Welcome to Branch 693

The Postal Book

The Postal Book By David Fielder 2012 Postal Benefits Group Page 2 Copyright 2012 David Fielder. All rights reserved worldwide. No part of this book may be copied or sold. 2012 Postal Benefits Group Page 3 Table of Contents Introduction ................................................................... 7 Chapter One: Federal Employees Group Life Insurance 11 Basic Insurance .................................................................12 Extra Benefit .....................................................................13 Basic Life Insurance in Retirement.....................................15 Living Benefits Act.............................................................17 Filing a Claim on Your Postal Life Insurance .......................25 Frequently Asked Questions..............................................26 Chapter Two: Health Insurance..................................... 33 Maintaining Coverage .......................................................33 Surviving Spouses..............................................................34 Cost...................................................................................35 Chapter Three: Civil Service Retirement........................ 37 Social Security ...................................................................38 Survivor’s Benefit ..............................................................40 Windfall Elimination Provision ..........................................42 Government Pension Offset ..............................................48 Chapter Four: FERS Employees ..................................... 55 Why was FERS created?.....................................................56 Three Pieces of the FERS Employee Pie..............................57 What Every FERS Employee Needs To Know......................58 Pension .............................................................................60 Early Retirement without Early Out...................................62 Social Security ...................................................................64 2012 Postal Benefits Group Page 4 FERS Special Supplement...................................................64 When is the FERS Special Supplement Payable? ................67 Chapter Five: Social Security Strategies........................ 71 Claim & Suspend ...............................................................72 Restricted Application.......................................................76 The Need for a Social Security Consultant .........................80 Disability Retirement ........................................................84 Chapter Six: Thrifts Savings Plan ................................. 103 G Fund ............................................................................ 104 F Fund ............................................................................. 105 C Fund............................................................................. 105 S Fund ............................................................................. 107 I Fund.............................................................................. 107 Lifecycle (L Funds) ........................................................... 108 Accessing Funds in the TSP .............................................. 111 Cashing Out..................................................................... 111 After Retirement ............................................................. 112 Should You Annuitize Your Tsp And Convert It To Monthly Payments? ...................................................................... 115 When can I rollover my TSP? ........................................... 117 Chapter Seven: Military Time and the Postal Employee ................................................................................... 121 CSRS................................................................................ 121 Should You Buy the Time?............................................... 123 FERS and Military Time.................................................... 124 When to Buy the Time..................................................... 125 Chapter Eight: Procedures for Making Military Deposits Post56 Military Service.............................................. 127 FERS ................................................................................ 130 Required Actions............................................................. 131 2012 Postal Benefits Group Page 5 Appendix A: FEGLI Election (Change) form ................. 134 Appendix B: FEGLI Designation of Beneficiary............. 136 Appendix C: Unpaid Compensation Designation of Beneficiary ................................................................. 138 Appendix D: TSP Designation of Beneficiary ............... 140 Appendix E: FERS Pension Designation of Beneficiary . 144 Appendix F: CSRS Pension Designation of Beneficiary 146 2012 Postal Benefits Group Page 6 2012 Postal Benefits Group Page 7 Introduction Congratulations. If you are holding this book, you are about to step out of the darkness and take a big step towards understanding your benefits. Our goal in writing this book is to empower you to make good decisions. Most Postal employees go through their entire career not understanding the most basic aspects of their benefits. While this isn’t a problem in the shortrun, it can cause significant problems later. Small misunderstandings can compound into major problems over a 30year career. One of the most important things we wanted to accomplish in putting THE POSTAL BOOK together was to make sure everyone could understand the basic concepts. The Postal 2012 Postal Benefits Group Page 8 Service expects you to read the 554page employee manual AND determine what parts of it apply to you. What good is a source of information if you can’t understand what it means to you? Wherever possible we have used examples from real situations we have encountered in our seminars and conventions. There aren’t many situations we haven’t seen, so we have a pretty good handle on how this stuff works. In the event you have a question about something we did not cover, please email me at david@postalbenefitsgroup.net. I’ll do my best to get in touch with you as quickly as possible. Postal Benefits Group’s sole purpose is to bridge the gap that was created when you lost your local HR representation. We specialize in offering “Postal Specific” retirement seminars 2012 Postal Benefits Group Page 9 across the country. If after reading this book you feel the information was helpful and would like to set up a retirement seminar in your area please email me directly. Whether you are two years into the job or you only have two years left, we hope you find the information in THE POSTAL BOOK helpful. After reading the book, we would appreciate you introducing it to your coworkers—odds are they needed the information just as badly as you did. David Fielder, President Postal Benefits Group david@postalbenefitsgroup.net www.postalbenefitsgroup.net 2012 Postal Benefits Group Page 10 The views expressed in this book are opinions of the author and based upon his expertise in the federal benefit plan and actual employee situations. Each employee should take time to review the information and consider their own personal situation in determining what is best for them. If an employee needs further guidance on what is best for them, please contact the author through www.thepostalbook.com. 2012 Postal Benefits Group Page 11 Chapter One: Federal Employees Group Life Insurance This chapter will discuss your Federal Employees Group Life Insurance (FEGLI) Coverage. FEGLI Life Insurance is very important and we believe you need to know everything there is to know about this most important coverage. FEGLI coverage is available to all Career Employees. We will discuss all coverage available to you. If you are not sure what coverage you have or what you are paying please call our office at 8887701287. A Benefit Specialist will be more than happy to help you. 2012 Postal Benefits Group Page 12 Basic Insurance Basic Coverage is very easy to calculate. You can calculate your Basic Coverage using the following formula: Example 1: Basic Coverage Base Pay Round up to the next thousand Add $2,000 Total Basic Coverage Let’s take a look at an example to make sure you understand how to calculate your Basic Coverage. Joe has a Base Pay of $45,300. Joe’s Basic Coverage would be as follows: 2012 Postal Benefits Group Page 13 Example 2: Basic Coverage $45,300 (Base Pay) $46,000 (Round Up) $48,000 (Total Basic Coverage) As you get raises and Cost of Living Adjustment (COLA), your Basic Coverage will also increase. Use the same formula except insert your new base pay after the raise. Extra Benefit Your Basic Coverage has an additional feature called the Extra Benefit. The Extra Benefit is basically a bonus on your Basic Coverage for being under the age of 45. Employees who are under the age of 45 will get Table 1: Extra Benefit Coverage 35…2.0 39…1.6 43....1.2 36…1.9 40....1.5 44…1.1 37…1.8 41…1.4 45....1.0 38…1.7 42....1.3 2012 Postal Benefits Group Page 14 a multiple of their Basic Coverage depending on their age. The ages and applicable multiples are listed in Table 1: Extra benefit Coverage. Here is an example of how the Extra Benefit works. Let’s take Joe from our previous example who has a Basic Coverage of $48,000. Assuming Joe is 38 years old; he is under 45 and qualifies for the Extra Benefit. Joe’s Extra Benefit would be calculated by taking his Basic Pay and multiplying that amount by the Extra Benefit Factor of 1.6 from Table 1. Example 3: Extra Benefit $48,000 (Base Pay) Multiplied by 1.6 (Extra Benefit Factor) $76,800 (Total Basic & Extra Benefit) It’s important to understand that when Joe turns 39, his Extra Benefit will be reduced to 1.5 and will continue to reduce as he gets older. At 2012 Postal Benefits Group Page 15 the age of 45, Joe will not have an Extra Benefit. Met Life (the government’s life insurance contractor) is willing to extend this additional Extra Benefit at no cost because younger employees are less likely to pass away. Postal Employees do not pay for Basic Coverage. All other divisions of the government do pay for Basic. Basic Life Insurance in Retirement As we just covered your Basic Life Insurance is free while you are employed. This changes when you retire and change to an “Annuitant” according to the government. As soon as you retire your Basic Life insurance is no longer free. Let’s look at the cost of keeping your Basic Life Insurance in retirement. 