Federal Retirement Facts: A True-False Quiz

Regular readers of this column know that every so often, I surprise you with a pop quiz. Well, the time has come around again.

Below are several statements about federal retirement benefits, Social Security, the Thrift Savings Plan and other subjects. It’s your job to determine which are true and which are false.

1. To be eligible to retire under the Federal Employees Retirement System or the Civil Service Retirement System, any combination of civilian federal service and active duty military service that equals five years is the minimum to be entitled to a retirement benefit.
2. If you knew you would live to be at least 90 years old, it would be best to wait until age 70 to claim your Social Security retirement benefit.
3. Once you reach age 65, you should cancel your Federal Employees Health Benefits Program coverage because you qualify for Medicare.
4. After you are retired and over age 70 ½, you must withdraw your entire TSP balance.
5. The Office of Personnel Management administers FERS, CSRS, and FEHBP, but not the TSP or Social Security benefits.
6. If you were born before Jan. 2, 1954, you can file for Social Security retirement benefits based on your spouse’s work record and delay your own Social Security retirement to age 70. You must wait until your full retirement age to take advantage of this option. If you were born after Jan. 1, 1954 and are eligible for benefits both as a retired worker and as a spouse (or divorced spouse), you must apply for both benefits and you will receive the higher of the two.
7. The FERS retirement benefit is a level payment for life. Only CSRS benefits have cost of living adjustments.
8. If you have prior federal service and received a refund of your FERS contributions, you cannot repay this money. Therefore, you can’t receive credit for this service towards your retirement if you are rehired into federal service.
9. If you have federal service that was performed before Jan. 1, 1989 that was not covered by retirement deductions, generally you can pay a deposit to FERS and receive credit for this service towards eligibility and computation of your retirement benefit.
10. To have a financially secure retirement, you should withdraw 3 percent to 5 percent of your TSP account balance per year.

Answers

1. False. To be eligible for a CSRS or FERS retirement benefit, you must complete a minimum of five years of creditable civilian service (along with meeting specific age requirements). Active duty military service may be creditable towards eligibility and computation of your retirement benefit; generally a military service credit deposit must be completed prior to retirement. Military service that is included with a military retirement benefit is generally not creditable (with some exceptions).
2. True. If you can delay your application for Social Security retirement, your benefit will be permanently increased over your lifetime. There are several things to think about when deciding when to apply for Social Security. First of all, if you are still working at 62, there is an earnings test that will reduce your Social Security benefit if you earn above a certain amount. (For 2019, the earnings limit is $17,640. If you earn above that amount, your benefit is reduced by $1 for every $2 earned over the limit). In addition, your CSRS or FERS retirement benefit and your retirement savings may provide adequate income to allow you to delay Social Security retirement.
3. False. Federal workers have been paying the Medicare tax since 1983 and qualify for premium-free Medicare Part A at age 65. Medicare Part B is also available for a premium and will cover outpatient care received from doctors and other health care providers. In addition, most federal retirees can continue their coverage under FEHBP for life.
4. False. The Internal Revenue Code requires that you receive a portion of your TSP account beginning in the calendar year when you turn age 70½ and are separated from service. The portion you must withdraw is called a required minimum distribution. You are never required to withdraw your entire account balance all at once a unless your vested balance falls below $200.
5. True. OPM runs CSRS, FERS and FEHBP, along with the Federal Employees Group Life Insurance Program, the Federal Employees Dental and Vision Program and other benefits programs. The Federal Retirement Thrift Investment Board is an independent agency that administers the TSP, and the Social Security Administration oversees Social Security.
6. True. Here’s some background information from SSA on the changes that have occured since 2015 that affect Social Security claiming strategies.
7. False. Although it is sometimes called a “diet and delayed” COLA, there is an annual adjustment to the FERS retirement benefit. Generally, it is payable to FERS retirees who are age 62 and older, but there are exceptions for special groups such as law enforcement officers and firefighters, survivor annuitants and disability retirees.
8. False. When FERS was enacted in 1986, the law provided that individuals who took refunds of their FERS employee contributions irrevocably lost service credit for the period of service covered by the refund. The 2010 National Defense Authorization Act changed this rule and to allow people who are reemployed into federal service to make a redeposit of the amount of refunded FERS contributions, plus interest, to have credit for the service reinstated.
9. True. The rules for crediting civilian and military service are different under CSRS and FERS. The accuracy of your CSRS or FERS retirement may depend on the accuracy of your documented service history that is covered by CSRS or FERS retirement deductions.
10. False. Withdrawing 3 percent to 5 percent might work for a lot of people, but what you should take out depends on your individual circumstances. The TSP website provides educational tools and a Retirement Income Calculator to help you understand the variety of withdrawal options that are available from the TSP.