employees will get compensated when the shutdown ends. But Congress has traditionally issued back pay. Sen. Ben Cardin, D-Md. has already introduced a legislation to make sure that all the federal employees are paid swiftly if the agencies close or Congress misses the deadline.

Bonus Situation: Though agencies can offer performance bonuses, they would not be paid until the government is reopened.

Unemployment: Furloughed employees that are eligible for unemployment compensation in some states may get it but they may need to return the money when Congress approves their back pay (it happened in 2013)

Healthcare: Federal workers will be covered by Federal Employee Health Benefits Program even if a shutdown takes place. Premiums will accrue during the shutdown period and will be deducted when the employees get a paycheck post the shutdown. When the government is closed, feds won’t be able to cancel the coverage. In cases of Federal Employees Dental and Vision Insurance Programs, if employees get furloughed for two successive pay periods, they will be billed through an email in order to maintain coverage.

Retirement Benefits: Retirees in the Federal Employees Retirement System and Civil Service Retirement System will get the deserved retirement benefits even if the government closes. People who are enrolled in the Thrift Savings Plan will not be able to contribute to the relevant accounts until the pay resumes post-shutdown.

Leaves: If the government closes down, the workers won’t be able to use paid leaves in place of unpaid furloughs. Even sick days or scheduled leave could be canceled.

Conclusion:

It is hoped that the aforementioned information would help federal employees with their financial planning. We also hope that federal employees’ benefits like the retirement benefits continue despite a government shutdown as it will help retirees to not be badly impacted by the situation.

What To Do With Your Qualified Plan (TSP)

Some of the Qualified Plans that offered to retirement savers force you to do the distribution if it is below the certain limit when you leave service.  These same Qualified Plans may offer you the chance to cash out the balance, but distributions will be taxed in most cases and possibly subjected to the 10% IRS penalty for early withdrawal. This is not the best option to consider.  If you decide to go ahead with the next employer, then there can be multiple choices to make with your old 401(K).

qualified plan
The Thrift Savings Plan is considered a qualified plan and has similar rules to private-market 401(k)s

The key questions to consider for your old retirement qualified plan (Should You Rollover To an IRA?)

Want to stay or go?

Conducting the rollover to another Qualified Plan may be the best thing to do. On the other hand, some Qualified Plans are not entitled to deliver the withdrawals funds like nongovernmental 457 investment plans. Keeping the records of these funds for directing the balance to your best investments plans may be something that you become responsible for, vs. asking your employers to do all the work for you.

Expenses to consider in your Qualified Plan

According to recently released data over the last two to three decades, the overall costs for the qualified plans have decreased consistently.  With additional fee disclosure requirements along with more competition, participants in these qualified plans have been able to secure access to retirement vehicles with a smaller overall cost than what may have been charged to them.  Apart from that, qualified plans like the Thrift savings plan (TSP), are available with the help of federal government employment matching certain employee contributions.

Qualified Plan Investment Options

Given the wide variety of qualified plan investment options that could exist, many plan sponsors offer “Target Date” funds by default. Along with this, your employer is likely to give you access to US large company related stock fund, US small company related stock fund, all in one fund, international stock fund and short-term bond in the minimum choices of a client’s retirement plan. The thrift savings plan withdrawals options provide you the ability to take advantage of the various funds within the TSP while also offering you the ability to roll over your TSP to another qualified plan or an IRA.

Distribution options

Most of the qualified plans today permit the distributions options for you starting in the year you turn age 59.5 years old, matching distribution options of IRAs. IRA’s are also complicated in its details or required substantially equal periodic payments. For early retirees, the odd duck 457 retirement plans can be a great source of funds that may permit distributions before the age of 55.

Leaving your retirement plan

If you decide to leave your retirement plan of old scenario after considering the above factors, then one such easy choice that you can choose by being a rollover could be to consider the retirement plan of the new employer. Apart from that, another option is to consider the traditional IRA approach and other tsp considerations that can deliver the best retirement plan for your unique circumstances.

 

Count On The Thrift Savings Plan For Your Future

The Federal Employee retirement system designed a retirement savings plan known as Thrift Savings Plan or the TSP. The TSP is available to all current as well as retired federal employees who were engaged in the federal civil service. The TSP is a defined contribution plan that has been designed to give same retirement savings to federal employees as are offered to private sector workers who enjoy the benefits of a 401(k). Federal Employees are eligible to make contributions through paycheck deductions, employer matching and rollovers from an existing defined contribution plan or eligible IRA.

thrift savings plan tsp

  • Eligibility for the TSP:-

Thrift Savings Plan involves the participation of the federal civilian employees and members of the uniformed services. To become eligible to receive matching contributions, uniformed service federal employees need to agree to serve on active duty for at least six years.

  • Benefits of the TSP:-

One of the primary benefits of the TSP is how contributions to the TSP are taxed.  Contributions to the Traditional TSP (Roth TSP contributions are handled differently) are made “before tax.” This helps in reducing your reportable income by the amount of the contribution that you make.  An additional benefit of the tax deferral is that earnings are also not taxed in the year they were created, but rather postponed until the employee begins to withdrawal the money. They are meant for allowing compound interest on the earnings.

According to the Thrift savings plan distribution rules, the tax bite is deferred until you start withdrawing funds from the plan. As per the TSP considerations, the federal employees are seen to transfer an approximate amount of $ 9 billion from the retirement accounts each year. These are regarded as defined contribution plans that offer access to the similar kinds of retirement benefits to the federal employees as the private sector employees receive along 401 (k) plans.

