PostalReporter.com

Questions and Answers on
Benefits, Pay, and Leave Under
Voluntary Early Retirement Authority

Table of Contents

Updated:  6/28/04

RETIREMENT COURT ORDERS CSRS VOLUNTARY CONTRIBUTIONS SOCIAL SECURITY MEDICARE HEALTH BENEFITS LIFE INSURANCE

THRIFT SAVINGS PLAN FLEXIBLE SPENDING ACCOUNTS LEAVE MERIT PAY SEVERANCE PAY UNEMPLOYMENT COMPENSATION

Question 1.

What is Voluntary Early Retirement (VER) Authority?

Answer.

Voluntary Early Retirement, or "Early Out," as it is commonly referred to, is a strictly voluntary option that allows eligible employees to retire early.

Question 2.

Who is eligible for Voluntary Early Retirement?

Answer.

Employees covered by the Civil Service Retirement System (CSRS) and employees covered by the Federal Employees Retirement System (FERS) are eligible if they meet the following requirements:

(1)   At least 50 years of age with at least 20 years of service, or any age with at least 25 years of service, and

(2)   At least five years MUST be creditable civilian service, not military service. Employees may use military service to meet the balance of service required for eligibility.

CSRS employees must have been employed under CSRS for at least one year out of the last two years, but the service need not be continuous.

Question 3.

Are all employees who meet the above requirements eligible?

Answer.

No, only those employees who are in specific locations where there is a substantial delayering, reorganization, reduction in force, transfer of function, or other workforce restructuring or shaping, or who are likely to be separated or subject to an immediate reduction in the rate of basic pay or are identified as being in positions that are becoming surplus or excess to the agency’s future ability to carry out its mission effectively.

Note: APWU employees are eligible based on the terms of the Memorandum of Agreement dated December 19, 2003.

Question 4.

What is the major difference between Voluntary Early Retirement and Optional Voluntary Retirement?

Answer.

The age and service requirements are less under VER than under optional. Early retirement may carry a penalty in the annuity computation.

Question 5.

I meet the service requirement with 20 years of service, but not the age requirement. Would my 50^th birthday be the earliest date I could retire?

Answer.

Yes, provided your birthday is within the offer window. For retirement purposes an employee legally meets the age requirement the day before a birthday. For example, an employee meeting the service requirement who will be 50 years old on October 4 would be eligible to retire if the last date of the VER offer would be October 3.

Question 6.

Is there a time period for retiring under Voluntary Early Retirement?

Answer.

Yes, each early out offer will have a 'window' during which applications may be accepted. The window dates will be established at the time of the offer.

Question 7.

I have submitted an application for disability retirement, but I now meet the eligibility requirements for Voluntary Early Retirement. Can I cancel my application for disability and take advantage of this offer?

Answer.

Yes, an application for disability retirement may be withdrawn at any time prior to approval from OPM. Also, applications may be submitted for more than one retirement for which you qualify (discontinued service, MRA, etc.), and OPM will review each separately.

Question 8.

I will not meet the service requirements. Can I use my accumulated sick leave to meet the years of service requirement?

Answer.

No, neither annual nor sick leave can be used to meet eligibility requirements.

Question 9.

I am a FERS employee who meets the minimum retirement age (MRA) and has at least ten years of service but less than 20 years. Am I eligible?

Answer.

No, 20 years of service is the minimum to qualify.

Question 10.

How much money can I expect to receive on a monthly basis?

Answer.

If you are offered a VER opportunity, you will receive an estimate of the annuity you will receive as of the effective date for retirements processed under your offer.

Question 11.

Will my annuity be reduced?

Answer.

CSRS/CSRS Offset employees: If you are under age 55, your annuity will be computed using a voluntary optional retirement annuity calculation based on total creditable years and months of service and average high-3 salary. Then, your annuity will be reduced at the rate of two percent for each year (or by 1/6th of one percent for each full month) that you are under age 55. This reduction is permanent — your annuity is not recomputed when you reach age 55.

