The CSRS .
FEGLI as your life insurance/by Admin(2)
FEGLI as your life insurance
Even the best-laid retirement plans can be thrown off by an unexpected expense. This could include personal care due to a physical or mental impairment or an untimely death. As it comes time for federal employees to retire, they need to look at their situation and reevaluate their insurance needs. They should consider health, long-term care, and life insurance.
The Federal Employee’s Group Life Insurance program, or FEGLI, is an easy option for federal employees. It’s offered by the government, and the premium is automatically deducted from your paycheck. Your coverage increases as your salary increases. If you joined the government in your 20s or 30s, there was additional optional coverage available. It was fairly inexpensive and provided an immediate solution. Overall, FEGLI is competitively priced, but the value depends on many factors.
The main reasons to have life insurance are to cover education expenses, income replacement, mortgages and other debt, along with final burial expenses. As you get closer to retirement, you may have already paid off your mortgage and debt. Your children may be grown, and their education may be paid for. This only leaves income replacement and final expenses.
There’s a fairly easy solution for final expenses. Basic FEGLI coverage. The premium for basic life insurance is mostly covered by the government. The federal employee pays 1/3 of the premium. The rate is 15 cents per $1,000 of coverage biweekly while you are employed. The death benefit is determined by your salary, rounded to the next highest $1000, plus another $2,000.
If you have a salary of $77,500, your FEGLI basic life insurance would cost $12 biweekly. Your beneficiary would receive $80,000 upon your death.
When you retire, your basic FEGLI is based on your final salary and remains at that level and at the same price ($0.325 per $1,000 of coverage per month) until age 65. The default choice when you retire is the 75% reduction, meaning that when you turn 65, or when you retire if that is after age 65, the insurance is free and the death benefit goes down by 2% a month until the coverage goes down by 75%. No matter how long you live, 25% of your death benefit will remain to cover your final expenses.
If you choose to take only a 50% reduction, or no reduction when you retire, you can pay an additional premium during retirement.
If you’re single and do not have to provide for anyone else financially, then it may not be beneficial for you to carry life insurance that would cover income replacement. However, if you’re married, your spouse could lose over half of your Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) annuity, depending on choices you have made. Depending on other factors, like the effect of the Government Pension Offset if you’re retired under CSRS, the receipt of your own earned Social Security retirement, your age, and whether you’re still working, there may be an additional loss of income from Social Security retirement.
FEGLI also offers additional optional life insurance. The Office of Personnel Management has a contract with MetLife to provide this insurance. There are three options. First, the standard option is a $10,000 death benefit. Your age determines your premium. Under this option you pay until you hit age 65 and are retired. Then this option is free. Coverage reduces by 2% per month until the benefit is down to $2,500.
The additional option is multiples of your salary, up to five times your basic pay. Your coverage continues into your retirement with the election of no reduction. Premiums continue and will increase every five years until age 80. You can also choose full reduction. With this choice, premiums are only charged until age 65 and retired. Coverage will then reduce by 2% a month. It will hit zero after 50 months.
The family options provides coverage for your spouse and dependent children. The benefit for your spouse is $5000. Each dependent child is insured for $2,500. Eligible employees are able to choose up to five multiples of this option and continue this coverage into retirement. They may choose no reduction or full reduction.
If you have any questions regarding FEGLI or alternative coverage options, please contact a financial professional.
GOP Bill Aims To Make Major Changes To Federal Retirement and FERS Systems/by Admin(2)
GOP Bill Aims To Make Major Changes To Federal Retirement and FERS Systems
Former House of Representatives speaker Rep. Thomas “Tip” O’Neill was once quoted of saying, “all politics is local.”
If that statement is true, then the different proposals affecting the federal retirement benefits of current and future postal and federal workers and retirees could be eliminated as House members consider what the changes could mean to their districts.
While the bill has been deemed a GOP bill, it does not come from the House or the White House. However, that has not stopped nine Republicans and the House Democrats from distancing themselves from the plan that would make federal workers pay more into their retirement to get small lifetime annuities or pensions.
Major Changes to Federal Retirement Being Considered:
- A 6% increase in how much working federal employees put into the Federal Employees Retirement System
- No cost-of-living adjustments for the FERS retirees
- A decrease in COLA protection for both present and future CSRS retirees
- The abolishment of the FERS annuity supplement for workers who quit working (retire) before they are Social Security eligible
It is the last idea that is a slap in the face to federal employees in the most dangerous and high-stress jobs – air traffic controllers, federal firefighters, law enforcement, etc. These jobs often have mandatory retirement age restrictions that are under 62.
Many GOP legislators alluded to both ethical and moral reasons to oppose a cut to any federal retirement benefit, saying it was a breach of contract between those who signed up to serve the government and Uncle Sam. The reality is that politicians answer to the people, who vote for their services every two years. Washington, D.C. is full of rule-making bureaucrats, but just 14 out of every 100 federal workers lives in the area. Most feds and active retirees who also vote live outside the Beltway. This is the reality.
Even if one doesn’t work for the Armed Services, Department of Interior or the Internal Revenue Service, the chances of them working for a firm that needs those bi-weekly incomes and once-a-month annuity deposits are high. An essential Dayton, Ohio employer is Wright-Patterson Air Force Base. Huntsville, Alabama is often called mini-D.C. and other places around the country are comprised of former feds where the passage of any proposals affecting retirement, annuity and inflation could be detrimental.
It would be difficult to find a location that the federal government didn’t have a presence. After all, there’s a VA center or hospital, a federal prison or a naval facility that could generate billions of dollars into the local economy.
The reality is that an active-duty civil servant or retiring person should be concerned. With one party controlling the White House, Senate and House of Representatives, things should be easy. It is until you realize what’s going on.
Some Congress members are safe in their districts because it’s the state legislatures that produced districts where politicians vote for whom they want – not the people of that district. And, here soon, there will be a plethora of districts up for grabs. The party that has gained control of the White House often loses congressional seats during the first election after its taken power.