  • How TSP works with FERS:-

Among the civilian participants, the Federal Employee Retirement System, commonly abbreviated as FERS, employees are entitled to receive employer contributions to their TSP and FERS Annuity.   As an FERS employee, the agency employer makes two different kinds of contributions to the account as a part of the FERS benefits. Just like other defined contribution plans, the employees need to bear investment risks for his account balance as well as the account concerning determining the performance and contributions of the investments with various TSP considerations. To participate in a TSP plan, you will select investments that you believe are best for your situation and that suit your financial profile.

However, the TSP modernization act is altered to change the current rules that have been restricting employees from the federal workforce to avail post-separation withdrawals.

Conclusion –

It all starts with a great plan if you want to set yourself up for a retirement that matches your income needs.  The Thrift Savings Plan can work amazingly well in this context.

Relaxing TSP Withdrawal Rules

Legislation Relaxing TSP Withdrawal Rules, which could impact every federal employees has been proposed.  Bill S.873 under the TSP modernization Act (Senators Rob Portman and Tom Carper) on April 6th has been designed to simplify TSP withdrawals.

Relaxing TSP Withdrawal Rules
Image Credits

The Latest Changes and Relaxing TSP Withdrawal Rules

According to a press release regarding this, Senators Carper and Portman introduced this legislation Relaxing TSP Withdrawal Rules. An article discussing these changes in the Thrift Savings Plan had been published earlier in the TSP investment report of FEDweek. The Thrift Board announced two years ago that it was planning to give some relaxation to federal employees for withdrawing the money by making the restrictions more flexible. Attempting to encourage participants to leave their retirement assets in the TSP upon retirement appears to be the main reason behind this strategy.

New legislation allows multiple Age-based withdrawals

As per the new legislation Thrift Savings Plan participants would be allowed withdrawals on multiple age-based levels.  For employees who have reached age of 59.5 have been eligible to carry out only one age-based withdrawal up until now. The second important thing to know about this plan is that it would introduce the chance for separate participants to take multiple partial withdrawals. It will be a better idea in comparison to the current status when it allows only one partial withdrawal.

TSP introduces periodic payment rules

The third item covered under this legislation are changes in periodic payment rules. The legislation has announced monthly or quarterly types of periodic TSP withdrawals / payments. The amount can be changed anytime and participants who would be able to elect a partial withdrawal according to its comfort. Participants who are taking periodic payments would be allowed to stop payment and leave the balance in their account. These rules regarding withdrawal of payment will offer much relaxation to participants in comparison to the current ones under which they could only do periodic payment on the monthly basis; they had only one chance annually to change the amount of payment; they couldn’t stop paying until the withdrawal of the full amount of the plan.

Participants and IRA Rollovers

Participants may be happy to find out that they will be able to be more selective in their decisions regarding IRA rollovers.  All these changes in TSP seem beneficial to participants with additional questions arising from the introduction of new legislation. The first thing to be taken into consideration is whether the thrift savings plan is currently capable of handling and managing the expected additional transactions. Secondly, the increase in the expense of a plan has been estimated to be noteworthy. The larger number or withdrawal request will almost certainly add to the management expense of the TSP as a whole, which has been a major advantage of the plan.  Would TSP be able to tolerate the increase in the number of transactions? Thirdly, the financial services sector may choose to fight this legislation as it may reduce the number of IRA rollovers from the TSP.

Conclusion – The amended legislation relaxing TSP withdrawal rules appears to be good news for participants of the plan.  The reality about these changes is yet to come, however, and added costs could be the final outcome.

Five Key Steps Towards Federal Retirement and Financial Security

If you’re concerned with your Federal Retirement and financial security you may want to look into the social security administration’s “National social security month” to learn more about the benefits of social security and your thrift savings plan. These plans can be applied to the federal employees & retirees.

thrift savings plan
Federal Retirement and Financial Security and how Social Security and the Thrift Savings Plan will impact your retirement

Steps To Help You With Your Federal Retirement and Financial Security

Step 1:

The crucial step towards keeping maximizing your social security is to first understand how social security works.  Understand that Social Security is not just simple as it might looks and that there are thousands of potential claiming solutions that you could elect.  Once you understand the different ways you can claim your Social Security benefits and how that might be impacted by other income source (like your TSP and the therefore impacted by potential taxes on your TSP Withdrawals) you will be able to make a more informed decision.

Step 2

Performing verification is the next crucial step to do under the mySocialSecurity account. Assuming that the Social Security Administration has an accurate record of your earnings could cause you to lose out on some of your benefits; you should check the earning record inside the statement of your account.

Step 3

The Social Security Administration suggests that estimating your social security benefits with the help of using their calculators/tools under the My Social Security Account section can be beneficial for you. Using these estimates along with tsp considerations and thrift saving withdrawals options can be a major step toward finding the perfect solution to maximizing what you will receive from your FERS / CSRS Annuities, TSP and Social Security combined.

At the same time, you can calculate how much you are entitled to receive social security benefits at different ages. You should be careful with the words like “on average” & “approximately” as most of the federal employees earn more than the average wage earner. According to the data received from the Bureau of Labor, the average salary of US workers in the year 2016 was $44K. This is because the formula used by many retirees for the calculation of SS benefits replaces the major percentile of higher earners with the low wage earners.

Step 4

The next consideration is to apply for your security benefits online. Online applications are easy to complete & are readily available. The representatives will call you to help you out with your doubts related to social security. At the same time, you have to mention the amount withheld inside the remarks section of the application from as current online application doesn’t address the federal income tax withholding. This can be achieved if you want to have your money withheld for taxes. Apart from that, if you are applying for the social security schemes after the attainment of perfect age for retirement, then you should indicate whether or not you want to receive the six months of retroactive benefits in place of remarks section.

