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Michael Evans: Good morning everyone. Audience Member: Good morning.
Michael: I'm glad you could all make it on such a rainy Friday. For those of you, who
are not actually physically here, but are tuning in via the webcast, the weather here
today, in DC, is rainy. I'm really impressed about the fact that anyone made it. This is
going to be the first in a series of webcasts that we are doing. As you all know, for those
of you who are in Human Resources and with other Federal agencies, due to budget cuts
and everything, we are not having a benefits conference this year.
What we are doing instead is a series of webcasts to make sure we get some training to Human
Resources staff. This is the first in that series. My name is Mike Evans. I'm from OPM.
I'm actually one of those people that is, a little unusual in that I've been at OPM
my entire federal career. I've been with the government for 22 years. I walked in the door
her and I liked it, and I never really left. I actually grew up in retirement, to speak.
I've processed both Civil Service Retirement Systems claims and Federal Employees Retirement
Systems claims. I've done training for the specialists who actually process the claims.
I've done training for the USDA grad school; I've actually trained HR people.
My current position is with our benefits officers, liaison, and development area, where we actually
train human resource specialists throughout government, also the OPM liaison for retirement
matters for Department of Defense and Department of Treasury, as well as some other agencies.
Today, we are actually going to be covering an overview of both retirement systemsthe
old retirement system, the Civil Service Retirement System, and the new retirement system, the
Federal Employees Retirement System, respectively known as CERS and FERS. This presentation
is really an overview of both of those systems and kind of a sidebyside comparison.
For those of you who are new human resource specialists, this is a great overview to get
an understanding of the differences between the two systems and really how they work.
For people who are not human resource specialists who happen to be tuning in via the webcast,
this is actually going to give you a good overview of the systems as well. It's going
to give you the knowledge of what goes into computing a retirement under both of these
systems and some of the benefits of those systems.
For experienced human resources people, you have this presentation, you can actually extract
from it. It's a great way to do a preretirement seminar for a group, if you need it. It's
also a great way to educate people on their benefits if they are just coming onboard with
your agency. It's also a presentation that you can use all or in part midcareer. That's
really what we're going to be covering today. I guess we should probably get started.
As far as retirement systems go, the federal government has several different retirement
systems. The most common ones are the civil service retirement systems which is the oldest
retirement system. CSRS offset, which is a combination of SERS and Social Security, the
Federal Employees Retirement system, and we've got a new...well, it's not really a new retirement
system. It's just different deduction rates. But it's the Federal Employees Retirement
System Revised Annuity employee, or FERS RAE. I'm going to give you a little bit of a history
of how all this has evolved. The Civil Service Retirement System actually came into existence
in 1920, if you can believe it or not. We're coming up really close to our 100 year anniversary
for the Civil Service Retirement System. It's been around for a while. Really interesting
when you think about how things have changed since 1920. We have cars now.
[laughs] Michael: We have electricity. We have phones,
although those landlines seem to be being replaced even now by cell phones. There are
some significant social changes and technological changes that have happened. You when you see
this, and when I give you this overview of these systems, you are going to see how those
systems have changed as society and technology has changed in the way we work and everything.
That's really what's kind of driven this whole change from the Civil Service Retirement System
to the Federal Employees Retirement Systems. These retirement systems have changed just
as we have changed as people. The Civil Service Retirement Act was effective
August 1920, as I said. It's a defined benefit. It's a contributory retirement system. Most
employees pay seven percent employee contributions and the agency pays seven percent into the
retirement fund. They have the option of paying into a voluntary contributions account.
Now, there are some employees who will pay a little bit more in contributions if they
are one of our special provision people, for example, law enforcement officers and firefighters.
Under CSRS, under this system, they'll pay 7.5 percent, but they also get an enhanced
computation as well. CSRS Offset, the CRS retirement system...its
still CSRS coverage, with reduced retirement contributions because the person is paying
into Social Security. Now, what drove this whole thing were the
Social Security amendments of 1983 that went into effect on January 1, 1984. What happened
was, prior to that time federal employees were not covered by Social Security, if you
are a regular CSRS employee you're not subject to Social Security deductions. You aren't
paying into the Social Security system. Congress passed a law in 1983 and changed
the law that brought Social Security coverage to federal employees, or most federal employees.
Basically what happened was you got new federal employees, new hires on or after 1/1/84, most
senior officials became mandatorily covered under Social Security, and people who were
federal employees that had a break in CRSonly coverage of more than 365 days that ended
on or after 1/1/94 were then mandatorily covered under Social Security. That is what has driven
this whole thing to be the creation of the Federal Employees Retirement System.
Now you'll notice on the slides, the bullet point says on 1/1/87 Congress created the
CSRS Offset System. Prior to that, the period of time between 1984 and 1987, we call the
CRS interim period. That is because when federal employees that were now subject to Social
Security, we had to create a new retirement system to accommodate that whole Social Security
piece. Prior to that, as I said, federal employees
weren't covered by Social Security, while Congress was creating this new federal retirement
system we had this interim period. The law that actually created FERS, the Federal Employees
Retirement System that went into effect on 1/1/87, also gave a name to this service that
was CSRS and Social Security. It was called CSRS Offset.
The law that actually created the new retirement system FERS, Federal Employees Retirement
System, also gave a name to the CSRS interim time, called CSRS Offset.
CSRS Offset applies to federal employees who had a break in service...I already discussed
this...greater than a year, and had five years of creditable service as of 12/31/86. Federal
Employees Retirement System, the new retirement system...
Just out of curiosity, I know we have some people in the audience here, how many people
are covered under the old retirement system, CSRS? OK, for those of you who are out there
who can't see the audience, about three or four hands went up.
How many people are covered under the Federal Employees Retirement System? OK, a lot of
hands went up on this one. I can tell you, when I started doing these
presentations the numbers were actually reversed. It used to be that we had a lot more CSRS
people that were covered, and FERS was the anomaly. Now we're seeing that most people
are covered under the Federal Employees Retirement System which, if you think about it, makes
sense since it's been around since 1987. Congress created FERS, effective 1/1/1987.
It's a new system for federal employees. It is really a threetiered system. You have to
think about the three tiers when you're talking about FERS. There's the FERS Basic Benefit,
that's administered by OPM. That's what...OPM administers the FERS Basic Benefit.
There's also another part to the FERS, and that is the Social Security Benefit. Social
Security deductions come out of all FERS employees' pay. FERS people are paying into Social Security,
there's that benefit that's a part of the three tiers.