2012 Postal Benefits Group Page 16 Option #1: The first option you will see in your retirement paperwork is “No Reduction” in basic life. This coverage will cost you almost $200/month for what amounts to about $50,000 for most employees. Unless you are uninsurable this is not a good option. Option #2: The second option will be a 50% reduction in your Basic Life Insurance. This option is expensive as well and about $100/month for $25,000 in coverage. Option #3: 75% reduction in Basic Life Insurance: This is what we suggest every employee to keep into retirement. The reason you want to keep this coverage is when you turn 65 you won’t have to pay for it anymore. The cost is less than $10/month and you will pay that from your retirement until you turn 65. Once your 65 the coverage stays with you the rest of your life but it’s free. You never paid anything for your Basic coverage while you 2012 Postal Benefits Group Page 17 were working so you’ll only pay for a few years and end up with about a $14,000 policy for free once you turn 65. Living Benefits Act The Living Benefits Act was passed in 1995. It is very important if you are ever in this unfortunate situation. If you are diagnosed with the terminal illness and physicians document that you have nine months or less to live, you can access your full Basic Coverage, plus any applicable Extra Benefit AT THE TIME YOU SUBMIT DOCUMENTATION OF YOUR CONDITION. In other words, if you are terminally ill you can collect $50,000 or more in taxfree cash BEFORE you pass away. Hardly anyone knows about this benefit; therefore, it is rarely used. This is also a great 2012 Postal Benefits Group Page 18 example of how important it is to understand ALL of the details concerning your Postal Benefits. Option A Option A is the first of the Optional Coverages we will review. You will have elected to pay for this coverage when you were hired. Option A is a very straightforward coverage under your FEGLI. Option A provides a $10,000 Death Benefit to your beneficiaries in the event of your death. This coverage is not expensive and some employees refer to this coverage as an affordable Burial Policy. The price increases every five years, but because the coverage is so small the cost is not an issue. 2012 Postal Benefits Group Page 19 Option C Option C is your Family Coverage. It is another optional coverage that you elected to pay for when you are hired on with the government. Family Coverage places you as the beneficiary should something happen to your family members. Family Coverage is offered in units. An employee can take 15 units of Family Coverage. Each unit of Family Coverage represents $5,000 on your spouse and $2,500 on each dependent child. Let’s look at an example of an employee who took five units of Family coverage. With five units of Family Coverage, the spouse will be 2012 Postal Benefits Group Page 20 covered for $25,000, and each dependent child will be covered for $12,500. It is important to note that there is no limit to the number of dependent children that can be covered under your Family Coverage. Another important aspect of your Family Coverage is that you cannot drop part of the coverage. For example, if your children are no longer dependents, you cannot drop the coverage on your children and keep the coverage on your spouse. When it comes to Family Coverage, you either have it or you don’t. Option B Option B within government Life Insurance is very popular among postal employees. This option allows an employee to pay for one to five times their Base Pay in additional Life 2012 Postal Benefits Group Page 21 Insurance. In most cases, this decision is made when the employee is first hired. Example 4: Option B If Joe has a $50,000 Base Pay and he takes five units of Option B, he would have an additional $250,000 of Life Insurance Coverage. The cost of this coverage is based upon his age. Below is the government and Met Life’s plan for pricing (prices per thousand dollars of Insurance Coverage): Table 2: Option B Pricing Schedule Pay Period Cost Under 35 $0.02/th $250,000 cost $5.00/pd 3539 $0.03/th $250,000 cost $7.50 /pd 4044 $0.05/th $250,000 cost $12.50/pd 4549 $0.08/th $250,000 cost $20.00/pd 5054 $0.13/th $250,000 cost $32.50 /pd 5559 $0.23/th $250,000 cost $57.50/pd 2012 Postal Benefits Group Page 22 6064 $0.52/th $250,000 cost $130.00/pd 6569 $0.62/th $250,000 cost $155.00/pd 7074 $1.14/th $250,000 cost $285.00/pd 7579 $1.80/th $250,000 cost $450.00/pd As you can see, the rates increase with the employee’s age. They don’t increase very fast until the age of 50, and then the price rises exponentially. The cost increases because the employee never had to get a physical exam to receive this additional coverage. The only thing Met Life knows about you is your age, so that is the basis they use to increase coverage. As you get older, you are more likely to pass away. As a result, they charge you more and more as you age. As a general rule, if you are healthy you are better off getting your Life Insurance through a private company. This will protect you from the increases that the federal program allows. If you are unable to obtain approval from a private 2012 Postal Benefits Group Page 23 company, you are better off keeping the Federal Life Insurance because you would not have had the coverage otherwise. Very few people in the federal government understand the details of their Life Insurance program. The cost of not understanding how the program works can be thousands of dollars in lost premiums. This can be avoided by simply learning the facts. If you just learned that your Postal Life insurance isn’t as good a deal as you thought AND your loved ones are depending on that coverage if you should pass away prematurely you owe it to them to look into better options where the prices NEVER increase. 2012 Postal Benefits Group Page 24 HOW MUCH ARE YOU PAYING FOR LIFE INSURANCE? If you are a nonsmoker it is very easy for you to get life insurance coverage outside of the Post Office. We can review the codes on your check and tell you what you are paying now and then determine if we can find a better option. LIFE INSURANCE BUILT FOR POSTAL EMPLOYEES • No physicals • Pay premiums out of your paycheck just like you do now. • We help with the paperwork in cancelling your Postal Life Insurance • Approval in less than 10 days • No one visits your home • ShortTerm Disability Benefit Available in some cases • LongTerm Care Benefit comes with every policy • Cash Value Whole Life Policies Available upon request All we need is 5 minutes to potentially save You thousands of dollars Call us today: 888-770-1287 2012 Postal Benefits Group Page 25 Filing a Claim on Your Postal Life Insurance Order of Precedence of payment: Upon the employee’s death, the government will pay benefits in this order: 1. Beneficiary on file. 2. Widow or widower. 3. The deceased’s child(ren). If a guardian is not available, they will pay the child(ren)’s surviving parent. If no parent exists, they will open an account in the child(ren)’s name and hold the benefit until the child(ren) become 18yearsold. 2012 Postal Benefits Group Page 26 4. If none of the above applies, the executor of the employee’s estate will receive the benefit. 5. Next of kin are then entitled under your home state’s laws. It is very important for you to review the beneficiaries listed on your Postal Life Insurance. This is especially important if you have had a divorce or your spouse has passed away. If you would like to change your beneficiaries, please see the FEGLI Designation of Beneficiary form in Appendix B. Frequently Asked Questions How will I receive benefits? If you are receiving $5,000 or more, the government opens a money market account in 2012 Postal Benefits Group Page 27 your name and then sends you the checkbook. You can write a check for some or all of the balance as soon as you get the checkbook. If the benefit is less than $5,000, the government will send you a check. What documentation do I need to submit if an employee dies while they are an active employee? Those who are entitled to receive benefits will need to notify the employing office. The employing office will provide form FE6 (FEGLI Claim for Death Benefits form found in Appendix C). The Post Office is responsible for sending the Agency Certification of Insurance Status SF2821, plus all of the original enrollment, 2012 Postal Benefits Group Page 28 designation of beneficiaries forms, divorce orders, etc. A copy of the death certificate must also be provided. How do I report the death of a retired employee? The employee needs to report the death to OPM by calling 8887676738. Upon notice of the claim, OPM will mail form FE6 (FEGLI Claim for Death Benefits form found in Appendix C) to the person who reports the death. Beneficiaries (all who are entitled to receive benefits) need to complete form FE6, plus provide a proof of death certificate. The documents should then be mailed to the following address: 2012 Postal Benefits Group Page 29 Office of Federal Employees Group Life Insurance (OFEGLI) P.O. Box 6512 Utica, NY 135046512 Special Note: OPM will provide Agency Certification of Insurance Status to the Office of Federal Employees Group Life Insurance. I am an employee. How can I file a claim on one of my family members under my Family Coverage? If you are not sure if you have Family Coverage, please contact Postal Benefits Group and a certified specialist will review the codes on the employee’s check stub to confirm coverage and the amount of benefit. If you are an employee and an insured family member dies, you must complete Parts A through C of the Statement of 2012 Postal Benefits Group Page 30 Claim, Option C Family Life Insurance (FE6 DEP), and a certified copy of the death certificate to your employing office. Your employing office must complete Part D (Certification of Insurance Status) and send the completed form with the death certificate to OFEGLI. I am retired. How can I file a claim on my deceased spouse under my Family Coverage? You will need to refer to your retirement package to see if you elected to keep Family Coverage. If you are retired or insured as a compensationer, you must send the FE6 DEP claim form and a certified copy of the death certificate to OPMT the following address: 2012 Postal Benefits Group Page 31 Retirement Operations Center P.O. Box 45 Boyers, PA 160170045 OPM will complete Part D of the claim form and send the completed form with the death certificate to OFEGLI. I am an employee. How can I claim the benefit for the death of my child incapable of selfsupport? OFEGLI can only pay Option C Benefits for a child 22 years old or over if the deceased child was incapable of selfsupport because of a mental or physical disability that existed before she/he reached age 22. If you do not have an employing office determination of incapability of selfsupport on file or if the determination has expired, you must provide your employing 2012 Postal Benefits Group Page 32 office with the information necessary to make this determination. This determination is made by your employing office, not OFEGLI. 