Navigating Your Federal Benefits

1. TAKING THE MYSTERY OUT OF THE FEDERAL RETIREMENT SYSTEM Navigating Your Federal Benefits PRESENTED BY: Empowering Your Federal Retirement & Optimizing Social Security Strategies Instructor : Starrla Norman

2. About Your Presenter AD LOREM klj;alksjflksadjflk;sdjflk;sadjflksjdafl;kfasklsjf Alskdjflkasdjf;lkajsf;kljasdl;kfjasdkljfls;dkajflksajflksdjf Lajsdflkjsad;ldfkjaslk;dfj;laskdjfl;asdkjf;alksjdflksadjflk ;lsadkjf;lksdjf;lksadjf;lsdkajfd;djlkfsa;lskadjf;klsdjflklsajdf;lk Salkdfj;lskdajflks;djfa;lskadjfl;sdajflksadjf;lkjsadflk;ajsfl Alskdjflk;djfaslk;sajdflksajdf;slkjadflkjsdaklfjsld;jkflksdjflksd ;lasdkfjlk;sdjfalksadjf;lksadjflksajdflksadjflk;djsafklsjdfksldf Kl;djsfalksdjflk;asjdflkjasdlkfjaslkdjflsakjflksajdflkasjfl;sjskdjflskdjflk;sjflk;asjflkasjflksajdfdljaslkfjlksadjflksadjflksajdflkjsadl;kfjsaldkjflksadjflksadjflkasjdfljsadlkfjasldkjfklsadjflksajdflksadjflksajdlfkjsalkfjslkaddjflksadjdflksjadlkfjsadlfklsajf;sd Chartered Federal Employee Benefits Consultant (ChFEBCSM) • Logos HERE • FRC/FFEBA NETWORK REP/CHFEBC/NSSA etc

3. Disclosures The Presenter is in no way employed by, affiliated with, or endorsed by the IRS, the Social Security Administration or any other government agency. All Examples are hypothetical and for illustrative purposes only. Actual results will vary. No part of this presentation is intended to make an offer of sale or purchase of any specific security or insurance product.Keep in mind, I am a licensed insurance professional, not a CPA, Enrolled Agent or Attorney, so the contents of this presentation are based on things I see day to day in my practice and are not specific advice for your situation. Some information and opinions included in this presentation have been provided by third parties and have been obtained from sources believed to be reliable. However, accuracy and completeness cannot be guaranteed by the presenter or his/her company. It is being provided for information purposes only and is not a solicitation for the purchase of a any product, nor should it be constructed as advice designed to meet the particular needs of the client. Not affiliated or endorsed by the Federal Government

4. Objectives: • Acronyms • The Three Part Retirement Package • Retirement Systems • How does the TSP Fit Into My Retirement Package and General Overview • Contributions and Matching • Tax Advantages • Social Security • FEGLI Overview • Report

5. Common Acronyms • ATC – Air Traffic Controller • AUO – Administratively Uncontrollable Overtime • GBP – Customs and Border Protection • COLA – Cost of Living Adjustment • CSRS – Civil Service Retirement System • FEGLI – Federal Employees Group Life Insurance • FEHB – Federal Employees Health Benefits • FERS – Federal Employees Retirement System • FERS/RAE – FERS, Revised Annuity Employee • FF – Firefighter • FLTCIP – Federal Long Term Care Insurance Program • FSA – Flexible Spending Account • GSA – Government Services Administration • GS 1811 – Criminal Investigator • GPO – Government Pension Offset • ICE – Immigration and Customs Enforcement • LEAP – Law Enforcement Available Pay • LEO – Law Enforcement Officer • MRA – Minimum Retirement Age • OPM – Office of Personnel Management • TRICARE – Military Health Insurance Program • TSP – Thrift Savings Plan • VA – Veterans Administration • VCP – Voluntary Contribution Program • VERA – Voluntary Early Retirement Authority • VSIP – Voluntary Separation Incentive Payments • WEP – Windfall Elimination Provision

6. Your Current Retirement Plan Retirement Social Security TSP/IRAs Pension

7. Retirement Systems CSRS Offset CSRS Established in 1920 Replaced after 12/31/1983 *No Social Security* (Subject to WEP & GPO) FERS 1/1/1984 Replaced after 12/31/2013 *Yes Social Security* (No Reduction) FERS Transfers

8. Retirement Systems NEW! FERS – RAE Established 1/1/2013

9. Retirement Systems NEWER! FERS – FRAE Established 1/1/2014

10. Two Important Dates What date were you Hired?When would you like to Retire? Were there any mistakes?

11. How many beneficiary forms are there?

12. Best Time to Retire CSRS Last day of the month or the first three days of the following month FERS Last day of the month