Step 5

The fifth & final step regarding your social security is to manage your benefits with the help of online tools or with the help of your personal mySocialSecurity Account.

Conclusion

Your social security retirement benefits will be based on your earnings history and inflation-indexed calculations.  Your thrift savings plans and your social security benefits will impact one another as income from either source could cause the other to be taxed at a higher rate.  You should carefully weigh the various social security claiming options along with thrift savings plan withdrawals options. At the same time, you should not forget your taxes on your TSP funds & all other TSP considerations while having the social security benefits.

Social Security Funds To Invest In Equities?

The recent article in the Wall Street Journal suggesting that allowing Social Security funds to invest in equities could increase the investment returns. The article suggested that this move could improve the long-term financial outlook of the Social Security Trust Fund while reducing the need for tax increases.  The risks here are estimated to be negligible if it is done carefully and even if the future returns of the equity are turned out to be lower than the historical ones.

Social Security funds to invest in equities - tsp example
Should the Federal Government allow Social Security funds to invest in equities? Does the TSP’s success demonstrate that this could work?

Also, allowing Social Security funds to invest in equities is unlikely to disrupt the stock market as the simulations suggest that the trust funds will unlikely to hold more than 2 percent of the outstanding market cap at the last stage of the projection period. If the stock accounted for more than 40 percent of the total security assets, then we can say that the % of the trust fund would likely to increase in the stock market by 2 to 3 %. The social security with the thrift savings plan withdrawals options would not take over the stock market.

Does The Thrift Savings Plan’s Success Justify Allowing Social Security Funds To Invest In Equities?

Today the critics of the equity investment suggest that Social Security ownership of publically traded shares would could create a conflict of interest for Congress as the Federal Government would become an owner of these companies and therefore have Voting rights on how the Companies were run. But at the same time, any risk of this kind can be easily avoided. The equity investments in consideration are designed primarily to address the broad market indexes’ such as Wilshire 5000 and S&P 500. Apart from that the voting rights of trust fund shares can be handled in 3 ways: by casting votes reflecting the votes of common shareholders, by no voting at all or at last by delegating the individual portfolio managers. These are the standard practices of the federal government’s Thrift Savings Plan.

Conclusion

The equity investment today is not a silver bullet which can resolve all Social Security issues, but at the same time allowing Social Security funds to invest in equities could t the tsp considerations of yours in your packaged plan for the restoration of balance. The moral of the story is that the policy makers should include some investment assets in their equities as options so that when they implement the thrift savings plan, they will construct the comprehensive packages for the long term run balance restoration. There are many thrift savings withdrawals options are available for you to choose in terms of better investment & beneficial growth for your retirement.

Need for Better Federal Retirement Benefits Boosts Retirement Assets

It seems that Americans finally understand the value of having better federal retirement benefits savings as it would help them to pick the best date to retire and face the realities of retirement. Why? Because the U.S. based retirement assets have increased considerably in the last year. IRA and target date funds were also among the funds that saw an increase recently. Have a look at which assets grew by what number by reading all the data given below.

federal retirement benefits

Need for Having Better Federal Retirement Benefits.

Though the need to have better retirement benefits was a key factor in increasing the U.S. based retirement assets, it’s not the only reason for the increase. A bull market also played a key role in pushing the assets.

The Increase

As per the revelations made by the Investment Company Institute, U.S.-based retirement assets were USD 25.3 trillion in 2016. It saw an increase of 6 percent for the year. At the end of the year 2016, retirement assets accounted for 34 percent of all household financial assets in the country.

Talking about the 401(k) and similar plans, it can be seen that Americans held USD 7 trillion in all the employer-based DC retirement plans. Out of this, about USD 4.8 trillion were held in 401(k) plans. Assets available in individual retirement accounts came to a total of USD 7.9 trillion. It saw an increase of 1.1 percent as compared to the end of the third quarter.

In contrast, their defined benefit counterparts in government including local, state and federal government plans, held about USD 5.5 trillion in assets at the end of December. It saw a 2.4 percent increase from the end of September.

Defined benefit plans of the private sector held approximately USD 2.9 trillion in assets at the end of the fourth quarter of 2016. Annuity reserves that are outside the retirement accounts accounted for another USD 2 trillion.

Assets of Defined Contribution Plans

At the end of the fourth quarter, $550 billion was held in other DC plans of the private sector, $282 billion in 457 and $905 billion in 403b plans. About $467 billion was in the retirement system of federal employees, the thrift savings plan which raised the hope that at least federal employees would now have access to better retirement benefits.

Mutual funds amounted to $3 trillion or consisted of 63 percent of assets that are held in 401(k) plans at the end of December 2016. Equity funds were the most common type of funds held in 401(k) plans as they amounted to USD 1.8 trillion. They were followed by $835 billion in hybrid funds that include the target date funds.

Increase in Target Date Funds

The mutual fund assets of the target date funds were $887 billion. It had increased 1.5 percent in the fourth quarter and 16.3 percent for the year. Not surprisingly, retirement accounts held most of the target date mutual funds assets as 88 percent of the target-date mutual fund’s assets were held through DC plans (67 percent of the total) and IRAs (20 percent of the total) at the end of 2016.

Slight Increase in Individual Retirement Accounts

The growth in IRA assets is just 1.1 percent when compared on a quarterly basis. It held $7.9 trillion in assets at the end of 2016.  47 percent of the IRA assets or $3.7 trillion was invested in mutual funds. $2 trillion was invested in the equity funds.