Then, finally, the thrift savings plan. FERS people will automatically get a one percent
agency contribution into the thrift savings plan, and then they get matching contributions
for certain percentages that they contribute, you've got three tiers to the FERS retirement
system as a whole. There's the FERS basic benefit, Social Security, and the thrift savings
plan. Basically, when you retire, you will be getting
payments from three different places. As far as FERSRAE, the Federal Employees Retirement
System Revised Annuity Employee, public law 11296, the Middle Class Tax Relief and Jobs
Creation Act of 2012, said that beginning in 2013, new federal employees will have to
pay 2.3 percent higher employee contributions. New members of congress and congressional
employees will pay the higher employee contributions and will see the same retirement benefits
as regular employees. Now let talk about that just for a minute.
If you are just a regular FERS employee, your retirement contributions are 0.8 percent currently,
0.8 percent of whatever your salary is. New federal employees will have to pay an additional
2.3 percent if they're covered under the FERSRAE system.
As far as congressional employees go, congressional employees, under the regular FERS system,
get a special computation. They pay a slightly higher contribution rate, but it's not as
high as this, under FERSRAE, and they've got a special computation, a special formula.
Now they will pay the higher contribution rate but will not get the special computation.
They will be treated like every other federal employee.
How do we get this benefit? What happens? How do we get this? Well, you have to apply
when you're eligible for retirement, the retirement application for CSRS and CSRS Offset is the
application for immediate retirement, which is the SF 2801, or Standard Form 2801. For
FERS and FERSRAE employees, the application is the application for immediate retirement,
which is the SF 3107. Again, depending on which system you're going
to retire under, you have to complete the appropriate application. The types of retirement
that are available to employees, there's regular optional retirement, and that, we're going
to look at these eligibility requirements in just a minute, but I wanted to touch base
with you and give you an overview of the different types of retirements that are available.
There's regular optional. There's early retirement. Now, for early retirement, there are some
special things that have to happen. The agency has to be undergoing some kind of either a
reduction in force, an abolishment of a position. It could be any number of things that could
be going on, and an agency would actually have to apply to OPM to get earlyout authority
in order for employees to be eligible to take an early retirement.
There's disability retirement. That is actually payable to somebody who is disabled and can
no longer perform the functions of their current job. There's special provision retirements,
which I briefly mentioned. Those are usually law enforcement officers, firefighters, nuclear
materials carriers, and so forth. There's the deferred retirement. Deferred
retirements are interesting in that they are retirements that you're going to get later.
You're not eligible for them right now, but you are going to receive them later. You're
going to become eligible later. Then there is phased retirement, which we have not implemented
yet. We're in the process of putting that together.
As far as agent service requirements for regular retirement, for CSRS people, if you are at
least 55 years old, and you have at least 30 years of service, you can retire voluntarily.
If you are at least 60 years old with at least 20 years of creditable civilian service, or
20 years of service, at least you can separate voluntarily. If you are 62 years old with
at least five years of service, you can retire voluntarily.
For FERS people, it's almost the same thing, but there's a little twist here. For FERS
people, once you reach your minimum retirement age, and you have 30 years of service, you
can retire voluntarily. Again, if you're at least 60 years old with 20 years of service,
you can retire voluntarily, and 62 years of age with at least five years of service, you
can retire voluntarily. FERS also has a special type of retirement.
It's what we call an MRA plus 10. Once you reach your minimum retirement age, if you
have at least 10 years of service, you can actually retire.
The thing is, and we're going to look at that in a minute, is that there is a huge age reduction
if you're going out on an MRA plus 10, and there are some other consequences as well,
but that is a special type of retirement that is available to FERS employees, that doesn't
exist under the Civil Service Retirement System. Notice on the previous slide, when I was saying
that, for CSRS people, we've got this 55 and 30 years, but for FERS people, we have this
minimum retirement age. Well, what is this minimum retirement age?
For people born prior to 1948, it's age 55. If you were born in 1948, the minimum retirement
age for you would be, 55 and two months. If you were born in 1949, it would be 55 and
four months, and so on, and we going ahead until we hit 1953.
If you were born between 1953 and 1964, your minimum retirement age is going to be 56 years
old. If you were born in 1965, it's going to be 56 and two months, and then we go all
the way up to 1970, and if you were born 1970 or later, your minimum retirement age is 57
years old. It's really important, under FERS, to understand
and to know what your minimum retirement age. The last thing you want to do is think that
you're eligible to retire, go to your HR office, walk in and go, "OK, I'm ready to go," and
to have the HR specialist tell you, "Yeah, no you're not."
[laughs] Michael: "You're not old enough yet." It's
really important to understand what your minimum retirement age is, because it's going to help
you with your retirement planning. Agent service requirements for early retirement. As I said,
early retirement is a special type of retirement that is only available to people in an agency
that's undergoing some kind of reorganization, some kind of change. Again, the agency would
have to write to OPM. They would have to get OPM's permission to
grant earlyout...OPM would have to grant earlyout authority to that individual agency in order
for them to initiate this, and it may not be for every position across your agency.
It may only be for certain targeted positions. For people who are eligible for an early retirement,
if your position fell into one of those things, you could be any age with 25 years of service,
or 50 years of age with at least 20 years of service, and you could retire voluntarily
under an earlyout provision. That age and service requirement, 50 years
of age with at least 20 years of service, or any age with 25 years of service, that
is equally applicable to both CSRS and FERS. For the early retirements, the age and service
requirements are the same. Under regular voluntary, it was a little bit different because we had
the whole MRA thing coming in. For earlyouts, it's the exact same thing.
Again, as I've mentioned several times, the agency would have to be granted early retirement
authority, or the person who could qualify for an early optional retirement actually,
and this is more of a discontinued service retirement, would have to be undergoing an
involuntary separation. That could be a reduction in force, a RIF.
It could be that what we see, and this is one of a special kind of situation we see,
where, for example, a person who's, say, working as a military reserve technician, part of
the requirement for them maintaining their civilian position is that they maintain an
active military membership, and there may be some situation where they no longer are
in the active duty military part, they're not having that active duty component to their
position. What would happen in a case like that, if
they lose their military component, they may qualify for a discontinued service requirement?
The one thing is that for a discontinued service requirement focused on one employee, they
cannot be being removed on charges of misconduct or delinquency; you can't be bad and get an
early retirement. That's important to let people know as well. It has to be something
that is beyond your control if it was going to be a discontinued service retirement.
Again, early retirement authority has to be granted to the agency. Discontinued service
is more focused. We're looking at individual employees, the person may not be able to perform
in the military component of their job if they have that dual status, because they lose
the military membership, they may not be able to maintain the civilian position as well.
There are other instances where this could occur as well.