2012 Postal Benefits Group Page 33 Chapter Two: Health Insurance Everyone is concerned about Health insurance. The Federal Health Plan is a great plan, and it’s important you know how to keep this coverage in force into retirement for both the employee and spouse. Maintaining Coverage To be eligible for health insurance in retirement, the employee must be enrolled in the Federal Health Plan for the immediate five years preceding retirement or 100% of the time they have been with the Postal Service if it is less than five years. We want to be very specific about who this pertains to and what you should do. The classic 2012 Postal Benefits Group Page 34 situation we see is where the Postal employee is on their spouse’s health coverage because the cost was less or it was better coverage. This is no problem until the Postal employee starts to consider retirement. The Postal employee must enroll in the Federal Health Plan five years before they retire in order to carry health insurance into retirement. Surviving Spouses This one is very simple. In the event of the employee’s death, the spouse can still remain on the Federal Health Plan as long as the Postal employee elected a Survivor’s Benefit for the spouse at retirement. If there is no Survivor Benefit elected, the spouse will NOT be eligible for health insurance after the employee’s death. WE STRONGLY SUGGEST EMPLOYEES ELECT SURVIVOR BENEFITS FOR THIS REASON 2012 Postal Benefits Group Page 35 UNLESS THE SPOUSE HAS AMPLE HEALTH COVERAGE FROM OTHER SOURCES. Cost Postal employees while active receive a subsidy to their Health Insurance premiums from the Postal Service. You receive this benefit for your entire career, and it represents a significant benefit. The bad part about this subsidy is you lose it when you retire and when you are looking at a reduction in income. A lot of people ask us how much Health Insurance will increase. The most accurate number can be found on the Annuity Estimate you receive from the Postal Service. If you are not far along enough in your career to receive one of these, you can estimate your Health Insurance cost at about double what you are currently paying. 2012 Postal Benefits Group Page 36 2012 Postal Benefits Group Page 37 Chapter Three: Civil Service Retirement This chapter will cover those employees who were under the Civil Service Retirement System (CSRS). CSRS employees were hired prior to Jan 1, 1984 or have had at least five years of CSRS service before returning to work between 1984 and 1987. A Civil Service employee could fully retire at age 55 with at least 30 years of service. If the employee worked past the 30year minimum, they could earn a higher annuity (pension) in retirement of 2% more per year. With 40 plus years of service, a CSRS employee could earn as much as 80% of their High 3 as a pension. The CSRS employee pays 7% of their income toward their CSRS retirement. (The total of your 2012 Postal Benefits Group Page 38 contributions to your CSRS retirement is listed in the bottom right hand corner of your check stub. This amount increases every year, and you can see your biweekly contribution to that number by looking at the Retire 1 deduction on your check stub). An easy way to determine how much your pension will be as a CSRS employee is to take your years of service, subtract two from it, and then multiply it by two. For example, if an employee has 28years of service, you subtract two from it to get 26. Then when you double it, you get 52%. Social Security CSRS employees did not pay into Social Security. Those employees who earned their 40 quarters of Social Security credits prior to their federal service could earn a social security 2012 Postal Benefits Group Page 39 check on top of their pension check; however, because of the Windfall Elimination Provision, their Social Security checks would be cut in half. The government viewed a CSRS employee as double dipping by getting a full pension and Social Security from the government. CSRS employees have challenged this provision, but as of today it is still in effect. There are employees who have Social Security credits, but not a full 40 quarters. People ask us if they should get the extra quarters to qualify. The answer is yes. If you have 37 quarters of SSI, you are not getting paid for those quarters. If you work the additional 3 quarters, it gives you 50% of a Social Security check. And that is better than nothing! Special note: If you were hired under CSRS on or after October 1, 1982, you will automatically get credit for military time served post 1956. This 2012 Postal Benefits Group Page 40 “free credit” will be taken back if you qualify for Social Security under the “catch62” reduction. If you have questions about “Catch62” and how this can affect your retirement, please contact me david@postalbenefitsgroup.net. Survivor’s Benefit One important choice or option for CSRS employees pertains to the Survivor Benefit. A Survivor Benefit is a benefit paid to your surviving spouse in the event of the employee’s death. A CSRS employee can elect as much as 55% of his/her pension check as a benefit. The employee can also select any amount smaller than 55% and will see a corresponding reduction in their pension check depending on that amount. There are instances where the employee’s spouse will not need a Survivor Benefit. Maybe 2012 Postal Benefits Group Page 41 the spouse has a pension of his/her own and the employee wants the largest pension check possible. In this instance, the employee can elect (0) Survivor Benefit. By choosing this option, the spouse will have to sign and notarize forms within the retirement package confirming this decision. One important thing to keep in mind when electing Survivor Benefits as a CSRS employee is Health Insurance. An employee’s spouse is eligible to maintain Health Insurance in retirement as long as the employee elected a Survivor Benefit for their spouse. This means if an employee does not elect a Survivor Benefit, the spouse will not be eligible for Health Coverage under the Federal Health Plan. This election will allow the spouse access to health coverage for the rest of their life in the event of the employee’s death. 2012 Postal Benefits Group Page 42 CSRS employees, who want Health Coverage for their spouse and the largest pension check possible, should elect a $3,600 annual Survivor Benefit. This election will allow the spouse to access Health Coverage. The cost will reduce the employee’s pension check by $90/year. With the $3,600 benefit annually, there is enough of a check coming to the spouse to cover Health Insurance Premiums. In the event of the employee’s death, it is much easier on the spouse if the pension check covers the cost of the Health Insurance. This way, the spouse won’t have to remember to write a check each month. Windfall Elimination Provision One of the most common questions we receive in our seminars is from CSRS employees on their Social Security. While there aren’t a lot of CSRS employees who qualified for Social 2012 Postal Benefits Group Page 43 Security there are enough that we felt it necessary to write this article. We have tried to simplify a very complex subject and explain it in a way you can understand. The Windfall Elimination Provision was passed by the government because they felt CSRS employees were getting Social Security checks that were higher than they should be. We don’t agree with this logic, but this is why the law was passed. In a nutshell, the Windfall Elimination Provision reduces CSRS employees Social Security benefits based on how many years they had “Substantial Earnings” per the Chart below: Year Substantial earnings 193754 $ 900 195558 $1,050 195965 $1,200 196667 $1,650 196871 $1,950 2012 Postal Benefits Group Page 44 Year Substantial earnings 1972 $2,250 1973 $2,700 1974 $3,300 1975 $3,525 1976 $3,825 1977 $4,125 1978 $4,425 1979 $4,725 1980 $5,100 1981 $5,550 1982 $6,075 1983 $6,675 1984 $7,050 1985 $7,425 1986 $7,875 1987 $8,175 1988 $8,400 1989 $8,925 2012 Postal Benefits Group Page 45 Year Substantial earnings 1990 $9,525 1991 $9,900 1992 $10,350 1993 $10,725 1994 $11,250 1995 $11,325 1996 $11,625 1997 $12,150 1998 $12,675 1999 $13,425 2000 $14,175 2001 $14,925 2002 $15,750 2003 $16,125 2004 $16,275 2005 $16,725 2006 $17,475 2007 $18,150 2012 Postal Benefits Group Page 46 Year Substantial earnings 2008 $18,975 2009 2011 $19,800 2012 $20,475 If you made at least the amount shown on the chart in a given year that year would be counted. If a CSRS employee worked 10 years from 19721982 and paid social security in those years and earned $7,000 in each of those years then the employee would have 10 years of “Substantial Earnings”. Now that we know how many years of substantial earnings we can find out how much our Social Security will be reduced by referring to another Social Security Chart. The following chart has years down the lefthand side. This is the year in which you turned 62. Find the year where you turn 62 and then find the years of 2012 Postal Benefits Group Page 47 substantial service and you will see the amount your Social Security is reduced. Maximum Monthly Amount Your Benefit May Be Reduced Because Of The Windfall Elimination Provision (WEP)* Years of Substantial ELY Earnings 20 or less 21 22 23 24 25 26 27 28 29 30 1990 $178.0 $160.2 $142.4 $124.6 $106.8 $89.0 $71.2 $53.4 $35.6 $17.8 $0.0 1991 185.0 166.5 148.0 129.5 111.0 92.5 74.0 55.5 37.0 18.5 0.0 1992 193.5 174.2 154.8 135.5 116.1 96.8 77.4 58.1 38.7 19.4 0.0 1993 200.5 180.5 160.4 140.4 120.3 100.3 80.2 60.2 40.1 20.1 0.0 1994 211.0 189.9 168.8 147.7 126.6 105.5 84.4 63.3 42.2 21.1 0.0 1995 213.0 191.7 170.4 149.1 127.8 106.5 85.2 63.9 42.6 21.3 0.0 1996 218.5 196.7 174.8 153.0 131.1 109.3 87.4 65.6 43.7 21.9 0.0 1997 227.5 204.8 182.0 159.3 136.5 113.8 91.0 68.3 45.5 22.8 0.0 1998 238.5 214.7 190.8 167.0 143.1 119.3 95.4 71.6 47.7 23.9 0.0 1999 252.5 227.3 202.0 176.8 151.5 126.3 101.0 75.8 50.5 25.3 0.0 2000 265.5 239.0 212.4 185.9 159.3 132.8 106.2 79.7 53.1 26.6 0.0 2001 280.5 252.5 224.4 196.4 168.3 140.3 112.2 84.2 56.1 28.1 0.0 2002 296.0 266.4 236.8 207.2 177.6 148.0 118.4 88.8 59.2 29.6 0.0 2003 303.0 272.7 242.4 212.1 181.8 151.5 121.2 90.9 60.6 30.3 0.0 2004 306.0 275.4 244.8 214.2 183.6 153.0 122.4 91.8 61.2 30.6 0.0 2005 313.5 282.2 250.8 219.5 188.1 156.8 125.4 94.1 62.7 31.4 0.0 2012 Postal Benefits Group Page 48 2006 328.0 295.2 262.4 229.6 196.8 164.0 131.2 98.4 65.6 32.8 0.0 2007 340.0 306.0 272.0 238.0 204.0 170.0 136.0 102.0 68.0 34.0 0.0 2008 355.5 320.0 284.4 248.9 213.3 177.8 142.2 106.7 71.1 35.6 0.0 2009 372.0 334.8 297.6 260.4 223.2 186.0 148.8 111.6 74.4 37.2 0.0 2010 380.5 342.5 304.4 266.4 228.3 190.3 152.2 114.2 76.1 38.1 0.0 2011 374.5 337.1 299.6 262.2 224.7 187.3 149.8 112.4 74.9 37.5 0.0 2012 383.5 345.2 306.8 268.5 230.1 191.8 153.4 115.1 76.7 38.4 0.0 *Important: The maximum amount may be overstated. The WEP reduction is limited to onehalf of your pension from noncovered employment. Using our example and assuming our employee turned 62 in 2011 they would have a