Catch-62

Some military veterans who went on to civilian careers in government are getting a nasty surprise when they turn 62. Their pensions are being cut. The Catch-62, as veterans call it, affects people who served in the military after 1956 and then were hired as civilian employees under the Civil Service Retirement System (CSRS) before Oct. 1, 1982, and who also are eligible for Social Security benefits. Veterans under CSRS who want their military service to count toward their civilian retirement benefits must make a deposit to the Civil Service Retirement fund amounting to 7 percent of their military earnings. They have to hand over the money before they retire. Veterans hired under the Federal Employees Retirement System must make a deposit worth 3 percent of their military earnings. Veterans make interest-free deposits during the first three years of employment as civilians. After the first three years of employment are over, they must pay the deposits plus interest. Those hired after Oct. 1, 1982 must make the deposit or receive no credit for their military service in their civilian pensions. But veterans hired before that date--and have enough earnings under Social Security to qualify for Social Security benefits--have a different choice with two options. Under the first option, they can make the required deposit and get full credit for their military service in their civilian pensions throughout retirement. Under the second option, they can waive the deposit in writing and get full credit for their military service until they reach age 62 and become eligible for Social Security benefits. Then the military portion of their retirement credit is taken away, and their pensions are cut. Mary Ellen Wilson, a retirement specialist at the Office of Personnel Management, said most veterans understand the rule and pay the deposit, ensuring full credit throughout retirement. But many veterans told Government Executive they either weren't informed of the rule or got bad information from their personnel offices. When they turned 62, they were shocked to learn from OPM that their pensions were about to be reduced. Tammy Flanagan, a retirement expert with the National Institute of Transition Planning, warned that many veterans may have "ticking time bombs" waiting to go off at their 62nd birthdays. One veteran who retired with 20 years of military service and 18 years of service under CSRS found his pension cut by $1,000 a month when he turned 62. He said he didn't know about Catch-62. Another veteran said that when he sat down with a retirement counselor in 1997, the counselor didn't explain the deposit requirement for his five years of military service. In 2002 when he turned 62, his monthly pension benefit dropped $565. "I must hold myself responsible for not being more informed about the laws governing my retirement, but why aren't the commands held responsible for training and counseling personnel about their retirement systems?" he asked. Veterans who learn about Catch-62 can make the deposit before they leave the government, albeit with interest. If they learn about it afterward, they can appeal to the Office of Personnel Management. OPM can decide to let a veteran make a late deposit if an administrative error is evident. If OPM doesn't believe the veteran, he or she can appeal to the Merit Systems Protection Board, and ultimately to the courts. Sometimes appeals work. Sometimes they don't. In one case before the board, a retired veteran whose personnel office had given him an obsolete form that didn't mention the Catch-62 rule won the right to submit his deposit and save his pension. In another case, a veteran whose retirement counselor told him the deposit would cost thousands of dollars, when actually it would have cost about $300, won his appeal before the merit board. In other cases, it seemed that people who made a bad decision had second thoughts when they saw the effect on their pensions. The retirement application form that OPM has used since 1993 clearly describes the Catch-62 rule, Wilson said. Posters hung in agencies' halls and instructions at retirement seminars describe the Catch-62 rule as well, she said. "This is a problem that's going to go away in time because we won't have that many people working in government who first came on before 1982," Wilson said. "It's time-limited … which doesn't alleviate the impact for someone who made a poor financial decision." Post-1982 Hires Beware Veterans hired into civilian service after 1982 shouldn't rest easy just because the Catch-62 rule doesn't apply to them. Just ask Stephen Wisniewski, a veteran who works at the Defense Logistics Agency in Battle Creek, Mich., and who will retire under the Federal Employees Retirement System. Wisniewski said he made a $200 deposit through payroll deductions in the late 1980s. But Defense Finance and Accounting Service (DFAS) officials can't find his payroll records. So they won't give him credit for making the deposit. In an e-mail last year to Wisniewski, a DFAS worker explained that it was taking her a long time to look for his record because "I am trying to sift through 10 years of records to locate one piece of paper." Then she added information that should give pause to anyone whose records are housed at DFAS: "Not to mention that for the most part, they aren't in alphabetical order.… Sorry that it is taking so long, but in 1988, we didn't even exist, which means that the work, if it is here, was transferred to us by disgruntled employees losing their jobs." DFAS was created in 1991through the consolidation of many of the finance and accounting operations of the armed forces and Defense agencies. DFAS searched its records in Pensacola, Fla., Charleston, S.C., and Columbus, Ohio, unable to track down Wisniewski's records. Wisniewski said other veterans he knows have discovered that DFAS lost their records. Retirement expert Flanagan said examples like Wisniewski's show the importance of keeping a copy of all of your personnel documents. "I always remind my classes to maintain their own 'personal' personnel folders," she said. "You never know when some documentation that is needed to prove credit for service or a payment might turn up mysteriously missing."