federal retirement
Federal retirement is a word that describes the retiring process and all the formalities involved for the federal employees of the country.
Five Key Steps Towards Federal Retirement and Financial Security by Carol Singer
Five Key Steps Towards Federal Retirement and Financial Security
by Carol Singer
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.
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.
Contact Carol:
Phone: 505.310.1474
Email: [email protected]
Other Carol Singer Articles
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The Correct Way of Saving for Retirement by Carol Singer
Is FEGLI Right For You, Right Now? By Carol Singer
Retirement Benefits Savers Get a Gift from IRS
The Internal Revenue Service of the USA has given a special gift to all the retirees who have some retirement benefits saving. It has allowed them a chance to explain why they didn’t stick to the 60-day deadline while moving their money from one IRA to another or from a 401(k) to an IRA. Earlier, the retirees just had to pay tax for missing the deadline and they didn’t get a chance to explain the situation. Experts are still advising to make the money transfer online.
IRS reduced the Worry of Retirement Benefits Savers
IRS has considerably made the life of a retiree easier as the rule of moving retirement benefits funds from one IRA to another and from a 401(k) to another within just 60 days cost a lot of money to the retirees earlier and harmed their nest eggs. When a retiree failed to move the funds in time, he or she had to pay taxes for the full amount. If the person moving the funds was 59 and a half years of age, he or she had to pay an additional penalty.
Avoiding the Risk
In order to avoid the risk of paying extra tax, the financial experts advised the retirees to do an online transfer of their funds. Not only it’s very convenient but it’s quicker too. It ensures that the funds are transferred smoothly within a few days.
The Mistakes
Some retirees had to pay extra tax because they had a misconception that the account they have moved their funds to a qualified retirement account while it was not the case. Some even made the mistake of losing the distribution check.
Expert Opinion
The founder of IRAhelp.com and a certified public accountant, Ed Slott says that this move of IRS is a big deal and it will help a lot of people. He says that when people had to pay full taxes due to a small mistake, they lost their tax-advantaged status.
Slott adds that people who didn’t submit the funds on time usually did it inadvertently rather than trying to pull something over on the IRS. He also said that there was a costly appeals process so only a few offenders pursued it. He concluded by saying that online transfer is still the best practice.
The Circumstances
IRS has announced that the new rule would be effective immediately and has shared a list of circumstances that allow a person to be excused for not submitting the retirement benefits savings in a new account on time. Some of these circumstances are severe damage to the residence of the taxpayer, death in the family of the taxpayer, serious illness of a family member, a postal error, etc. In such circumstances, the taxpayer must immediately provide a written self-certification explaining why or she missed the window.
Manning City Council to get Retirement Benefits
The members of Manning City Council will have access to health insurance and retirement benefits starting spring 2018. This decision was made recently. A few people have shown their displeasure with the decision. They argue that the decision should be taken when it is to be implemented rather than 2 years before. Some even stated that people should have a say on the issue.
Why are Retirement Benefits and Health Insurance Benefits being offered now?
The Council members had the option of getting the retirement benefits and the health insurance benefits because of the state insurance and they were considered to be full-time employees. Now the ordinance needs to be modified so that the members can get the employers portion of it. These details were shared by Scott Tanner who serves as the Manning Administrator.
He also added that the ordinance would not be effective until April 2018 when the next council is supposed to be elected.
The Opposition
Pro Prothro who is a local businessman as well as the Clarendon County Chamber President has challenged the decision taken to amend the ordinance. He says that the timing of the proposal is not good. He admitted that the council members had the right to take the decision legally but he didn’t like the fact that the change is approved today while it will be effective after two years. The situation after 2 years is hard to guess. No one can decide the cost of retirement benefits and health insurance benefits at that time accurately.
Prothro accepted that the council members should get paid for their time. But he insists that the change should be tabled till January 2018 because getting statistical data on healthcare costs would be an easy thing to do then.
Another Opponent
Another opponent of the change, Art Lambert said that the council’s Rules of Procedure don’t allow the council members to fix their own salaries especially when they are in the office. He thinks that the council members should consider whether it’s appropriate for them to take this step.