Conclusion:

People who have decided to choose the best date to retire only after ensuring that they have better federal retirement benefits savings have something to cheer about. The retirement assets of the Americans have improved considerably, and this is great news for all the people planning to retire and face the realities of retirement.

Keep Your Federal Health Insurance In Retirement

Many people worry about losing their Federal Health Insurance In Retirement because they don’t have the resources to pay for all the medical bills on their own. If you are also worried about one of the most crucial federal employee resources, federal employee health benefits or FEHB health insurance, this article will attempt to guide you through your eligibility and options you have if you are ineligible for FEHB.

Federal Health Insurance In Retirement
How to keep your Federal Health Insurance In Retirement

Federal Health Insurance In Retirement and the FEHB Five-Year Rule

If you are currently enrolled in FEHB and have been enrolled in it for at least five years or from the earliest opportunity to enroll, you typically can maintain your federal health insurance in retirement. Your health insurance benefits in retirement will also remain even if you have bounced from one plan to the other. Being enrolled in some FEHB plan for a full five years before the retirement is what matters most, according to the rules.

What happens to health insurance benefits in retirement if you are not enrolled in FEHB for five years?

If you are unable to meet the requirement of being enrolled for five years, you should see if you qualify for a waiver. OPM can grant a pre-approved waiver if you are offered an early retirement offer and you have accepted it. There are still certain conditions that need to be met to be eligible for the waiver. These conditions are different for DoD and non-DoD employees. In case an early retirement offer comes your way, your agency would usually let you know whether you qualify for a pre-approved waiver or not. If the agency has not made it clear, you should ask the agency about it.

Seeking Individual Waiver

People who wish to keep health insurance benefits in retirement but haven’t got a pre-approved waiver can try their luck at getting an individual waiver from OPM. Waivers can be difficult to obtain through OPM as they will only grant you an exemption under limited circumstances.

Free Extension

A person who is not eligible to carry the FEHB coverage into retirement is given a 31-day extension of the coverage without any costs. After that period is over, you need to decide whether you wish to convert to an individual contract or you need to ask for Temporary Continuation of Coverage. In the latter option, you can keep your FEHB enrollment for a maximum of 18 months, but you will need to pay the full premium and an additional two percent to cover all the administrative costs.

Making Decisions

In case you get to enjoy health insurance benefits in retirement when you reach 65 years of age, you will become for Medicare Part A and will need to make some decisions. Firstly, you need to decide whether you need the FEHB coverage at the same level. The decision would usually depend on factors like cost and benefits of the said plan at that time and the extent to which the plan overlaps with Medicare Part A. You need to do some research before reaching any decision.

The second decision would be whether you should enroll in the Medicare part B or medical insurance. In case you are enrolled in a fee-for-service plan at that time, you need to seriously consider enrolling in the Medicare Part B because it will cover almost all of your medical expenses.

If you are enrolled in an HMO at that time, you may choose to opt for enrolling in Medicare part B, because it will cover the costs if you decide to use non-plan providers. Medicare Part B can also lower the premiums for each 12 months if you later move to a fee-for-service plan.

The last problem you need to solve is how much you need to pay for FEHB coverage post-retirement. If you are not a postal worker, you will need to pay the same premiums like you did as an employee.

Conclusion

If you are eligible, maintaining your Federal Employee Health Benefits or FEHB in retirement is an excellent idea.  There are ways to request a waiver if it is determined you are ineligible, and whatever effort you need to put forth to obtain this waiver is advisable, as maintaining your federal Health insurance in retirement (FEHB) is undoubtedly one of the more important components of your retirement well-being.

Is Auto-Enrolment Good for Financial Planning and Wellness of Civilian Employees of the US Army?

It is a general belief that auto-enrolment is a smart idea as it allows people to save more towards the retirement benefits and boosts their financial planning and wellness. But does the boost to financial planning and wellness actually occur? A study sought answers to these questions by analyzing the data of civilian employees of the US Army who have contributed to DC TSP or thrifts savings plan.  The results of the study are not as definitive as one would have expected.

financial planning

Auto Enrolment Expected To Boost Financial Planning and Wellness

Auto-enrolment to defined contributions plans began due to the Pension Protection Act which nudged the employees into DC plans. This step was taken to ensure that there was a boost in financial planning and wellness of the participants of the DC plans.

The Debt Danger

Though it is evident that auto-enrolment was initiated to ensure people benefit from better financial planning and wellness but an unpublished research paper has recently surfaced which states that it may be responsible for driving people deeper into debt. The study showed that an increase in debt payments is offsetting about 73 percent of the gains of low-income participants.

Analysis of Data

The researchers have analyzed savings data of the civilian employees of the US Army who had contributed to federal defined contribution thrift savings plan. Auto-enrolment on the set plan was associated with an increase in the wealth, but new consumer debt counterbalanced more than a third of the average gain.

The authors of the report compared more than 32,000 civilian U.S. Army employees who were hired in the year before the implementation of auto-enrollment change with nearly 27,000 employees employed in the year after. The authors also conducted a study on 2,345 employees who were hired in the month before the implementation and compared it to the 3,414 employees who were hired in the month after the change. It got similar results in both comparisons.

The Results

During a four-year period after the employees were hired, those who were auto-enrolled had an increase in the overall wealth, which increased by 5.2 percent on an average.  Wealth also rose by 13.9 percent at the 25 percentile of the income and 21.5 at the 10th percentile of income, says the study. Main reasons for the increase were employer and employee contributions. The report also mentions that auto-enrollment had no effect on 75th and 90th percentiles.