Congress is well-known for its scare tactics, and this appears to be one of those moments. However, there’s a saying “don’t poke a sleeping bear” as well as its friends. You may get what you’re wanting.
Federal Employee Benefits and Early Federal Retirement/by Sonny Dothard
Considering Early Federal Retirement? You should know what happens to your benefits when you retire before you are eligible for your full benefit package?
People often wonder about the best date to retire so that they can avail maximum federal employee benefits. It’s always advised that a person retires only after he or she is eligible for it. It will help the person to be financially sound while he or she needs to face the realities of retirement. If a person is planning to retire early, the person should know about the consequences of retiring early in order to make a wiser, better and smarter decision.
Why do Federal Employees Elect Early Federal Retirement and Sacrifice Some Federal Employee Benefits?
There are many reasons of why people choose to retire early and sacrifice some of the federal employee benefits that might have grown over time. The reasons may range from complex health issues to just being tired of working for the federal government. Some people also leave jobs to start something of their own and some just fear that they might lose their job if the agency they are working for is abolished in the new administration. No matter what the reason is, every federal employee must know about what happens to his or her federal employee benefits if they choose to retire earlier than the eligibility. Here’s what actually happens.
If an individual chooses to retire earlier than the eligibility date, the person will get an automatic 30-day extension of their FEHB (health insurance). At the end of these extended days, a person has the option of converting to an individual policy from the current insurer. The person can also continue the current coverage for 18 months as per the temporary continuation of coverage.
The costs and coverage of the individual policy will vary. The costs for a Temporary Continuation of Coverage (TCC) will include a person’s share, the government’s share and a two percent administrative fee. In both scenarios, there is no need to undergo a physical. Also, there is no ban on the pre-existing conditions.
A person can easily convert the life insurance to an individual policy. But it must be noted that there will be no coverage for dismemberment or accidental death in an individual policy. The policy also cannot be term insurance and has to have premiums.
If a person has got five years of creditable federal service, the person can choose to leave the retirement funds on deposit with OPM or Office or Personnel Management and be entitled to FERS pension or CSRS at a later date. This option is highly recommended to ensure that a person maximizes the federal employee benefits or retirement benefits even if the person retires earlier than the eligibility date.
When a person leaves a federal job, the annual leave, compensation time balance and credit hour are paid to the person. It is credited in a short period of time from the date of leaving the job. The sick leave is useless until a person plans to come back to the federal service. If it happens, one can re-credit this one among federal employee benefits.
With a TSP, a person has several choices. When a person leaves their job, he or she can leave their retirement balance in the TSP, create an income stream with the balance or make a TSP Withdrawal. A person also has the option of making inter-fund transfers even after retirement. The TSP can also be transferred to a tax-deferred retirement plan of a subsequent employer or to an IRA. When choosing the transfer option, you should remember to do a direct transfer (from TSP to a new plan) to help avoid any sort of withholding.
People who are wondering what will happen if they choose to retire before reaching 55 years of age should know that whatever money you withdraw from your TSP before reaching 59 1/2 years of age would be subject to a 10 percent early withdrawal penalty plus the corresponding income tax on that withdrawal. For people serving the nation as a special category employee (the ones who are in Firefighting, Air Traffic Control or Law Enforcement, etc.) have 50 as the age, not 55. You may be able to avoid this early withdrawal penalty by exercising a 72(t) withdrawal strategy, but you should talk with your financial advisor before attempting this maneuver to ensure you understand the requirements, etc.
It is recommended that federal employees, as with all employees, choose the best date to retire for their unique circumstances. Talk with a financial professional to ensure your receive proper education and information regarding your federal employee benefits and to make sure you are prepared for the realities of retirement. In the event that you choose to retire early it is recommended that you work with an expert prior to retirement and especially when it comes to how you handle your TSP. You will also want to consider the ever-increasing expenses associated with FEGLI and may want to change your life insurance to an individual policy prior to retirement. Take a few precautionary steps and always talk with a professional to make sure you have the information you need before opting to for early federal retirement.
Planning for Retirement in Five Years by Ron Raffino/by Ron Raffino
Tips from Ron Raffino for Those Planning on Retiring in Five Years
You must have heard that it’s never too late to start planning, but have you heard it’s never too early to start planning? In fact, the earlier you start your retirement planning, the better it will be for you. Retirement planning is no joke as a lot of factors need to be considered carefully. We will advise you take some assistance from your local personnel service center. Since they have your employment records, they are in a position to provide you with personalized assistance.
We all know and understand that health and life insurance are of top most priorities but still, we see a lot of retired personnel without proper coverage. This usually happens because of lack of awareness and lack of knowledge. It must be noted here that in order to carry the coverage forward, one must be covered continuously for five years before retirement.
Help from your employer
You can get all the information you need on the retirement process from your agency. It should be noted here that the agency only provides you with the information. In order to interpret it and get advice on what to do, you should contact your local personnel service center. As they have your employment records, they are in a better position to advise you on such matters.
When to start planning
This is an important question. We hear a lot of employees asking this question – when should I start planning. Well, to be honest, it’s better to start as early as possible. But just in case if you haven’t done it then make sure you start planning at least five years before retirement. We advise you to start planning five years prior to your retirement as you must have insurance coverage for five years immediately before retirement to keep it after retirement.
Keeping your health insurance benefits after you retire
Pay close attention to this part. Following are points that specify the conditions for being eligible to continue your health insurance coverage.
- You must be covered at the time of retirement.
- Your coverage must not fall under the category of converted individual policies.
- The date of issuance of the first annuity check must not be later than 30 days after the retirement.
- Prior to 5 years of the date of retirement, you must have continuous coverage.
You can also avail the benefits of optional life insurance if at the time of retirement you are eligible to continue your basic coverage, and again if you were continuously covered for a period of 5 years before your retirement date.