FERS employees with a frozen CSRS component: The portion of your annuity based on a benefit that you accrued and retain under CSRS frozen service is subject to the reduction mentioned above for CSRS/CSRS Offset employees.

FERS employees without a CSRS component: No reduction.

Question 12.

How is high three average salary determined?

Answer.

By averaging your basic pay over the three consecutive years of service with highest salary. Basic pay does not include cost of living allowance (COLA), overtime, bonuses, etc. It does include higher level pay.

Question 13.

When will my annuity start?

Answer.

Your annuity will begin on the first day of the month after the effective date of retirement.

Question 14.

When I first started working, I was in a position for which no retirement contributions were deducted from my pay. How can I get credit for this time?

Answer.

CSRS/CSRS offset employees: If the service was performed prior to October 1, 1982, it is creditable in full toward retirement eligibility and in computing your annuity if you make a deposit. However, if you don’t make a deposit for this service, your annuity will be reduced by ten percent of the amount of the unpaid deposit, plus interest. If the service was performed on or after October 1, 1982, it will be used to determine retirement eligibility, but is not creditable for annuity computation purposes unless you make a deposit, with interest, for this service.

FERS employees with a frozen CSRS component: The portion of your annuity based on a benefit that you accrued and retain under CSRS frozen service is subject to the creditability rules and calculations as mentioned above for CSRS/CSRS Offset employees.

FERS employees without a CSRS component: If the service was performed prior to January 1, 1989, it will not count toward retirement eligibility or in computing your annuity unless a deposit, with interest, is made prior to the final adjudication of your retirement application. If the service was performed on or after January 1, 1989, it is not creditable under FERS, and a deposit cannot be made for this service.

Question 15.

I previously withdrew my retirement contributions. What impact will this have on my retirement annuity?

Answer.

CSRS/CSRS offset employees:This period is creditable in establishing your retirement eligibility—that is, in meeting the service requirements. However, if the service for which you received a refund terminated before October 1, 1990, you will not be required to make a redeposit and full credit will be allowed in the annuity. However, your annuity will be actuarially reduced based on the amount you owe and your age at retirement. If the service terminated after October 1, 1990, you will be required to make a redeposit in order to receive credit in the computation of the annuity.

FERS employees with a frozen CSRS component: The portion of your annuity based on a benefit that you accrued and retain under CSRS frozen service is subject to the creditability rules and calculations as mentioned above for CSRS/CSRS Offset employees.

FERS employees without a CSRS component: If the refunded period of service was covered by CSRS, you may deposit FERS contributions for this period. However, if the period of service was covered by FERS, no redeposit is possible, and the years are not creditable.

Question 16.

If I take Early Voluntary Retirement, will I be eligible to withdraw my retirement contributions and take a reduced annuity?

Answer.

No. The Alternative Form of Annuity/Lump Sum option is presently available to only those employees documented to have a life-threatening affliction, and who separate with immediate entitlement to an annuity, other than disability annuity.

[NOTE: Questions 17 through 23 apply to FERS employees ONLY]

Question 17.

What is the Special Retirement Supplement?

Answer.

FERS employees only: It is an annuity supplement only for FERS employees paid by the Office of Personnel Management (OPM), which estimates the Social Security benefit earned by your FERS years of service. It is paid until you become eligible for a Social Security benefit at age 62. However, under VER, this supplement is payable only if you have reached your MRA — your earliest optional retirement age. If you are separating at less than MRA, the supplement will not be paid until you reach your MRA.

Question 18.

I am a FERS employee and my annuity has both a CSRS component and a FERS component. Can I still receive the Special Retirement Supplement?

Answer.

FERS employees only: Yes, if you had one full calendar year of service subject to FERS computation rules.

Question 19.

How is the Special Retirement Supplement computed?

Answer.

