Planning for Retirement Federal Employees Retirement System FERS Trans

Planning for Retirement Federal Employees Retirement System (FERS/Trans. FERS)

FERS Background § CSRS 1920 § Social Security Amendments Act 1983 created FERS § Effective January 1, 1987 § CSRS Interim Jan 1, 1984 – Dec 31, 1986 § 3 -tiered system § Six FERS Options (+SP) § Defined Benefit Creditable service X High-3 salary X Applicable formula Pinnacle Personnel Services, LLC (Mar 10) Civil Service Retirement and Disability Fund Social Security or FERS Supplement TSP

Creditable Service Civilian Service I. • • • Covered Service Non-Deduction Service Redeposit Service II. Military service III. Sick Leave • Available with passage of NDAA 28 Oct 09 Pinnacle Personnel Services, LLC (Mar 10)

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; prorated for money Actual Hours Worked over Career Total Full-Time Hours Possible over Career Pinnacle Personnel Services, LLC (Mar 10)

Non-Deduction Service § Federal civilian service when retirement contributions were not withheld from wages. § Service performed prior to 01/01/89 § Deposit required for time to be creditable (for any purpose) § Service performed after 01/01/89 § Not creditable. Deposit not available § If service was under CSRS component; CSRS rules apply Pinnacle Personnel Services, LLC (Mar 10) There is no Jan 1, 1989 cut off for Peace Corps or VISTA deposits.

Redeposit Service § Federal civilian service when retirement contributions were refunded concurrent with a break in service. NDAA, 28 Oct 09, authorizes FERS redeposits § If redeposit made, time is fully creditable for eligibility and length of service § If service was under CSRS component, Trans. FERS use CSRS rules for deposit Pinnacle Personnel Services, LLC (Mar 10)

NAF Service NDAA 2002: Permits employees who move between Do. D 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, . Pinnacle Personnel Services, LLC (Mar 10)

Multiple SCDs Possible… Leave RIF Retirement 6 C (Special Provisions) Pinnacle Personnel Services, LLC (Mar 10)

http: //ask. afpc. randolph. af. mil/Civ. PSD/ 800 -525 -0102

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 § Post-56 military service requires a deposit for eligibility and annuity computation purposes § 3% of military base pay and variable interest § No interest if paid within the first three years Pinnacle Personnel Services, LLC (Mar 10)

Military Deposit Example § Retire with 20 years government service at age 60 § 4 years military service § High-3 average salary = $55, 000 Do not buy back time, annuity = $11, 000 per year or $916. 66 per month § DO buy back military time, = increase to annuity of $2, 200 per year or $183. 33 per month § Pinnacle Personnel Services, LLC (Mar 10)

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/RI 20 -97. pdf Call BEST, 800 -525 -0102, and ask for military deposit paperwork. § BEST will prepare SF 3108, Application to Make Service Credit Payment, and OPM Form 1514, Military Deposit Worksheet. § Mailed or faxed to you 4 -8 weeks after request. Pinnacle Personnel Services, LLC (Mar 10)

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. Pinnacle Personnel Services, LLC (Mar 10)

Sick Leave Became available to FERS with NDAA 28 Oct 09 50% until 2014 Pinnacle Personnel Services, LLC (Mar 10)