One of the big things and this is critical for counseling people, and it's critical to
know, for those of you out there who are not a human resources person, but are using this
to try to get some information for retirement, to know when it's appropriate to separate,
to selecting a retirement date. For both CSRS and CSRS Offset, you could separate
on a regular voluntary retirement on the last day of the month, and your annuity would commence
on the first of the next month. If you separate on the first, second, or third, your annuity
would commence the next day. Say, for example, you separate from your agency
on August 1st. Your annuity would commence on August 2nd. What would happen is OPM would
then be looking at that, and we would calculate how much we would be paying you as far as
a retirement amount from August 2nd to the end of August, and then your first payment
would be received on September 1st. Basically, like when you're employed, you
get paid for having worked, when you're in retirement, basically we're paying you for
living that month. [laughs]
Michael: Your annuity commences on the...if you separate on the 1st, your annuity would
commence on August 2nd. You would accrue annuity from August 2nd to the end of the month. Your
first regular payment would be received on September 1st. Same thing if you separated
on the 2nd of the month. The annuity would commence on the 3rd. You would get paid from
the 3rd through the end of that month, on the first of the next month.
You're always like a month behind with regard to payments. The payment that you would receive
on September 1st covers the period that you were there in August. The payment that you
receive October 1st is for the month from September 1st to the end of the month in September.
We have a question, with questions, could you come up to the microphone so people that
are tuning in remotely can hear? Audience Member: Yeah. Could you go into a
little bit why it's better to retire the first, the second, or the third, rather than the
end of a pay period, or the end of the week, or something like that?
Michael: It's actually not better. You can choose whichever you want. Now we're getting
into financial planning. There may be some reason for you personally why you would want
to choose to separate on this day or that day, but as long as you separate on the last
day of the month, the first, second, or third, under CSRS or CSRS Offset, the annuity will
commence the following day. For a regular retirement, what you do not want to do is,
say, separate on the fourth or the fifth, because if you do that, what's going to happen,
and maybe this goes to your question, is that...say I separate on August 4th. Well, it's not the
last day of the month, it's not the first, second, or the third, if I separate on August
4th, what's going to happen is my annuity is not going to commence until the first of
the following month. That means my annuity is going to commence
on September 1st. I'm going to accrue annuity from September 1st to the end of September,
which means my first payment, then, from OPM is not going to be received until October
1st. There's going to be a period of time from the fourth until the end of August that
I am not going to get paid by my agency and I'm not going to get paid by OPM. There's
just going to be this hole there. That's really important. Again, this is for
regular voluntary retirements. If we're talking about an involuntary retirement, a discontinued
service, then that's a little bit different. The annuity would commence the day after separation.
Disabilities, there's also a different annuity commencing date.
Again, this is CSRS and CSRS Offset. For FERS people, it gets really simple. You have to
separate on the last day of the month in order for your annuity to commence the next day,
if you separate the last day of August, your annuity commences September 1st. You accrue
annuity from September 1st to the end of September. Again, first payment is October 1st.
If you were to separate on September 1st, your annuity would not commence until October
1st, which would mean that you would accrue annuity from October 1st to the end of the
month, and your first payment wouldn't be received until November.
For FERS people, for regular voluntary retirements, it's critical that you separate on the last
day of the month, unless this is a discontinued service retirement, in which case your annuity
would commence the next day. Any questions on that? OK, great.
As far as crediting service goes, your amount of federal service is really important because
it determines, as we've already seen, when you can retire, but it also determines how
much money you're going to get when you do retire. Service determines when you can retire
and how much money you're going to get once you do retire.
For federal service, the amount of creditable service, federal civilian services normally
credited from the beginning date of the appointment to the ending date of the appointment. There
are some exceptions, though. For example, leave without pay.
Normally leave without pay, up to six months in a calendar year, is really not going to
affect your retirement. That's not going to have an impact on you. We do have situations
where people fall into what we call excess leave without pay. That means leave without
pay that exceeded six months in a calendar year. You can only get credit for up to six
months per calendar year of leave without pay.
Let's say, for example, I'm an employee, and I'm working, and on January 1st, I go into
a leave without pay status. I stay in a leave without pay status through June 30th, and
I come back to work on July 1st. Well, I have used six months of leave without
pay in a calendar year. It is not going to be a problem. I'm going to get one year of
credit for that time I was in...Even though I was in a leave without pay status for six
months, when we go to process the retirement, I'm going to get a full year of credit. Nothing
happens. Same situation, I could actually go into leave
without pay on July 1st, and I could stay in leave without pay until June 30th of the
next year. I will get credit for a full year in that July that I went into leave without
pay, and I will get credit for that full year where I stayed in leave without pay up to
June 30th, because we're looking at six months per calendar year. Everybody with me?
Now let's say I did something a little bit different. Go back to my previous example.
I went into leave without pay on January 1st, and I stayed in leave without pay until September
1st of that year. Well, now I'm in what we call an excess leave without pay status, because
I've spent more than six months in a calendar year in a leave without pay status.
As of June 30th, starting on July 1st, I am in an excess leave without pay status, I do
not get credit for the month of July and I do not get credit for the month of August,
I'm only getting credit for 10 months towards retirement in that year where I was in an
excess leave without pay status. I had two months of excess leave without pay. In a case
like that, that could affect your retirement eligibility.
Michael: OK. [laughs] Michael: OK. Another situation that may come
up is if somebody is in what we call WAE appointment. WAE stands for "when actually employed." It's
also called intermittent time. This is...and to try to kind of explain WAE or intermittent
service to you, it's somebody who gets credit for the actual days that they worked, and
this is even different from parttime service, because parttime service is a regularly scheduled
tour of duty. Intermittent time means that you're kind of oncall. You're getting called.
When they need you, they call you and you come in. In a case like that, you'll only
get credit for the actual days that you worked, you're going to have to be aware of that if
you're planning for retirement, and if you're an agency HR person, you're going to have
to be aware of that because you're only going to be able to give the person credit for the
actual days that they worked. To complicate things even more, there is something
called seasonal WAE, or seasonal intermittent. This is a type of intermittent service that's
available...we usually see it with agencies that have seasonal employment, or have seasons
to the type of work that they do or a workflow. IRS is a big one, because we have taxes and
pretty much everyone submits their tax returns sometime between the end of January, if you're
really good, or April 15th if you wait until the last minute, there's this taxes, IRS gets
a lot of...they have to have more people there, their seasonal intermittent time there.
