Federal Retirement Program CSRS: Civil Service Retirement System FERS: Federal Employees’ Retirement System FEGLI: Federal Employees’ Group Life Insurance TSP: Thrift Savings Plan UVM Extension currently has thirteen participants in FERS and one participant in CSRS. Three individuals are retiring as of June 30, 2011. These individuals also participate in FEGLI and TSP. Years ago, UVM Extension ended their participation in the Federal Employees’ Health Benefits Program (FEHB). The federal retirement participants are covered by the University health plan.

Civil Service Retirement System (CSRS) Contribution rates: Employee: 7% Employer: 7% Participants generally pay no Social Security retirement, survivor and disability (OASDI) tax, but must pay the Medicare tax. Employees may contribute up to 5% of their pay to the Thrift Savings Plan (TSP) but no agency contribution, either automatic (1%) or match (up to 4%). The Civil Service Retirement System (CSRS) is the original program. Most of UVM Extension’s participants started in this plan.

CSRS Retirement Eligibility AGE and CREDITABLE SERVICE 62 5 years 60 20 years 55 30 years Eligibility requirements are listed here, combination of age and years of service.

CSRS Annuity CSRS benefits are based on the employee's "high-3" average pay and their years of service. The annuity will be increased periodically by cost-of-living increases that occur after retirement. The initial cost-of-living increase will be prorated based on how long the annuitant has been retired when the cost-of-living increase is granted.

CSRS Monthly Benefit Options Full annuity – nothing to survivors Full survivor annuity Reduction to retiree’s annuity 55% of full survivor benefit to survivor Partial survivor annuity Reduction to retiree’s annuity based upon survivor annuity Can be any amount between zero and full survivor annuity From “Retirement Facts 1: Civil Service Retirement System”, Providing for Your Survivors on Retirement: If you an individual is married when they retire, the annuity will be reduced to provide a full survivor annuity for the spouse (unless the spouse consents to a lesser benefit). To provide for a survivor annuity, the annuity will be reduced by 2.5 % of the first $3,600 plus 10% of the annuity over $3,600. The survivor annuity will be 55% of the amount of the annuity before this reduction. Note: If you were divorced after May 6, 1985, your former spouse may receive by court order, all or part of the survivor annuity that the current spouse would otherwise get. The annuitant can also elect a survivor annuity for a former spouse (but if currently married, the annuitant must get the spouse’s consent).

Federal Employees’ Retirement System (FERS) Contribution rates: Employee: .8% Employer: 11.7% FERS is a three-tiered retirement plan: Social Security Benefits, Basic Benefit Plan, and Thrift Savings Plan Employees may contribute up to $16,500 for 2011 (the elective deferral limit) to the Thrift Savings Plan and up to $5,5000 in catch-up contributions. These dollars are tax-deferred. The agency contributes an automatic 1% and matches up to 4%. The Federal Employees’ Retirement System (FERS) became effective January 1, 1987. Almost all new employees hired after December 31, 1983, are automatically covered by FERS. UVM Extension participant’s that transferred from CSRS to FERS, did so very late 1987, early 1988.

FERS Retirement Eligibility Age and Years of Service 62 5 60 20 MRA* 30 MRA * 10 If the individual retires at the MRA with at least 10, but less than 30 years of service, the benefit will be reduced by 5 percent for each year they are under the age of 62, unless they have 20 years of service and benefits start when they reach age 60 or later. *MRA: Minimum Retirement Age Minimum retirement age on next screen.

FERS Retirement Eligibility Minimum Retirement Age (MRA) If you were born Your MRA is Before 1948 55 In 1948 55 and 2 months In 1949 55 and 4 months In 1950 55 and 6 months In 1951 55 and 8 months In 1952 55 and 10 months In 1953 through 1964 56 In 1965 56 and 2 months In 1966 56 and 4 months In 1967 56 and 6 months In 1968 56 and 8 months In 1969 56 and 10 months In 1970 and after 57

FERS Annuity The basic FERS annuity is based on the employee's length of service and the "high-3" average pay. For most employees, the formula for computing the annual annuity is 1 percent of average pay for each year of creditable service. The FERS annuity supplement is paid in addition to the monthly FERS annuity. It represents what the annuitant would receive for their FERS civilian service from the Social Security Administration (SSA) and is calculated as if the individual is eligible to receive social security benefits on the day they retire. The supplement continues until the annuitant is eligible for social security or the last day of the month in which they reach age 62.

