RETIREMENT

RETIREMENT INFORMATION SESSION AGENDA • • • • • RETIREMENT ELIGIBILITY ANNUITY CALCULATIONS HEALTH & LIFE INSURANCE THRIFT SAVINGS PLAN (TSP) SOCIAL SECURITY & MEDICARE RETIREMENT ELIGIBILITY CSRS VOLUNTARY, OPTIONAL AGE 55 60 62 • SERVICE • 30 • 20 • 5 • MINIMUM REQUIREMENTS: • 5 YRS OF CIVILIAN SERVICE • 1 OUT OF 2 RULE • AGE • 50* • ANY* INVOLUNTARY SEPARATION (DSR)& VOLUNTARY EARLY • SERVICE • 20 • 25 • *PERMANENT REDUCTION = 2% FOR EACH YR UNDER AGE 55 RETIREMENT ELIGIBILITY FERS VOLUNTARY, OPTIONAL • • • • • • AGE MRA* 60 62 MRA* *MINIMUM RETIREMENT AGE: 55 IF BORN BEFORE 1948; GRADUALLY INCREASES TO 57 • • • • • SERVICE 30 20 5 10** • **ANNUITY REDUCED 5% FOR EACH YR UNDER AGE 62 AT RETIREMENT • MINIMUM REQ.: 5 YRS CIVILIAN SERVICE • AGE • 50 • ANY INVOLUNTARY SEPARATION (DSR)& VOLUNTARY EARLY • SERVICE • 20 • 25 • NO AGE REDUCTION FOR UNDER AGE 55, UNLESS A CSRS COMPONENT IN ANNUITY COMPUTATION INVOLUNTARY SEPARATION • • • • EXAMPLES: REDUCTION-IN-FORCE (RIF) ABOLISHMENT OF POSITION UNACCEPTABLE PERFORMANCE (UNLESS FOR MISCONDUCT • TRANSFER OF FUNCTION OUTSIDE COMMUTING AREA* • REASSIGNMENT OUTSIDE COMMUTING AREA* (NO MOBILITY AGREEMENT) • * COMMUTING AREA IS DEFINED AS THE GEOGRAPHIC AREA THAT USUALLY CONSTITUTES ONE AREA FOR EMPLOYMENT PURPOSES. IT INCLUDES ANY POPULATION CENTER (OR 2 OR MORE NEIGHBORING ONES) AND THE SURROUNDING LOCALITIES IN WHICH PEOPLE LIVE AND REASONABLY CAN BE EXPECTED TO TRAVEL BACK AND FORTH DAILY IN THEIR USUAL EMPLOYMENT. INVOLUNTARY SEPARATION • CONDITIONS: • EMPLOYEE MUST RECEIVE SPECIFIC WRITTEN NOTICE OF AN INVOLUNTARY SEPARATION • NOTICE MUST BE DIRECTED TO AN INDIVIDUAL EMPLOYEE • NOTICE MUST INFORM EMPLOYEE THAT HE/SHE FACES INVOLUNTARY SEPARATION FROM POSITION OR FEDERAL SERVICE • IT MUST SPECIFY REASON FOR ACTION AND EFFECTIVE DATE OF THE ACTION INVOLUNTARY SEPARATION • MAY NOT DECLINE A REASONABLE JOB OFFER • OFFER MUST MEET FOLLOWING CONDITIONS: • OFFER MUST BE IN WRITING • EMPLOYEE MUST MEET QUALIFICATION REQUIREMENTS FOR POSITION • OFFERED POSITION MUST BE IN EMPLOYEE’S AGENCY • OFFERED POSITION MUST BE WITHIN EMPLOYEE’S COMMUTING AREA • OFFERED POSITION MUST BE OF SAME TENURE • OFFERED POSITION MUST NOT BE LOWER THAN THE EQUIVALENT OF 2 GRADE/PAY LEVELS BELOW EMPLOYEE’S CURRENT GRADE OR PAY LEVEL ANNUITY COMPUTATION CSRS • BASED ON: • HI-3 AVERAGE SALARY • CREDITABLE CIVILIAN AND MILITARY SERVICE (INCLUDING UNUSED SICK LEAVE) • FORMULA: • 1.5% OF HI-3 X 1ST 5 YRS OF SERVICE + • 1.75% OF HI-3 X NEXT 5 YRS OF SERVICE + • 2% OF HI-3 X REMAINING YRS OF SERVICE CSRS OFFSET • SAME FORMULA • ANNUITY REDUCED AT AGE 62 IF ELIGIBLE FOR SOCIAL SECURITY • REDUCTION BASED ON AMOUNT OF SOCIAL SECURITY BENEFIT EARNED WHILE COVERED UNDER CSRS OFFSET ANNUITY COMPUTATION FERS • 1% OF HI-3 X ALL SERVICE • TRANSFEREES: • CSRS SERVICE COMPUTED UNDER CSRS FORMULA • FERS SERVICE COMPUTED UNDER FERS FORMULA • 1.1% OF HI-3 FOR FERS SERVICE IF AGE 62 WITH 20 YRS OF TOTAL SERVICE NOTE • UNUSED SICK LEAVE (USL) IS ADDED TO CSRS COMPONENT = LESSER OF USL AT TIME OF TRANSFER OR AT TIME OF RETIREMENT • FERS SUPPLEMENT: • $25-$30/MONTH ADDITIONAL ANNUITY FOR EACH FULL YR OF FERS SERVICE (UNTIL AGE 62) SIMPLE FORMULA CSRS • YRS OF SERVICE MINUS 2 X 2 = % OF HI-3 • EXAMPLE: • 30 YRS OF SERVICE – 2 = 28 X 2 = 56% OF HI-3 (ACTUAL FIGURE IS 56.25%) SIMPLE FORMULA FERS • • • • YRS OF SERVICE X 1 = % OF HI-3 EXAMPLE: 30 YRS OF SERVICE X 1 = 30% OF HI-3 NOTE: FOR TRANSFEREES, USE CSRS FORMULA FOR CSRS SERVICE (INCLUDE FROZEN SICK LEAVE) AND FERS FORMULA FOR FERS SERVICE RETIREMENT DATES • CSRS: LAST DAY OF MONTH OR 1ST, 2ND, OR 3RD OF FOLLOWING