Welcome to the May issue of the Retire Federal newsletter that covers the latest topics of interest for retiring and retired federal employees. Retire Federal exists to help prepare federal employees for retirement, provide assistance when applying for benefits, and guidance to those who need direction when navigating the maze of all the parts of your retirement benefits that fit together for financial independence.
Need to Know
Tips for end of year retirement:
The lump sum payment of your unused annual leave and credit hours will be paid to you following your retirement. The value of this payment should equal the salary you would have received if you could have continued working until the expiration of your leave balance. This includes the increase in your basic pay with locality for the annual January pay adjustment. The increased amount may come later, after your initial lump sum annual leave has been paid to allow for updating the payroll system.
Retirees cost of living adjustments (COLAs) are effective December 1, 2022. The first COLA will be prorated based on the number of months you've been retired since December 1, 2021. For example, if you retire July 31, 2022, then eligible retirees will receive their first COLA equal to 4/12 (1/3) of the 2022 COLA that is granted because you were retired August, September, October and November - four months prior to December. FERS retirees will receive their first COLA as long as they are retired and at least age of 62 prior to December 1, 2022. FERS retirement benefits computed under the special provisions for Law Enforcement Officers, Firefighters, or the special provisions under FERS "Special" for CIA employees do not have to wait until 62 to receive their first COLA.
Most agencies will receive your completed retirement application 90 - 120 days prior to your retirement date to allow ample time for processing and so that your application will be close to the top of the queue of applications for processing on the same retirement date. Check with your agency's human resources office for details on the appropriate process.
TSP changes are almost here: TSP is introducing new features thanks to a new record keeping system including:
Virtual Assistance 24/7
Mobile App to check your balance, track fund performance, make transaction requests, etc.
Connect with a TSP Representative during business hours using a live-agent chat function
Redesigned My Account interface
Complete more transactions online
Simplified process with specialized support to roll money from an IRA or other qualified retirement plans into the TSP
Process transactions using electronic signatures
Additional investment options including a mutual fund window (fees required)
Review additional information here
Expected Transition Dates: May 16 to the first week of June
All transactions temporarily unavailable: May 26 to the first week of June
Full access and transactions restored: First week of June
During this time your money will remain invested in the TSP funds. The TSP will continue to send correspondence with more details as the new record keeping system is rolled out.
NOTE: You will need to set up a new login for the new My Account. You may want to download your historical documents in "My Account" as they will not transfer to the new system. They will be available by calling the ThriftLine who will mail them to you when requested.
TSP classes are available live online or your could subscribe (at no cost) to their channel, TSP4gov on YouTube. The official YouTube channel for the Thrift Savings Plan (TSP), a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. Be aware that there are many YouTube channels that provide information about the Thrift Savings Plan. Check out videos from Haws Federal Advisors (Dallen Haws) and Plan Your Federal Retirement (Micah Shilanski and Tammy Flanagan). Dallen and Micah are two financial advisors who work almost exclusively with Federal employees and retirees and they are qualified to provide financial and tax planning advice.
Employees with an outstanding TSP Loan: As you are preparing for retirement, do you need to consider paying off an outstanding balance on a TSP loan? If so, you may want to make extra payments or consider re-amortizing your loan to get the balance paid back to your account before leaving federal service. The TSP will declare a taxable distribution to the IRS and you will owe income taxes on the entire unpaid balance of your loan plus accrued interest if you do not repay your loan in full within 90 days after you separate from federal service. Once a taxable distribution is declared, you may be able to roll over the taxable amount into an IRA or eligible employer plan within 60 days to avoid taxes and penalties. Yes, you may need to wait until the new record keeping system is in place to make future adjustments.
The Office of Personnel Management (OPM) is the federal agency responsible for administrating your CSRS or FERS retirement benefit as well as your retirement insurance benefits. They are responsible for finalizing retirement benefits and sending monthly annuity payments.
FERS/CSRS Retirement Processing: OPM has a reasonable goal for you to be in interim status, receiving partial retirement payments for the least amount of time...ideally for less than 90 days. That is everyone's desire, especially yours! However, retirement applications are increasing and in the COVID world that we live, it is often a months long process to finalize a retirement claim with some claims taking more than six months to complete. It is reasonable to expect the best, but be sure to prepare for delays and complications that can occur along the way. To avoid panic, it is wise to have several months of living expenses on hand prior to your separation from federal service. There are many things you can do to ensure you have what OPM calls a "healthy" package that will have the least amount of delays. Delays can occur at all stages of the retirement processing including a delay that you may encounter when submitting your application too close to your retirement date! You, your agency's human resources office and your agency's payroll provider all can have an impact on the amount of time it takes to complete your retirement benefit request in addition to the retirement adjudication delays that the Office of Personnel Management may also encounter. Tammy's recent webinar Preparing Retirement Forms: Costly Errors and How to Avoid Them is on National Active and Retired Federal Employees' (NARFE) Federal Benefits Institute website. Retire Federal is here to help if you want a review of your application before you submit it to your Human Resources Office.