Days 2087 Hour Sick Leave Chart 1 Day 1 Mth 2 Mths 3 Mths 4 Mths 5 Mths 6 Mths 7 Mths 8 Mths 9 Mths 10 Mths 11 Mths 0 174 348 522 696 870 1044 1217 1391 1565 1739 1913 1 6 180 354 528 701 875 1049 1223 1397 1571 1745 1919 2 12 186 359 533 707 881 1055 1229 1403 1577 1751 1925 3 17 191 365 539 713 887 1061 1235 1409 1583 1757 1930 4 23 197 371 545 719 893 1067 1241 1415 1588 1762 1936 5 29 203 377 551 725 899 1072 1246 1420 1594 1768 1942 6 35 209 383 557 730 904 1078 1252 1426 1600 1774 1948 7 41 214 388 562 736 910 1084 1258 1432 1606 1780 1954 8 46 220 394 568 742 916 1090 1264 1438 1612 1786 1959 400 574 748 922 1096 1270 1444 1617 1791 1965 0 9 52 226 10 58 232 11 64 238 12 70 243 13 75 249 14 81 255 15 87 261 16 93 267 17 99 272 18 104 278 19 110 284 20 116 290 21 122 22 Divide by 2 prior to Jan 2014 406 580 754 928 1101 1275 1449 1623 1797 1971 412 586 759 933 1107 1281 1455 1629 1803 1977 417 591 765 939 1113 1287 1461 1635 1809 1983 423 597 771 945 1119 1293 1467 1641 1815 1988 429 603 777 951 1125 1299 1472 1646 1820 1994 435 609 783 957 1130 1304 1478 1652 1826 2000 441 615 788 962 1136 1310 1484 1658 1832 2006 446 620 794 968 1142 1316 1490 1664 1838 2012 452 626 800 974 1148 1322 1496 1670 1844 2017 458 632 806 980 1154 1328 1501 1675 1849 2023 464 638 812 986 1159 1333 1507 1681 1855 2029 296 470 643 817 991 1165 1339 1513 1687 1861 2035 128 301 475 649 823 997 1171 1345 1519 1693 1867 2041 23 133 307 481 655 829 1003 1177 1351 1525 1699 1873 2046 24 139 313 487 661 835 1009 1183 1357 1530 1704 1878 2052 25 146 319 493 667 841 1015 1188 1362 1536 1710 1884 2058 26 151 325 499 672 846 1020 1194 1368 1542 1716 1890 2064 27 157 330 504 678 852 1026 1200 1374 1548 1722 1896 2070 28 162 336 510 684 858 1032 1206 1380 1554 1728 1901 2075 29 168 342 516 690 864 1038 1212 1386 1559 1733 1907 2081 Pinnacle Personnel Services, LLC (Mar 10)

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) Pinnacle Personnel Services, LLC (Mar 10)

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!!! Pinnacle Personnel Services, LLC (Mar 10)

Option 1: Voluntary Retirement Age and service requirement § Minimum Retirement Age 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 § This is an unreduced retirement § Pinnacle Personnel Services, LLC (Mar 10)

If year of birth is. . . The minimum retirement age is… Before 1948 1949 1950 1951 1952 1953 to 1964 1965 1966 1967 1968 1969 After 1969 Pinnacle Personnel Services, LLC (Mar 10) 55 years and 2 months 55 years and 4 months 55 years and 6 months 55 years and 8 months 55 years and 10 months 56 years and 2 months 56 years and 4 months 56 years and 6 months 56 years and 8 months 56 years and 10 months 57 years

Option 2: MRA +10 Minimum retirement age (MRA) Minimum 5 years federal civilian service 10 -year service requirement No entitlement to immediate annuity based on age and service § Retire from a position covered by retirement contributions § Reduced for age – reduction equals 5% for every year under age 62, permanent penalty for life § Can elect to postpone this retirement to eliminate reduction § § Pinnacle Personnel Services, LLC (Mar 10)

Options 3 & 4: 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 Serve in position covered and separate by close of early out period § No refusal of valid offer § No age penalty for FERS § With CSRS component, 2% for each year under 55 § § Pinnacle Personnel Services, LLC (Mar 10)

Option 5: Deferred Retirement Not eligible for immediate annuity within one month of separation § Minimum 5 years federal civilian service § No refund of retirement deductions § § No sick leave, FEGLI, or FEHB § When can I take my deferred annuity? § 5 – less than 10 yrs of service: at age 62 § 10 yrs of service: at MRA, with penalty if under 62 § 20 yrs of service: at age 60 § 30 yrs of service: at MRA § LEO/FFs with 20 yrs of service: at MRA, no penalty Pinnacle Personnel Services, LLC (Mar 10)

Option 6: Disability Retirement § § § Covered by and disabled while subject to retirement coverage 18 months federal civilian service, no age requirement Documented disability criteria Periodic medical reviews Medically recovered Restored to earning capacity Pinnacle Personnel Services, LLC (Mar 10)

High-3 Average Salary Includes § CONUS & Hawaii/Alaska (28 Oct 09) 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 Pinnacle Personnel Services, LLC (Mar 10)

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 Pinnacle Personnel Services, LLC (Mar 10)