Lambert also expressed doubt on the exact date when the council’s decision to change retirement benefits and health insurance was proposed. He claimed that he had studied all the minutes and could not find the record of this change. He also had the opinion that people should get the opportunity to vote on the matter and so it should be a referendum.
Calculating the FERS Supplement by Paul Kalra
A Lesson on Calculating the FERS Supplement by Paul Kalra
There are many FERS annuitants who are able to retire prior to the age of 62, and who are eligible for the SRS (Special Retirement Supplement). You can meet such requirements if you have retired:
- Following the MRA (Minimum Retirement Age) after putting in at least 30 years of service;
- At age 60 with at least 20 years of service; or
- Upon either an early voluntary or an involuntary retirement at age 50 after having 20 or more years of service, or at any age after at least 25 years of service, when it has been determined that your agency is undergoing a major reorganization, a RIF (reduction in force) or a transfer of function. (In this situation, you will not receive the SRS until you have reached your Minimum Retirement Age).
As Social Security retirement benefits cannot be received until you reach at least the age of 62, the Special Retirement Supplement can help you with bridging your income until the time that these benefits are paid out.
In order to determine roughly how much you will receive from your SRS, you should first obtain an estimate of benefits from the Social Security Administration. Each year, Social Security provides a statement of estimated benefits, so you will be able to easily find the dollar amount of estimated benefits that you are likely to be receiving at age 62.
Next, take this dollar amount and multiply it by your years of FERS service (rounded off to the nearest whole number). Once you have done so, divide this figure by 40. This will provide you with the approximate amount of FERS supplement that you should receive.
As an example, if the amount of Social Security benefit that you are estimated to receive at age 62 is $5,000 and you have put in 30 years of FERS service, then the calculation will be as follows:
$5,000 X 30 / 40 = $4,500
In running this calculation, your estimated FERS Supplement benefit would be approximately $4,500 per month. It is important to note, however, that certain situations such as obtaining outside employment following retirement could have an impact on the amount of benefit that you ultimately receive.
More From Paul Kalra
5 Things You Must Do If You Are Eligible for Federal Retirement
If you are a Federal employee who is counting the days to his or her retirement then you must remember to do certain things. These things will help you to get your money soon after retirement and would save you from any unforeseen financial trouble.
How to make Federal Retirement Easy on You?
- Check your service records: If you are among those people who are about to retire in a few years, you may want to start checking your federal service records and make sure there are no loopholes. If you have any time lag then you may want to prepare an explanation of the same to speed up the process of your application.
- Connect with HR: You may also want to connect with the HR department (ORM) to see that they have all the data required to process your federal retirement Also, check that your crucial details like address are not misspelled or obsolete. Remember, a little mistake can cause a lot of time delay.
- Save Some Money: It would also be smart for you to start saving some money for the days when your retirement benefits application is being processed by the concerned departments. As you will not have a regular income, you may want to pay up your bills in advance. It will save you from embarrassments like having to borrow a few bucks from your friends or relatives.
- Track Your Application: The progress of your application can be tracked online in all cases. These online checks will let you know how soon you will get your money and you will not have to visit the respective office every now and then. If you really need the money you can also request the concerned department to process your application a bit faster.
- Be Prepared for Different Outcomes: The outcome of the entire process can be different in unusual cases. For instance: If a retired employee has had a divorce and is bound by law to take care of the spouse financially, the employee would get only half of the amount unless the matter is studied by the respective authorities. So you must be prepared for these obstacles in advance and discuss your case with an expert to avoid feeling disappointed in the end.
It is assured that these steps if taken at the right time will make your federal retirement process much smoother.
Things to know about federal retirement and taxes
[Photo credit: Lending Memo]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.
Looking to start your savings or retirement accounts?
