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Planning for Retirement

Planning for Retirement. Civil Service Retirement System (CSRS/CSRS Offset). CSRS Background. CSRS 1920 Social Security Amendments Act 1983 created FERS, effective January 1, 1987 CSRS Offset: 5 yrs or more, 365+ break in service, returning to Federal government after FERS created

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Planning for Retirement

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  1. Planning for Retirement Civil Service Retirement System (CSRS/CSRS Offset)

  2. CSRS Background • CSRS 1920 • Social Security Amendments Act 1983 created FERS, effective January 1, 1987 • CSRS Offset: 5 yrs or more, 365+ break in service, returning to Federal government after FERS created • 3-tiered system • Six FERS Options (+SP) • Defined Benefit Creditable service X High-3 salary X Applicable formula

  3. Creditable Service • Civilian Service • Covered Service • Non-Deduction Service • Redeposit Service • Military service • Sick Leave

  4. Covered Service • Federal civilian service that can be counted toward qualification of eligibility for an annuity • Contributions were withheld from wages • Break in service 3 days or less • Up to 6 months (in a calendar year) Leave Without Pay • Time on Worker’s Compensation (and agency rolls) • Intermittent schedule • Part-time schedule • Full time for eligibility; may be prorated for money Actual Hours Worked 4/7/86 - Retirement Total Full-Time Hours Possible

  5. Non-Deduction Service • Federal civilian service when retirement contributions were not withheld from wages. • Service performed prior to 10/01/82 • Deposit not required for time to be creditable • If deposit is not made, 10% of amount owed (with interest) subtracted • Service performed after 09/30/82 • Deposit not required for time to be creditable • If deposit is not made, no credit in computation

  6. Redeposit Service • Federal civilian service when retirement contributions were refunded concurrent with a break in service. • Service performed prior to 03/01/91 • Creditable for eligibility and computation even if redeposit not paid but benefit will be actuarially reduced • Service performed after 03/01/91 • Redeposit not required for time to be creditable • If redeposit is not made, no credit in computation Prior to NDAA, 28 Oct 09, date was 10/01/90

  7. NAF Service NDAA 2002: Permits employees who move between DoD or Coast Guard NAF and any APF after 28 Dec 01 without a break in service of more than 1 year, to remain in civil service or NAF retirement even if not vested in that plan. CSRS or FERS employees may use prior NAF service to qualify for an immediate annuity but credit will NOT result in a higher annuity benefit,.

  8. Multiple SCDs Possible… Leave RIF Retirement 6C (Special Provisions)

  9. 800-525-0102 http://ask.afpc.randolph.af.mil/CivPSD/

  10. Military Service • Military service counts if • Performed prior to separation upon which title to an annuity is based • Is not included in the computation of retired military pay • Military service deposits • If employed prior to 10/01/82, post-56 military service counts with no deposit but possible reduction at age 62 • If employed after 09/30/82, requires a deposit for any purpose • 7% base pay plus variable interest

  11. Military Deposit Example • Hired prior to 10/01/82 • Retire with 32 years government service at age 55 • 4 years military service • High-3 average salary = $55,000 • Annuity at retirement = 60¼% of high-3 ($33,137/yr) • If deposit was not made, and eligible for SSA at age 62, annuity reduced by 8% or $4,400/year ($366/month)

  12. Military Deposit Process RI 20-97, Estimated Earnings During Military Service, completed and mailed to military payroll office with copy of DD 214. www.opm.gov/forms/pdf_fill/RI20-97.pdf Call BEST, 800-525-0102, and ask for military deposit paperwork. BEST will prepare SF 2803, Application to Make Service Credit Payment, and OPM Form 1514, Military Deposit Worksheet. Mailed or faxed to you 4-8 weeks after request.

  13. Military Deposit Process After you review forms, sign/date, mail everything to DFAS BEST will provide the address. DFAS will compute the actual deposit amount and contact you to arrange for payment.

  14. 2087 Hour Sick Leave Chart - page 18

  15. Full Years and Full Months • Retirement Date: 2011 - 01 – 03 • Retirement SCD: 1977 - 09 - 01 • Creditable Civ: 33 years 4 months 3 days • Creditable Mil: 4 years 2 months 9 days • Add unused SL: 897 hrs = 5 months 5 days Retirement computed on 37 years 11 months (dropping 17 days)

  16. Full Years, Full Months Retirement Date: 2011 - 12 - 31 Retirement SCD: 1977 - 09 - 15 Creditable Civ: 34 years 3 months 16 days Creditable Mil: 4 years 2 months 9 days Add unused SL: 897 hrs = 5 months 5 days Retirement computed on 38 years 11 months If this person used 5 days of sick leave, retirement based on 38 yrs, 10 months... They would have lost 23 days!!!