FERS Monthly Benefit Options Full annuity – nothing to survivor Full survivor annuity 10% reduction to retiree’s annuity Survivor receives 50% of retiree’s annuity Partial Survivor annuity 5% reduction to retiree’s annuity Survivor receives 25% of retiree’s annuity If the retiree chooses the full annuity then there is no annuity to the survivor.

Life insurance options after retirement BASIC Amount is determined by the annual pay in effect when the annuitant separated for retirement, rounded to the next higher thousand (if not an even thousand), plus $2,000. Three election choices: 75% reduction, 50% reduction, or No reduction. No Reduction after age 65 If the annuitant elects this reduction, the full amount of the Basic life insurance remains in force after they reach age 65. Premiums for this additional coverage are withheld from the annuity beginning at retirement and continuing for life. The most expensive. There is no regularly scheduled dates for Open Seasons. Life insurance Open Seasons are held infrequently. Participants will receive plenty of notice if and when there is an Open Season.

Basic cont’d 50% Reduction after age 65 75% Reduction after age 65 Begins to reduce by 1% of the face value each month beginning with the second month after the date the age 65 or the second month after the individual retires, whichever is later. This reduction continues until the Basic life insurance reaches 50% of the face value At age 65, 2% per month reduction of life insurance to 50% reduction (i.e., $40,000 to $20,000) 75% Reduction after age 65 Reduce by 2% of the face value each month beginning with the second month after the date the individual is 65 or the second month after retirement, whichever is later. At age 65, 2% per month reduction to 75% reduction or, 25% of the face value ($40,000 to $10,000)

Federal Employees’ Group Life Insurance (FEGLI) Cost for Annuitants for each $1,000 of the Basic Insurance Amount in Effect at the Time of Retirement 75% Reduction 50% Reduction No Reduction Until the Month after the 65th Birthday $0.3250 monthly $0.9250 monthly $2.1550 monthly Starting the Month after the 65th Birthday Free $0.60 monthly $1.83 monthly   * This amount will be withheld from the annuity for life (unless the annuitant cancels or subsequently elects 75% Reduction).

FEGLI – Option A Option A – Standard Insurance ($10,000) Reduces by 2% per month beginning the second month after the annuitant is 65 or the second month after retirement, whichever is later, until it reaches 25% of the face value ($2,500). Premiums will be withheld from the annuity through the end of the month in which the annuitant is 65, unless they elect to cancel this coverage.

FEGLI – Option B Option B – Additional Insurance Amount is determined by multiplying the final annual basic pay rate rounded to the next higher thousand by the number of Option B multiples (1 to 5) that were in effect for the five years of service immediately before retirement. Annuitants who are eligible will be given a second opportunity to make this election around their 65th birthday. Can elect Full Reduction or No Reduction. See page 11 of Information for Retirees and Their Families (RI 76-12) for additional information.

FEGLI – Option C Option C – Family Insurance $5,000 coverage for a spouse per multiple $2,500 coverage for each eligible dependent child Amount of insurance is determined by the number of multiples (1 - 5) that were in effect for the five years of service immediately before retirement. The annuitant is the beneficiary. After the annuitant’s death, Option C stops. However, covered surviving family members will have an opportunity to convert to a non-group policy.

FEGLI Unless the annuitant has assigned the insurance, it may be canceled at any time. If the Basic life insurance is cancelled, ALL Optional insurance is cancelled as well. The annuitant should keep the designation of beneficiary up-to-date. OFEGLI cannot make payments if they cannot locate the beneficiary. See RI 76-12, Information for Retirees and Their Families for the explanation of assigning insurance.

What are the requirements to keep life insurance in retirement? The participant has coverage when they retire; The annuity begins within 30 days and, The participant was insured for life insurance for the five years immediately preceding retirement or the full periods of service when coverage was available.

Thrift Savings Plan (TSP) Individuals can calculate their estimated TSP annuity by using the “Calculators”, under “Planning & Tools”. They will need their last TSP statement.

How much can the participant contribute to TSP? The Internal Revenue Code places an annual limit on elective deferrals (e.g., tax-deferred employee contributions to the TSP). The elective deferral limit is $16,500 for 2011. Consequently, once the $16,500 limit has been met, the participant may not make any additional (regular) tax-deferred contributions for the rest of the year.  For FERS employees, this also means that they will not receive any additional Agency Matching Contributions for the rest of the year. CSRS employees/participants do not receive Agency Match and Contributions.