Waiver of the requirement for continuing life insurance coverage into retirement
Currently, there is no such provision that allows a retirement employee to bypass the stipulated conditions for continuing life insurance coverage. However, if you do find yourself in such a situation then you always have the chance to migrate to an individual policy.
Review your service history
As someone who is about to retire, it’s always a good idea to review your service history. You can find all the information in the Official Personnel Folder (OPF). The purpose of such a review is to make sure that all your service records are valid and verified. If you encounter a situation where some of the records are missing then you must report it to your employer. Your employer can help you to find the missing records and document them properly. Some employees are required to make retirement contributions. You can enquire about the consequences of payment or nonpayment of such contributions from your employer.
A complication can arise if you haven’t made payment for receiving the military credits (only if you have served in the military). Such payments are to be made before you retire. You can also get advice from the Personnel Officer on waving the military retired pay.
In order to check for your eligibility to receive social security benefits, you need to visit your local Social Security Office. After you fill and submit the form SSA-7004-PC, you will be provided with a benefit estimate statement. This statement will contain all the information your future eligibility for Social Security benefits and estimates of these benefits at specified dates.
Government Pension Offset
In some cases, it has happened that the social security benefits of a retiring employee’s spouse saw some kind of offset. This mostly happens when the pension of the retired employees is not covered by social security. In such cases, there is no offset on the social security benefits of the retired employee; it happens only to the social security benefits of the retired employee’s spouse. This offset amounts to two third of the federal pension.
Such an offset does not apply universally. There are some exceptions. For example, those employees who are covered by the Federal Employees Retirement System (FERS), Civil Service Retirement System (CSRS) Offset, and those who voluntarily took transfers to the FERS before January 1988, are exempted from the Government Pension Offset.
Windfall Elimination Provision
Windfall Elimination Provision reduces the Primary Insurance Amount (PIA) of a person’s Retirement Insurance Benefits (RIB) or Disability Insurance Benefits (DIB) when that person is eligible or entitled to a pension based on a job which did not contribute to the Social Security Trust Fund. While in effect, it also affects the benefits of others claiming on the same social security record.
The Windfall Elimination Provision does not apply if:
The WEP is applied to certain beneficiaries who are receiving RIB or DIB and who also:
- The beneficiary becomes entitled to the benefits after 1985
- The beneficiary also first becomes eligible, after 1985, for a pension based in any way upon earnings from employment that was not covered by social security
- The beneficiary’s entitlement to this pension has not yet ended (even if not yet claimed)
- The beneficiary is still alive
- The beneficiary has not obtained 30 Years of Coverage (YOCs) at the age of 62 years.
Estimating the amount of the Windfall Elimination Provision reduction
At your request, using the form SSA-7004, the Social Security Administration will send you a Personal Earnings and Benefits Statement (PEBES) that will list your earnings from employment covered by Social Security and provide a Social Security benefit estimate assuming retirement at alternative ages, 62, 65, and 70. You should contact your local Social Security office (external link) to determine the effect of the Government Pension Offset and the Windfall Elimination Provision on your Social Security benefits.
Effects on benefits
When the WEP applies, it is used in determining all benefits on the record, both for the primary beneficiary and any auxiliaries. This includes an effect upon the maximum total benefits paid on the record as well. Since the WEP does not apply after the death of the primary beneficiary, it is never used for survivors.
More from Ron Raffino:
Ron Raffino Author Page
http://benefitseducationgroup.com – Ron Raffino
Getting Started Early for a Successful Retirement by Kevin Wirth/by Kevin Wirth
Kevin Wirth Explains How to Get Started Early for a Successful Retirement
Nearly everyone dreams about the day they can retire. Regardless of whether you plan to hike in the mountains, relax on the beach, or volunteer in a faraway place, one thing is for certain, and that is in order to have a successful retirement, a good plan should ideally be in place.
Unfortunately, though, not everyone has the opportunity to do an ample amount of long-term planning. That may be due to an unexpected health situation, an offer of early retirement, or some other event that has moved up the clock on your leaving the world of employment.
In any case, the good news is that you still have some options on your side for making the most of your finances, as well as your insurance benefits, for your retirement years. The best way that you can ensure success beforehand, then, is to start by taking a good inventory of what you’ve got.
Getting All of Your Retirement Ducks in a Row
As you plan for this next phase of your life, the most important aspects from a planning standpoint will include the following:
- Insurance – Because health care can be a retiree’s biggest expense, you will want to make sure that you have good coverage here. If you won’t be eligible for Medicare yet, and if being added to a spouse or partner’s employer-sponsored health plan also isn’t an option, then there are ways that you can take your FEHB (Federal Employees’ Health Benefits) with you – provided that you meet certain criteria. You will also want to ensure that you don’t leave your loved ones vulnerable to financial hardship when it comes to life insurance. So, be sure that you check into either an individual plan of coverage, or consider taking your FEGLI (Federal Employees’ Group Life Insurance) coverage with you in retirement.
- Financial – A good, solid financial plan is also an essential aspect of a successful retirement. This is because in order to live the lifestyle that you desire, you will need a way to replace your current income. Therefore, you should start by obtaining an approximation of how much you will be receiving from your retirement annuity when that time comes. If you’re covered by FERS, inquire as to how much income you’ll get from Social Security benefits, too. Because this income won’t likely be enough to completely replace your employer’s salary, you will also want to give yourself a boost by maxing your contributions while you still can to the TSP (Thrift Savings Plan). This will help you to obtain a larger amount of payout when the time comes to convert your savings into income down the road.
Once you have actually decided when the big day will be, you will want to get your retirement paperwork filled out in plenty of time. Typically, you should do so approximately two months prior to your actual date of retiring. This will help to ensure that all goes well – and just in case there are any glitches, you will have some time to get things straightened out and back on track.