  17. 1 Option: Voluntary Retirement • Age and service requirement • Age 55 with 30 years of service • Age 60 with 20 years of service • Age 62 with 5 years of service • Minimum 5 years federal civilian service • Retire from a position covered by retirement contributions and meet one out of two rule • This is an unreduced retirement

  18. Options 2 & 3: Early Voluntary & Discontinued Service • Age and service requirement • Age 50 with 20 years of service or • Any age with 25 years of service • Minimum 5 years federal civilian service • Retire from a position covered by retirement contributions and meet one out of two rule • Separate by close of early out period • No refusal of valid offer • Age penalty • 2% for each year (1/6th of 1%/month) under 55

  19. Option 4: Deferred Retirement • Not eligible for immediate annuity within one month of separation • Minimum 5 years federal civilian service • No refund of retirement deductions • Not eligible to collect under CSRS until age 62 • No sick leave, FEGLI, or FEHB

  20. Option 5: Disability Retirement • Covered by and disabled while subject to retirement coverage • 5 years federal civilian service, no age requirement • Documented disability criteria • Periodic medical reviews • Medically recovered • Restored to earning capacity

  21. High-3 Average Salary Includes • CONUS & Hawaii/Alaska (28Oct09) locality pay • Night differential pay for wage system employees • Environmental differential • Runumeration pay and tropical differential pay for citizen employees of any agency in Panama • Premium pay for firefighter standby time • Irregular, unscheduled overtime for LEOs • Special pay established for recruiting and retention purposes

  22. High-3 Average Salary Excludes • Foreign post differential/allowance pay • Bonuses, allowances, overtime, holiday, & military pay • Lump-sum payments covering accrued and accumulated leave • Retroactive pay granted pursuant to a wage survey • Payment for credit hours • Premium pay for certain air traffic controllers • Supplemental payments from OWCP

  23. High-3 Average Salary Largest annual rate average over 3 continuous years of service. Retirement date 1/3/2011 Divide $151,806.69 by 3 = $50,602.00

  24. CSRS General Annuity Formula • 1.50% x high-3 x 1st 5 years/service • 1.75% x high-3 x 2nd 5 years/service • 2.00% x high-3 x years/months over 10 (including unused sick leave) • Maximum annuity payable cannot exceed 80% of high-3 average salary = 41 years/11 months of service (sick leave can make it more than 80%)

  25. CSRS Shorthand Formula • Years of service multiplied by 2 • Subtract 4 and add 0.25% Example: • 30 years x 2 = 60 – 4 =56 + ¼% = 56¼% • Multiply percentage by high-3 average salary to determine annual annuity

  26. Sample Computations • High-3 average salary = $50,602 • General formula: • 1.5% x $50,602 x 5 = 3,795.15 • 1.75% x $50,602 x 5 = 4,427.68 • 2% x $50,602 x 20 = 20,240.80 $28,463.63 per year • Short-hand formula • $50,602 x 56.25% = $28,463.63 per year

  27. CSRS Disability Computation • Higher of either the general formula or guaranteed minimum. • The guaranteed minimum is the lesser of: • 40% of the high-3 average salary (this provides an individual with an annuity as if they had worked 21 years 11 months) • Amount obtained under general formula after increasing the actual years, months and days of service by the total years, months, and days remaining from the commencing date of the employee’s annuity through the date they become age 60

  28. CSRS Offset • Full CSRS annuity until age 62. Then a reduction of the lesser of: • The difference between Social Security monthly benefit including and excluding CSRS Offset service; or • Total Social Security monthly benefit multiplied by a fraction where the numerator is the employee's total CSRS offset service rounded to the nearest whole number of years and the denominator is 40. Social Security X Total Years of Offset Service Benefit 40

  29. Offset Example – page 26 Computation method #1 • Social Security monthly benefit with offset service: $900 • Social Security monthly benefit without offset service : $300 • Difference. ................. $600 Computation method #2 • Social Security amount with offset service =$900 X 20 years* = $18,000 divided by 40 = $450*Nearest whole year to 19 years 8 months. The lesser of these two computations is $450 so that would be the CSRS Offset reduction to retirement at age 62

  30. Contributions to TSP • Employee contributions • No percentage limit • IRS employee limit for 2010: $16,500 • Catch-up contributions: $5,500 • FERS Agency Automatic Contributions (1%) and • Matching Contributions • Limit for all contributions: $49,000

  31. TSP Options After Leaving • Leave Money in TSP (if balance of $200 or more) • Cash Out (automatic if balance less than $200) • Full or partial(must remove at least $1,000) • Transfer to an IRA/other tax deferred account • As of Jan 08 – transfer to Roth • Monthly Payments • By Dollar Amount • By IRS Life Expectancy Table

  32. TSP Options After Leaving • Purchase annuity ($3,500 or more) • Single Life • Joint Life w/spouse • Joint Life w/other survivor (insurable interest) Jan 08, creation of stretch IRAs for survivors Jun 09, spouses of deceased employees/retirees can elect to maintain TSP account.

  33. Social Security Must be at least 62 and have a minimum of 40 quarters to qualify $1,120 = 1 / Maximum of 4 per year • 2010 Earnings Limit is $14,160 • Includes salary and/or wages from a job • Net profit from a business (self-employment)

  34. Computing Social Security Based on earnings averaged over worker’s lifetime Indexed to “today’s” dollars Calculate average monthly indexed earnings during highest 35 years Apply formula to arrive at Primary Insurance Amount (PIA) or basic benefit WEP &/or GPO will reduce your benefit if you do not have a full 30 years of substantial earnings • 2010 Formula: • $761 x 90% • Next $4,586 x 32% • Remainder x 15% • Rounded to next lower multiple of $10

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