Also, surprisingly, an agency that a lot of people don't think of that has this seasonal
intermittent time is the Department of Agriculture. Because they monitor agriculture, there are
harvest seasons. There are crops and things like that, it goes with the seasons as well,
USDA has seasonal WAE appointments as well. It's just something to be aware of. For seasonal
WAE, we treat the time in a nonduty status or a nonwork status just like leave without
pay, a person can be in a nonwork status or leave without pay, basically, for up to six
months in a calendar year, and they will still get credit for that full year. That's something
to be aware with seasonal WAE, and that's one of the things that could affect the amount
of time that you have with regard to an appointment. Crediting military service, military service
is interesting because, depending on which retirement system you're under, it's treated
differently. In all cases, it has to be honorable. You have to have an honorable discharge from
the military. It has to be active duty service. If you are in receipt of military retired
pay, in most cases, you're going to need to waive the military retired pay if you want
to combine it to get credit for it in your civil service retirement annuity or your Federal
Employees Retirement System annuity. The exceptions to that are if the military
retired pay was awarded under the provision of Chapter 1223 Title 10, which used to be
Chapter 67 Title 10, which is reserve retired pay, or if it was awarded under because of
a disability incurred in combat caused an instrumentality of war during a period of
war. Those are the two instances where you would not need to waive your military retired
pay. If you have any military service that occurred
January 1957 or later, then you may need to make a military deposit in order to get credit
for that time in your civil service or FERS retirement benefit.
Military deposits for post'56 military service, for CSRS, under the old system, both CSRS
and CSRS Offset, are seven percent a base pay plus interest that accrued on that deposit.
For FERS people, the military deposit equals three percent of base pay plus interest.
Any questions on that before...yes. Can you go to the microphone please?
Audience Member: Can you just repeat the title under retired military?
Michael: Yes. For reserve retired pay, it's Chapter 1223 Title 10, and it used to be,
if somebody retired under it a long time ago, it used to be Chapter 67 Title 10. What's
going to happen in a case like that, an employee will have an award letter that will say that
you retire under this provision, and you've been awarded military retired pay under this
provision of law, you just need to check that. In a case like that, they would not need to
waive that military retired pay to get credit for it in their annuity, but they may, if
it occurred on or after 01/01/57, they would still possibly need to make a deposit for
that military service. Anybody else...? Any questions on the military
stuff? Great. Let's talk about civilian service, CSRS nondeduction
service performed prior to 01/01/82. What am I talking about when I'm talking about
nondeduction service here? I'm talking about service that was not covered by retirement
contributions. You did not pay into the retirement fund for this period of time. You were just
pay into Social Security. It was FICAonly time.
We usually see this particularly with CSRS people. Its temporary appointments not to
exceed a year. It could be term appointments. It could be indefinite appointments. It could
be TAPER appointments, which is a temporary appointment pending establishment of a register,
things like that. Its service that retirement contributions were not withheld from your
pay, but you were paying into Social Security. For this type of service, this nondeduction
time where you didn't pay into the retirement fund, if that service occurred prior to 10/01/1982,
it's creditable for eligibility to retire. It's creditable for computation in your retirement
benefit, regardless of whether or not you pay a deposit for that time.
However, if you do not pay a deposit for this nondeduction time, what's going to happen
is we're going to look at how much you owe for a deposit if you wanted to pay it, it's
going to be the amount that should've gone into the retirement fund had deductions been
withheld plus interest, and we're going to look at that and say, "OK," and take 10 percent
of that amount, and reduce your annual annuity by that 10 percent of the deposit owed.
That is going to be the cost to you to not pay a deposit for that time, but you'd still
get credit for it towards eligibility to retire and in the computation of the retirement benefit.
CSRS nondeduction service that was performed on or after 10/01/82 is a little bit different.
This has a bigger impact on your annuity. You get credit for eligibility to retire,
regardless of whether or not you pay a deposit for that nondeduction time. However, we're
only going to use the service in the computation of your annuity if the deposit is paid.
That means, let's say we have somebody who's 55 years old. They've got 30 years of service.
Let's say they have two years of nondeduction time that occurred on or after 10/01/82. When
we go to do the computation for their benefit, we are not going to use 30...
If they don't pay the deposit for that time, we're not going to use 30 years of service
in the computation of their benefit. We're only going to use 28 years, because they have
that two years of nondeduction service that they did not pay. That's a bigger impact to
your annuity than the 10 percent of the deposit owed usually.
In any event, if you have service like this and you haven't paid it before you retire,
when OPM goes to process your case, we're going to look at that again. We're going to
calculate the amount of the deposit owed, and we're going to send the retiree a letter,
stating, "Hey, you have some nondeduction service that occurred on or after 10/01/82."
"If you pay the deposit for that time...here's how much the deposit is. If you pay this deposit,
this is how much you're going to get per month, and if you don't pay the deposit, this is
how much you're going to get per month. What do you want to do?" Then we'll wait for them
to tell us. If you're an HR person and you're counseling
somebody, you're going to want to run your annuity estimate for the person so that they
can see this, or if you're tuning in and you're a federal employee who's not an HR person,
when you see your HR person, your human resources office should be providing you with an annuity
estimate that's going to show you the consequences of paying or not paying this deposit.
For FERS, it gets a lot simpler. For FERS people, nondeduction service performed prior
to January 1st, 1989 is creditable for eligibility and computation purposes, but only if you
pay a deposit. If you do not pay a deposit for that nondeduction time that occurred prior
to January 1st, 1989, you do not get credit for eligibility to retire, and you do not
credit in the computation of your annuity. With FERS, there's an added consequence of
you don't even get credit for it towards your eligibility to retire. Again, when you get
an annuity estimate, or if you're doing an annuity estimate, this should be reflected.
Again, also, if you have not paid this prior to retirement, whenever you go to retire,
if the case gets to OPM and that deposit has not been paid, we're going to do the computation
and send the retiree a letter stating, "Hey, you have this period of time. You owe a deposit
for it. If you pay the deposit, this is how much you're going to get. If you don't pay
the deposit, this is how much you're going to get."
FERS nondeduction service performed on or after 01/01/89 is generally not creditable
at all, and a deposit cannot be made. There are a couple of exceptions to that. For example,
Foreign Service. You can pay for nondeduction time under the Foreign Service Retirement
System for nondeduction time that occurred on or after 01/01/89 under FERS. Peace Corps
and VISTA service under FERS, nondeduction service can be paid on or after 01/01/89.
There are a few exceptions. If you're a regular employee, not an HR person, you're going to
want to check with your HR office to find out about this. If you're an HR person or
a human resources specialist, you're going to want to review our CSRS and FERS handbook
to make sure, to find out what all the exceptions are for making a deposit under FERS on or
after 01/01/89. The amount of the deposit for CSRS people,
it's seven percent of earnings plus interest. For FERS people, the deposit equals 1.3 percent
of earnings plus interest. Refunded service. Refunded service is a little
bit different. We call this a redeposit. Whereas when we were talking about nondeduction service,
we were talking about deposit, we were putting money into the fund that had never been there,
for refunded service, when we pay that back, we call that a redeposit, because the money
was in there, it was taken out, and now you're redepositing it. I just want to let you know
the terminology that we use. For refunded service, this is service that
was in the retirement fund, the person separated from federal service, they were separated
for more than 30 days, and they actually applied for and got a refund of all the retirement
contributions that were paid into the retirement fund. That's what a refunded service is.