FERS employees only: The supplement is computed as if you were age 62 and eligible for a Social Security benefit when the supplement begins. By law, OPM first estimates what your full career (40 years) Social Security benefit would be. Then it calculates the amount of your civilian service under FERS and reduces the estimated full career Social Security benefit accordingly. For example, if your estimated full career Social Security benefit is $1,000 and you have worked five years under FERS, OPM will divide five by 40 (0.125) and multiply ($1,000 x 0.125 = $125). The result would be your Special Retirement Supplement, before any reductions.

Question 20.

Do salary or wages earned after I retire affect the supplement?

Answer.

FERS employees only: Yes. Your Special Retirement Supplement, like Social Security benefits, is subject to an earnings test. It is reduced if you earn more than the exempt amount of earnings (determined each year by Social Security) in the immediately preceding year.

Question 21.

Can my FERS basic benefit also be reduced because of earnings over the earnings test limit?

Answer.

FERS employees only: No.

Question 22.

How long will I continue to receive the Special Retirement Supplement?

Answer.

FERS employees only: The Special Retirement Supplement will continue until the earlier of (1) the last day of the month before the first month for which you would be entitled to Social Security benefits or (2) the last day of the month in which you reach age 62.

Question 23.

What if I don’t apply for Social Security benefits at 62 or I’m not eligible for them? Can I continue to get the Special Retirement Supplement after I’m 62?

Answer.

FERS employees only: The supplement ends at age 62, regardless of whether or not you receive benefits from the Social Security Administration.

[NOTE: End of questions that apply to FERS employees ONLY]

Question 24.

If I am receiving military retired pay, how can I receive credit for military service?

Answer.

To receive credit, retired pay must be waived and a post-1956 deposit must be made, unless your retirement is based on exception criteria. You should check with your personnel office if you were injured in combat or in the line of duty.

Question 25.

If I decide to make my Post 1956 military deposit, when should I do that?

Answer.

Deposits plus applicable interest are required prior to retirement; however, you may initiate this payment while completing the retirement application package. The payment is acknowledged and full credit is allowed.

Question 26.

Where can I find more information on retirement?

Answer.

If you are eligible for retirement under VER you will receive further information from your personnel office, which is your source for retirement information while you are an employee. If you would like to learn more about retirement, the U.S. Office of Personnel Management (the separate government agency that administers the federal retirement plan) provides extensive information. Do NOT call OPM, since they cannot respond to questions from employees. You may refer to the OPM web site.

Question 27.

I'm divorced. What effect, if any, will a court order have on my application for early retirement?

Answer.

None. If your court order is on file with the Office of Personnel Management (OPM), OPM will see to it that all payments are made in accordance with the court order. If a copy is not on file at OPM, you must attach a certified copy in its entirety, and any attachments or amendments, with your application for retirement.

Question 28.

I previously made voluntary contributions to the Civil Service Retirement System. Will these contributions be refunded to me as excess contributions?

Answer.

There will be no automatic refund, but you may apply for this at any time before you retire. Otherwise, your annuity will be increased according to the Voluntary Contribution regulations.

Question 29.

How would Voluntary Early Retirement affect my Social Security benefits?

Answer.

The eligibility requirements and benefits provisions for Social Security will not be affected by Voluntary Early Retirement. If you qualify, you may receive benefits beginning between age 65 and 67, depending on your date of birth. (You may apply to receive actuarially reduced benefits as early as age 62.)

Question 30.

Will my Social Security benefit be reduced because I will be receiving a CSRS annuity?

Answer.

Your Social Security benefit may be reduced under the Windfall Elimination Provision (WEP). WEP lowers the percentages used to compute benefits for all workers who have less than 30 years of Social Security-covered employment and who have earned an annuity from employment not covered by Social Security, e.g., CSRS Annuity. The Social Security Administration publishes information on this provision on the Social Security web site.

Question 31.

What is the Government Pension Offset?

Answer.