Lowering the Wealth Increase

A big blow to the financial planning and wellness benefits of auto-enrolment was that automatic enrollment increased net wealth during the same period by an average of just 3.3 percent. It demonstrated a 37 percent crowding effect. It was just 8.6 at 25th percentile which indicates 38 percent crowd out. It was also 5.8 percent at 10th percentile which shows 73 percent crowd out. There was no effect on the net wealth at 90th or 75th percentiles.

The Authors

The authors of the study were John Beshears, David Laibson and Brigitte Madrian of Harvard, William Skimmyhorn of the U.S. Military Academy and James Choi of Yale. Many authors have been studying the behavioral efforts to lift the U.S. savings rates for more than a decade.

Conclusion:

After having a look at the report regarding auto-enrolment and its effects on financial planning and wellness, it can be stated that the increase in wealth is not as high as it was assumed to be initially as debt is playing a key role here. Though auto-enrolment has boosted the retirement benefits savings of people because they are saving up more in DC plans of TSP or thrift savings plan, the boost is not as much as many people expect it to be.

Federal Agencies Are Responsible For Retirement Education?

Whether or not Federal Agencies are responsible for retirement education and planning information is no longer a matter for debate.  It is mandatory for every federal agency to ensure that people have a financial & retirement strategy and a plan to execute this strategy. Feds should also have access to resources like seminars, videos, etc. to boost their literacy on the said matters.

financial planning

Federal Agencies Are Responsible For Retirement Education  and Retirement Benefits Planning?

OPM has made it mandatory that all agencies help in financial planning education and retirement benefits planning. It needs to be done by ensuring that every agency has a retirement and financial education literacy strategy as well as a plan to implement the said strategy. For those who don’t know, this requirement is explicitly mentioned in the Benefits Administration Letter (BAL) 11-104. One can find BAL 11-104 on the website of OPM.

Need for Education

As per OPM, financial planning education and retirement benefits planning education must focus on educating federal employees on the need for retirement benefits savings such as the importance of federal employees maximizing their TSP or taking advantage of FEGLI in retirement. It should also aim at teaching them about the need for making investments. Federal workers should also get information about how they can plan for retirement and how they could calculate the retirement investments that would meet their retirement goals.

OPM’s Stance

OPM further explains that the goal of the plans to ensure the systemic design of programs developed that communicate information to employees so that they could plan for retirement and formulate informed decisions. Agency plans should be there on an agency-wide level, and they should discuss how an agency would manage the elements of the program in its components to support financial education model. The plans should clearly address the goals and objectives of agencies for the retirement financial education program.

More Requirements

As per rules, every agency should appoint a Benefits Officer to ensure compliance with OPM’s guidelines. Several of the agencies are also required to offer employees who are nearing retirement (often five years before retirement) to get the opportunity to participate in a pre-retirement seminar. This provision was applied only after negotiated labor agreements (union contracts).

The Rights of Federal Employees

If a federal employee is not getting any support regarding financial planning education and retirement benefits planning as no seminars have been planned for some time, the federal employee can inquire the human resource staff regarding how they are implementing the requirements laid out by OPM that they need to create a financial literacy strategy.

Other Options

Agencies that cannot organize seminars for financial planning education and retirement benefits planning have other options available to them. They can:

  • Provide videos of retirement classes on the intranet of the agency.
  • Provide reimbursement and travel in some cases for employees so that they can participate in open enrollment retirement seminars.
  • Have some pamphlets, books, and other training material in human resources libraries, training libraries or a self-learning center.

Seek Self Help

If you need information on financial planning education and retirement benefits planning remember that Federal Agencies are responsible for retirement education, and if your agency are not cooperating; you have the liberty to engage in self-help. The website of OPM has some brochures that begin with the letters RI on their website which cover most vital areas of retirement.

The Thrifts Savings Plan also has a bunch of informational publications and videos that will help you to understand the role of TSP in retirement. You can also make use of the search feature on these websites so that you can locate information of interest in a swift and easy manner. You can also buy books on retirement from various online and offline resources.

Conclusion

It is quite clear that though OPM is trying hard to ensure that all federal employees get financial planning education and retirement benefits planning training by making Federal Agencies responsible for retirement education. If your agency is not offering the information you need, however, you can either question the HR regarding it or seek self-help so that you are not dependent on anyone for getting you the information you need to plan retirement in a better manner.

Bargaining Unit Federal Employees’ Official Time Increased Considerably: OPM

As per a report shared by OPM bargaining unit federal employees’  are using more formal time when compared to the last report. AFGE considers this time to be minuscule as compared to the times used by the entire workforce. The time estimates are far below the federal employee benefits & compensation. A new bill has also been proposed that would impact the retirement annuities of feds.

bargaining unit federal employees’

Bargaining Unit Federal Employees’ Official Time Estimate

According to a long-awaited report released by the Office of Personnel Management (OPM) recently, bargaining unit federal employees have used more official time in 2014 fiscal as compared to 2012 fiscal year. The timing of the report is notable as it comes at a time when the House lawmakers are suggesting some limitations to its use in a few agencies.

Exact Numbers

To be specific, bargaining unit, federal employees spent about 3,468,170 on official time in 2014 fiscal which is 0.84 percent increase over 2012. Employees individually spent 2.88 hours on official time in 2014 which is more than 2.81-hour rate of two years before the said year. Agencies have spent around USD 162.5 million on official time in 2014 which is a 3.4 percent increase over the 2012 report.