MONTH • ANNUITY STARTS NEXT DAY, OTHERWISE 1ST OF NEXT MONTH • FERS: LAST DAY OF MONTH • ANNUITY STARTS 1ST OF FOLLOWING MONTH SURVIVOR BENEFITS CSRS • ANY BASE = TO OR LESS THAN FULL ANNUITY* • REDUCTION = 2 ½% OF FIRST $3,600 AND 10% OF BALANCE OVER $3,600 • SPOUSE’S SURVIVOR RATE = 55% OF BASE ELECTED • NO ELECTION NEEDED FOR CHILDREN • COURT ORDER FOR FORMER SPOUSE MAY AFFECT • *SPOUSAL WRITTEN CONSENT REQUIRED IF BASE ELECTED IS LESS THAN FULL ANNUITY SURVIVOR BENEFITS FERS • MAY ELECT 50% OR 25% OF YOUR ANNUITY * • REDUCTION = 10% OR 5% OF YOUR ANNUITY • NO ELECTION NEEDED FOR CHILDREN • * SPOUSAL WRITTEN CONSENT REQUIRED IF ELECT 25% OR NONE DEPOSITS FOR NON-DEDUCTION SERVICE • CSRS: SERVICE PRIOR TO 10/1/82 • CREDITABLE, BUT ANNUITY REDUCED BY 10% OF DEPOSIT DUE AT RETIREMENT • DEPOSIT = AMOUNT OF RETIREMENT DEDUCTIONS THAT WOULD HAVE BEEN WITHHELD + 3% INTEREST/YR • CSRS ON AND AFTER 10/1/82 • SERVICE NOT CREDITABLE FOR ANNUITY COMPUTATION UNLESS DEPOSIT IS PAID • OPM WOULD GIVE OPPORTUNITY TO PAY DEPOSIT DEPOSITS FOR NON-DEDUCTION SERVICE • FERS: SERVICE PRIOR TO 1/1/89 • NOT CREDITABLE FOR ELIGIBILITY UNLESS DEPOSIT PAID • DEPOSIT = AMOUNT OF RETIREMENT DEDUCTIONS THAT WOULD HAVE BEEN WITHHELD + INTEREST (VARIABLE RATE SINCE 1985) • FERS SERVICE ON AND AFTER 1/1/89: • NOT CREDITABLE FOR ELIGIBILITY PURPOSES • DEPOSIT NOT ALLOWED • CREDITABLE FOR SOCIAL SECURITY PURPOSES ONLY Redeposit for Refunded Service CSRS • For service prior to 10/1/90 • - OPM will “deem” redeposit paid and reduce monthly annuity by actuarial factor based on your age at retirement • - Redeposit amount=refund + interest • - Interest rate is 3% if service prior to 10/1/82; variable rate applies for service on or after that date • For service on and after 10/1/90 • - Must pay redeposit to receive credit for service • - OPM will give you the opportunity to pay FERS • Cannot ever pay redeposit for refunded FERS service • - Service NOT creditable for title to an annuity • May pay redeposit for a prior CSRS refund Post ’56 Military Service CSRS • If covered by CSRS prior to 10/1/82 • - Pay deposit if will be eligible for SS at age 62 • - Don’t pay if will not be eligible for SS at age 62 • Don’t pay if drawing military retired pay unless you plan to waive retired pay • If first covered by CSRS on or after 10/1/82 • - Must make deposit to get credit • Deposit = 7% of military earnings after 1956 + interest (variable rate) • See your personnel office for details Post ’56 Deposit FERS • Must make deposit to get credit for retirement purposes • Deposit = 3% of military earnings +interest (variable rate) • See your personnel office for details • NOTE: Military service prior to 1957 is creditable without deposit Health Benefits • Must be currently enrolled and continuously enrolled or covered under spouse’s family enrollment for the last 5 years of service prior to retirement • If 5-year rule not met, must have been enrolled since first opportunity to enroll • Cost is the same as now, except premiums are withheld monthly • If you cancel your enrollment after retirement, in most cases you will not be permitted to re-enroll at a later date • Spouse MUST be eligible for a survivor annuity in order to continue coverage after retiree’s death Life Insurance • You must have had basic coverage for the 5 years of service prior to retirement or since your first opportunity to enroll if less than 5 years • This applies to each of the optional coverages: • - Option A – Standard • - Option B – Additional • - Option C – Family Amount of Coverage • Basic – Based on final salary rounded up to next $1,000 + $2,000 • Option