This provision in the Social Security law affects the Social Security benefit of a CSRS retiree who did not pay Social Security taxes, but expects to receive a Social Security benefit as a spouse or surviving spouse. This provision does NOT affect CSRS Offset and FERS annuitants. The Social Security Administration publishes information on this provision on the Social Security web site.

Question 32.

How do I obtain more information about Social Security?

Answer.

Social Security offers several pamphlets, books and fact sheets. For more information or free publications, contact your local Social Security office, or call 1-800-772-1213, or refer to the Social Security web site.

Question 33.

Am I eligible for Medicare?

Answer.

Generally, if you are age 65 or older and have sufficient quarters of coverage based on your earnings, you are eligible to enroll in Medicare.

Question 34.

How do I obtain more information about Medicare?

Answer.

Call 1-800-MEDICARE (1-800-633-4227), or refer to the Medicare web site.

Question 42.

What will happen to my life insurance?

Answer.

Your current life insurance coverage will transfer into retirement provided you meet the eligibility requirements of:

(1)   Retiring on an immediate annuity, and

(2)   Continuous coverage of each election in the FEGLI program for the five years immediately preceding retirement/or since your first opportunity to enroll (if less than five years), and

(3)   You did not convert to an individual life insurance policy.

Question 43.

What about the premium costs?

Answer.

Provided you are eligible and choose to keep all of your current coverage, you will now be responsible for paying the premiums on your Basic insurance based on the type of reduction you choose at the time of retirement. Your Optional insurance premium rate will continue as it is, and continue to increase based on your age.

Question 44.

What about the coverage amounts? Will they change?

Answer.

Your Basic, Option B, and Option C coverage will begin to reduce when you reach age 65 unless you choose no reduction (or 75 percent or 50 percent reduction for Basic) at the time of retirement.

Question 45.

If I take Early Voluntary Retirement, I will not meet the five year requirement to continue my FEGLI optional coverage. Can I convert this coverage to an individual policy?

Answer.

Yes. You may convert the amount of your FEGLI Optional coverage to an individual policy as long as you have not assigned your insurance.

Question 46.

I filed a Designation of Beneficiary, Form SF 2823, with my employing office. Will my designation remain valid after I retire?

Answer.

Yes. Any valid designation on file in your official personnel folder will remain valid unless your annuity terminates or you change or cancel the designation. Changes or cancellations after retirement must be submitted directly to OPM.

Question 47.

Where can I find more information on life insurance in retirement?

Answer.

If you are eligible for VER retirement, you will receive further information from your personnel office, which is your source for such information while you are an employee. If you would like to learn more about life insurance during retirement, the U.S. Office of Personnel Management (the separate government agency that administers the federal life insurance and retirement plans) provides extensive information. Do NOT call OPM, since they cannot respond to questions from employees. You may refer to the OPM web site.

Question 48.

If I retire under VER, are there any special Thrift Savings Plan (TSP) advantages, penalties or rules?

Answer.

There are no differences in TSP provisions for retirement under VER versus separation or optional retirement. You will have the same withdrawal choices and tax consequences as any other separated or retired employee with the same separation or retirement date and age.

Question 49.

If I retire under VER, can I keep on contributing to TSP?

Answer.

No. Following retirement, you are not eligible to make additional contributions to or borrow money from your Thrift Savings Plan (TSP) account. You may continue to reallocate money among the TSP funds.

Question 50.

If I retire under VER, can I take out my TSP money?

Answer.

Yes. If you retire, you will receive extensive information regarding your TSP withdrawal options and also whether you may leave your money in TSP.

Question 51.

How long will it take me to get my money?

Answer.

Withdrawal of funds may take at least two months following separation and after the receipt of properly completed forms by TSP.

If you have an outstanding TSP loan, this would delay any TSP withdrawal because you cannot withdraw funds from your TSP account until you have repaid your loan in full or until your loan has been declared a taxable distribution.

Question 52.

If I withdraw money from my TSP account, will I have to pay taxes?