TSP Catch-Up Contributions If the participant has made — or will make — the maximum amount of regular employee contributions for the year ($16,500 in 2011), they may also make catch-up contributions. The catch-up contribution limit for calendar year 2011 is $5,500.

What if I contribute to TSP and another employer tax-deferred retirement plan during the year?  The elective deferral and catch-up contribution limits apply to the combined employee contributions for TSP and other qualified employer plans as described under sections 401(k), 403(b), 408(k), or 501(c)(18) of the Tax Code. See the Fact Sheet: Annual Limit on Elective Deferrals for more information on participating in the TSP and other tax-deferred retirement plans, including what happens when the elective deferral or catch-up contribution limits are exceeded by contributing to more than one employer plan. “Annual Limit on Elective Deferrals” can be found at http://www.tsp.gov/forms/oc91-13.pdf.

Social Security Each individual should ask for a form SSA-7004-PC, Request for Earnings and Benefit Estimate Statement, from the local Social Security Office or visit the website at http://www.ssa.gov. If this form is submitted, the individual will get a statement that provides information on their future eligibility for Social Security benefits and estimates of these benefits at specified dates. These estimates do not reflect any reduction for the Government Pension Offset or the Windfall Elimination Provision (WEP). Copied from the website Planning for Retirement in Five Years, http://www.opm.gov/retire/faq/pre/faq9.asp. For additional information on “Government Pension Offset”, go to this website.

What is the Windfall Elimination Provision? If an individual receives a Federal pension and is also eligible for Social Security benefits based on their employment record, a different formula may be used to compute the Social Security benefit. This formula will result in a lower benefit. The Windfall Elimination Provision affects workers who reach age 62 or become disabled after 1985 and are first eligible after 1985 for a Federal pension. The Windfall Elimination Provision does not apply if: The individual is eligible to retire before January 1, 1986; or, They were first employed by the government after December 31, 1983; or, They have 30 or more years of substantial earnings under Social Security. Another question on this website, http://www.opm.gov/retire/faq/pre/faq9.asp, “Can I estimate the amount of the Windfall Elimination Provision reduction?” Answer: At your request, using the form SSA-7004, the Social Security Administration will send you a Personal Earnings and Benefits Statement (PEBES) that will list your earnings from employment covered by Social Security and provide a Social Security benefit estimate assuming retirement at alternative ages, 62, 65, and 70. You should contact your local Social Security office to determine the effect of the Government Pension Offset and the Windfall Elimination Provision on your Social Security benefits.

Consult a tax advisor once you have your annuity estimates! I do claim to be a tax advisor.

What happens when an individual plans to retire? About six weeks prior to the retirement date, the individual will receive a package of forms from me. The enclosed letter will ask the individual to return the completed forms two weeks prior to the retirement date. This is in case I have any questions, I can reach you. After I have reviewed the forms and completed the forms and/or sections of the forms I need to complete, I forward the information to OPM (Office of Personnel Management). According to the http://www.opm.gov/retire/faq/pre/faq8.asp#payment website, OPM will send the retiree materials concerning: - survivor benefit election - alternative form of annuity - rollover to an IRA; or - if the individual is a FERS MRA+10 retiree, the annuity commencing date

The first two to four annuity payments will represent a portion of the final benefit and is usually made on the first business day of each month.  OPM will send an annuity statement once they have finalized the application for retirement. The time frame could be longer depending on the number of annuity applications submitted to OPM.

Session 23 Federal Benefits—Retirement Counseling Panel Becky Priebe, Washington State University Celia Rainville, University of Vermont Mary Fran San Soucie, Montana State University

Common Errors on Retirement Applications

Common Errors on Retirement Applications

Common Errors on Retirement Applications

Common Errors on Retirement Applications

Common Errors in Retirement Applications

Common Errors in Retirement Applications

Common Error in Retirement Applications

Delay in Retirement Claims Processing Average processing time has been reduced from 138 days to 117 OPM has hired 40 additional claims examiners who will be ready to work this summer   In the future recipients will be provided with the name and contact information of the OPM employee handling their claim

Delay in Retirement Claims Processing OPM is committed to providing retirees with as much of their annuity as possible. Conditions that may cause the annuitant to receive less are: FERS annuity supplement Unpaid service credit deposits Redeposits or military deposits

Questions