More from the Author: Kevin Wirth
Federal Employees May Get a Social Security Boost/by Sonny Dothard
A WEP provision of the old Civil Service Retirement System has been reducing the benefits of many federal employees. A new bill was introduced by Republican leader Kevin Brady to change the WEP provision. If the change is successful, it would benefit many federal workers. National Active and Retired Federal employees is playing a pivotal role in pushing for the change.
Why Federal Employees get Fewer Benefits?
The WEP provision of the old Civil Service Retirement System or CSRS reduces the benefits of the federal employees, state employees, county employees and even municipal employees who have worked in the private sector. Whether the employees worked in the private sector before, during or after the federal service time does not matter. It also includes the employees who receive an annuity from government employment that is not covered by social security.
All the federal and postal employees have contributed to the civil service retirement fund and the Social Security since last 30 years when the Federal Employees Retirement System was introduced. The people who retired under the old CSRS plan get significantly reduced Social Security benefits because of the WEP provision.
Though feds have hoped to get rid of WEP since the day it was created, they have been unsuccessful so far. They have now got a glimmer of hope as the Republican leader Kevin Brady has introduced a bill against WEP. It’s known as the ETPSA bill (H.R. 711).
Brady has got a better chance at getting the bill cleared because he is a republican who would have no problem in rounding up the supporters of GOP. He is also the Chairman of the influential House Ways and Means Committee. The committee has jurisdiction over Social Security.
If the efforts of Brady prove to be successful, the federal employees who are turning 62 this year would have the maximum benefit. Many of the people in this age group would be eligible to get a monthly benefit of $77. This bill may decrease the monthly benefit of about 17 percent feds by $13 per month.
The Fact Sheet
The National Active and Retired Federal Employees have played a key role in ensuring that all the current and retired federal workers get rid of the WEP provision. They are currently leading the charge to change the law. They even have a detailed fact sheet that explains how WEP works and what would be the impact of the changes.
Figuring Out Your Federal Retirement Annuity by Jeff Boettcher/by Jeff Boettcher
Figuring Out Your Federal Retirement Annuity by Jeff Boettcher, AIF
Having a plan for retirement is a must. This is because simply saving for the future, without any knowledge of what you will have available in terms of income, can be a recipe for disaster. It is essential to have at least an approximation of how much money you will have coming in for you to meet your living expenses.
This is especially important because, if there is a “gap” between what you will need for expenses and what you will have coming in, you will need time to plan for some type of additional incoming cash flow that can help you make up for that difference.
For those who are federal employees, there are ways that you can determine approximately how much retirement income you will be able to generate from your FERS or CSRS plan, depending on when you are eligible to separate from service and the type of plan that you have.
For FERS (Federal Employees’ Retirement System) employees, benefit amounts can be calculated as follows:
- Immediate Unreduced Annuity – For those who will retire with an immediate, unreduced annuity, simply multiply 0.01 X your high-3 X all years and full months of service. However, if you have a minimum of 20 years of service and you will be retiring at the age of 62 or over, then you should substitute 0.011 for the 0.01 in the calculation.
- MRA + 10 Annuity – If you will be retiring at your minimum retirement age (MRA) and you have between 10 and 30 years of service, then you will have a reduction of 5% for each year that you retired before the age of 62.
- VERA (Voluntary Early Retirement Authority) – If an employee accepts a VERA, then he or she is able to retire at age 50 if they have at least 20 years of service, or at any age if they have at least 25 years of service. In this case, the annuity amount will be calculated by using the same FERS standard formula, yet without the 5% penalty for retiring at below age 62.
- Special Category Employees – Certain individuals such as firefighters, law enforcement officers, and air traffic controllers are considered to be Special Category Employees. Provided that they have put in at least 20 years of service, then they are eligible to retire. In this case, the annuity amount would be calculated by taking 0.017 X the high-3 X 20 years of service plus 0.01 X the high-3 X all additional years and full months of service.
Some individuals may also be eligible for the SRS, or Special Retirement Supplement. This is because Social Security benefits do not begin until at least the age of 62. Therefore, this SRS income will be provided until that time. In order to calculate one’s SRS benefit amount, take the estimated amount of Social Security benefit at age 62 and divide it by 40, then multiply this figure by the total years of FERS service. (Round the service figure up to the nearest whole number). The total here will be the dollar amount of the SRS monthly benefit.
CSRS (Civil Service Retirement System) employees will calculate their retirement benefits in a somewhat different manner than those of the FERS retirement system. In this case, the way to determine the amount of the CSRS annuity for regular employees entails multiplying (0.015 X the high-3 X five years of service) + (0.0175 X the high-3 X five years of service) + (0.02 X the high-3 X all remaining years and full months of service).
All other CSRS retirement benefit amounts would be determined as follows:
- VERA – If a CSRS employee accepts a Voluntary Early Retirement Authority, he or she may retire at age 50 if they have put in at least 20 years of service, or at any age if they have put in at least 25 years of service. If this is the case, then their annuity will be determined by using the standard formula for the CSRS annuity. If, however, the individual is under the age of 55 when they retire, then the amount of their benefit will be reduced by 2% for each year that they are under age 55. This equates to a reduction in benefits of approximately 1/6% per month.
- Special Category Employees – Certain individuals such as firefighters, law enforcement officers, and air traffic controllers are considered to be Special Category Employees. Provided that they have put in at least 20 years of covered service, then their annuity would be determined by calculating (0.025 X the high-3 X 20 years of service) + (0.02 X the high-2 X all additional years and full months of service).
No matter which area of service a federal employee retires from, if the individual still has any remaining hours of service that are leftover, these will be combined with their unused sick leave in order to create more months. These will then be used in computing their annuity benefits – which can make a difference in the total amount that is received.