Answer.

Yes. All persons, including those who retire under VER, will have to pay federal income taxes on any amounts withdrawn from TSP. Those taxes are due on both withdrawn TSP contributions and TSP earnings. After all, TSP is a tax-deferred savings plan, which means you didn't pay taxes when you contributed to your TSP account or on any earnings in the account.

Also, if you retire before the year that you reach age 55, then any amount that you withdraw from your TSP account before you reach age 59 1/2 is subject to an early withdrawal penalty tax of ten percent. However, this penalty tax does not apply to amounts received under certain withdrawal options, such as an annuity or rollover to an Individual Retirement Arrangement.

Question 53.

I'm a FERS employee. Will I forfeit my Agency Automatic (one percent) Contributions or earnings on those contributions, or am I vested?

Answer.

All employees eligible for VER are fully vested in their TSP contributions and the earnings on those contributions, including any agency automatic or matching contributions for FERS employees.

Question 54.

Where can I find more information on TSP?

Answer.

If you are eligible for VER retirement, you will receive further information from your personnel office, which is your source for such information while you are an employee. If you would like to learn more about TSP, the Federal Retirement Thrift Investment Board, (the separate government agency that administers TSP) provides extensive information. Do NOT call the TSP Service Office, since they cannot respond to most questions from employees. You may refer to the

Thrift Savings Plan web site.

Question 55.

I participate in FSA. What happens with my FSA if I retire?

Answer.

If you are a Flexible Spending Account (FSA) participant, your participation ends the date after the date of your retirement.

Question 56.

If I retire, can I still file FSA claims?

Answer.

You may request payment only for the expenses of eligible services or items received up to and including your retirement date. Any services or items received after that date are not eligible for payment.

Your deadline for submitting claims does not change — it is September 30 of the year following your year of FSA participation.

Question 57.

Will I still have to pay the full contribution that I pledged if I retire?

Answer.

As of the date of your retirement, you do not owe any more FSA contributions. (Of course, you still are required to make up any contributions you missed before your participation ended.)

Question 58.

Can I continue my FSA account coverage into retirement?

Answer.

The Postal Service FSA program is not available to you as an annuitant. (Under Internal Revenue Service (IRS) tax rules, all employers may only make FSAs available to employees, not retirees.)

Question 59.

If I separate from the Postal Service under VER, what will happen to my accumulated sick leave?

Answer.

No payments are made for accumulated sick leave.

CSRS/CSRS Offset employees: If you separate from the Postal Service under VER, you can receive additional service credit towards your retirement or survivor annuity.

FERS employees: If you separate from the Postal Service under VER, your sick leave is not credited towards additional service credit for annuity computation purposes unless you transferred to FERS from CSRS and your annuity has a CSRS component. In this situation, you can receive additional service credit based on the sick leave balance you accrued at the time you transferred to a FERS or your sick leave balance at the time of your retirement, whichever is less.

Question 60.

If I separate from the Postal Service under VER, what happens to my earned and unused annual leave?

Answer.

If you have completed your 90-day probationary period, you may be eligible for a lump sum payment for the balance of your earned and unused annual leave for the previous year up to your annual leave carryover limit plus any annual leave earned and unused in the current year as well as any unused donated leave.

Question 61.

If I separate from the Postal Service under VER and have earned and unused annual leave, will I be paid holiday leave for any holidays which occur after my separation date but before my annual leave would be exhausted?

Answer.

Yes. Annual leave is spread over the appropriate number of days following your separation date and extended one day for each postal holiday which occurs during that time period. For example, if you have 160 hours of earned and unused annual leave and two holidays would occur in the four weeks (40 hours per week) after the date of your separation, you would receive terminal leave pay for 176 hours (160 hours of earned and unused annual leave plus 16 hours of holiday leave).

Question 62.

I am a supervisor who participated in the Annual Leave Exchange Program. What effect will this have on my terminal leave payment?