reduction of $374.50 (using the 20 or less for years of substantial earnings). The more substantial earnings years you have the less the deduction from your social security. Government Pension Offset This provision affects CSRS employees who have lost a spouse who was vested in Social Security. You are entitled to a spousal social 2012 Postal Benefits Group Page 49 security benefit in the event of your spouse’s death. The math on this one is much easier than figuring the Windfall Elimination Provision: Your Social Security Spousal benefit will be reduced by 2/3 of your government pension. Let’s look at an example: Jane a widowed retired CSRS employee receives a pension of $1,000 a month. Her Social Security Spousal benefits will be reduced by $666.67 (2 thirds of the gross pension). If the spousal benefit was $1,000 then the CSRS employee would receive $333.33 as s monthly benefit from Social Security. CSRS OFFSet Pension Calculation: CSRS Offset Annuity Reduction Your CSRS Offset annuity is reduced by the portion of your total Social Security benefit that 2012 Postal Benefits Group Page 50 is payable based on federal service performed after 1983 while covered by both the CSRS and Social Security. Your annuity will not be reduced by any portion of your Social Security benefit that is based on service other than CSRS Offset employment. When Will the CSRS Offset Annuity Be Reduced? Normally, OPM will contact SSA when you are close to age 62 (the normal age of Social Security eligibility), to obtain an entitlement determination. If you are eligible to receive Social Security benefits, SSA will provide OPM with information concerning your benefits. Please note that even if you do not apply for Social Security benefits when first eligible, the reduction in your annuity must still be made if you are eligible for Social Security benefits. 2012 Postal Benefits Group Page 51 If you retire at age 62 or later and already are entitled to Social Security benefits, the offset in your annuity will be made at retirement. If you never become eligible for Social Security benefits based on your own employment, there is no offset. How is the Offset Computed? The Social Security Administration takes the Federal earnings in the period(s) when you are covered by both Social Security and CSRS and computes a Social Security benefit with those earnings included, and then without those earnings included. These two amounts are sent to OPM so that we can determine the CSRS Offset amount. Your CSRS benefit is computed as explained above. The offset reduction is then subtracted from the annuity rate to become your new gross annuity rate. 2012 Postal Benefits Group Page 52 The offset reduction is the lesser of: 1. The difference between the Social Security monthly benefit amount with and without CSRS Offset service (service after December 31, 1983, covered under the interim CSRS provisions or the CSRS Offset provisions); or 2. The product of the Social Security monthly benefit amount, with federal earnings, multiplied by a fraction where the numerator is the employee's total CSRS offset service rounded to the nearest whole number of years and the denominator is 40. Social Security Benefit X Total Years of Offset Service 40 2012 Postal Benefits Group Page 53 Example: In this example, the employee is age 62, and has 3 years and 8 months of offset service. Computation 1 Social Security monthly benefit with offset service $600 Social Security monthly benefit without offset service $550 Difference $ 50 Computation 2 Social Security amount with federal earnings: $600 X 4 years* = $2400 divided by 40 = $60 (*Nearest whole year to 3 years 8 months) In this example the offset to the CSRS annuity would be $50, since that is the lesser amount. 2012 Postal Benefits Group Page 54 2012 Postal Benefits Group Page 55 Chapter Four: FERS Employees The Federal Employee Retirement System (FERS) affects employees who were hired on or after January 1, 1984. The only exception to this rule applies to CSRS employees who switched from CSRS to FERS when FERS was rolled out. This chapter will explain FERS, but also how an employee can effectively use the program to retire successfully. Very few FERS employees understand how the program works, and as a result they will be in for some serious surprises when they get ready to retire. Please pay close attention to the sources of income for a FERS employee. If you understand what the sources are and how much those sources can be, you will ensure success for you and your family. 2012 Postal Benefits Group Page 56 Why was FERS created? While you will never find a direct answer from the government to this question, there are some obvious facts that cannot be ignored. 1. The government wanted to save money compared to the CSRS: After 30years of service, FERS employees earn a 30% pension compared to 56.25% for a CSRS employee. Obviously, the government saved a ton of money by redesigning the program this way. 2. Social Security: FERS employees pay into Social Security. About the time the FERS program was rolled out was when Social Security was underfunded. The government decided to put all federal employees in Social Security and that 2012 Postal Benefits Group Page 57 created four million federal payers into the Social Security System. In a nutshell, the reason for FERS is saving money for the government. The program saved so much money that the government even hired people to call CSRS employees to convince them to switch to FERS. Three Pieces of the FERS Employee Pie FERS employees receive their retirement income from three different sources. These three sources include the following: 1. Pension 2. Social Security 3. Thrift Savings Plan TSP 2012 Postal Benefits Group Page 58 What Every FERS Employee Needs To Know When the government created the FERS program, they never intended FERS employees to get any more money than CSRS employees. All they wanted to do was take the same pie and divide it three ways. Then two of the pieces would be your responsibility, while at the same time the government reduced their obligation. What are we talking about? Let’s look at an example: Example 8: FERS Employee with 30years of Service Joe is going to retire after 30years with a High 3 of $50,000. If he elects to take the full FERS PILLARS PENSION SSI TSP 2012 Postal Benefits Group Page 59 Survivor Benefit, his numbers will look something like this: Net Pension Check*........................ $850 Social Security.............................. $1,200 TSP................................................??????? ....................................................... 56.25% *Net check assumes Health Insurance and taxes will deduct $275/month. The gross check is $1,125. The example above shows FERS employees what they can count on from the government during retirement. In this case, a little over $2,050/month. Any additional money the employee needs will have to come from the Thrift Savings Plan (TSP). Many employees think the TSP is “bonus” money or something that is elective. Many Postal employees contribute 5% to their TSP because this allows them to get the full 2012 Postal Benefits Group Page 60 matching. In most cases, this is not enough! Just like the old rule you heard when you were young, “Put 10% of your money away, and you’ll be able to retire comfortably.” We believe this statement can be used as the golden rule for TSP as well, as long as an employee is planning on working a full 30years. If you are like a lot of employees, you became a career employee later in life and do not plan on working 30years. If you are one of those employees, the 10% number won’t be enough because you don’t have the same amount of time. To make up for lost time, you should consider contributing 1520%. Pension The calculation for a FERS pension is pretty simple. FERS employees earn 1% for each year of service if they are retiring at an age under 62. 2012 Postal Benefits Group Page 61 If you retire after 62 your pension is calculated at 1.1% per year of service. There are three opportunities to retire with an unreduced annuity: 1. Minimum retirement age with 30years 2. Age 60 with at least 20years service 3. Age 62 with at least 5years of service Minimum Retirement Ages are based on your year of birth. Table 3: Minimum Retirement Ages provides this information. Table 3: Minimum Retirement Ages If you were born: Your MRA is: Before 1948 55 In 1948 55 and 2 months 2012 Postal Benefits Group Page 62 In 1949 55 and 4 months In 1950 55 and 6 months In 1951 55 and 8 months In 1952 55 and 10 months In 19531964 56 In 1967 56 and 6 months In 1968 45 and 8 months In 1969 56 and 10 months In 1970 and after 57 Special Note: The only exception to the eligibility requirements above is in the event of an Early Out. The Early Out allows you to retire without meeting these requirements. Early Retirement without Early Out We meet with a lot of employees who want to retire no matter what because they are just tired of working for today’s Post Office. There is 2012 Postal Benefits Group Page 63 another way to retire but you will be penalized on your pension. An employee can retire as long as they have met their MRA and have at least 10 years of service (MRA +10). Let’s look at an example: Joe is 57 (MRA) and has 15 years of service. If he has a pension of $15,000 for his 15 years of service he will be penalized 5% for every year he is under age 62. That would be 5 years x 5% per year so his pension would be reduced by $3,750 a year. 2012 Postal Benefits Group Page 64 Social Security Social Security for FERS Employees is just like any private employee. If you have earned 40 quarters, you have the right to collect SSI at age 62 or later. The longer you wait, the more the check will be. THERE ARE NO REDUCTIONS IN SSI FOR FERS EMPLOYEES. CSRS employees do see substantial reductions in their SSI, but not FERS employees. FERS Special Supplement Very few FERS employees know about this supplement, much less understand how it should be considered in their retirement decisions. Through our training, we have taken a very complex subject and boiled it down to a very basic explanation that we hope each of you can fully understand. 2012 Postal Benefits Group Page 65 In almost every case FERS employees are eligible to retire under the age of 62. Almost everyone knows that you don’t qualify for Social Security until the age of 62. Social Security is a major part of FERS, so what is an employee supposed to do between their Minimum Retirement Age and when they turn 62? Answer: FERS Special Supplement. Think of the FERS Special Supplement as a “bridge” that gets you from Minimum Retirement Age to age 62 when you will qualify for Social Security. You do, however, have to qualify for the Supplement. There are two milestones that must be met in a normal retirement situation. 