The Calculation

OPM calculates the total official time cost estimates by multiplying the numbers of hours that are reported by average bargaining unit, employee hourly wage in each agency plus the fringe benefits. OPM mentioned that the total official time’s estimates represented about one-tenth of 1 percent of the total cost of federal employee benefits and salaries in 2014.

AGFE’s Opinion

  1. David Cox, the National President of American Federation of Government Employees, stated that OPM’s report confirms that the official time used by the federal workers is minuscule when it is compared to the entire workforce, and yet the benefits availed by American taxpayers are enormous.

Changing the Formula…Not Yet

OPM also revealed that it considered changing the formula for calculating the costs of official time as per a recommendation of the Government Accountability Office but ultimately it stuck to the earlier method only. The report pointed out that the agency considered the value of maintaining a constant approach to cost estimates which allows meaningful comparisons from one year to another. The agency also considered the time and resources that were needed to implement the alternate methodologies and to provide official time estimates for all the agencies.

The New Act

The clearance of Official Time Reform Act of 2017 by The House Oversight and Government Reform Committee is a vital change that must be mentioned. As per this act, any days that are spent by an employee on official time would be prevented from counted toward the employees’ retirement annuity.

A New Bill

Another bill entitled The Veterans, Employees, and Taxpayers Protection Act limits the VA employees from spending more than half of their work hours on official time. VA employees who are involved in direct patient care would not be allowed to spend over 25 percent of the work hours on official time. This bill also bars physicians, podiatrists, dentists, optometrists and chiropractors from using the official time at all.

Rep. Jodey Arrington (R-Texas) was the one who introduced this legislation after GAO had reported about the department’s unreliable official time data. The department also supports Arrington’s bill and stated that it didn’t seem reasonable that an employee spends 100 percent of hours on official time.

VA’s Official Time Hours

VA is the second-largest government department, so it is obvious that it had most official time hours and spent the most as compared to any other reporting agency. As per OPM report, its employees spent more hours on official time in 2014 as compared to 2012. But the official time rate per employee reduced in 2014. It clearly indicates that more employees are using the official time, but they are doing it for shorter periods individually.

Cutting Back on Hours

Most agencies have reduced the total number of official time hours the bargaining unit federal employees used in 2014. About 37 agencies admitted that their employees spent fewer hours on official time while 20 agencies confessed that the employees used more. Four agencies said that there were no changes.

Data Collection

To prepare a report regarding bargaining unit federal employees official time, OPM collected the data from the agencies own manual reports, their attendance system, and the Enterprise Human Resources Integration (EHRI) system. The agency also asked other agencies to explain any and all discrepancies between departments’ information and the EHRI data.

OPM said that the agencies which report official time by using EHRI were asked to verify the official time hours used by the employee representatives within the organizations to validate how these hours were used within the four specifically predefined categories, namely mid-term negotiations, term negotiations, general labor-management relations and dispute resolution.

Conclusion:

It is clear that there has been some increase in bargaining unit federal employees official time. The lawmakers see it as an opportunity to impact the federal employee benefits and retirement annuities by introducing new laws.

Majority of Americans Never Hired a Financial Planning Expert

A new study has revealed that a majority of Americans have never hired a financial planning expert. This lack has resulted in less familiarity with terms like annuities, long-term care insurance, etc. People without an expert guidance also run a greater risk of not having sufficient retirement benefits funds. The study also discussed reasons for not hiring an expert and found a lack of enough money, self-confidence and high costs to be the key barriers.

financial planning expert
The Majority of Americans have never hired a financial planning expert

Study Says Majority of Americans Never Hired a Financial Planning Expert

The study which says a majority of Americans have never hired a financial planning expert was commissioned by Million Dollar Round Table (MDRT). The key result of the study was that about 79 percent of Americans have never even hired a financial planning expert. This study was conducted online by Harris Poll, and the results were announced just a few days back by MDRT.

No Planner, Less Confidence

The study has also highlighted the key side effects of not hiring a financial planning expert. People who have never hired an expert demonstrated less confidence with complex financial terminology as compared to those who had hired an expert. For instance, people who have worked with a financial planning expert were confident with terms like annuities (49 percent) and long-term care insurance (41 percent).

Familiarity with Traditional Terms

More than half of the Americans (51 percent) who never hired a financial professional seemed confident with traditional terms like life insurance. But when it comes to complex terms like long-term care insurance and annuities the percentage drops to 31 percent and 28 percent respectively.

Expert Opinion

Jerad Sorgenfreir, CFA(R) of Bedrock Investment Advisors shared his opinion on the matter by saying that these results further stress the importance of planning for a healthy financial future. Mr. Sorgenfrei advises people to hire financial planning experts as early in their working lives as possible.  “Even it that means starting off with a once-a-year visit to a professional who can offer some basic guidance on trying to maximize your TSP, IRA or 401(k) contributions.  Starting early” as Mr. Sorgenfrei went on to say, “is incredibly important.  But making sure you are on the right track by consistently monitoring your progress may prove to be even more critical.”  Small incremental changes along the path to retirement can have an enormous impact on the results you see?

Retirement Planning

Many of the Americans who never hired a financial planning expert are not yet ready for retirement. Just less than half (about 46 percent) have a retirement benefits plan or an emergency fund. Only 19 percent have created a long-term financial plan for the future, and around 46 percent have a life insurance.

In contrast, of the 21 percent, Americans who have hired a professional for financial management are better prepared for retirement or an emergency. Approximately 77 percent have got a retirement benefits plan or an emergency fund, and half of them have crafted a long-term financial plan for securing their future. Around 63 percent have a life insurance as well.