13. Creditable Service • OPM counts years and months. • All remaining days do not count and you will lose them.

14. Minimum Retirement Age (MRA)If you were born before 1948 your MRA is 55

15. Required Years of Service for Full Annuity Benefit

16. High 3 • A retiree’s annuity depends primarily upon the retiree’s “high-3” average pay and length of service. • The High-3 average pay is the highest average annual basic pay from any 3 year period of employment (36 consecutive months which can include breaks in service). • In other words, basic pay is the amount of your earnings from which retirement deductions are taken. *LEAP (Law Enforcement Availability Pay) which is a fixed 25% of base pay and paid biweekly. **AUO (Administratively Uncontrollable Overtime) is for employees who have a lot of irregular, unscheduled overtime work and is based off of a percentage (10-25%) of base pay. It is paid annually. ***Comparability allowances for physicians is included, with a max of $30,000 per year.

17. FERS/CSRS Annuity Computations *CSRS annuity capped at 80% of High-3 **Only available for FERS employees age 62 and above with 20+ years of service ***For employees with both CSRS & FERS components, compute them separately based on the years they contributed to each system and then add the two annuity totals together.

18. 58 years old with 30 years service High 3 years salary of $80,000 $80,000 X 1% = $800 X 30 years = $24,000 Annually $2,000 Monthly Special Retirement Supplement: 30 (years) X SS at 62 ($2000) = $1,500 Monthly 40 $3500 Monthly Keep in mind Special Retirement Supplement stops at age 62 even if you don’t file for S.S.

19. 62 years old with 30 years service High 3 years salary of $80,000 $80,000 X 1.1% = $880 X 30 years = $26,400 Annually $2,200 Monthly Social Security at 62 = $2,000 Monthly $4,200 Monthly This is a difference of $700 monthly, $8,400 Annually and $252,000 over a 30 year retirement!! What does 1.1% mean to you? Keep in mind you don’t file for Social Security at age 62.

20. CSRS FERS Special Retirement Supplement • FERS employees who retire prior to 62 and meet the age and service requirements for FULL Benefits can receive an additional benefit to help get them to the age when they can start drawing Social Security. • The supplement begins at retirement, stops at age 62, and is subject to the SS earnings test (except in regards to Special Provisions Employees). • The supplement is calculated using an estimated SS amount provided by the Social Security Administration. Estimated SS X Total Yrs of FERS Svc benefit 40 *FERS SS Supplements are not adjusted for COLA

21. FERS Early Retirement • MRA with ten years of service. • Pension is reduced 5% for every year you are under age 62. And, this is a permanent reduction!

22. FERS Annuity Postponed • You can POSTPONE your annuity if you are at your MRA or later. • You can apply for your annuity before age 62 to OPM. • By postponing you will not receive a reduction of your retirement annuity. • You are eligible to SUSPEND then re-enroll into FEHB and FEGLI if you have met the 5 year enrollment prior to retirement.

23. CSRS SURVIVING SPOUSE BENEFIT Reduced Annuity Maximum Benefit 55% of Retired Federal Employee’s Annuity Cost is 2 ½% of first $3,600 annual annuity and 10% on all the rest of your annuity Example – Basic Annual Annuity = $45,000 (Hi 3 - $80,000 w/30 Years) 2 ½ % First $3,600 = $90 10% of Remaining $41,400 = $4,140 A total reduction of your annuity = $4,230 annually To provide your spouse $24,750 annual survivor annuity If your spouse predeceases you, the cost deductions will stop; but you will not receive a refund of any previous deductions! A total REDUCTION of $42,300 in 10 years, $84,600 in 20 years to your CSRS annuity!!!!

24. FERS SURVIVING SPOUSE BENEFIT Reduced Annuity Maximum Benefit 50% of Retired Federal Employee’s Annuity Cost is 10% on all your annuity. Example – Basic Annual Annuity = $24,000 (Hi 3 - $80,000 w/30 Years) 10% of $24,000 = $2,400 To provide your spouse $12,000 annual survivor annuity If your spouse predeceases you, the cost deductions will stop; but you will not receive a refund of any previous deductions! A total REDUCTION of $24,000 in 10 years, $48,000 in 20 years to your FERS annuity!!!!