Under the old retirement system, under CSRS, refunded service ending before March 1st,
1991 is creditable for eligibility and computation purposes, regardless of whether or not that
redeposit is paid. However, if the person does not make that redeposit, what's going
to happen is we're going to actuarially reduce the annuity.
I have to tell you, actuarial reduction, when I say that word, it kind of freaks people
out a little bit. They're not quite sure what I'm talking about sometimes, I actually came
up with a great way to explain an actuarial reduction to people. At one point, I had to
do a series of these presentations for a group; I think it was Federal Executive Institute.
I'm trying to remember now, but I had to do a series of presentations, and I was at a
hotel in Columbus, Ohio. It was winter, and if you've ever spent a winter in Ohio, I grew
up there; I know...I was at the airport in Columbus, Ohio, getting ready to do these
presentations the next day, and the hotel was great, but there was really nothing around
it, of course I was in the hotel room for the evening.
I turned on the TV and I found the greatest way to explain an actuarial reduction. How
many of you in the audience remember a show called "Medium" that was on? OK, I see some
heads going. It was basically about this woman who was a psychic, who worked with the police,
and she would help solve crimes. I turn on the TV, and this woman wakes up
one day and suddenly, on top of everyone's forehead, she sees a number. It turns out
that that number was the number of days that the person had left to live. That's kind of
what an actuarial reduction is. We have a whole office of people here at OPM
that are actuaries, and what their job is, one of their jobs is basically to figure out
how long we all have to live. They basically calculate how long we're going to live on
average. What an actuarial reduction is we look at
the age you are when you retire, and we calculate how many months you're projected to live on
average, and then we take the amount that you owe, divide it by the number of months
you're projected to live, and reduce your monthly annuity by that amount. That's an
actuarial reduction. That being said, if you live longer than you're
actuarially projected to live, well, we still keep withholding that actuarial reduction.
My boss, who just retired, used to make the joke as well, "If you really want to beat
the system, you can die before you reach your actuarial factor," but most people choose
not to do that. [laughs]
Michael: You can screw the system, but it's probably not going to be in your best interest.
That, in essence, is what an actuarial reduction is. I picture our actuaries, when I run into
them in the hall every now and then, I just picture them walking down the hall saying,
"Oh, hey, Mike. Looking good. Oh, Sally. I'm concerned about you. That number's awfully
low on your forehead." [laughs] Michael: For CSRS refunded service that ended
on or after 03/01/91, it's generally creditable for eligibility, regardless of whether or
not a redeposit is made. However, just like for that nondeduction time that occurred on
or after 10/01/82, if you don't pay the redeposit for it, we don't give you credit for it in
the computation of your annuity. That, again, is a bigger hit to your annuity. Again, we
send letters out. If a person hasn't paid this redeposit before they separate, we send
a letter to the employee whenever we go to process the retirement case, saying, "Hey,
you have a redeposit that occurred on or after 03/01/91. Do you want to pay it or not? This
is how much you're going to get if you pay it. This is how much you're going to get if
you don't." For FERS, it used to be that for FERS people,
if you got a refund of your FERS retirement contributions, it was like you never worked
for the government. You did not get credit for eligibility, you did not get credit for
computation, and you could not redeposit that money into the retirement fund. It was just
gone. This all changed with Public Law 11182. Section
1904 allows individuals who are subsequently reemployed to make a deposit of the amount
refunded plus interest, and to have credit for the service reinstated.
One of the other interesting things that this law did is that before, for FERS people, as
I said, when you got a refund, you really didn't get credit for that service at all.
It didn't count towards eligibility. It didn't count towards computation.
One of the other things, because this law references the CSRS provisions, for FERS people
now who get a refund, they get credit for eligibility to retire, regardless of whether
or not they pay that refund. FERS refunded service now counts for eligibility
to retire regardless of whether or not you pay that redeposit, but if you don't pay the
redeposit, you don't get credit for it in the computation of your annuity, but FERS
people now can pay for refunded service. That's something important to keep in mind.
Nondeduction service under FERS, you don't get credit for eligibility or computation
if you don't pay the deposit for that. For refunded service, you do get credit for eligibility
regardless of whether or not you pay the redeposit, but you only get credit in the computation
of the benefit if you do pay the deposit. Unused sick leave under CSRS and FERS. Sick
leave may be added to the length of service used to compute immediate annuity. It's not
creditable for establishing retirement eligibility, you can't be age 60 years old, have 19 years
of service, have a year of unused sick leave, and say, "Hey, I want to use that sick leave
now to get credit for eligibility to retire at 16 and 20."
What you can do is you can be 60 years old with 20 years of service, and have one year
of unused sick leave, and get credit for 21 years of service in your computation. We'll
use it to increase the amount of your benefit, but we will not use it to give you initial
eligibility in most cases. FERS sick leave...well, for CSRS people; it's
the amount of the sick leave that you have that you get credit for. For FERS people,
you get 50 percent credit for your unused sick leave for retirements through 12/31/2013.
Starting on January 1st, 2014, FERS people will get 100 percent credit for their unused
sick leave to be used in their retirement computation.
This is, again, one of those changes...it was the same public law, it was a different
section, but it was the same Public Law 11184. This was another provision of that public
law, and basically what happened, before that public law went into effect, FERS people used
to not get credit for unused sick leave. It created quite a problem, because people
who were eligible to retire would suddenly become very sick...
[laughs] Michael: ...and it would cause a lot of problems,
because, really, the person's already eligible to retire. What are you going to do? You can't
really fire them, because they'll just submit their application for retirement, they would
get sick and use the unused sick leave, Congress had changed the law and allowed FERS people
unused sick leave. Another interesting point, and I actually just got this question yesterday,
I want to bring this up, because for all of the human resource people out there, this
is going to be a really important issue coming up this year. If you notice on the slide,
it says that people get 50 percent credit through 12/31/2013. This is retirement's effect
through 12/31/2013. They get 100 percent credit for retirements
on or after 01/01/2014. I see some heads nodding. I know you all know where I'm going with this.
Remember for FERS, the annuity commencing date, your separation date has to be in at
the last day of the month if you want your annuity to commence the next day.
If you are a FERS employee and you separate on December 31st, 2013, you are only going
to get credit for 50 percent of your unused sick leave. If you separate on January 1st,
your annuity is not going to commence until February 1st, which means that your first
payment wouldn't be received until March 1st; you are going to miss a month of annuity.