Reasons for Not Hiring an Advisor

When asked why they haven’t hired a financial planning expert, 44 percent mentioned that they don’t have the assets or money to justify hiring one, 38 percent were confident that they could manage their finances on their own, while 36 percent said that hiring a professional would cost too much money.

Conclusion

On the whole, it can be said that there is a need for Americans to understand that they all need the assistance of a financial planning expert, and especially for Federal Employees who face the added complexity of understanding their federal annuities and Thrift Savings Plan.

OPM Releases Revised Guidance for Federal Employees and Agencies

Recently released OPM Releases Revised Guidance on administrative furloughs for federal employees and agencies. These guidelines come at a crucial time when Trump administration is pressing for cutting down the federal workforce to save extra expenses. The guidelines also mention other alternatives to the reduction in workforce and clearly highlight which employees are exempt from it. If agencies adopt for the route of reduction in workforce, it may cut back federal employees resources and may harm federal employee benefits in the future.

federal employees

Federal Employees and Agencies must know about OPM Releases Revised Guidance.

Federal employees and Agencies should first know about the definition of administrative furloughs. In simple terms, it is a planned event by an agency. It is designed to absorb reductions that are necessitated by downsizing, lack of work, reduced funding or any kind of budget situation other than a lapse in appropriations. Administrative Furloughs also result from sequestration.

Guidance for Federal Employees and Agencies on Administrative Furloughs

OPM constantly offers guidance for federal employees and Agencies on administrative furloughs. It was last updated in June 2013. It has now been updated in March 2017. The reshaping guide stated that OPM is issuing workforce operations handbook to offer assistance to agencies which are considering or undergoing any reshaping like management directed reassignments, reorganization, transfer of function, furlough and reduction in workforce.

Timing Matters

The guidance is released just a few weeks after President Trump signed an executive order asking agencies to analyze the offices, components, efforts and programs in preparation for a major reorganization. The guide is intended to assist human resources offices and agency heads with options and specified procedures that ensure reshaping efforts comply with laws and regulations of the merit system.

OPM has also asked agency heads to consider the scope and timing of reorganization efforts in addition to their labor-management relationships and communication capabilities.

Aim for Less Disruption

OPM’s guidance for federal employees and agencies also advises opting for less disruptive options. For instance, if management reshapes specific functions in an organization as compared to reduce the whole numbers by choosing for across the board cuts, there will be less disruption in an agency.

Protecting the Rights of the Workers

The details included in the guide released by OPM reinforces why Agencies need to begin planning today for any workforce cuts that need to be made in the future. As per Jeff Neal, who serves as the Vice President of ICF and served as a chief human capital officer for the Homeland Security Department, there is not enough time to be prepared for a reduction in the workforce if the agencies wait until the budget is passed. Agencies that start to plan for reduction in the workforce even without the budget numbers of the firm are not abandoning their employees. Rather they are ensuring that any reduction in the workforce they may have to deal with protects the rights of their workers.

Other Alternatives

In the latest guidelines for federal employees and agencies, OPM has also offered a few alternatives to the reduction in workforce. A good option for every Agency is to consider detailing workers to other departments on a reimbursable basis. Other options are to using furloughs and reassigning employees who are in surplus functions to other positions.

Some other less pleasant alternatives are cutting down on the hours of an employee, making use of voluntary early retirement authorities and asking employees to change to a lower grade on the General Schedule.

RIF Teams

The agencies which are planning to ensure RIF should create an RIF team by working closely with the human resources office.

The Second Guide

OPM has released a second guide for federal employees and agencies which describe the types of employees who are exempt from furloughs and under what kind of circumstances. It also provides details on a vast variety of employee scenarios and how an agency should approach the pay issue during any furlough.

Conclusion

As OPM releases revised guidance on administrative furloughs for federal employees and agencies, it offers advice on how to go about the reduction in workforce by cutting down federal employee resources or federal employees’ benefits. The the guidance also provides various options other than the reduction in workforce that would cut employee costs without terminating anyone on a permanent basis. It is advised that all agencies and feds go through the guidelines once to get an idea on what’s next under President Trump’s rule and whether they are likely to deal with a reduction in workforce or not.

Federal Employees’ Bonuses Threatened

New legislation introduced in the Senate is threatening federal employees’ bonuses. Three Senators are supporting the bill, and they propagate that they are saving the hard earned money of the taxpayers. If this bill becomes law, the chances are high that annuities and federal retirement benefits would be targeted next. If this trend goes on further, the government may end up losing the talented employees who may switch to the private sector to obtain better money instead of their hard work.

federal employees' bonuses
As per a new legislation, federal employees’ bonuses may soon be under threat and some feds may have to return the granted bonuses to the government.

Details on Legislation Threatening Federal Employees’ Bonuses

The legislation that prohibits federal employees’ bonuses is entitled as The Stop Improper Federal Bonuses Act (S. 696). It will prevent paying bonuses to federal workers who commit major infractions under the agency’s code of conduct. It would also require federal employees who engage in egregious misconduct to repay the bonuses they have already availed.

The bill threatening federal employees’ bonuses is sponsored by Senator Deb Fischer (R-NE). Senators Dean Heller (R-NV) and Claire McCaskill (D-MO) are the co-sponsors of the bill.

Senators’ Opinion

All three senators had something to say about the bill they have introduced recently. Senator Fischer propagated that he had the best interest of taxpayers’ as motivation when he stated that it is his duty to ensure that the hard-earned tax dollars of Nebraskans are used in a wise manner. He also opined that this bill would eliminate waste from the government when he stated that federal employees who have broken the law or have engaged in a serious misconduct should not get any bonus pay. There is a need to continue the bipartisan push to end this practice which he called ridiculous and root out all the waste in the government.