25. CSRS FERS CSRS Voluntary Contributions • CSRS and CSRS Offset employees have the option of making voluntary contributions in addition to their regular CSRS contributions. (Not available to FERS) • These voluntary contributions are used to purchase an additional annuity at retirement. At retirement, the employee has the option of withdrawing the total amount as a lump sum or of purchasing the additional annuity, which would be added to their regular annuity amount. • The entire VCP account can also be rolled into a Roth account, bypassing the Roth annual contribution limit! But this must be done prior to retirement. • They can contribute up to 10% of their TOTAL lifetime base pay into the program. The contributions can be made as a one time lump sum or in small amounts (in $25 increments) over a period of time. But the total lifetime base pay cannot include future projected income. • Contributions, including interest, can be withdrawn at any time. • Regular VC annuity- Every $100 buys $7 a year if you retire at age 55 or younger. Every year you wait adds $.20 per $100. So retiring at age 62 would give you $8.40 a year per $100. • VC annuity with survivor benefit- The regular VC annuity is reduced by 10% plus an additional 5% for every full 5 years your spouse is younger than you. The survivor benefit is 50% of the adjusted regular VC annuity. • The interest rate in the VCP was 2.125% for 2018.

26. Thrift Savings Plan (TSP)

27. What Is TSP? • A defined contribution retirement savings plan similar to 401(k) plans offered to private sector employees • The purpose of the TSP is to give federal employees the ability to participate in a long-term retirement savings and investment plan • The assets of the TSP are held in trust in the Thrift Savings Fund

28. TSP Eligibility • Most federal employees, including those under CSRS* • A member of the uniformed service - Active Duty or Ready Reserve • A civilian in certain other categories of Government service • In pay status, in order to contribute, and • Working full or part-time *Certain federal workers who are covered by other retirement systems are not included in the TSP, such as those covered by the judicial retirement system, the Federal Reserve Board of Governors system, the Non-appropriated funds retirement system.

29. Advantages of the TSP •Retirement savings plan for federal employees • Regular contribution limit is $19,000 • Catch-up contribution, for participants age 50+ is $6,000 •Agency Automatic Contribution of 1% •Agency Matching Contribution up to first 5% Prior to requesting a rollover from your Thrift Savings Plan (TSP) account to an Individual Retirement Account (IRA), you should consider whether the rollover is suitable for you. There may be important differences in features, costs, services, withdrawal options and other important aspects between your TSP account and IRA. TSP accounts have very low administrative and investment expenses. Expenses can have a significant impact on your investment returns over time. TSP offers various withdrawal options, including in-service, partial and full withdrawal options. You should consider the effect that a withdrawal from your TSP account may have on your ability to make future contributions or withdrawals. TSP permits only one in-service or partial lump-sum withdrawal; therefore, if a second lump-sum withdrawal is needed, you must elect a full withdrawal option (i.e., lump sum, monthly payments, and/or life annuity). You may also want to consider maintaining at least a minimal TSP account balance because, in the event you want to transfer or rollover qualified assets to your TSP account in the future, you must have an open TSP account with a balance when your request is received by the TSP. For additional information regarding TSP, visit www.tsp.gov.

30. TSP Investment Fund Options *The F, C, S, and I Funds also have earnings from securities lending income and from temporary investments in G Fund securities. **These amounts represent a very small portion of total earnings. ***Each of the L Funds is invested in the individual TSP funds (G, F, C, S, and I). The proportion of your L Fund balance invested in each of the individual TSP funds depends on the L Fund you choose. Income from interest and dividends is included in the share price calculation. It is not paid directly to participants’ accounts. ****The L 2010 Fund reached its time horizon and was retired on December 31, 2010, making way for the L 2050 Fund, which has an inception date of January 28, 2011.

31. TSP Fund Returns Percentages in red are negative. • The returns of the four benchmark indexes do not reflect any deductions for administrative expenses, trading costs, or investment fees.

32. Agency Contribution Match

33. Should You Stop Contributing? While contributing 5% enables them to capture the entire agency match, if able, they should go beyond contributing 5% of their salary. All contributions they make to the Traditional TSP up to the IRS annual maximum limit* (in 2019, $19,000) are tax deferred and help their retirement nest egg grow even faster. They are eligible to contribute an additional “catch-up” in a given year starting in January of the year they turn 50. For 2019, the “catch-up” limit is $6,000. *For a complete details on contribution limits see the link: https://www.tsp.gov/planparticipation/eligibility/contributionLimits.shtml

34. Can You Afford It? You can’t afford NOT to! • Consider Increasing Their TSP Contribution with Each Pay Raise Until They Reach the Maximum. • Traditional TSP (vs Roth TSP) Contributions are Pre-tax Dollars and Investment Earnings are Tax Deferred which lessens the impact on their take home pay. Roth TSP Contributions are Post-tax dollars so your take home pay is reduced by the full amount of your contribution; however, if you comply with IRS regulations your earnings are tax free. • They can reap the Benefits of Low Administrative Expenses & Compounding Over Time.