1. Minimum Retirement Age with 30 years of Service 2. Age 60 with 20years of service 2012 Postal Benefits Group Page 66 Special Note: The exception is during an Early Out. In this instance, if the employee is retiring under an Early Out these two requirements are waived. Let’s look at an example to make things more clear. Example 9: FERS Special Supplement Joe is retiring with 30years of service at his Minimum Retirement Age of 56. His Social Security Check at age 62 is projected to be $1,200 (from his Social Security statement). Joe’s Supplement will be calculated as follows: 30years of service Divided by 40 total years possible service Equals 75% 2012 Postal Benefits Group Page 67 This percentage gets applied to the Social Security check at age 62 ($1,200), and now Joe is eligible to receive $900/month Supplement ($1,200 x 0.75=900). If Joe had only worked for 20years, it would be 20/40 and he would get 50% of his age 62 Social Security benefit. **Military time you have bought is not used in the FERS supplement calculation** When is the FERS Special Supplement Payable? This is very important if you are retiring under Early Out and you do not meet the Minimum Retirement Age and 30years of service or age 60 with 20years of service. As we stated before under an Early Out, you will qualify for the Supplement even though you did not meet the two normal retirement objectives. However, the 2012 Postal Benefits Group Page 68 Supplement will be payable starting at either your Minimum Retirement Age or age 60, whichever is next. Let’s look at an example to make sure you understand how an employee retiring under an Early Out can influence the FERS Special Supplement. Example 10: Influence of Early Out on FERS Special Supplement Let’s take Joe again, and he is going to retire at age 53 with 18years of service. Remember without the Early Out he would not be eligible to retire. Joe’s Minimum Retirement Age is 56. His Social Security check at age 62 is $1,200. Joe’s Supplement would be 18/40 or 45%. We apply that 45% to the $1,200 2012 Postal Benefits Group Page 69 and come up with $540/month Supplement. Joe won’t be able to start drawing the supplement for three years (Current age 53 MRA 56). Just because you are eligible for the supplement doesn’t mean you can start drawing it immediately after you retire. We’ve heard stories of people who retired thinking the Supplement check started right away; they found out after the fact, it wasn’t going to start until years later. Take the time to understand the FERS Special Supplement and how it can affect your retirement. Don’t trust Shared Services to get it right—they have a long history of getting it wrong. 2012 Postal Benefits Group Page 70 Another important note to make on the FERS Supplement pertains to working part time in retirement. The government treats the FERS Supplement just like Social Security with respect to the Earnings Test. If you make more than $14,160 under age 65 you will be penalized $1 off you FERS Supplement for every $2 over $14,160 you make. This amount increases substantially when you turn 65 to over $30,000. Your pension is not factored into the $14,160 only earned wages count. Special Note: Taking the Supplement has no impact or penalty on employees who do not want to file for Social Security until age 66 for a higher check. 2012 Postal Benefits Group Page 71 Chapter Five: Social Security Strategies Many Postal employees over simplify their decisions surrounding Social Security. We want to give you access to the information you need to make the BEST decision for you and your family. We feel we have found the foremost experts in Social Security in Premiere Social Security Consulting. It is very hard to find one company with such a broad understanding of Social Security. Jim Blair worked for the Social Security Administration for 35 years and understands everything there is to know about Social Security. Marc Kiner is a CPA and understands the financial issues that surround Social Security. We feel there is no better place to go to get advice surrounding your social security and invited them to write a few pages 2012 Postal Benefits Group Page 72 in this book. We encourage all of you to invest in a Social Security Consultation with them. The consultation will pay for itself 10 times over through higher and broader benefits from Social Security for you and your family. We encourage you to visit their website at www.premiersocialsecurityconsulting.com or call them at 8005180761. Claim & Suspend An option available to everyone who has reached their full retirement age is claim & suspend. This option has two very distinct purposes. The first purpose of claim and suspend is to create a safety net for benefits if the need for a lump sum of cash is needed. The Social Security Administration has rules about retroactivity of benefits. The Social Security law and regulations state for retirement benefits filed before a persons full retirement age there is no retroactivity. Benefits will begin no earlier 2012 Postal Benefits Group Page 73 than the month the application is filed and all factors of entitlement are met. If you file for your benefits after you reach your full retirement age there is a possibility of retroactivity for benefits but the period is limited to 6 months and cannot go back any farther than the month you reached your full retirement age. This is where claim and suspend can be useful. You have the option to file and suspend your benefits any time starting with the month you reach your full retirement age. Currently, full retirement age is 66 for individuals born during the period 1943 through 1954. You would claim & suspend if you wanted to earn delayed retirement credits and postpone drawing your benefits past your full retirement age up to the age of 70. The request to suspend your benefits can be wither written or oral and the request does not have to be signed. If you change your mind and want to have your benefits reinstated 2012 Postal Benefits Group Page 74 before you reach age 70, you may request to have your benefits reinstated effective for any month you choose during the suspension period. Social Security will accept a written or oral request and there is no requirement for a signature. This option allows you to earn delayed retirement credits while creating a safety net. You will have a large amount of benefits available to you should the need arise. Social Security will not pay you interest on your money and you will lose the delayed retirement credits earned for the months you take the payment but you are looking at as many as 47 months of benefits payable if the need for cash arises. If you don’t need the cash you can begin your benefit payments at age 70 and you will have earned all of your delayed retirement credits and increased you monthly benefit by as much as 32%. This is an option that can work well for single beneficiaries or couples. 2012 Postal Benefits Group Page 75 The second option for claim & suspend is to allow your spouse or any children who are eligible to receive benefits from your work record to do so while you earn delayed credits. Suspension of your benefits only affects your benefits. If you have a spouse or children eligible for benefits on your work record they will draw their monthly benefits even while yours are suspended. You can claim & suspend at your full retirement age and your spouse, if they are age 62 or older can file for spousal benefits if they are eligible for those benefits. If you have a child under the age of 18, between age 18 and 19 and still in high school, a child who became disabled before the age of 22 may draw a monthly benefit check from your work record. Spousal benefits and children’s benefits can only be paid from your record if you have filed an application for benefits. Claim & suspend fulfills that requirement. This is one of the options available to couples that will allow 2012 Postal Benefits Group Page 76 them to maximize their Social Security benefits. This option alone or in conjunction with the restricted application provision allows individuals to increase monthly benefits by postponing their own monthly benefit and draw a monthly benefit as a spouse. Claim and suspend is an option all folks should consider. The only drawback is if you contribute to a Health Savings Account (HAS) and you claim & suspend, you will be automatically enrolled in Medicare Part A (Hospital Insurance). You cannot contribute to an HSA when enrolled in Medicare. You can use the funds you have in the account but cannot add any additional funds. Restricted Application An option that is often overlooked is the restricted application. Normally, when an 2012 Postal Benefits Group Page 77 individual files an application for a Social Security benefit the application covers all types of benefits you may be eligible for on any Social Security number. The Social Security deems an application for one type of benefit an application for all types of benefits. Individuals who have reached their full retirement may restrict their applications to a specific type of benefit. You can restrict your application to exclude a class of benefits you may be eligible to receive for any reason. This includes filing for spousal benefits instead of your own, widows/widowers benefits instead of your own and filing for your own benefit instead of widows/widowers benefits. You would restrict your application to maximize your total benefits over a period of time. This includes earning delayed retirement credits or receiving maximum benefits between your own work record and that of a deceased spouse. 2012 Postal Benefits Group Page 78 Your statement to restrict your application must be specific and done before the Social Security Administration processes or adjudicates your application. The question is why would you want to restrict your application for benefits? This means you may be electing to receive a smaller benefit payment each month. This option isn’t for everyone but you need to consider the affect of using this option. Often you can take less now to receive more at a later date to maximize you and possibly your spouse’s benefits over your lifetimes. This affects of this option can be greatly reduced for individuals entitled to a pension from work not covered by Social Security. The effects of the Windfall Elimination Provision and the Government Pension Offset need to be considered. That doesn’t mean you should not consider using this provision. 