A recent study that was conducted by the ORC international and the Federal Credit Union of the Navy revealed that the military youngsters are incredibly and remarkably more inclined towards taking up the savings and/or the retirement funds than the youngsters from the general population. Saving money is something everybody wants to do but not many are able to do it because it’s definitely easier said than done. Everybody is aware of the importance but not many are able to get started without facing challenges. For those who have just joined the military or have been there for some time now, there are enough retirement accounts opening facilities for them to be able to be satisfied:
An emergency fund is one of the best avenues to take upon in this regard. Emergencies can never really be avoided because of their sudden transpiring nature. What we can do however is to be prepared once we are faced with any predicament. For people that can have retirement accounts or savings’ ones for that matter, an emergency fund can go a long way. You can just get it opened without any hassle and don’t touch it unless you absolutely have to. Make small additions to it every month and you should be able to have money when your car needs a sudden repair or any other such out of the blue emergence of something.
The best way to make your retirement accounts filled with money all the time is to take small steps. Don’t try to be extravagant and put all of your month’s salary in there. Another thing to remember in this regard is to start as early as you can. Often officers start late in their service tenure and when they reach their retirement they don’t have much in their accounts to look forward to. There are many avenues to take upon like the IRAs, 403(b)s and the 401(k)s etc. in this regard.
Details about the new military retirement system
Soon we will be hearing from the Defense Department regarding the new military retirement system that’s set to be put in to effect from January the 1st of 2018. There are some intricate details regarding the system that are to be shared and everybody is looking forward to hearing something that they would like to hear.
Details about the new military retirement system:
During 2016, the armed personnel can expect the implementation of the financial education programs that are going to be spread across the whole force and will allow the service members that are eligible to get help regarding making decisions of selecting retirement packages. They can either get enrolled in a new retirement plan or just go with the rudimentary benefit that is given under the grandfather clause. Even though, as mentioned the plan will not be put in to practice before 2018, all the already in service troopers will be offered the traditional grandfather clause that is part of the basic 20 year retirement system.
If you entered the troops after January 1st 2006, then you will have the liberty to choose between the 401 (k) system and the offered one. This would definitely create an ambience of uncertainty as 2018 approaches near for the people that are in the middle of their services.
The troopers who came before 2006 and have served for over 12 years, will be given the chance to opt for a waiver but because this ensures few financial fruits, not many would like to make the switch.
There have been cases where the Pentagon has forcefully asked some of the troops to take upon retirement plans but with the new military retirement system and its launch, it’s expected that things are going to get a lot more open to choice of the military.
The Last of the Government Research Chimpanzees are Retiring
The Government is retiring the last of the research Chimpanzees
There have been some chimpanzees used by the government for scientific research purposes but now the National institutes of health has decided to send the final few research animals into federal retirement. These research chimpanzees include some that were present in the Texas facilities. They will be moved to the nearest federal sanctuary as soon as some space is cleared out for them.
This is not something to be surprised of for most of the people as the government had already made such remarks and indicated that one of the closest ancestors to the homo sapiens will cease to be used as research specimens. During 2014, the national institutes of health had announced that soon all the chimps that were serving as lab rats will be retired and this looks like something to do with that announcement.
In the past week, the labs had cleared the chimps and it was said that they are no longer going to be subject to experiments in the lab anymore. The main director of NIH stressed during his last speech that the research on chimps in the world of today is no longer something pragmatic and it’s finally time for us to move on.
The first thing on the mind of the NIH board apparently will be to send the 20 chimpanzees that they currently own to the Chimp haven which is a government owned and funded chimp sanctuary up in Los Angeles. After that more animals are destined to follow and be placed in other sanctuaries that are spread out across the country.
Here’s hoping that steps like these mean an end to the exploitation of these animals and they can finally spend some years without having to abide by the rules formed by the human scientific civilization. Steps like these can only be lauded.
Medicare Premiums to Rise for Some Retirees
On Monday, November 1, President Obama signed legislation that averts what, for many federal retirees, would have been a very large increase in their Medicare Part B insurance premiums. Instead of facing a $50 plus increase, federal retirees who do not receive Social Security payments will see an increase of about $19 a month. This includes a $15.80 a month increase in their basic premium, plus a $3 monthly surcharge.