You are not going to get paid by OPM or your agency for the period of time from January
1st to the end of January. For FERS people coming up, the best day to
actually retire if they wanted to get 100 percent credit for their unused sick leave
would be January 31st 2014 because they would then be separating on or after January 1st,
2014. They would get 100 percent credit for their unused sick leave and their annuity
would commence February 1st. They wouldn't have a period of time where they're not getting
paid by their agency and/or by OPM. This is going to be really critical because
I know a lot of human resources offices get hit with retirements. A lot of people like
to retire on December 31st. That's still OK for CSRS people, but for FERS people, it's
going to be important when you're counseling people to let them know that if they separate
on December 31st, they're only going to get credit for 50 percent of their sick leave
balance whereas if they wait another month they're going to get credit for 100 percent
of their sick leave balance. Depending on what your sick leave balance
is, that could be quite substantial to your monthly annuity because it could be a year
or more of service. Some people have several thousand hours of sick leave, this is really
important. It's an important counseling point for all of the HR people out there to be aware
of. For FERS retirements with a service component,
again 100 percent of the sick leave at the time of the FERS election is added to the
SERS calculation. The difference between the total sick leave at retirement and the sick
leave use for a SERS component added to the first calculation is 50 percent until 12/31/2013
and 100 percent after January 1, 2014. After January 1, 2014, we are not going to have
to deal with this 50 percent anymore. It should make things pretty straightforward.
Do you have a question? Can you go to the microphone please? I'm sorry. People that
are tuning in...We have a lot of people actually that are watching this via webcast.
Audience Member: It's not a question, but it's more like a statement. The leave year
ends on 1/12 or 1/11 of 2014. There are a lot of concerns in regards to that they don't
want to forfeit anything that they have over 240.
Michael: That is the annual leave. Audience Member: Yeah. They want to get paid
out for that and then they want to have the 100 percent. They leave in the middle of the
month instead. Michael: Yeah. Well, now we're getting into
really...it's fine. I love this kind of stuff. It's one of those things, where it's going
to be based on the individual and how much leave they have accrued. I always have use
or lose. I understand that you really have to calculate that. Again, you're going to
have to work with a person on a casebycase basis to figure out what is to their advantage.
There's not going to be a onesizefitsall answer. They may actually, in some cases, when they
take that leave or take it to the point where they know that they are not going to lose
any. Again, you really have to work with the employee. That's where the fun of working
in HR and actually counseling people and trying to figure out what is best for them really
comes into play. That's where the rubber meets the road so to speak, the handson.
I know we've talked and talked about this. This is what everybody wants to know. How
much am I going to get in retirement and how do we do the computation? It's actually not
as complicated as people would think in some cases. It can be, depending on how many layers
we throw onto this. Believe me, you can throw a lot of layers down. But, generally speaking,
the basic computation is not that difficult. The annuity is based on a percentage of the
high three average salary. You're going to hear this term thrown around
a lot...high three average salary. We are going to talk about what the high three average
salary is, in just a minute. The percentage of the high three average salary
that you get is determined by the amount of creditable service you have and the appropriate
annuity formula. Now, your high three average salary is your highest three consecutive years
of salary rates. It's not your highest three years of pay. In most cases, most people are
going to have that at the end of their career anyway.
You can't just grab a year here and grab a year here and grab a year here. Most people
have more than one salary rate in a year, depending on when they are within grade spell
and everything. Not everybody falls neatly, like, "I started on January 1st; I'm going
to get this right here. It's just always going to be a nice full calendar year." Usually,
they are within grades or promotions are going to fall at different times.
It's the highest three consecutive years of salary rates averaged together. It's basic
pay. It's the highest three consecutive years of basic pay. What does basic pay include?
It includes regular pay. It includes locality pay. It includes night differential for wage
grade employees, about which I actually just got a call this morning, before I came to
do this presentation. It includes premium pay for firefighters and law enforcement officers.
It does not include bonuses over time, allowances and special pay for recruiting and retention
purposes. How do we determine how much of your high
three you get? We use a formula. The formulas are different for both CSRS and FERS. The
SERS formula is a little more complicated than the FERS formula. With the SERS formula,
you get one and a half percent of your high three average salary for each year, for the
first five years that you work. We look at your first five years of service,
one and a half percent of your high three average salary for each of the first five
years of creditable service that you work, one and three quarter percent for the sixth
year that you are a Federal employee, seven, eight, nine and ten.
Then two percent of your high three average salary times the service that you have that
is over 10 years. For FERS people, you either get one percent of your high three average
salary for every year that you work or 1.1 percent. We are going to look at why the 1.1
percent comes in, in just a second. I'll show you the computation here. If we
look at one and a half percent times five, that's seven and a half percent. One and three
quarter percent times five is 8.75 percent. Two percent times twenty is 40 percent. If
somebody had 30 years of total service, they would have 56.25 percent of their high three
average salary. That's what their annuity would be. That would be their annual, unreduced
annuity. Once we've calculated their high three average
salary, the average of their highest three consecutive years of pay rates, they would
get 56.25 percent of that. For FERS people, it's either going to be 30 percent or 33 percent
of their high three average salary. You see an obvious difference in the formulas here.
I know FIRS people, when they see the sidebyside comparison, look really discouraged.
But you have to keep in mind that, again, CSRS people are not getting a Social Security
benefit in most cases. They did not pay into the Social Security system. They do not get
matching contributions on TSP. FERS people, in addition to this basic benefits, are going
to get a Social Security benefit, when they become eligible. Providing that they contributed
to TSP, which I would encourage everyone to do, they are also going to get money from
TSP as well. [coughs]
Excuse me. Again, an employee has 30 years of service and their high three average salary
is $98,000. If we take one and a half percent of $98,000, which is $1,470 times five years
of service, one and three quarter percent again times the average salary, we come up
with $1,715 times five, then two percent of that high three average salary, which is $1,960
times the 20 years of service. We add it all together. We come up with an unreduced annuity
of $55,125. With a high three average salary of $98,000,
a person would get, annually, $55,125 before any reductions for unpaid deposits or redeposits
or anything like that. Again, this just breaks it out. If we look at a FERS annuity, generally
speaking, a FERS employee gets one percent of their high three average salary for every
year they work. With 30 years of service, you would get 30 percent of your high three
average salary. Where the 1.1 percent factor kicks in is,
if you are at least 62...yes. I hear an answer back here already. This is great. If you are
at least 62 years old, with at least 20 years of service, you'll get 1.1 percent of your
high three average salary for every year that you work. Let's say we have an employee, who
is age 62 and has 24 years of service and, again, a high three average salary of $98,000.
They would get 1.1 percent of $98,000 or $1,078 times 24 years of service that they had, which
would give them an annual benefit of $25,872. We would divide that by 12 and that would
be how much they would get per month. Let's say somebody has elected FERS and they had
a lot of service under CSRS. They had at least five years of CSRS only or FICA only time,
prior to their FERS election. They would have what we call a CSRS component.