Disclosure: All opinions represent the judgment of the author on the date of the post and are subject to change. Content should not be viewed as personalized investment advice or as an offer to buy or sell any of the investments discussed. Legal and tax information is general in nature. Always consult an attorney or tax professional regarding your specific legal or tax situation. BWM Advisory, LLC reserves the right to edit blog entries and delete those that contain offensive or inappropriate language. Content will also be deleted that potentially violates securities laws and regulations. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. All investment strategies have the potential for profit or loss. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours.BWM Advisory, LLC is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
More from Jeff Boettcher
Can federal employees get phased retirement/by Matt Pierce
We all know that the Moving Ahead for Progress program authorized the phased retirement program but are the federal employees of the US eligible to apply for it and eventually enjoy its benefits? In 2014, the office of personnel management released a comprehensive report that comprised of the final rules related to the program that will guide all the agencies and the employees about the people that should ideally elect phased retirement. It also included all the benefits that are provided by it, how the pension and the annuity is calculated during the whole phase and how the exit from the program can be made without any hassle.
The phased retirement program:
In general, all the agencies working under the umbrella of the federal government can offer phased retirement programs for their employees. However, this can’t be termed as a “right” of the employees. If it were, it would have meant that all the full-time employees who have worked for the preceding three years and meet the age and year of service requirements (for immediate retirement) and are part of the CSRS or the FERS can be considered eligible; however that is not the case. All the employees that are set to get mandatory retirement including firefighters, air traffic controllers or the law enforcement officers should not participate.
OPM indicated that all the participants must have spent around fifth of their service time mentoring coworkers for them to be considered eligible. Also, phased retirees are obviously going to have to deal with deductions in retirement annuity, social security and other funds. However the health benefits get provided in the same manner and are subject to no deduction.
While the phased retirement program has its pros, there are some cons as well and if you are eligible, you need to think long and hard before making a decision.
Things to know about federal retirement and taxes/by Jeff Boettcher
If you are a servant of the federal government, then there is nothing you would look forward to more than achieving your federal retirement and enjoy the benefits that follow. The road towards retirement isn’t always an easy one but if you follow the right procedures and fund the right account then when the time comes, you normally have what you would hope for. Here is a list of things that we believe every federal retiree or future retiree should know:
Things to know about federal retirement:
- The federal income tax will purpose all of the incomes that you get out of retirement. This is inclusive of TSP, Social security and IRAs etc. So, this entails that the amount you will lose to federal income tax will be dependent upon the marginal tax bracket within which the income lies.
- It doesn’t matter if you are getting a CSRS or a FERS pension, it won’t be fully taxable. The reason being that you made the contributions from dollars that were already taxed. This does make sense because otherwise you would be taxed twice.
- The deductions because of TSP don’t affect the retirement income either. This is because retirees can’t make TSP contributions.
- The payroll taxes will not be deducted from your retirement income but only from your earned income. So, you won’t be parting with any money pertaining to your Social security tax or the Medicare tax.
- Around 85 percent of the Social security benefits are taxable. The specific amount is based on the provisional income. This is a very important keyword and to find out the figure, you can add ½ of your social security, some non-taxable income and all of your taxable income. This provisional income will then be compared with certain thresholds meant for joint and single filters.
Retiring in 2016; These Tax Traps Are To Be Avoided/by Matt Pierce
2016 promises to be a year during which state and federal income taxes are not going to stay constant. If you are planning to retire during this year, then there are some tax traps for you to avoid. If you plan well enough then you can easily avoid them. All the three retirement income sources can cause you troubles in this regard. Let’s take a look at each of the three:
Tax traps to avoid:
When you are filling the forms for your retirement application, you will get your hands on a W4-P among all the paperwork. You need to stay calm, put in the withholding level that you want to and you are good to go. If you are liable to get the FERS pension and are retiring before 62, your W4-P will also encompass the payments that the Special Retirement supplement guarantees for employees.
Once again, things are not that difficult to implement. Your SS will not keep any federal income taxes away from your benefits unless you make the explicit request. IF you miss this request making, then you will end up losing a lot of money. This is pertaining to the fact that most of the federal retired officials have to pay income tax on almost 85 percent of their SS retirement benefits. So whenever you apply, make sure you have a W4-V form with you and fill it to make your benefits impervious to tax.
It gets a little tricky here. TSP extracts taxes depending on your withdrawal habits. The TSP will not tax your money unless you withdraw more than 1500 dollars per month though. Otherwise you are going to have to pay serious amount of tax withholding money.
Civil Service Pay Raise Will Be Dependent On Performance/by Jeff Boettcher
Civil Service Pay Raise Will Be Dependent On Performance
The rises in pays are always anticipated by workers and officers from around the country and there is some news to pay heed to for the public sector officers and workers. It has been announced that the rise in civil service pay for them will be automated but a strong factor in this regard will be their performance. This was indicated by Franz Manderson who is the Deputy Governor. This announcement, according to Franz could go a long way in inculcating a drive to do better in the civil servants because incentives do lie in wait; but only to those who do well.
Civil service pay dependent on performance:
Teachers and a lot of other public sector officers should anticipate some handsome rises in civil service pays over the next year. This would be in addition to the increase that has been seen to be made in the cost of living allowance of all the employees. This was announced by Alden McLaughlin in his bid to address the needs of everybody.
Manderson saw it fair to thank McLaughlin for this generous allotment of rises and he had nothing but praise for the man. He ensured the premier that this is only going to further instigate a sense of responsibility and love for the job in the hearts of civil employees and that they are going to work ever harder knowing that they are going to be compensated for the extra input they give to the department.
It’s really appreciative to see these kind of steps being taken by the government and the officials because nothing pleases a civil service employee more than knowing the fact that they are not the ones who get overlooked when priorities for the country are set. Here’s hoping that steps like these continue to be taken.
The Results Are In! Government Has Failed To Properly Train Federal Employees/by Jeff Boettcher
The results are in! Less than 20% of Federal Employees are satisfied with the retirement training they have received. -75% report receiving no training at all.