Retirees whose Social Security income covers their Medicare Part B premiums will see no increase. Current law limits the increases in Medicare insurance premiums that Social Security recipients must pay.
Increases in Medicare premiums may be no larger than a recipient’s increase in Social Security payments. For the 2016 calendar year, there will be no increase in Social Security payments, consequently Social Security recipients are protected from 2016 increases in Medicare Part B premiums.
However, this “hold harmless” provision only applies to retirees whose Social Security income pays their Medicare Part B insurance. Before the November 1 legislation became law, other Medicare Part B beneficiaries would have faced a premium increase from $104.90 to $159.30 per month.
No such “hold harmless” protection exists for Federal retirees who do not get Social Security. Without a change in legislation, these retirees would have had to pay the extra $50 plus in monthly Part B premiums.
To offset lower revenue for the Medicare Trust Fund, Medicare beneficiaries will pay a $3 per month surcharge, for about five years beginning in 2016. Social Security recipients will not pay the $3 surcharge in 2016. However they will pay the surcharge in any future years when their “hold harmless” provision does not apply.
The November 1 legislation reflected a broad-ranging budget and debt-limit agreement negotiated between the President and the Congress. The legislation avoids a default on U.S. Government debt payments. It also raises caps on federal defense and non-defense spending. An additional provision of this legislation caps the increases in Medicare premiums.
— by John Zottoli
VA Federal Employees Face Charges for Misuse of Funds
VA Federal Employees Face Charges for Misuse of Funds
Two senior Veterans Affairs managers face criminal charges after a watchdog group reported that these federal employees gave employees large salaries and relocation reimbursements as an incentive to reward executives.
The inspector general of the Veterans Affairs Department said that the two federal employees received some $400,000 in total for a relocation of about 140 miles. Moving expenses are allowable expenditures for the agency; however, evidence indicates that Kimberly Graves and Diana Rubens rigged the system to create job openings for which they could apply.
In addition to arranging new positions for themselves, the two federal workers kept their higher paying salaries despite the new positions sitting on a lower federal pay scale. Ironically, Rubens moved to her new position in Philadelphia to clean up that VA office following a range of scandals including changing benefit claim dates and retaliation against whistle blowers.
These two women could face criminal charges and their case is at the U.S. Attorney’s office.
Scheme of Increasing Salaries
While the case of fraudulent behavior by federal employees is startling, the Inspector General detailed a bigger scheme that involve increasing salaries for many executives. The report showed that some 22 federal VA employees received promotions to executive positions or relocated over about 3-years. The report that these promotions/relocations were used to justify salary increases. All but 1 of the 22 employees listed received a substantial pay increase following their promotion or relocation.
The Attorney General’s report said “Annual salary increases totaled about $321,000 with relocation expenses totaling about $1.3 million.” In addition, the report further detailed another $140,000 in relocation incentives. In total, federal employees spent some $1.8 million on reassignment.
Jeff Miller, the House Veteran’s Affairs Committee Chairman said that the finding align with recent investigations into the organization.
“It is clear from this report that Undersecretary (Allison) Hickey and others in VA leadership knew they could use fear, intimidation and timely relocation incentives to coerce subordinates to relocate to jobs they didn’t apply for, at the taxpayers’ expense. These VA managers knew what they were doing and it is clear that from day one that VA officials were using the relocation expenses program to enrich themselves.”
The VA Response
The VA responded to the allegations, agreeing with the attorney general. The released the following statement: “As a result of their findings, VA leadership will conduct a 30-day review of all incentive and relocation procedures in the department… The VA will full cooperate with other federal agencies as required as we continue our daily effort…”
Federal employees have come under fire his year as numerous reports have shown that this federal benefits program is riddled with fraud and mismanagement. Reports have included mishandling of healthcare requests, changing the dates on applications, and unaccounted spending of about $6 billion per year, and a shortfall of some $2.6 billion this summer that nearly caused several VA hospitals to shut down.