A - $10,000 • Option B – Based on final salary rounded up to next $1,000 x number of multiples (1,2,3,4,or 5) • Option C • - $5,000 per multiple on spouse (maximum of 5 multiples) • - $2,500 per multiple for each dependent child under age 22 (maximum of 5 multiples Cost After Retirement • Must make choice on basic • - 75% reduction – $.325/month/$1,000 of coverage until age 65. No cost after age 65 (if retired) – Reduces 2%/month after age 65 until = 25% of original amount • 50% reduction – $.925/month/$1,000 of coverage until age 65 and $. 60/$1,000 thereafter – Reduces 1%/month after age 65 (if retired) until = 50% of original amount – NOTE: Premium after age 65 is based on amount of coverage at retirement, not reduced amount • No Reduction – $2.155/month/$1,000 of coverage until age 65 and $1.83/$1,000 of coverage thereafter – Amount of coverage at time of retirement remains the same after age 65 • Option A - Standard ($10,000) – You pay premiums until age 65 (and retired) – Reduces 2%/month after age 65 until = 25% of original amount ($2,500) Option B – Additional - You pay premiums until age 65 (and retired) - Reduces 2%/month until = 0 - May elect unreduced and continue to pay • Option C – Family – You pay premiums until age 65 (and retired) – Reduces 2%/month until = 0 – May elect unreduced and continue to pay May cancel any or all coverage at anytime If elect 50% or no reduction for basic, may change to 75% reduction at anytime Thrift Savings Plan (TSP) • Withdrawal Options – Transfer to IRA or other eligible retirement plan – Receive lump-sum payment • 20% tax withheld • 10% tax penalty if under age 55 – Series of equal payments • 20% tax withheld • 10% tax penalty if under age 55 (until 59 ½) • Partial Withdrawal (one time only) • Mixed Election (can mix single, monthly & annuity options) • Accounts less than $200 will receive automatic cashout • If more than $3,500 may elect one of several annuity options • Defer until later date – May not add to account – Account continues to earn – May still do interfund transfers as often as want • May leave money in until April 1 of year following year turn 70 ½ (if retired) • If no election made, Thrift Board will purchase an annuity for you Social Security • If you have necessary quarters or credits (40 for those born after 1928) eligible for reduced benefit at age 62 • Earnings limitation if under 65 – $11, 640 in 2004 – Benefit reduced $1 for each $2 earned above limit • Windfall Elimination Provision (WEP) – Reduction in SS benefit if have less than 30 years of substantial earnings under SS – Does not apply if you were eligible to retire from Federal Gov’t before 1/1/86 or were first hired 1/1/84 or later – Full benefit in 2004= 90% of 1st $612 of AIME – Reduced= 40% of 1st $612 of AIME • Government Pension Offset (GPO) – Usually eliminates spouse or surviving spouse SS benefit if you are eligible for CSRS annuity • SSA subtracts 2/3 of annuity from SS benefit – CSRS Offset, FERS & FERS transferees are generally exempt • Those who transferred in 1998 must be under FERS for 5 years to be exempt Medicare • You are eligible at age 65 • If you are 65 and still working, FEHB is the primary payer & Medicare is secondary • After age 65 and retired, Medicare becomes primary & FEHB is secondary payer – FEHB plan usually waives deductibles & copayments • Two Parts to Medicare – Part A is hospital insurance • No premium • You pay 1.45% of salary until you retire, even if after age 65 – Part B is medical insurance (doctor visits, etc.), but does not pay Rx • Premium is $66.60/month in 2004. Don’t sign up until after you retire