Presentation on theme: "Federal Retirement Active Duty Military Service Credit FERS & CSRS MOS IRS – FY 2010."— Presentation transcript:
Federal Retirement Active Duty Military Service Credit FERS & CSRS MOS IRS – FY 2010
CSRS If you were first employed in a civilian position… Credit for Post-1956 Military Service Before 10/1/82 When you become eligible for Social Security benefits, your military service after 1956 will be used in the computation of your Social Security. Unless you pay a deposit, prior to retirement, for your military service after 1956, it will no longer count toward your CSRS retirement benefit. However, if you pay the deposit, no adjustment to your retirement benefit is made at age 62. On or After 10/1/82 You will not receive any credit for post-1956 military service unless you pay a deposit for the service before you stop working.
CSRS (cont.) Amount of Deposit- The CSRS deposit for military service performed after 1956 is 7 percent of your military basic pay. Procedures for paying the post-1956 military service deposit- You must make the payment before you stop working for the government. You should ask your local servicing personnel center for help in determining whether to make this payment. They can provide personalized assistance because they have your employment records The form required to do so is the SF-2803, submitted along with the calculated cost of your deposit to your HCO contact:
FERS As a general rule, all honorable active duty military service is potentially creditable under FERS. Exceptions: Employees in receipt of military retired pay receive no credit for military retired pay unless the military retired pay is waived. Waiver request must be submitted at least 60 days before separation from federal service so that it will take effect when FERS annuity commences. (Waives only monthly check; it does not waive other military benefits.), or The active duty military service was not included in the computation of military retired pay (to include service as a cadet or midshipman in the U.S. Naval Academy, U.S. Military Academy, U.S. Air Force Academy, or the U.S. Coast Guard Academy). However, credit is allowed if retired pay is based on combat-connected disability or age and service in the reserves (under chapter 67, title 10, USC). FERS: Military Service Credit (Military Service "Buy-Back") No deposit is due for military service performed before A deposit is required in order to receive credit for military service performed after 12/31/1956. (The deposit is necessary to get credit for both eligibility and computation purposes.) The military deposit is 3% of the basic pay earned during the post-1956 military service, plus interest. Interest starts and is compounded annually beginning 2 years from the date of the first employment under FERS. Interest is charged at the variable market rate.variable market rate
FERS To receive FERS credit for military service performed after 1956, you must pay a deposit. The form required to do this is the SF-3108: If you are entitled to have part of your retirement computed under CSRS Rules, military service performed prior to your transfer to FERS comes under the following CSRS deposit rules: The CSRS deposit is 7 percent of your military basic pay If you were first employed in a civilian position before October 1, 1982, you do not pay the deposit and you are eligible for a Social Security benefit at age 62, the CSRS part of your annuity will be recomputed at age 62 to delete credit for the post-1956 military service. If you were first hired on or after October 1, 1982, you will not receive any credit for post-1956 military service if you do not make the deposit for it. Procedures for paying the post-1956 military service deposit- You must make the deposit payment for your post-1956 military service before you stop working for the government. It is paid to your employing agency. You should ask your local servicing personnel center for help in determining whether to make this payment. They can provide personalized assistance because they have your employment records.
CSRS & FERS If you transferred to FERS and have a CSRS component, you continue to be under the CSRS military deposit rules for service performed before the transfer. Under the CSRS rules, the deposit equals 7% of base pay and the earliest interest begins to accrue is October 1, 1986 or your third anniversary of entry into a CSRS position (if no CSRS component, interest begins to accrue 2 years from the date of transfer to FERS; posted on the third year). FERS Employees With A CSRS Component If you were first hired prior to October 1, 1982 and your military service is in a CSRS component, the military service will be credited for eligibility and annuity computation. However, you must consider the potential reduction based on Catch-62. If you are not eligible for Social Security at age 62 or at retirement, if later, Catch-62 will not impact your annuity. If you were first hired on or after October 1, 1982, a deposit is required for the service to be creditable, regardless of eligibility for Social Security. Note: The Office of Personnel Management (OPM) will only check with Social Security for eligibility the year that you turn age 62 or at retirement, if later. Catch-62 Example If you do not make a deposit of 7% of basic military pay for your post-56 service subject to CSRS rules, your annuity will be computed: Age at retirement - 55 Years of service - 30 (military and civilian) Years of military service - 10 (post-56) At age 62, if eligible for Social Security, annuity will be recomputed eliminating the 10 years of post-56 service. With over 10 years of service, the annuity formula uses 2% for each year over 10; therefore, the annuity will lose 2% X 10 (military service) or 20%.