2012 Postal Benefits Group Page 79 Everyone’s situation is different and while it may not work for some it could work for others. One example is someone who works beyond their full retirement age. The Government Pension Offset does not apply until you begin to receive your pension. After your full retirement age you can apply a restricted application for spousal benefits and receive one half of the amount your spouse is eligible to receive at their full retirement age without suffering the effects of the Government Pension Offset. Your own benefit will increase by 2/3rds of 1 percent or 8% a year. Therefore, when you do retire, the spousal benefit may be totally offset but your own benefit was increased. Many options exist and should be considered before you file for Social Security benefits. While the Windfall Elimination and Government Pension Offset greatly reduce or eliminate 2012 Postal Benefits Group Page 80 options, there are still some you need to consider. Be sure to make a plan before you file. It may be to late after you file. The Need for a Social Security Consultant Complicated Social Security laws combined with Social Security being a joint lifetime benefit and you can see why future retirees should meet with a Social Security consultant prior to applying for benefits. It is imperative that Social Security recipients "Make a Plan" to take control and to maximize their Social Security benefits. Single folks have 35 options, surviving spouses have 46 options and married couples may have up to 12 options. Married couples are leaving up to $10,000 a year on the table by not taking the time to "Make a Plan". If you are contemplating beginning Social Security benefits at 62, take a timeout and "Make your Plan". Our friends at Premier Social Security 2012 Postal Benefits Group Page 81 Consulting have identified 10 reasons why recipients must "Make a Plan". 1. Social Security is a lifetime benefit. A decision made today will impact recipients for life. Thus, taking benefits at age 62 and the 25% haircut may have a significant impact to benefits paid over your lifetime. 2. Social Security may be a joint lifetime benefit. Your surviving spouse may step into your shoes and receive the same benefit you were receiving at death. Again, taking benefits at age 62 or even age 66, (Full Retirement Age), may significantly reduce Social Security benefits paid over two lifetimes. 3. More than 90% of all Social Security recipients leave money on the table as they are not aware of available options. 4. CPAs, financial advisors and other professional advisors are not familiar with 2012 Postal Benefits Group Page 82 many of the Social Security options. Your advisors may be familiar with the reduction if benefits begin prior to Full Retirement Age and that you will receive Delayed Retirement Credits of 8% per year by waiting to age 70. However, very few advisors are aware of the "restricted application" and "claim and suspend" strategies. Nor are advisors familiar with “filing a protective claim”. 5. Around 40% of all SS recipients rely solely on their monthly income. It is imperative for all Social Security recipients to "Make a Plan" and to review all of their options. 6. Through proper planning and exploration of options a Social Security recipient can increase monthly income by $150$800 per month. This additional income is not magic or voodoo, but is due to the available options. 7. With 10,000 people turning 65 per day, the Social Security administration and offices are 2012 Postal Benefits Group Page 83 stretched too thin. The good folks at the SS offices cannot be expected to explain and explore the various options available to recipients. As 2030 year veterans of the Social Security Administration are retiring, the younger Social Security representatives lack the basic understanding of Social Security options. 8. Social Security benefits at age 70 are 75% greater than benefits at age 62. 9. Taking benefits early will permanently reduce an individual’s benefits for the rest of their life. Delaying until the age of 70 will result in a permanent increase in benefits. 10) Children under age 18 are entitled to Social Security benefits when a parent begins collecting. A child under age 19 and still in high school is also entitled to benefits. Additionally, if a child is under age 16, then the spouse is also entitled to benefits. 2012 Postal Benefits Group Page 84 Disability Retirement There are thousands of Postal employees who are eligible for a Disability retirement but are unsure if they qualify or they are intimidated of the process. Our goal in putting this chapter together is to give you a detailed description of what is involved as well as how to provide your documentation in a way that gives you the best chance at being approved. Applying for a Disability Retirement is an option all federal employees have available. It is a time consuming process and remember you are certifying that you cannot perform your job anymore due to health reasons. There are forms that will need to be completed by your doctor, your supervisor, and yourself. There are two basic formulas that are followed and one deals with the procedures for CSRS and the other deals with FERS disability. The basic 2012 Postal Benefits Group Page 85 criterion that must be met for both is the following: Required Criteria: OPM considers the documentary evidence that you, your physician, and your agency provide. Your claim can be allowed only if the evidence established that you meet all of following criteria: 1) A medical condition, which is defined as a health impairment resulting from a disease or injury, including a psychiatric disease. 2) Disability must last more than one year 3) Become disabled while serving under FERS or CSRS 2012 Postal Benefits Group Page 86 4) A deficiency in service with respect to performance, conduct or attendance, OR in the absence of service deficiency, show that your medical condition is incompatible with either useful service or retention in the position. (Useful and efficient service means fully successful performance of the critical or essential elements of the positionor the ability to perform at that leveland satisfactory conduct and attendance.) 5) Your medical condition has caused a service deficiency. 6) Your employer must certify it is unable to reasonably accommodate your medical condition in your present position and that it has considered you for any vacant position in the same agency, at the same grade or pay level, and within the same commuting area, for which you are qualified for reassignment. 2012 Postal Benefits Group Page 87 7) You, or your guardian or other interested person, must apply before your separation from service or within one year of your separation. The application must be received by OPM within one year from the date of your separation. This time limit can be waived only in instances involving incompetency. When should I apply for a disability retirement? You should consider applying for disability retirement only after you have provided your employing agency with complete documentation of your medical condition and your agency has exhausted all reasonable attempts to retain you in a productive capacity, through accommodation or reassignment. Your supervisor will need to provide a statement for OPM that is contained in the packet. 2012 Postal Benefits Group Page 88 What forms do I fill out? Complete SF 2801, Application for Immediate Retirement, and SF 3112, Documentation in Support of Disability Retirement. What are the service requirements? For CSRS employees you must have completed at least five years of creditable Federal civilian service and for FERS employees 18 months. What documentation will I need to support my application? Your doctors will need to provide OPM with statements stating that your condition will not be improving (you have reached maximum medical improvement) AND your condition(s) keeps you from performing the essential elements of your position. The thing to remember when applying for disability retirement is that you and your 2012 Postal Benefits Group Page 89 Physician need to show a correlation between your illness or disease and the expectations of your job with the agency. How will my doctor know what the essential elements of my job consist of? In your medical retirement packet that you receive from your agency, it will contain a copy of your “Standard Position Description” but it does not accurately detail what you do on a daily basis for your job. Include a detailed account of what you do in your position with the “Standard Position Description” and a cover letter for your physician so he has a clear understanding of what your job truly involves. EXAMPLEThe position of a Sales and Service Distribution clerk assigned to the Anytown Post Office 2012 Postal Benefits Group Page 90 involves the following tasks. Use this as an example, then analyze your position in the same detail the next day you go to work. Document every move and every detail. In the morning, when breaking mail down to be sorted, I will be moving carts and large hampers from the dock area into the facility. This requires me to push equipment that weighs from 451200 pounds. Empty weight of a cage (6’x 4’x 3’ with a metal shelf that weighs 25 lbs) that is used to transport mail ~325 lbs and when it is fully loaded with mail, it can weigh up to ~1200lbs I will have to remove the mail from the equipment and it will be in trays (815 pounds), flat tubs (550 pounds), and mail sacks (variable weights up to 70 pounds) I am required to stand for 23 Hours, intermittently static, when I am sorting mail to a letter case. These trays of mail weigh approximately 15 lbs. when full. The case is 2012 Postal Benefits Group Page 91 approximately 30 inches off the ground and has mail slots of 3” x 4” for mail to be placed in each slot. The mail sorting case looks like a grid and is a total of 56 slots for mail to place with a total height of 6 feet. I will stand as I sort the mail and be required to place mail in the case reaching from below my waist to 18 inches above my shoulder. This requires a repetitive motion utilizing my upper arms and hands. I will repeat this motion 200500 times in a 15 minute period. I am required to stand for 23 hours, intermittently static, when I am sorting mail to a flat case. The flat tubs of mail (plastic containers 1’x 1.5’x 1’that weigh up to 50lbs) vary in weight from a few pounds to 50 pounds when full. The case is approximately 30 inches off the ground and has slots for flats that are 10” x 4” for mail to be placed in each slot. The mail sorting case looks like a grid and is a total of 40 slots for mail to placed I will stand as I sort the 2012 Postal Benefits Group Page 92 mail and be required to place mail in the case reaching from below my waist to 1 foot above my shoulder. I will repeat this motion 300500 times in a 15minute period. When I sort the mail to the Post Office Boxes in the office the task is similar to casing mail but the dimensions’ include boxes located only 18 inches off the floor to a height of 65 inches. The mail distribution portion of my position requires prolonged standing, walking, bending, lifting (up to 70 lbs), pulling, pushing/pulling large metal containers (with weights up to 1200 lbs), and reaching above my shoulders and below my waist. When assigned to the window section of the office, my tasks include selling stamps, accepting mail (letters and flats) and