Senator McCaskill also stated that the bill would save the dollars of taxpayers. She believes that this should be a cut and dried issue. If a person has taken actions that could get him or her suspended, thrown into a jail or fired from the job, that person should not be allowed to get a bonus. The bill would protect the taxpayers’ dollars that are currently being used to pad the pockets of irresponsible people working for the government.

Heller also shared his opinion on the matter by saying that at the moment, federal employees who have violated the agency rules or any law are eligible for bonuses. It includes IRS employees who have conducted violations. This is not acceptable, and it’s a high time to end the status quo.

The Law

If the bill targeting federal employees’ bonuses is turned into law, a federal agency would be prohibited from awarding a bonus to a federal employee for five years after an adverse finding that may have been resulted in removal, jail time or a long suspension. The law would also require a guilty employee to repay any bonuses that were awarded for any year in which any adverse finding is made.

Conclusion

It is very clear that federal employees’ bonuses are under threat and if the aforementioned bill becomes law, it will be sad news for all the feds. After this law is passed, the chances are high that Republicans Senators would next target the other retirement benefits like federal annuities. If that happens, the recruitment and retention challenges of government agencies are also likely to increase further because young people would not prefer a government job where one mistake could cut the bonuses they have rightfully earned. Even feds who are working with the government right now could also switch to a well-paying private sector job.

Federal Employees’ Managers Still Discouraging Teleworking: Report

A report from the Government Accountability Office has found that federal employees’ managers still discourage employees from teleworking. Though the number of federal workers opting for telework has increased and there is an increase in federal employee resources like technological equipment that promotes telework, managers often think that teleworking will harm one’s performance. GAO report also found that there was a need to improve the records maintenance of telework data.  Maybe federal employees are more concerned with the many benefits, such as their federal annuities and the TSP, and nervous to make demands from the federal employee’s managers to provide them the the opportunity to telework, which is much more prevalent in today’s working world.

federal employees’ managers
A recent report by GAO clearly states that federal employees’ managers in many agencies are reluctant to let staff enjoy telework and its benefits.

Federal Employees’ Managers Discouraging Telework Despite an Increase in It

Telework has grown dramatically since the 2010 Telework Enhancement Act as 40 percent more workers took advantage of teleworking opportunities in fiscal 2015 as compared to three years earlier.

A new report by GAO clearly mentioned that though each agency had established the goals to increase the telework further, many of federal employees’ managers are yet to fully embrace the practice and they are demonstrating reluctance towards it.

The Reasons

For people who are wondering why federal employees’ managers and Agencies are not approving telework, there are several reasons for it. Some managers prefer to allow telework by favoritism while some need, or believe they need, in-person attendance for all the staff meetings rather than allowing employees to call in or setting up video conferencing. Some managers have also shown reluctance in approving unscheduled, situational telework based on unplanned events such as weather. A few managers even limited the number of days employees can opt for telework.

GAO report also states that the managers who do not fully support telework believe that it contributes to poorer performance as compared to employees who come to the office on a daily basis.

Reduction of Technological Barriers

Many agencies have made considerable progress in reducing the technological barriers that earlier prevented people from doing telework, said the auditors. But getting proper equipment remains an impediment for employees.

The Subjects

GAO based all its findings on a case study of four agencies, namely, Labor Department, Education Department, the Securities and Exchange Commission and General Services Administration.

Lack of Training

In most of the cases, the agencies did not make it mandatory for the supervisors to complete a mandatory training before they began approving the telework agreements of the employees. This lack of training often prevented supervisors from understanding the goals & objectives of agencies concerning telework before signing off on all the agreements.

Lack of Reviews

GAO report also highlighted that nearly three-quarters of the Agencies looked at were not reviewing the telework agreements as intended. The auditors said that as the responsibilities of employees often keep on changing, agencies should ensure that the agreements are reviewed to make sure that they keep on addressing the current business needs. GAO said that unless all telework agreements are regularly reviewed, and the reviews are documented at regular intervals, the agencies will risk losing some of the most talented employees to the private sector.

The Positives

The GAO report also found some positive work done by the agencies. It said that all had successfully instituted several practices which were in compliance with the Telework statute. For instance, the agencies had adequate controls to make sure that telework did not diminish the performance of employees and organization and didn’t affect the expectations regarding employees’ performance. Agencies also met all requirements regarding setting up of agreements which included notifying all new hires regarding their eligibility to telework.

Severe Criticism

GAO criticized the agencies and the Office of Personnel Management, which administers the telework policy on a governmentwide basis because they failed to maintain proper telework data. For instance, The Labor Department is still using a manual entry system to report telework. Some agencies also rely on self-reporting that may lead to variance in what employees submit. GAO also exposed the fact that there were instances of inaccurate data in telework reporting done by OPM.

Key Recommendations Rejected

GAO has made a series of recommendations to both agencies. OPM has rejected the suggestions made by GAO by stating that it did not have the resources needed to create more tools that analyze the effectiveness of telework and to measure management resistance as well as other barriers to accelerating its use.  It also stated that it would refuse to verify the telework data it receives by saying it is up to individual agencies to report only accurate information.

Conclusion:

It is quite clear from the GAO report that federal employees’ managers are not letting federal workers enjoy telework despite the availability of technological tools and various federal employee resources. Maybe most of the feds still don’t complain because they like the jobs and its benefits like annuities.