Part of their annuity would be computed under CSRS rules, using the CSRS formula and part
of their annuity would be computed under FERS rules, using the FERS formula. If that's the
case, then we apply the CSRS formula to the CSRS side of the service and the FERS part
to the FERS part of the annuity. We add them together. Here is an example, where we have
a CSRS component. An employee is 62. He has 20 years of CSRS
service, elected FERS and has 10 years of FERS service, with a high three average salary
of $98,000. We would do just what we did in all those other examples I showed you, where
we take the 20 years of CSRS service, apply the general formula to that and come up with
a basic CSRS annuity on the CSRS side of the house of $35,525.
We apply the appropriate FERS formula to the FERS part of the annuity, which would give
them $10,780 on the FERS part and we add it together, which would give them an annual
annuity of $46,305. That's really where we are with that. That's pretty straightforward.
That's just plugging it into the formulas. Most human resources offices have software
that does this. You could do it manually. I've done manual
computations and taught people manual computations. But it's much easier to key the information
into software. FERS has something also that's very special, because the FERS benefit, as
I've discussed so many times, is three tiers. We are contingent upon those three tiers,
the FERS basic benefit, TSP and...What's the other one?
Social Security. Exactly. Social Security is such an important part of the FERS retirement
system. That was the genesis for creating it in the first place, because federal employees
were now subject to Social Security. We have what we call a FERS annuity settlement. This
substitutes for the Social Security part of the total FERS benefit, until age 62. Why
age 62? It's because most people become eligible to apply for Social Security at age 62.
This FERS annuity settlement is a quasiSocial Security benefit. If you retire before age
62, that will substitute for the Social Security piece of the benefit, until you become eligible
to apply for Social Security. It approximates the Social Security benefit earned under FERS,
it's only the FERS Social Security benefit computed for the years that you worked under
FERS. It's subject to the Social Security earnings test, just like any other Social
Security benefit would be. Say you get a job in the private sector, after
you retire and you earn over the exempt amount set by Social Security for that year. That
annuity supplement is going to be reduced in exactly the same way that a regular Social
Security benefits would be reduced. The annuity supplement is not subject to costofliving
adjustments, because for FERS people, costofliving adjustments don't even begin until the age
of 62 and the annuity supplement stops at 62.
To be eligible for this FERS annuity supplement, employees must have one full calendar of deductions
under FERS and they must qualify for an immediate nondisability retirement, other than an MRA
plus 10 retirement. Remember I mentioned that FERS has that peculiar thing...that MRS plus
10 retirement? Once you reach your minimum retirement age, if you have at least 10 years
of service, you can retire. One of the costs of taking an MRA plus 10
retirement is that you would not get the annuity supplement. You would not get this. You wouldn't
be eligible for it. The other cost to that FERS/MRA plus 10 retirement
is that there is a substantial age reduction for taking an MRA plus 10 retirement under
FERS. The age reduction for an MRA plus 10 retirement is five percent per year, for every
year you are under age 62 or five twelfths of one percent for each full month you are
under age 62. It's the same thing. This leads me into talking
about reductions apply to these basic benefits. For CSRS people, there could be an age reduction,
if you go out on an early retirement. Nondeduction service, as we talked about, could reduce
your annuity under CSRS. Electing a survivor benefit could cost you refunded service and
CSRS offset, if you are a CSRS offset employee. For FERS people, you have a CSRS component.
The age reduction could apply to that CSRS part of your annuity. If you're an MRA plus
10 person, as I mentioned, if you retire under the MRA plus 10 provisions, you have an age
reduction. There is also the cost to provide a survivor election. The CSRS age reduction,
if you go out on an early out, is a permanent reduction to a CSRS annuity. It equals two
percent for each full year you are under age 55.
It's two twelfths of one percent for each month you are under age 55 to reduce a CSRS
annuity. It applies to CSRS annuities or FERS annuities with a CSRS component, if somebody
retires prior to age 55. A FERS age reduction...for early optional retirement or discontinued
service retirement under FERS, as long as you are at least age 50, with 20 years of
service or any age, with 25 years of service, there is no age reduction for FERS annuities.
However, if you go for an MRA plus 10, once you've reached your minimum retirement age,
you have 10 years of service, but less than 30, you're going to be subject to an age reduction
that is five percent for each year you're under age 62, which is quite substantial.
Again, as I said, for MRA plus 10 retirements, they also don't get the annuity supplement.
The cost to provide a survivor benefit to someone, it applies if an employee selects
a survivor annuity for a spouse, and/or former spouse, or has a former spouse entitled to
a survivor annuity based on a valid court order, or elects to provide someone with an
insurable interest annuity. For CSRS people, the survivor annuity is twoandahalf
percent times...for the first $3,600 of the base of the amount elected by the retirement,
and 10 percent in excess of the $3,600 of the base elected by the retiree. The survivor
receives 55 percent of the base elected by a retiree.
For FERS people, it gets much simpler. We have a full survivor annuity, which is 50
percent of whatever the retiree would be receiving. The survivor gets 50 percent of that, and
it costs the 10 percent reduction to the annuity, or a partial survivor annuity is 25 percent
of whatever the retiree would have been getting, and it costs the reduction to the annuity
of the person a five percent. That being said, I have to tell you that,
by law, if you have a spouse, you have to provide your spouse with a full survivor benefit,
unless you get your spouse's consent to something other than a full survivor benefit.
That even includes if you have a court order awarding a former spouse a survivor benefit,
because OPM will honor the court order, but you still, by law, have to provide your current
spouse with the full survivor benefit, unless you get your current spouse's consent to something
less than a full survivor benefit. Any questions on that...? OK, great.
Insurable interest. When I mention insurable interest, people think a lot of things. They
think you're talking about life insurance. They think you're talking about health benefits.
It's none of that. It's basically another type of survivor annuity, and an insurable
interest is payable to anyone who has a reasonable expectancy of financial benefit in the continued
life of the employee. The reduction to provide the survivor annuity
to someone with an insurable interest ranges between 10 percent and 40 percent, the annuity
could be reduced anywhere from 10 to 40 percent. It depends on the difference between the age
of the retiree and the age of the person that they're leaving that insurable interest benefit
to, because, remember, when the retiree dies, and we start paying the survivor benefit,
we have to pay that survivor for the rest of their life too. Again, based on actuarial
tables, the younger that person is that's receiving the survivor benefit, the longer
we're going to have to pay them. Now, why would somebody elect an insurable
interest? Who would they provide this insurable interest to? Again, it could be anybody who
has an expectancy of financial benefit in the continued life of the employee. It could
be a business partner. It could be...some people leave it to...