Nearly 1 Million Federal Employees were asked to participate in the 2015 Year-End Retirement Survey conducted by PSRetirement.com. After tabulating the responses, and apart from the surprising number of Federal Employees that were left unsatisfied with their training, there were also a few other interesting insights into the retirement training that the Federal Employees are currently receiving.
¾ of Federal Employees Surveyed Report Receiving ZERO Retirement Training
According to PSRetirement.com’s 2015 Retirement survey over 75% of Federal Employee respondents have not had any retirement training at all. Of the Federal Employees surveyed less than 20% of those stating they have received training also state that they are satisfied with the training they received
Federal Employees Prefer One-On-One Retirement Training
Responding to the type of benefit training these Federal Employees would prefer:
- 42.5% of Federal Employees selected one-on-one training as their preferred method
- 29% of Federal Employees chose group training;
- A surprisingly large number of Federal Employees (28.5%) specifically requested interactive online training, which is something that is predominantly unavailable.
One thing is certain Federal Employees believe that their employer should be doing a better job of training employees on their retirement benefits. We happen to agree.
Reconsidering FEGLI Life Insurance at Age 55/by Andy Ramirez
First published on COMPAREFEGLI.COM
Reconsidering FEGLI Life Insurance at Age 55
The age of 55 is a critical milestone when it comes to federal retirement benefits and plans. If you have put in 30 years of service, this is the age when you become eligible to retire early and take full retirement benefits through the Federal Employees Retirement System (FERS) or Civil Service Retirement System (CSRS). Age 55 is also when you are able to start withdrawing your Thrift Savings Plan (TSP) fund investments without triggering the 10 percent penalty. You may believe this to be the case with FEGLI Life Insurance.
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Senate Passes Bill to Reduce FERS and CSRS Benefits Fraud and Misuse/by Andy Ramirez
Senate Passes Bill to Reduce FERS and CSRS Benefits Fraud and Misuse
This bill (S.1576) cracks down on federal retirement benefit fraud and misuse by giving U.S. Attorneys the statutory authority to prosecute retiree representatives who misuse funds from the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS).
FERS and CSRS are the primary retirement funds of federal workers, and they’re managed by the Office of Personnel Management (OPM). S.1576 was introduced due to concerns about an increase in embezzlement of government benefits by dishonest representatives of retirees, and to help prevent the misuse of these retirement funds that the government pays.
This bill classifies the crime of misusing federal retirement funds as a felony. This is expected to deter deceitful behavior targeting retirees and provide the same protections to federal employees and retirees that Social Security and Veterans benefits recipients already have.
Bill to Reduce FERS and CSRS Benefits Fraud Sails Through Senate
It was introduced by Senators James Lankford (R-OK) and Heidi Heitkamp (D-ND) in June 2015. Lankford and Heitkamp are chairman and ranking member, respectively, of the Homeland Security and Governmental Affairs Subcommittee on Regulatory Affairs and Federal Management. The bill was approved by the Senate Homeland Security and Governmental Affairs Committee on June 24.
After the bill sailed through the full Senate with Unanimous Consent, Sen. Lankford issued a statement saying that “I’m pleased the Senate has passed this bill to protect the retirement and annuities of federal employees all across America from caretaker misuse and fraud. We must fight against the embezzlement of federal government civil worker benefits to ensure a stable retirement for them and their families.”
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Federal Employees Could Face Higher Medicare Premiums/by Tamila McDonald
Rising Medicare Costs
A law fluke could cause a price hike in Medicare costs for individuals receiving federal retirement benefits. This hike could affect several hundred thousand retired federal employees. The law fluke conspiring with low inflation rates could see retirees paying a significantly more per month for Medicare premiums than other retirees receiving the benefits do. Projections show that the increased premiums for retired federal employees could jump beginning in late 2016. According to a Medicare report, the premiums will not increase until October and some 70 percent of recipients will not even see a premium increase. However, the vast majority of the 30 percent of do are recipients of federal benefits, according to an article in the Washington Post.
Unqualified for “Hold Harmless”
The reason retired federal employees would see the increase is because most individuals who take part in the Civil Service Retirement System, do not qualify for the “hold harmless” provision, which helps maintain a Medicare Part B premium steady, if social security benefits do not increase to help offset the increased cost of medical coverage. This provision is designed to help keep Medicare affordable. Low inflation prices have the rate indicator (which also helps determine military retirement benefits payments) is current at negative 0.2 percent. Despite the low number, recent indications show that positive numbers may be in the future. Combined with a low projected cost of living adjustment, the indicator predicts rates increases could fall into effect later next year.
While the vast majority of Medicare recipients will not see an increase, the 30 percent who do, including retired federal employees, will likely include new Part B enrollees, individuals with no social security premium and individuals with an income-related premium. Projections for this increase are due in part to a possible low cost of living adjustment for social security recipients. If the cost of living adjustment does not provide enough to cover the additional cost of Medicare, individuals who qualify for the “hold harmless” clause will not have to foot the cost of the additional fees. However, those who do not qualify for hold harmless will have higher premium rates to offset the loss of those extra premiums.
CSRS equals no protection
Because most of the individuals who utilize the CSRS do not receive social security, they are not even eligible for any protection against rate increases. This leaves the burden of offsetting the low cost of living adjustment on their shoulders. While some retired federal employees utilizing the CSRS do receive social security via another employer, an estimated 800,000 retirees on the CSRS could have to pay higher premium rates next year. Some estimates say that there may not even be any COLA this year, which could increase the cost of premiums even more. ‘
Retired federal employees do not have to enroll in Medicare because they are covered via the Federal Employee Health Benefits Program (FEHB). However, many employees opt for Medicare at age 65 to receive better benefits. If they opt not to pay the higher premium, they could still receive coverage from FHBP.