Reminder on FERS Annuity Supplement:
The annual earnings test applies to most retirees who receive the FERS Annuity Supplement . The Office of Personnel Management has recently mailed the 2021 earnings survey to retirees who are receiving the FERS supplement.
If your earned income from wages, salaries or self employment (not including retirement income) is in excess of the 2021 earnings limit of $18,960, the supplement will be reduced by $1 for every $2 over this limit or the supplement may be terminated if your wages are large enough to completely offset the supplement. This adjustment will be made with your July annuity payment that you will receive on August first.
For special groups such as law enforcement officers and firefighters, the earnings limit doesn't apply until after you reach the FERS Minimum Retirement Age (55 - 57, depending on your year of birth).
The earnings limit increased to $19,560 for 2022 and your earnings survey for this year will be mailed to you around May 2023.
The FERS Annuity Supplement ceases at age 62 when you are eligible to apply for your Social Security benefit.
Starting May 26th:
A new process for signing into OPM Services Online will be used to provide better protection of your personal information. OPM's electronic system for retirees and survivors is called Services Online and it currently uses a claim number and password to access. OPM will send new retirees access information shortly after they receive the retirement application. Like many online systems, OPM is adding additional security features. A new username and password will be required via Login.gov along with a special code to authenticate identity and process accounts. Using only the claim number and password will no longer be allowed. OPM created a number of frequently asked questions about this new system for Services Online users.
Medicare and FEHB
Many FEHB plans provide incentives to enroll in Medicare Part B. Check with your FEHB plan to find out if your cost sharing (deductible, copayments and coinsurance) will be waived once Medicare Parts A & B become your primary coverage. In addition, some plans will provide a partial reimbursement for Part B premiums (you may need to apply for the reimbursement). In addition, more FEHB plans are also offering an enhanced benefit of Medicare Advantage enrollment that will provide additional benefits to retirees and their eligible spouses and surviving spouses who are enrolled in Medicare A & B. Here is a sample of plans providing incentives to enroll in Medicare A & B:
Medicare usually does not cover health care while you are traveling outside the United States, with limited exceptions, so be sure to check your FEHB plan for overseas coverage requirements.
Make changes to your FEHB coverage outside of the annual open season using Qualifying Life Events (QLE). QLE 2L allows a once in a lifetime change in health plans beginning 30 days before you reach age 65.
You should not need to enroll in Medicare Part D, Prescription Drug coverage since FEHB plans typically offer drug coverage that is as good or better than Medicare Part D plans.
Tammy has presented several webinars that are archived on the NARFE Federal Benefits Institute that cover the various choices, options, and decision points when contemplating the "to B" or not "to B" Medicare decision.
Medicare Advantage / Medicare Part C: Here are some of the differences between Medicare Part C or Medicare Advantage plans and Original Medicare A & B:
Medicare Part C aka Medicare Advantage Plans are private health plans that incorporate Medicare Parts A, B & D, but once you have enrolled, the plan is billed for services rather than Medicare. In most cases, you need to use in-network providers to receive coverage, but there are some plans that will cover out-of-network providers for a higher cost-sharing.
Plan your Federal Retirement Podcasts with Tammy Flanagan and Micah Shilanski, CFP partner provide fun and informative retirement planning guidance.
Retirement Planning Tammy's weekly column appearing on www.govexec.com covers what you need to know for a successful transition to retirement. Get the latest stories and updates sent to your inbox every Friday.
TSP offers free webinars for federal employees and uniform members.
Tammy's team provides one-on-one consultations on all your important retirement decisions as well as navigating FEHB and Medicare. They can also review your retirement forms to ensure they are complete. Contact the team here.
NARFE Federal Benefits Institute's upcoming webinars (must be a NARFE member to register). Join NARFE today!
Tammy Flanagan recently presented a webinar for Special Category Employees (Federal law enforcement officers (LEOs), firefighters (FFs), and air traffic controller (ATCs)) to help maximize your federal benefits when planning a "special" retirement from federal employment From Employee to Annuitant: Special Retirement Considerations for Special Category Employees.
Mark Keen, CFP® to discover Post-Retirement Tax Planning for Federal Employees on Wednesday, February 16 at 2 p.m. ET
Tammy will enlighten all on the decision points of when to retire in It's Not Magic: Target Your Best Retirement Date on Tuesday, March 15 at 2 p.m. ET
Tammy will provide important tips on the application in Preparing Retirement Forms: Costly Errors and How to Avoid Them on Wednesday, April 6 at 2 p.m.