Republican representative Dan Benishek expressed frustration earlier this year. “Do we have to listen to this repeatedly? Obviously, there are some problems that really need to be fixed. It’s unbelievable that this is happening.” He continued, “It seems to be a new revelation every month about some incompetence.”
The VA is responsible for managing and distributing federal benefits for military veterans. The purpose of the VA is to help veterans receive proper medical care, compensation and insurance coverage.
Federal Retirement Backlog Still Backed Up
Federal Retirement Backlog Still Backed Up
Despite efforts to reduce a massive federal retirement backlog, the Office of Personnel Management did not make much headway in August, according to numbers released by the OPM. The OPM began tracking their progress in May of 2014 as a way to help reduce the retirement benefits backlog.
Currently the Office of Personnel Management has a backlog of 16,350 applications for federal retirement. This number is only down by 105 from July. Although the Office of Personnel Management processed just under 7500 retirement claims last month, they fell short of their goal by about 150. Compounded with the 7,341 new government retirement claims received in August, (roughly 550 more than received the same time last year) the numbers may not be dropping anytime soon.
The Numbers Keep Growing
The Office of Personnel Management saw progress in backlog reduction from March through May, but new applications grew the backlog by almost 2,000 applications in June and July. The backlog grew from 14,511 to 16,455 between June and July. The OPM had projected a backlog of about 11,442 by July, but were stymied by the unexpected influx of new applications. As of May, the backlog of federal retirement benefits was reduced by 15.6 percent.
Percentages of claims processed each month have dropped 12 percent from the high of 83.7 percent in December of 2014. In the last six months, they have averaged just over 70 percent, with some months dropping as low as 68 percent processing.
In most years, the OPM receives a high volume or retirement applications in January, with levels lowering to a steadier flow throughout the year. It is common for some months to spike though.
Budget Cuts Complicate Matters
Retired federal employees may be concerned because government-wide budget cuts take effect in October, reducing the amount of overtime the OPM can pay to claims handlers. The budget cuts will also reduce the OPM’s ability to hire new employees to help tackle the overflow.
In addition, retired federal employees may face longer delays if the government cannot reach a budget agreement for funding agencies by midnight, October 1. A government shutdown would delay retirement benefits processing and potentially add to the backlog.
The OPM has struggled to clear the backlog for years and frequently deals with frustrated retired federal employees and complaints from Congress. The Office of Personnel Management set a goal to reduce the number of claims by just over 11,000 by the end of September, which does not appear to be likely.
According to the OPM website, retired federal employees should expect their first payment within 5 to 7 days from the time the OPM receives the electronic files. The OPM says that delays may be caused by missing information and that some 23 percent of applications filed are missing some information and about 11 percent fail to meet the 30-day deadline. The OPM typically attributes these errors to the agency from which the retiree completed their service.
August’s low numbers follow a backlog growth of 13 percent in July.
Reemployed Annuitants and FEGLI
FIRST PUBLISHED ON COMPAREFEGLI.COM
FEGLI For Reemployed Annuitants
So you decided to hang up your federal employment boots and enjoy retirement benefits such as FEGLI for annuitants. But then you get lured back into the federal workforce, whether by want or need or the call of duty. Whatever the reason, one of the things you have to sort out here will be about your life insurance coverage. READ MORE:
MORE FEGLI ARTICLES:
What is FEGLI Option A, Option B and Option C?
Evaluating your life insurance policy by Todd Carmack
Converting FEGLI to Individual Life Insurance After Separation From Federal Service
Who Gets Your FEGLI Life Insurance Benefits When You Die?
FEGLI – Federal Life Insurance Living Benefits Guide
Pending Retirement Claims and FEGLI
FIrst published on COMPAREFEGLI.COM
FEGLI and Pending Retirement Claims
So you’re eligible for FEGLI and your life insurance coverage will continue when you are an annuitant after federal separation. But there’s a twilight zone in between the two, when your reettirement claim is pending. What happens to your coverage if you die in this twilight zone or if your insurance gets terminated? The following links discuss your pending retirement in further detail. READ MORE…
OTHER FEGLI ARTICLES:
What is FEGLI Option A, Option B and Option C?