parcels (of all shapes and sizes up to 70 pounds). My job will involve fine manipulation using a computer system. I will have to lift packages across the 2012 Postal Benefits Group Page 93 counter to place them on a scale to be weighted. After the mail is accepted I will have to place the package in a mail cart/hamper/metal container for transport to the rear of the Post Office for dispatch. The window clerk portion of my position requires prolonged standing, walking, bending, lifting (up to 70 lbs), twisting turning, pushing/pulling carts/hampers/large metal containers (with weights up to 1200 lbs). I will do this multiple times in an hour period depending on how busy the windows are. I am allowed 2 15 minute breaks and a hour lunch in an 8 hour window. (hour 2 break, hour 4 lunch, hour 61/2 break) ATTACH THIS TO THE FRONT OF THE JOB DESCRIPTION YOU GIVE YOUR PHYSICIAN 2012 Postal Benefits Group Page 94 EXAMPLE LETTER TO DOCTOR Dr. Anyone, On August 6, 2012, I wrote to you informing you that I had submitted my papers to the United States Postal Service Office of Personnel Management (OPM) requesting a Medical Retirement. You stated to me during my last scheduled appointment with you that you thought that was the best route for me to take other than just quitting. You stated that you would assist me in any way that you could. Enclosed is a Physician’s Statement, which is required by the OPM, along with copies of my bid job description (both personal and professional). I have highlighted exactly what is required from you (minus the copies of my medical records, as I already have those). It is 2012 Postal Benefits Group Page 95 important for me to show the OPM that I can no longer continue to do the work required in my current position as a Sales and Service Distribution Clerk (SSDA), as the repetitive work and heavy lifting, pulling and pushing is debilitating to my health and body. I must show that I have complied with all the tests, surgeries and therapies that you have suggested and completed; but that continued employment in this position is regretfully not conducive to my continuing issues with tendonitis and joint/arthritis issues. They also need to know I have reached “Maximum Medical Improvement” with my condition. I realize this is additional work for you and I apologize for any inconvenience. This information is time critical. I need to have it as quickly as possible. 2012 Postal Benefits Group Page 96 Thank you If I am seeing one doctor for my arthritis issues, another doctor for my respiratory condition and another doctor for back issues, do I need each one to send in a physician statement? Yes, the employee’s total medical health is taken into consideration. If your arthritis limits your mobility and your back condition limits your ability to lift weight, both conditions have an overall effect on if you can perform the essential requirements of your position. 2012 Postal Benefits Group Page 97 What will my annuity be if I am approved for a medical retirement? As a CSRS employee, you are guaranteed a minimum of 40%. However, if you have more than 21 years 11 months of service, your disability will be computed using all your creditable years of service. For example if you had 30 years of service and were only 52 years old, you would receive credit for all years of service and would receive a disability of .5625% of your high3. That wouldn’t be a full annuity because you are forced to leave due to a medical reason three years earlier than a full retirement (which could have added another 6% at full retirement). You would receive this amount plus any additional COLA’s every year that one is granted. If you are a FERS employee your computation is a bit different. You will receive earned 2012 Postal Benefits Group Page 98 annuity based on actual service if you are age 62 or over, or you are eligible for a regular Voluntary retirement with no age reduction. If you are age 61 or less the FERS disability is computed at 60% for the first 12 months minus 100% of your Social Security entitlement (if you receive one from Social Security). This means you would receive an amount of 60% of your high3 the first year. After the first 12 months, you would receive 40% of your high 3 minus 60% of the social security amount. If you filed for disability from OPM, you are required to also file for disability from Social Security at the same time. This is required because you have Social Security as a component for your retirement and it also has a disability payment for FERS members. Once you have been approved for Social Security disability, you must immediately 2012 Postal Benefits Group Page 99 notify OPM that it has been approved. If you are approved for both, you must recognize that you are not allowed to keep both of these amounts in total. You would receive this amount until age 62. At that time your retirement would be recomputed and you would receive a new annuity for all years of service plus the years you were retired on disability. There is no underlying principle of the computation, which allows for the offset. It is federal law and if you are under FERS, then you must follow the law. Do not think you can keep the entire OPM amount and the Social Security amount and it will not catch up to you. Understand that the government will catch up with you eventually. Sooner or later, you will have to pay this money back. 2012 Postal Benefits Group Page 100 What if I want to work doing something else? If you are approved for disability retirement from OPM, you can still work elsewhere and earn as much as 80% of your base for the grade and level of your last government position. It should be something within your restrictions. If you earn more than 80% while on disability, your retirement could be jeopardized. 2012 Postal Benefits Group Page 101 DO YOU NEED HELP APPLYING FOR USPS DISABILITY RETIREMENT? Postal Benefits Group has secured the services of the only Disability Retirement expert in the country. This individual has had 100% of the cases she has submitted approved by OPM! If you elect to retain her services she will work with you every step of the way to get your disability retirement approved. This person is a retired postal employee and knows everything there is to know about disability retirements. If you are interested in getting help from our disability expert please email us at disability@postalbenefitsgroup.net Instructions on the next steps will be included in our email to you. 2012 Postal Benefits Group Page 102 2012 Postal Benefits Group Page 103 Chapter Six: Thrifts Savings Plan The Thrift Savings Plan (TSP) is the government’s version of the 401k. Employees can set aside pretaxed money and defer payment of taxes until retirement (see the Thrift Savings Plan form in Appendix D). CSRS employees receive no match from the government. FERS employees receive matching on their contributions based on the following formula: 1%: free from the government First 3%: Dollar for dollar match Next 2%: 50 cents on the dollar match 2012 Postal Benefits Group Page 104 There are six funds the employee can choose from within the TSP. All funds have different levels of risk and have their investment performance tied to different securities and indexes. G Fund This fund is invested in Government Bonds. This is the safe place within the TSP. The down side, however, is the performance. The G fund had a return of 2.45% for the year ending 2011. Gas prices alone have gone up 30% in the last year. What’s unfortunate about the G fund is it is losing for most Postal employees every year. You might say, “I’m not losing, it’s guaranteed.” Well just because you don’t see a negative on your statement doesn’t mean you didn’t lose money. If the cost of goods are going up higher than the rate you are earning you are in a losing 2012 Postal Benefits Group Page 105 situation. This problem becomes huge over longer periods of time. F Fund The F Fund is slightly better than the G Fund. This fund is invested in highgrade bonds that are not government bonds. They are still safe, but with better returns than the G Fund. For the year 2011 the F fund was the place to be earning 7.89% with almost no risk. As a company we are big proponents of the F Fund. C Fund The C Fund is the common stock fund and is invested in the S&P 500. This is the fund that lost 40% in 2008 when a lot of employees lost a lot of money. For the year ending in 2011 the C fund ended up making a whopping 2.11%. I think the chart I have below will show that it 2012 Postal Benefits Group Page 106 wasn’t an easy ride for those in the “C “ Fund in 2011. As you can see there were significant dips in the market. What if these years were the years you were planning on retiring? In almost every case significant loses close to or soon after you retire can devastate your retirement plans. Since none of us know when these crashes are going to happen we suggest moving your money to the G or F as you get within 5 years of retirement. After you retire, we suggest you only invest 2012 Postal Benefits Group Page 107 your money in products that guarantee and protect you from losses. S Fund The S Fund is invested in small cap stocks that are not in the S&P 500. The S Fund did not do well in 2011 and showed a loss of 3.38%. I Fund The I Fund is invested in international stocks. It’s no secret that the international markets are anything but stable right now. For the year ending 2011 the I Fund lost 11.81%. I’ll give you a fund fact about the I Fund that I bet you didn’t know. Everyone knows the best countries to be in are Japan, China and India. 