35. Social Security

37. 2018 Annual Trustee Report What About Solvency? • Report Combined Both OASI and DI Trust Funds • Without Future Changes In Policy, Combining both the Old Age and Survivor's Insurance (OASI) and the DI Trust Fund, Capable Of Fully Funding Payments Only Through 2034. Source 1 • Thereafter, Tax Revenue Would Be Sufficient To Pay Only About .89 Cents On The Dollar In Benefits, Decreasing To .77 Cents On The Dollar By 2090. Source 1 • 44% of single retirees count on their Social Security benefit for 90 percent or more of their monthly income* Source 2 https://www.ssa.gov/OACT/TR/2018/ http://docs.house.gov/meetings/RU/RU00/CPRT-114-RU00-D001.pdf https://www.cnbc.com/2018/12/18/these-retirees-cannot-count-on-social-security-payments.html*

38. Restoring Social Security Solvency • Reduce Benefits • Increase Payroll Taxes • Means Testing for Benefits • Increase Retirement Age • Increase Or Eliminate Earnings Cutoff For SS Payroll Taxes - In 2019 it is $132,900 *Source- http://www.ncsl.org/ncsl-in-dc/standing-committees/labor-and-economic-development/maintaining-the-solvency-of-social-security.aspx **Source: www.usdebtclock.org

39. How do I qualify? • To Qualify, You Must Meet Certain Criteria. • If You Were Born In 1929 Or Later,You Need To Work At Least 10 Years.* • In 2019, Each $1,360 In Earnings =One Credit.* • Can Earn Maximum Of 4 Credits Per Year.To Earn 4 Credits In 2019, Must Earn At Least $5,440. You Can Receive All 4 Credits In A Single Quarter If You Earn At Least $5,440.* • Your Social Security Benefits Will Be Based On Your 35 Highest Earnings Years.* • Finally, You Must Be At Least Full Retirement Age (Ages 66 Or 67, Depending Upon The Year You Were Born) To Collect Your Full Retirement Benefit. ** https://www.ssa.gov/planners/credits.html https://www.ssa.gov/planners/retire/retirechart.html **Source:

40. Age Required To Received Full Social Security Benefits

41. Early/Late Benefit Comparison Chart Social Security % of Allowable Benefits Retirement Age http://docs.house.gov/meetings/RU/RU00/CPRT-114-RU00-D001.pdf https://www.cnbc.com/2018/12/18/these-retirees-cannot-count-on-social-security-payments.html*

42. Social Security: New for 2019 Tax rates and the social security wage base limit. • Social Security and Medicare taxes have different rates and only the social security tax has a wage base limit. The wage base limit is the maximum wage subject to the tax for the year. • For 2019, the Social Security tax rate is 6.2% (amount withheld) each for the employer and employee (12.4% total). The social security wage base limit is $132,900 ($128,400 in 2018, $127,200 in 2017 & $118,000 in 2016). The tax rate for Medicare is 1.45% (amount withheld) each for the employee and employer (2.9% total). There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax.

43. Federal Employee Group Life Insurance (FEGLI)

44. FEGLI Federal Employees’ Group Life Insurance FEGLI is the largest group-term life insurance program in the world, covering more than 4 million federal employees and retirees.

45. FEGLI Basic Insurance • Provided to every eligible employee unless waived • Coverage equal to amount of your base pay, rounded up to next $1,000, plus $2,000 • Cost is 32.5 cents/$1,000/month or 15 cents/$1,000/per paycheck • Minimum amount is $10,000, regardless of salary

46. FEGLI Optional Insurance In addition to Basic Insurance and the Extra Benefit, three Optional Insurance packages are available: Option A Option B Option C

47. FEGLI Option A • Provides additional $10,000 of coverage – $10,000 AD&D coverage included • Must have elected Basic coverage

48. FEGLI Option B • Provides option to purchase up to five times your annual pay as additional coverage • Must have elected Basic coverage

49. FEGLI Option C • Provides up to: – $25,000 of coverage on spouse – $12,500 of coverage for each eligible child • Must have elected Basic coverage

50. FEGLI- Eligibility Requirements in Retirement • Must retire on an immediate annuity • Must be insured on date of retirement • Must be enrolled for last five years – If less than five years, then for entire period that coverage was available to you