10 Things You Probably Don’t Know About Federal Retirement

How much do you know about the federal retirement system? Do you think you could pass not only introductory and intermediate courses on retirement, but Retirement 301, too? If so, you’d have to get decent scores on all of the retirement quizzes I’ve offered over the years.

Even if you do have deep knowledge of retirement rules, practices and procedures, there might be a few things you don’t know. Here are 10 things only the true experts know about retiring from a federal career.

1. Employees who separate from federal service in the year they reach age 55 are generally able to withdraw a partial payment or monthly payments from their Thrift Savings Plan accounts without incurring an additional 10 percent tax penalty. (See Important Tax Information About Payments From Your TSP Account, Page 7)
2. There is a special computation for Civil Service Retirement System employees who have performed service abroad after 1986 with the Central Intelligence Agency, Defense Intelligence Agency or National Security Agency that provides a more generous retirement computation. There are also special rules for crediting certain service performed abroad for those under the Federal Employees Retirement System. (See Chapter 50, CSRS and FERS Handbook, Page 18, FERS Credit for Certain Government Service Performed Abroad, and Public Law 101-193, Special Annuity Computation Rules for Certain Employees’ Service Abroad.)
3. FERS employees who leave federal service after reaching their minimum retirement age (and before age 62) with at least 10 years of service (but less than 30 years, or less than 20 years at age 60 and 61) are able to postpone their retirement benefit to avoid a retirement age reduction. When such employees choose to receive the postponed annuity, they may be able to reinstate their Federal Employees Health Benefits (See Chapter 40, CSRS and FERS Handbook, Page 10)
4. Most FERS retirees who receive the FERS annuity supplement must complete an annual earnings report to determine eligibility to continue receiving the supplement. There is an exception for special groups such as law enforcement officers and firefighters who retire younger than the FERS minimum retirement age. (See Retirement and Insurance Form 92-22)
5. FERS employees will receive 100 percent credit for their unused sick leave beginning Jan. 1, 2014. This means that an employee who uses the retirement date of Dec. 31, 2013, will receive only 50 percent credit for unused sick leave. (See Benefits Administration Letter, Jan. 12, 2010, National Defense Authorization Act Retirement Changes)
6. When two federal employees are married, they can be enrolled in one self-and-family Federal Employees Health Benefits Program plan or they can choose to have two self-only enrollments (unless they have dependent children). Two federal retirees may change their coverage from one self-and-family enrollment to two self-only enrollments after they have retired. Both employees are considered covered by FEHBP and both will be eligible for continuous coverage. (See Reference Materials, Annuitants and Compensationers, Eligibility for Health Benefits After Retirement, Office of Personnel Management)
7. Agencies are responsible for providing retirement counseling for federal employees, including assistance with deposits, redeposits and creditable service information; retirement estimates for specific retirement dates; specific retirement date selection support; help with completing the retirement application; and information to assist employees who are seeking sound financial planning information to help them avoid scams and fraud. (See Chapter 40, Planning and Applying for Retirement, CSRS and FERS Handbook, and Fact Sheets on Retirement Scams, Benefits Administration Letter, Aug. 16, 2011)
8. Employees who work beyond their full Social Security retirement age may apply for Social Security retirement benefits, widow’s benefits or spousal benefits. There is no longer an earnings limit after reaching the full retirement age. (See How Work Affects Your Benefits, Social Security Administration)
9. If a FERS employee dies prior to retirement and is survived by his or her current spouse (or certain former spouses with a properly worded court order or divorce decree), the surviving spouse is entitled to a lump sum death benefit payment of $31,316.46 (for 2013) plus 50 percent of the employee’s final basic annual pay rate if the employee had a minimum of 18 months of creditable service. If the employee had at least 10 years of creditable service, a spousal survivor annuity also is payable. (See FERS Information: Survivors, OPM)
10. Many Americans receive their Social Security retirement benefits tax-free. This is not true for most federal retirees, however, due to the additional income from federal retirement benefits and investment income from the TSP. But most states allow tax-free Social Security income. (See Benefits Planner: Income Taxes and Your Social Security Benefits and Kiplinger’s State-by-State Guide to Taxes on Retirees)