Facts and Myths Now that we've covered the basics of CSRS & FERS buybacks, let's look at some of the common misperceptions about retirement eligibility. After each of the following commonly-heard statements is whether it is a fact or myth and why: 1.Employees who want to retire early may take a reduced benefit at age 50 if they have 20 years of service or at any age if they have completed 25 years of service. Myth: The only employees who are eligible to retire before age 55 (or at the MRA for FERS) with immediate unreduced benefits are those in special groups (such as law enforcement officers, air traffic controllers and firefighters), those who are offered voluntary early retirement by their agencies and those subject to discontinued service retirement. For more information, see my column, The Early Way Out (May 26, 2006).The Early Way Out 2.If you add your age plus your service and it adds up to 80, you can retire even if you are younger than age 55. Myth: I'm not sure where this one started, but every once in a while it comes up. There are some state and probably some local public retirement systems that have this rule, but it does not pertain to CSRS or FERS.
3.You may be able to retire at age 55 or your minimum retirement age, but you cannot begin receiving Thrift Savings Plan distributions until age 59½ unless you are willing to pay a 10 percent early withdrawal tax penalty. Myth: If you leave federal service the year you turn 55 (or later), you are eligible to begin TSP withdrawals without a tax penalty. Those who retire younger than 55 must be careful of the timing and type of withdrawal they choose. The TSP Web site has more information.more information 4.If you haven't completed 30 years of service by the time you reach age 55 (or your MRA), you must wait to retire until age 60. Myth. You do not have to wait until 60 if you meet the minimum age and service requirements before then. For example, if Paul is covered under CSRS and is 55 with 28 years of service, he will become eligible as soon as he completes 30 years of service. Or suppose Wanda is covered under FERS and is at her MRA, but only has 22 years of service. She can choose to retire with a reduced immediate benefit (under what is known as MRA+10 requirements) or she can continue working until age 60, when she will qualify for an unreduced immediate benefit. She also has the option to resign and postpone her MRA+10 retirement until age 60. Facts and Myths
5. Since Social Security is an integral part of retirement planning under FERS, employees must wait until they turn 62 to fully retire since they won't be eligible for Social Security before then. Fact, but...: Even though it is true that the earliest age to apply for Social Security retirement is 62, under FERS you may be entitled to a Retirement Supplement that will bridge the years between your FERS retirement and age 62. To learn more, see Supplementing FERS (Jan. 26, 2007) and Supplementary Information (Feb. 2, 2007). Supplementing FERSSupplementary Information 6. Unless given a special exemption, federal employees are required to retire at 70. Myth: Believe it or not, I still run into people who believe this is true. There is no mandatory retirement age for most federal employees. However, there are limits on employees in special positions. Law enforcement officers and firefighters, for example, must retire at 57. For air traffic controllers, the mandatory age is 56.
7. If you have 30 years of service, you may resign and apply for a deferred retirement at age 55 (or your MRA under FERS). Fact for FERS, Myth for CSRS: There is only one age for a deferred retirement under CSRS FERS employees may apply for deferred retirement benefits as early as their MRA as long as they had at least 10 years of service when they left the government (and did not apply for a refund of their retirement contributions). 8.There is a maximum retirement benefit that you achieve after 41 years and 11 months of creditable service. Fact for CSRS, Myth for FERS: CSRS employees max out after 41 years and 11 months of service. This provides a retirement benefit equal to 80 percent of an employee's high-three average salary. Employees who work beyond this time will be entitled to a refund of excess retirement contributions. They may use their unused sick leave to add to the retirement computation and exceed the 80 percent maximum. FERS employees are not subject to a maximum basic benefit computation. It is possible for them to replace 100 percent of their pre-retirement income when you consider the value of their basic benefit, TSP investments and Social Security retirement benefits. Facts and Myths
9.If you have completed a minimum of 20 years of covered law enforcement, firefighter or air traffic controller service, you may resign and apply for a deferred retirement at age 50. Myth: To be eligible for the "liberalized" benefits for special groups, you must retire after meeting the minimum age and service requirements. Employees who leave early are eligible for a deferred retirement computed as it is for any other separated federal employee. See Chapter 46 of the CSRS and FERS Handbook: Special Retirement Provisions for Law Enforcement Officers, Firefighters, Air Traffic Controllers and Military Reserve Technicians.Chapter If you have completed a minimum of 20 years of covered law enforcement, firefighter or air traffic controller service, you may transfer to a non-covered federal job and still qualify for "liberalized" eligibility and computation. You will no longer be subject to mandatory retirement if you retire from a "non-covered" position. Fact: An employee must be at least 50 at the time of separation and have at least 20 years of service as a law enforcement officer or firefighter to be eligible for retirement under the special provisions, but does not have to be in a law enforcement officer or firefighter position at separation. Likewise, an employee is not required to separate from a position as an air traffic controller to retire under the special provisions. Once an employee meets the minimum service requirement (that is, 20 or 25 years), he or she may exercise the right to retire under the special provisions even if the employee is no longer covered by these provisions at the time of retirement. Facts and Myths