Evaluating your life insurance policy by Todd Carmack
Converting FEGLI to Individual Life Insurance After Separation From Federal Service
TSP Bill Equals Christmas in July for Federal Employees
Eliminating TSP Withdrawal Penalties for Certain Federal Employee Participants
On June 29, 2015, the President of the United States, Barack Obama, signed a bill that would prevent the penalization of public safety employees who must retire under mandatory age guidelines, many as young as age 50 or before. Federal firefighters, law enforcement officers (LEOs), air traffic controllers and border protection officers most of who leave the public sector or their job classification by the time they turn 50 or shortly thereafter suffered a 10% early withdrawal penalty from the Thrift Saving Plan (TSP) before enactment of the law.
The bill, Defending Public Safety Employees’ Retirement Act, amends the Internal Revenue Service Code and allows those employees falling into the above category to make early withdrawals from the TSP without incurring the 10% penalty when a TSP participant is 50 years old or less.
The Thrift is still reviewing the law and its impact on TSP accounts. The Thirft Savings Plan intends to publish information on the TSP website before the law’s effective date set for December 31, 2015. Roll-out of the bill is a great after Christmas gift for these public safety employees who put their lives on the line to protect the federal workforce everyday.
P. S. Always Remember to Share What You Know.
Dianna Tafazoli
Other Federal Retirement Articles
IMPORTANT UPDATE…FEGLI Open Enrollment Season! by Gary Fouts
No COLA Increases in Social Security Benefits
Are You Thinking About a “Deferred” Retirement? by Gary Fouts
SCOTUS Ruling Impact on Federal Employee and Retirement Benefits
FEGLI Verification of Life Insurance (VOLI)
First published on CompareFEGLI
FEGLI Verification of Life Insurance (VOLI)
Unlike individual life insurance purchased from private insurers, enrollees in the Federal Employees Group Life Insurance (FEGLI) Program don’t get a bunch of documents or a file mailed to them in the post with all their policy details.
Federal employees often forget details about their FEGLI coverage and options. Annuitants, beneficiaries and compensationers may not even be aware of the coverage, or may have forgotten about it. This is where it’s helpful to be able to see and print a FEGLI Verification of Life Insurance (VOLI) for your records. READ MORE…
OTHER FEGLI ARTICLES
Work With Local FEGLI Experts Through CompareFEGLI.com
What Factors Can Alter the Rate of FEGLI?
Using side-by-side Comparisons to Choose the Right Insurance Policy?
Easy to Understand FEGLI Calculator – Find the Right Insurance For You
FEGLI – How to Reduce the Costs of Your Life Insurance?
Public Sector Pensions in Peril
Most employees look forward to the day they can hang up their hat and start retirement. For decades, many employees have relied on the promise on a steady income following leaving the workforce through pension plans. However, times are changing and the pension system is in a state of dire distress. For young employees, there is still plenty of time to secure retirement through smart investments with Thrift Savings Plans (TSP), 401(k) accounts and other means of saving. However, for employees who can see retirement on the horizon, times are scary. Many employees who have given decades of dedicated work may never see their promised pensions come to fruition.
According to a new report from The Pew Charitable Trusts, there is an epidemic of public sector pensions, with a combined deficit for all states estimated to be close to $1 trillion. Leading the deficit are Connecticut, Kentucky and Illinois.
Among the three states, they all fall well below the standard 80 percent funded standard. Connecticut is ranked at 48 percent, Illinois at 39 percent and Kentucky ranked at an astonishing 23 percent. On the heels of the report, all three states have taken drastic steps to attempt to correct their saving habits and build up a healthy pension fund for their employees – some are succeeding, others are not.