A lot of times, the most common time we see an insurable interest being paid to someone
is to a current spouse, where there's a former spouse who has a court order that awards them
a full survivor benefit, and it's pretty much wiped out the survivor benefit for the current
spouse. Unless that former spouse remarries before
age 55 or dies, then the current spouse is probably not going to get a survivor benefit,
the retiree, if they want to provide for that current spouse, will also provide an insurable
interest to that current spouse. That's usually the most common time that we see that.
Some people will leave it to a child, but again, remember that if you're leaving it
to a child, it's the difference between your age and the person you're leaving it to, it's
going to be quite expensive, and there might be other ways to do that.
That's when, if you're in that situation, or if you're counseling and employee that's
in that situation, that's a prime example where you might want to send someone to a
financial counselor to see what options are available to that employee. There might be
more costeffective ways of providing that benefit to somebody.
New regulations, effective July 20th, 2012, basically modified the regulations were presumed
insurable interest for samesex domestic partners used to be...Obviously, samesex domestic partners
you could provide an insurable interest anyway. It just moved that presumed category up to
somebody who has an insurable interest. It used to be the presumed people were usually
blood relatives closer than first cousin. Now samesex domestic partners are presumed
to be in that category of somebody who is presumed to have an insurable interest in
somebody. Modifications to the preexisting rule now
includes samesex domestic partners as having an insurable interest in the continued life
of the retiree, which, obviously, if you're a domestic partner, you have a presumed insurable
interest. You're expecting the person to be alive.
The other thing about insurable interest that I really want to talk about is that you have
to be in good health and you can't be retiring on a disability annuity. That is one of the
things that will stop you from providing an insurable interest to somebody, and we may
ask for medical documentation showing that you are in good health, we might ask for a
medical exam. Other reductions that could apply to the annuity
are if you're a CSRS Offset employee, it could be the actual CSRS Offset that kicks in when
you become eligible for Social Security, and that's going to be the Social Security benefit
minus the Social Security benefit computed without the CSRS Offset service.
Another thing I want to touch on is maximum annuities. I get this question a lot. For
CSRS people, the most you can get, the biggest percentage of your highthree average salary
you can get is 80 percent, generally speaking. There are things that will throw you over
that, for example, unused sick leave, but just based on years and months of service,
applying that general formula, oneandahalf percent for the first five years, oneandthreequarter
percent for the next five years, and then two percent per year thereafter, once you
hit 80 percent of your highthree average salary, for a regular employee, they reach that after
working for 41 years and 11 months. They reach that with 35 years of service under
the law enforcement officers' and firefighters' provisions, and the limit, as I said, may
be exceeded with unused sick leave. We stop it at 80 percent, and you still, while you're
working, say you're a regular employee, you work for 41 years, 11 months, you continue
working. We have people that have worked for 50 years.
They're still paying those retirement contributions into the retirement fund, but what's going
to happen when they retire, we're going to look at the date that they hit the 80 percent.
We are then going to refund all those contributions to them with interest.
They have the option at that point, depending on how old they are, if they are still allowed
to do that, to roll the interest over into an IRA, or they can receive it in a lump sum,
things like that. That's really what we're dealing with, with maximum annuities.
For FERS people, there is no maximum annuity under FERS. What's interesting about this
is that, and I've seen this happen, and we haven't seen it yet, but we may see somebody,
and our policy folks would love to see this, is when somebody gets, under FERS...
Say somebody worked for a long time under CSRS. They hit the 80 percent. Say they separated
or whatever and they came back to work, and then they elected FERS. Well, there is no
maximum annuity under FERS, let's say they've accrued the 80 percent. Well, now they start
accruing one percent per year under FERS, and let's say they work for another 20 years.
Keep in mind, they're going to be old, because they've worked for 41 years, 11 months already,
and now they're accruing one percent per year on top of that. Conceivably, somebody could,
in theory, go over 100 percent of their highthree average salary. We've never seen it happen
yet, but there is no maximum annuity under FERS, that's just one of those oddball things
that...I don't know if we'll ever see it. I would like to see it before I retire, just
because it would be interesting. Let's say you return to work after you retire.
This gets a little complicated, reemployed annuitants, somebody who's retired and comes
back to working, get a little complicated. Generally speaking, your annuity would continue
and your salary is going to be offset by the amount of the annuity that you're receiving.
There are some exceptions. If you're a disability annuitant, if you get
what we call a dual comp waiver, a dual compensation waiver, where, basically, the position is
so hard to fill, the agency has said, and applied to OPM, and OPM has approved, for
someone to fill that position with a retiree because it's so hard to recruit and there's
such specialized knowledge, that that person, for that position alone, would be able to
get their full salary and their full annuity, without being offset.
Discontinued service retirements under CSRS, if you retire under a discontinued service
retirement under the old system, under the CSRS system, your annuity terminates, and
then you are just a regular employee again, and you continue working. Presidential appointments,
it's a little bit different, but the same kind of thing. The annuity stops when you
become reemployed, and then you accrue additional annuity.
For FERS people, again, in most cases, the annuity continues and the salary is offset
by the amount of the annuity. The only exceptions to that really are disability annuities and,
again, if you're subject to a dual compensation waiver, in which case you would get full salary
and full annuity. Cost of living adjustments, or as we refer
to them here at OPM, COLAs, for CSRS people, they begin the first December after retirement.
The first COLA is prorated. For FERS people, they generally are not applied until the December
after you reach age 62, and exceptions are disability annuities, because the person is
retiring on a disability, law enforcement officers, and firefighters, and air traffic
controllers. What is this cost of living adjustment? How
much is it? For CSRS people, it equals the change in the percentage of the CPI, the percent
change and the Consumer Price Index, from year to year. For FERS people, FERS people
not only do they have to wait to get their COLA, but it's a diet COLA when they get it.
[laughs] Michael: The percentage is the change in CPI.
If it's between zero and two percent, the cost of living adjustment equals the change
in the CPI. If it's between two and three percent, the cost of living adjustment equals
two percent. If it's over three percent, it's the change in the CPI minus one percent. For
more information, if you're an HR specialist, you can always sign up for our Listserv. If
you are a regular employee who's tuning in, who doesn't work in an HR office, please do
not...what I would suggest is that you definitely go to see your human resources office, because
a lot of the material that comes out on the Listserve is really information that's geared
to the HR community. Basically, if you are a regular employee who's
not in the HR community, definitely go to see your human resource person. They are great.
They will be able to help you. They will be able to give you all the information you need.
For HR people, again, your headquarters benefits officer is the place to go for more information
as well. We also have liaisons assigned to every federal agency throughout the government
in my office. As I said, I myself am liaison for Department of Defense and Treasury, I
can speak to any questions that you have there. Does anybody have any other questions before
we conclude? No? Great. Well, thank you for coming. I really appreciate you coming out
on such a rainy day. For those of you who are tuned in via the webcast, thank you so
much for tuning it. I really appreciate it.