High-3 Average Salary Largest annual rate average over 3 continuous years of service. Retirement date 12/31/2010 01/01/2008 to 01/08/2008 $44, 650. 00 x 0. 022222 = $ 992. 21 01/09/2008 to 03/26/2008 $45, 900. 00 x 0. 216667 = $ 9, 945. 02 03/27/2008 to 01/07/2009 $47, 250. 00 x 0. 780556 = $ 36, 881. 27 01/08/2009 to 01/06/2010 $51, 300. 00 x 0. 997222 = $ 51, 157. 49 01/07/2010 to 12/31/2010 $53, 717. 00 x 0. 983333 = $ 52, 821. 70 Total salary over three years = $151, 806. 69 Divide $151, 806. 69 by 3 = $50, 602. 00 Pinnacle Personnel Services, LLC (Mar 10)

FERS General Annuity Formulas § Under age 62 with any number of years, or age 62 or older, with less than 20 years of service 1% x high-3 x years/months of service § 62 or older with more than 20 years = 1. 1% x high-3 x years/months of service § CSRS component (5 or more years) computed under that formula Pinnacle Personnel Services, LLC (Mar 10)

Sample Computation High-3 average salary = $50, 602 § Work 25 years and retire under age 62 § $50, 602 x 25% = $12, 605. 50 per year or $1, 054. 20 per month § § Work 25 years and retire age 62 or older § $50, 602 x 1. 1% x 25 = $13, 915. 55 per year or $1, 159. 63 per month Pinnacle Personnel Services, LLC (Mar 10)

FERS Disability Computation § First 12 months - 60% of high-3 minus 100% of social security benefit § After first 12 months - 40% of high-3 minus 60% of social security benefit § Re-computed at age 62 Pinnacle Personnel Services, LLC (Mar 10)

Sample Disability Computation § § § High-3 average salary = $50, 602 10 years of service and age 40 when disability approved Social Security Disability benefit = $10, 000 Year 1 computation § 60% x $50, 602 = $30, 361. 20 - $10, 000 SSA = $20, 361. 20 + $10, 000 SSA (Total combined annual benefit = $30, 361. 20) § Year 2 up to day before age 62 § 40% of $50, 602 = $20, 240. 80 - $6, 000 (60% of SSA benefit) = $14, 240. 80 + $10, 000 SSA (Total combined annual benefit = $24, 240. 80) § At age 62, § 10 yrs service + 22 yrs collecting disability = 32 yrs X 1. 1% X $50, 602 = $17, 811. 90 + $10, 000 SSA + all FERS COLAs since disability was approved § Pinnacle Personnel Services, LLC (Mar 10)

Options that Qualify for the Supplement § Voluntary retirement at MRA with 30 years or age 60 with 20 years. § Discontinued service retirement and/or early voluntary retirement but neither pays the supplement until retiree reaches MRA. § Special provision employees are eligible for the supplement immediately. Pinnacle Personnel Services, LLC (Mar 10)

Estimate the FERS Supplement 1, 200. 00 25 25 1, 200 Pinnacle Personnel Services, LLC (Mar 10) 0. 625 750. 00

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 Pinnacle Personnel Services, LLC (Mar 10)

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 Pinnacle Personnel Services, LLC (Mar 10)

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. Pinnacle Personnel Services, LLC (Mar 10)

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) Pinnacle Personnel Services, LLC (Mar 10)

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 2010 Formula: $761 x 90% Next $4, 586 x 32% Remainder x 15% Rounded to next lower multiple of $10 Pinnacle Personnel Services, LLC (Mar 10)

Yr of Birth Full Age 62 Reduction Months Monthly Reduction Total Reduction 1938 65 Y 2 M 38 . 548 20. 83% 1939 65 Y 4 M 40 . 541 21. 67% 1940 65 Y 6 M 42 . 535 22. 50% 1941 65 Y 8 M 44 . 530 23. 33% 1942 65 Y 10 M 46 . 535 24. 17% 1943 -1954 66 Years 48 . 520 25. 00% 1955 66 Y 2 M 50 . 516 25. 84% 1956 66 Y 4 M 52 . 512 26. 66% 1957 66 Y 6 M 54 . 509 27. 50% 1958 66 Y 8 M 56 . 505 28. 33% 1959 66 Y 10 M 58 . 502 29. 17% 1960 or later 67 Years 60 . 500 30. 00% Pinnacle Personnel Services, LLC (Mar 10)

Pinnacle Personnel Services, LLC (Mar 10)