Other CSRS Related Articles
Programming Error Forces DFAS to Issue CSRS Offset Program Refunds/by Andy Ramirez
Programming Error Forces DFAS to Issue CSRS Offset Program Refunds
It seems the DFAS payroll system has been erroneously taking too big a retirement savings plan contribution from the pay checks of federal civilian employees in the CSRS Offset program serviced by DFAS due to a programming error.
A majority of federal employees’ retirement plans are housed in either CSRS or the Federal Employees Retirement System (FERS). However, CSRS Offset houses the retirement plans of federal employees who were in CSRS for five years or more before FERS came along in 1987, and then quit and joined federal employment again after a year or more.
A letter sent by DFAS to those affected by the error explains that when a federal employee in the CSRS Offset program serviced by DFAS started earning enough to hit the maximum amount of Social Security contribution, the DFAS payroll would prematurely hike the CSRS Offset contributions to the full withholding rate.
So these employees were over-deducted in between these two points and paid more than they should have into the CSRS Retirement Fund. This went on until the system was fixed starting from the December 28, 2013 pay period.
DFAS Provides Refunds for Federal Employees in CSRS Offset Program
According to federal law, the agency is allowed to provide refunds for this error only for the six years prior to the date on which the error was discovered, which in this case was Feb 18, 2012. So this set of CSRS Offset will be getting the back pay and interest starting from February 18, 2006, through to the pay period ending December 14, 2013.
Those who are already retired and have started receiving retirement annuity benefits, OPM will adjust your annuity payments to account for the refund. Current and former federal employees who were in the CSRS Offset plan serviced by DFAS in between 2006-2013 should contact DFAS for more information about the refund (call 1-800-729-3277).
FERS – An Overview/by Tiffany Jones
FERS (Federal Employees Retirement System) – An Overview
Working for the federal government has its perks, and one of them is a comprehensive retirement package, commonly referred to as FERS (The Federal Employees Retirement System). The multi-faceted program empowers its employees to easily take their financial future into their hands and have adequate financial coverage throughout their golden years.
The FERS Basics:
FERS has three main components that make up the retirement package, Social Security, a Basic FERS Annuity and the Thrift Savings Plan. All federal employees are enrolled in FERS if they were hired after January 1, 1984, have elected to transfer into the FERS program, have rejoined the federal government after a break in service with more than one year, but less than five years of creditable CSRS service or upon rehire into a FERS position after a separation from a FERS position.
FERS and Social Security:
Federal employees are will enjoy the security that comes with being covered through Social Security. Employees pay 6.2% of their earnings up to the maximum taxable wage base and the government matches your contributions throughout your career. The benefits cover employees and their family members’ financial coverage who fall under Old-Age Survivors and Disability Insurance (OASDI), Social Security’s Medicare Hospital Insurance for beneficiaries over the age of 65.
Most of the cost of Social Security is paid for through payroll taxes. Each year you pay a percentage of your salary up to a specified earnings amount called the maximum taxable wage base. The Federal Government, as your employer, pays an equal amount. The percentage you each pay for old age, survivor, and disability insurance coverage is of your earnings.
FERS Basic Benefit Plan:
Federal employees who are lifers will reap the benefits from the Basic Benefit plan after they have earned five years of creditable civilian service. Employees who transfer from the Civil Service Retirement System are also eligible to participate in the program (these employees are commonly called Trans-FERS).
As part of the FERS Basic Benefit Plan, employees will also gain survivor and disability benefits after 18 months of credible civilian service. Now what does credible service mean? Credible service means the employee has made contributions while serving as a federal employee. The contributions you are making to FERS for your future is about a 7% difference from your standard pay. This 7% will encompass the 6.2% paid to Social Security and 0.8% to your FERS Basic Benefits plan.
Employees are eligible to withdraw all of their contributions if they decide to leave the Federal Government, however, if they return to work for the Federal Government, the employee will not be eligible to receive benefits based on service covered by that refund. Good news, there are no regulations if you refund your Basic Benefits plan contributions back into FERS.
The FERS Basic Benefit Plan takes your financial future by offering three different retirement options to accommodate your life and financial needs. The plan allows for Immediate, Early and Deferred Eligibility.
Immediate Retirement allows employees who are 62 years of age and have five years of credible service or are 60 years of age with 20 years of service to start receiving retirement benefits within 30 days of stopping work.
Early FERS Retirement allows is available to employees who have been involuntary separated or voluntary separations during major reorganization or reductions in the federal workforce. Eligible employees must be 50 years of age with 20 years of service, or any age and 25 years of service.
Deferred FERS Retirement is determined by the employee’s age and number of years of creditable service. Each case will vary, and will be dependent upon the employee’s Minimum Retirement Age.
FERS and Employee Disabilities:
Life sometimes throws you a curve ball, and sometime they strike you out. If a federal employee becomes disabled during their tenure with the government, they may be eligible for FERS disability benefits to supplement part of their income.
Employees are considered disabled under FERS if they are unable to perform useful and efficient service in their position due to disease or injury. In some instances, the agency may offer the employee an alternate position that accommodates their disability – but if the employee declines the alternate position then they will no longer be considered disabled under the FERS benefit program.
You may also qualify for Social Security disability benefits if you are unable to work in any substantial gainful activity.
FERS Benefits to Surviving Family Members:
Dealing with a loss of a family member is never easy, but also dealing with the loss of income can add salt to the wound. Under the FERS program, actively working employees who have at least 18 months of credible service will have a peace of mind knowing that their spouses will receive financial aid after they are gone.
After a FERS-covered federal employee passes away, the surviving spouse can either receive a lump sum payment plus the higher half of your annual pay rate at death, or the spouse may elect to receive half of the employee’s high three—year average pay. In addition, an employee that has 10 years of service, your spouse will also receive an annuity equaling 50% of their spouse’s accrued basic retirement benefit. These FERS benefits are paid in addition to any Social Security, group life insurance, or savings plan survivor benefits. For your spouse to be eligible to receive all of the benefits under FERS, you must have been hitched for at least nine months.