Connecticut has taken steps in recent years to improve its pension savings habits. “It’s clear that Pew is trying to get the attention of governors who haven’t gotten it yet that they need to deal with their pension liabilities,” said GianCarl Casa, spokesman for Governor Malloy’s budget office. “Here in Connecticut, Governor Malloy gets it and has been acting consistently to take care of the problem over the last four-and-a-half years, under Governor Malloy, Connecticut has been funding 100 percent of its annual required contribution, something that was not always the case before he took office. Taken in combination with changes in benefits that he negotiated, Connecticut is on track to fully fund our pension system in about 15 years. We have made our pension system more affordable and we are keeping our commitments – at a time when other states are not.”
While all eyes have been on Illinois, Kentucky’s Employee Retirement System is at a dismal 23 percent and is $14 billion in the hole. The state has been paying around 50 percent of the actuarially required contributions (ARC) and 75 percent for teachers over the last 10 years – creating the present day situation. While Governor Beshear implemented a reform in March 2013, the deficit was only slowed down its growth. The reforms were recently ridiculed by a bankruptcy judge, stating, “the solvency of the fund to meet future requirement obligations is dependent upon consistent payment of the ARC…will almost certainly result in a fund that insufficient to pay future retiree benefits.” Areas of Kentucky have seen 6 percent property tax increases to help slow down the deficit. While there are very positive signs of financial gains in Kentucky, Governor Beshear says that the economy is gaining momentum, but the $14 billion liability will need to be handled by the next elected governor.
The state of Illinois has struggled to ease their monumental public pension deficit, and seem unable to gain their financial footing. Recently, the state has received a downgraded credit rating and have the worst-funded pension system in the country with $105 billion unfunded liability. Governor Rauner’s sweeping changes have included the option for the state to file for municipal bankruptcy to save billions of dollars for the local and state government – which is not a possibility, only insolvency of the pension payments can occur. However, if the state is able to obtain insolvency there will be massive layoffs in the public sector which is nothing short of catastrophic itself.
Most recently, Illinois, more specifically Chicago received another piece of bad news. Cook County Circuit Court Judge Rita Novak has deemed Mayor Emanuel’s pension reform act, void, unconstitutional and adding that “A public worker’s pension is a contract that cannot be diminished or impaired.” While many public sector employees rejoice over the ruling, one scary truth remains the same, without some type of reform to the current pension systems the funds will run out of money and Chicago cannot borrow any more money or continue to raise taxes. Currently, the city has a hefty $20 billion pension deficit that is only growing.
Compounding the Illinois’ dire financial situation is the recent downgrade of the state’s credit score.
Throughout the country 15 states have an overall funded ratio of 80 percent or higher, according to the Pew report. Many experts say a healthy pension program should have enough funds to cover at least 80 percent of its long-term obligations. South Dakota and Wisconsin ranked among the highest, each with 100 percent funding.
Lisa Grasso Egan, undersecretary for the Office of Policy and Management’s labor relations unit.
This debt “will remain higher as a percentage of U.S. gross domestic product than at any time before the Great Recession,” the Pew report states. “State and local policymakers cannot count on investment returns over the long term to close this gap and instead need to put in place funding policies that put them on track to pay down pension debt.”
Overall, if the state pension programs are unable to implement a stable legislation that has a solid path back to financial health then it could be disastrous. According to the Voya Retire Ready Index, nearly half of all public sector retirees (48 percent) say pension plans are a vital and major source for their retirement income.
Federal Retirement Related Articles
Survey Shows Lack of Retirement Savings Among Federal Employees
OPM Hikes Federal Long Term Care Insurance Program Premiums
FEGLI vs. Private Life Insurance
Survey Shows Lack of Retirement Savings Among Federal Employees
Jeb Bush Proposes Benefit Cuts for Federal Employees in Candidacy Run
According to Presidential candidate, Republican Jeb Bush proposed making major cuts to the size of the federal government, specifically federal employees. Bush argued that a lot of money is diverted to the hiring and promoting of federal employees who may not deserve it.
In a speech in Tallahassee, Tennessee he said, that employees are “hired, promoted and given pay increases without regard to performance.” Bush proposed reforms that would change the way the federal workforce runs.