When a retired federal employee passes away, the employee’s FERS annuity is automatically reduced by 10% for the surviving spouse. Unless those benefits are jointly waived in writing by the retiree and the spouse before retirement.
Children may be eligible to receive an annuity up to the age of 18, or 22 if they are full-time students and children who became disabled before the age of 18. Depending on how many children an employee has will determine the amount of aid received following the employee’s death. The FERS surviving child benefit is $344 per month, per child and $413 if orphaned. The total children’s benefit is reduced dollar for dollar by any Social Security children’s benefits that may be payable.
Federal Retirement Comfort and Financial Security/by Dianna Tafazoli
The journey to federal employee retirement promises to be everything that human nature is: complicated, a little bit frightening, exciting, anticipative, wonderful and riddled with the strong emotion of change and what to do with it. When you think about retiring from Federal Service, there is so much to do. There are hundreds of things that could be added to the list of things we have to do to get ready for your federal retirement.
Federal Retirement Financial Plan
However, it is apparent that there are two travel companions we must carry with us into our retirement future – a solid financial plan and an action plan tailored to our own individual needs and desires. There is no perfect time to retire and there is no perfect set of goals by which to reach for. There is, however, a best time to retire and there are SMART Goals that are realistic and attainable. There are logical steps to making decisions. We can only reach a place where we can even discuss retirement through hard work and self-reliance; and we know that plans will often fail even under the best of circumstances, if we make them without the commitment and wherewithal to stick with them, stay the course and know when to modify our plans.
From 2007 to 2009, the country faced a temporary slow-down in the economy. A slow-down in the economy is technically called a recession. Foreclosures and job losses were at an all-time high. 2010 to present have still not normalized the economy for many Americans, but it is getting better.
Given the brutal economic melt-down of the past years, should we prepare differently for retirement? The answer is NO. It is not that we should prepare differently for retirement, but that we should prepare always early and consistently for retirement. The two key words – Early and Consistent are not dependent on the state of the economy, but rather on proactive individual determination to enter retirement in relative comfort and security.
Barriers must always be included in the plan. These are things that might prevent us from accomplishing our retirement goals. A good plan must be flexible and evolve over time as events in our lives change.
Retirement is a methodical process of carefully orchestrated steps culminating in an individual action plan and a very well laid-out financial plan. What is perhaps the most critical thing that any of us can do to protect our retirement future, irrespective of the sway of the economy, is to consider the words of an ancient proverb: Cut Your Coat According to Your Own Size. In essence, it means you must measure your coat (your resources) to fit your budget (your expenses) in good times, so that in bad times, it will still fit. Be careful with spending and saving in hard economic times. Be fanatical about spending and saving in good economic times.
P. S. Always Remember to Share What You Know.
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Important 2014 TSP Dates/by Jeff Boettcher
Important 2014 TSP Dates for Federal Employees
December 15 – This is the last date you can your monthly payments for the year. Federal Employees must be in monthly payment status for this to take effect.
December 18 — monthly TSP payments, which are normally processed between December 19 and December 31 will instead be processed on December 18 due to the holidays. These payments will be reported to the IRS on your 2014 tax returns.
December 19 – TSP Beneficiaries will have their final Required Minimum Distribution processed on December 19. These payments will be reported to the IRS on your 2014 tax returns.
December 22 – Civilian and uniformed service participants will have their Residual Required Minimum Distributions for 2014. These payments will be reported to the IRS on your 2014 tax returns.
December 25 — The TSP will be closed on December 25th due to Federal Holiday observance. Any transactions that would may been processed on December 25 will, instead, be processed on December 26th.
December 26 — Withdrawals processed through December 26th will be reported to the IRS on your 2014 tax returns.
December 29 – Any withdrawals or distributions processed on or after December 29th will be reported to the Internal Revenue Service as income for 2015.
January 1, 2015 – The TSP will be closed on January 1 due to the Federal holiday.
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Is Retirement On Your Christmas List?/by Dianna Tafazoli
Many Federal Employees See the End fo the Year as a Good Time To Retire
Are you planning to retire at the end of the year, starting 2015 as a retiree instead of an active Federal employee? You might hear a number of rules and reasons when you should retire. However, the day you retire is a very personal decision hopefully based on planning and sharing with your family and close friends. Everybody’s circumstances are different and should not be compared to anyone else’s.
Many people start planning for retirement 20 or more years prior while others allow retirement to creep up on them. Whether you fit into the first group, the second or none, when you retire is a decision that is yours and yours alone. Nobody knows better what your circumstances are and how you are equipped to deal with them. You do, however, want to get the greatest value possible out of your benefits when you retire.
You want to make sure you are retiring at a time where you have gotten the maximum benefit from your annual and sick leave. For both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) sick leave adds value to your retirement so you want to save as much as possible. Only months and years are used when calculating your years of service, days are dropped off. If you need to work a while longer so that your days can be turned into months or perhaps years, hold on a while longer if you can to reap the benefits.
By the same token, save up as much annual leave as allowed because you will need it if you have to wait to receive your annuity. Your annual leave lump sum payment generally gets to you fairly quickly and can often serve as a gap filler while waiting on your annuity check. Even when you receive your annuity check, it might be an interim check which is not equivalent to your full retirement annuity. Although your lump sum annual leave check is generally taxed at the 20 percent rate, it will still be a life saver if you need extra money and your budget is tight.
It might be a good idea to delay costly vacations when preparing to retire and save your leave to enhance the way you are able to live in retirement. On the other hand, you might have a completely different perspective on how you should handle your leave and your retirement years. Whatever decision you make, be certain you have done your homework, put some plans in place so that your retirement is comfortable and secure.
P. S. Always Remember to Share What You Know.
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