Proposed Changes to Federal Employee Benefits
Among his proposed changes for federal employees and federal employee benefits included a hiring freeze to help reduce the size of the workforce. Essentially, federal agencies would only be allowed to hire one new employee for every three that left. Bush’s proposal cut could the number of federal employees by 10 percent within five years. Bush said that not all retiring federal employees should be replaced. While this would save money for the government, it was also directly impact daily roles of some already stretched federal employees.
According to Bush, this cut in employment would not require the firing of current employees, but could save the government billions of dollars without directly contributing to unemployment. Bush also said that too many federal employees are continuing to be paid, and even promoted, when they may not deserve it. Bush proposed performance-based raises, which would offer an incentive for better federal employees.
Staying Longer under Current Federal Employee Pay System
Bush told supporters that the current payment system for most federal employees promotes staying around longer. Essentially, you get more money the longer you stay, instead of promoting more efficient workdays. Instead of the current federal employee pay system, Bush proposed that federal employee payment benefits focus on the ability of the employee to help reduce federal spending through their actions.
Currently, some 2.1 million federal employees receive a pay raise every year because of the current pay system. Bush said changing this method could save the federal payroll a lot of money. While Bush called for a reduction in nearly all federal jobs, he did concede that national security positions should be exempt for the hiring freeze.
Bush’s reasoning behind the proposed cut is stemmed on his believe that “just like the real world, compensation should depend on the type of work and the quality of the work,” as opposed to how long an employee has managed to hang on.
Bush also argued that federal employees make some $1500 more per year than private counterparts do and an estimated $16,000 in federal benefits. Bush did not cite his sources for these numbers and there has been a long-lasting debate between conservatives and federal employee groups on who actually makes more money.
Bush also proposed making changes to the way federal agencies can fire employees. Bush argued that while there are plenty of excellent federal employees, most of them receive the same treatment as those who do not put as much effort or care into their jobs. Bush also said that federal agencies should have an easier time removing ineffective employees from the ranks. “Job security is one thing; job entitlement is another…” Bush said.
If Bush makes it to the White House, he will likely begin by directing state agencies to cut back their workforce by close to 25 percent.
Planning for your Federal Retirement by Todd Carmack
Preparing for your federal retirement starts the day you are hired! By this I mean you want to start taking advantage of one of the greatest benefits a FERS employee has as early as possible; the Thrift Savings Plan. In order to maximize the matching contributions, you want to contribute at least 5%. This may be difficult for newbies in the workforce, but free money is too hard to come by. For those who are high-income earners and can’t take advantage of a private Roth, you can contribute to the Roth TSP.
For those employees who have served in the military, take advantage of buying back your military time (service credits) to count towards your CSRS/FERS pension. This can enhance your retirement annuity by thousands of dollars a year.
If you intend on carrying your Federal Employee Health Benefits Program into retirement, make sure that you have been enrolled for at least 5 years. When it comes to ensuring your spouse or significant other can continue on the FEHB if you pass away, make sure to select either the 25% or 50% Survivor Benefit option. This will not only ensure part of your FERS annuity payment, but also continuation of their FEHB coverage.
Throughout your working career with the federal government, you want to make sure to be up to date on your beneficiaries for TSP and FEGLI. Life events such as children born, marriage or divorce or death can happen. Part of retirement planning is making sure your loved ones are provided for both during the working years and after.
Start considering the issue of Long Term Care coverage when you are young. You may want to consider utilizing either traditional long-term care policies, available through the government (John Hancock) or private policies (sometimes less expensive). Another option to consider is permanent life insurance with long-term care coverage or living benefits which can potentially allow for accelerated payments in the event of in-home health care or nursing home care expenses.
I would also suggest 5-10 years out, attend a retirement seminar – sometimes more than one. This may help you plan and provide some tips on the benefits and process.
Other Todd Carmack Articles
Social Security for FERS Employees by Todd Carmack
Understanding The Thrift Savings Plan, By Todd Carmack
Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack
Understanding Your FEGLI Coverage, by Todd Carmack
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