2012 Postal Benefits Group Page 108 None of these countries are included in the I Fund through the TSP. Makes no sense to me. Lifecycle (L Funds) The government recently reviewed how employees were utilizing the TSP and saw that too many of them had all their money in the G Fund. Knowing that the average federal employee is not an investment manager and does not know how to invest money, the government then created the Lifecycle Funds. These funds are named with the employee’s closest planned retirement year in mind. Today employees have a choice of the following L Funds: Table 4: Types of L Funds L2010............G Fund 43%..........C Fund 27%...........30% other 2012 Postal Benefits Group Page 109 L2020............G Fund 27%..........C Fund 34%...........39% other L2030............G Fund 16%..........C Fund 38%...........46% other L2040............G Fund 5%............C Fund 42%...........53% other We list what the G and C allocations are, so you can see the purpose of the L Funds. The longer the employee has until retirement, the more money they have invested in the C and other risky funds. The L2010 is almost half in the G Fund and is very conservative. The government went to the big banks on Wall Street and got their advice on how employees should invest their money based on their options within the TSP and how long they had to work. Now employees can pick the fund closest to their retirement date and have their 2012 Postal Benefits Group Page 110 TSP allocated across all the funds, as if a Wall Street bank was managing it for them. One nice feature of the L Fund is that they reallocate every quarter. Because every quarter the employee is closer to retirement, the investment gets a little safer each quarter. The best benefit of this feature for employees is it acts as an “auto pilot.” With the L Fund, the employee can turn it on and forget about it. The allocation automatically adjusts every quarter. If an employee had their money in the L2010 account in 2008, they would have only lost 3.03%. If they were in the 2020, they would’ve only lost 9.22% versus the 19.89% they would’ve lost if they were in the C Fund last year. These numbers are validation the L Funds work. 2012 Postal Benefits Group Page 111 As a company, we suggest employees use the L funds if they have no strategy of their own. You can learn more about the TSP by visiting www.tsp.gov. Accessing Funds in the TSP Because the TSP is pretax, the government puts limitations on how you can access that money with or without paying taxes. It’s important to understand these options in the event you need these funds. Cashing Out An employee can withdraw cash from their TSP only with an acceptable hardship: 2012 Postal Benefits Group Page 112 1. Documented Negative CashFlow: The employee has to fill out a worksheet to document their cashflow to qualify 2. Medical Expenses 3. Legal Costs due to Divorce or Separation 4. Personal Property Loss: Home repairs that are necessary Special Note about Taxes: All funds the employee receives are after taxes have been taken out. If the employee was under 59.5years of age, they will also pay a 10% penalty for early withdrawal. After Retirement The TSP gives you a few options to access your funds should you decide to leave your money in 2012 Postal Benefits Group Page 113 the TSP. They are very strict and very inflexible compared to what most people can get in the private sector. Monthly Payments: This option allows you to tell the TSP what you want each month for the upcoming year. You have the option to change this amount on an annual basis. The downside to this option is it is permanent. You elect your monthly payments in December and you CANNOT change them until the next December. A lot of things can happen in a year and in our opinion these rules are extremely strict compared to options you have in the private sector. Lump Sum Withdrawal: Let’s say you don’t want payments but would prefer to just take the money out as you need it 2012 Postal Benefits Group Page 114 in chunks as you need them. Sounds pretty easy until you review the TSP rules. Once you retire you have a ONETIME option to make a partial withdrawal of your TSP. That’s it ONE TIME. Your only other choices on getting money is a monthly payment (that we’ve already covered) or rolling it over into a private IRA. Again, this is very strict and in our opinion makes the TSP obsolete to use in retirement. THE TSP IS THE ONLY RETIREMENT ACCOUNT IN THE COUNTRY THAT HAS THESE LIMITATIONS. BECAUSE OF THESE LIMITATIONS POSTAL EMPLOYEES SHOULD ROLL THEIR TSP INTO A PRIVATE IRA WITH MORE FLEXIBILITY AND ACCESS TO YOUR FUNDS. 2012 Postal Benefits Group Page 115 Should You Annuitize Your Tsp And Convert It To Monthly Payments? This is a choice that a lot of Postal employees exercise because they aren’t aware of their options and because it is the only option people in Shared Services are allowed to “support” during your preretirement counseling sessions. The choice to annuitize your TSP has one benefit and several consequences. The only benefit to this option is you can have the assurance of a check each month in retirement and never worry about it changing or outliving your money. While these are strong benefits, they should be weighed against the consequences. 1. Your money no longer grows: Once you annuitize the TSP funds, the government applies an interest rate to calculate your payments. If you run an annuitization 2012 Postal Benefits Group Page 116 quote today, the rate of interest they use in calculating your monthly payments is 2.25%. There are rates much higher in the private sector that are just as safe. 2. You no longer have access to the cash: When you annuitize, you are handing over your pile of cash in exchange for the monthly payments. If later down the road you need a lump sum of cash, you will not have that option. 3. Your heirs are disinherited: When you annuitize your TSP you can elect a survivor benefit for your spouse in the event of your death. Once the spouse passes away, your children or other family members will receive nothing. This consequence is huge in situations where there is a large TSP balance and the 2012 Postal Benefits Group Page 117 premature deaths of the employee and spouse. Again, the TSP is very rigid and has very little flexibility to accommodate most Postal employees. In almost every scenario it is better to rollover your TSP to a Private IRA to allow more access to your funds and better options for investing. When can I rollover my TSP? Very few Postal employees understand their options when it comes to the TSP. Hopefully after reading the previous sections you now understand that the TSP doesn’t really measure up for your retirement needs. 2012 Postal Benefits Group Page 118 You have two opportunities to rollover your TSP: After Retirement: Once you have been “retired” for 30 days you are eligible to rollover your TSP. The form you would use is a TSP70. This form can be used to transfer your funds to any private IRA you wish. While Working: This option is one of the best options you have as a Postal employees. The government realizes that the TSP isn’t the best option out there. The day you turn 59.5 you can rollover your TSP to a private IRA with no penalties or taxes. If you are a FERS employee you can still contribute to the TSP until you retire and still receiving matching. If you rollover your TSP while you are working and are still contributing to the TSP when you retire you will have another sum accumulated. 2012 Postal Benefits Group Page 119 After you retire you could use the TSP70 to rollover your reaccumulated balance into your existing IRA you’ve already set up. 2012 Postal Benefits Group Page 120 Understand Your TSP Options There are many advantages to rolling over your TSP with Postal Benefits Group: • Your funds are guaranteed you can’t lose money. • Your interest is based on what the S&P 500 does (better upside potential) • You can name as many beneficiaries as you want • Your children are protected • You have better access to your funds than the TSP. • In the event of your death the funds are transferred to your heirs in half the time the TSP normally takes. If you would like to discuss your options with your TSP and do what’s best for you and your family please email or call our office. We will arrange for someone to meet with you. 8882113779 MonFri 95pm CST Or email us at david@postalbenefitsgroup.net There is no cost for the meeting. 2012 Postal Benefits Group Page 121 Chapter Seven: Military Time and the Postal Employee There are thousands of Postal employees who had prior military time. One of the reasons for this is the preferential treatment of veterans on the entrance exam. While the Post Office gives veterans a preference upon entrance, they are hurting them by not fully explaining their options on buying military time as soon as they are hired by the Post Office. CSRS CSRS employees who had prior military time that was post 1956 can buy their time by paying 7% of what they made the 1st year in the military and for each additional year in the 2012 Postal Benefits Group Page 122 military. An example will make the math easier to understand: Example 10: Buying Military Time Military Service 1962.......Pay: $10,000........ Buy back: $700 Military Service 1963.......Pay: $11,000........ Buy back: $770 This math continues for each year the employee chooses to pay. There is an additional factor of interest that has to be included. The government charges different amounts of interest for each year of buy back because they lost the opportunity to invest your contributions during those years. A great resource for calculating and estimating what your buy back would be can be found at www.fedcalc.com. You can input your earnings and years of service and come up with an estimate of deposit. 2012 Postal Benefits Group Page 123 Should You Buy the Time? The question of whether to buy back or not really comes down to looking at the cost and the benefit of the purchase. An example of a real employee we spoke with this year will help you understand the choices. Example 11: The Choice to Buy Military Time The employee had four years of military service and the buy back amount he had to pay was about $7,000. He wasn’t sure if it would be worth it to buy the time. For a CSRS employee, each year they buy is worth 2% more on their pension. In this employee’s situation, he would receive another $4,000 a year in pension by paying the one time fee of $7,000. In just two years of retirement, he would recover 2012 Postal Benefits Group Page 124 his investment and then some. We advised him to buy the time immediately. FERS and Military Time FERS employees have a pretty easy decision when buying their military time. THEY SHOULD ALWAYS BUY IT, AND BUY IT AS QUICKLY AS POSSIBLE. The government only charges a FERS employee 3% of pay in the military to buy their time. That’s only $300 for every $10,000 earned in the military. As long as the employee did not fully retire from the military, it is in their best interest to buy whatever years they have and have that time added to their creditable service. 2012 Postal Benefits Group Page 125 When to Buy the Time This is the area where we get a bit frustrated. A FERS employee should buy their military time as early as possible. In an ideal situation, the employee should buy their time in the first two years of working for the Postal Service. If they buy the time in the first two years, they will be exempt from any interest. The difference in buying the time in the first two years and waiting to do this before retirement is thousands of dollars. The frustrating aspect of this is the Postal Service knows if the employee had prior military service because they are giving the preference on the entrance exam. How hard would it be for them to add one document addressing the 2012 Postal Benefits Group Page 126 choices veterans have regarding buying their military time? To sum it up, veterans should buy their time as early as possible. This not only limits applicable interest, but also gives the employee a longer time to pay for the time, which will allow for lower payments coming out of their checks. See chapter 7 for instructions on how to buy your military time. 2012 Postal Benefits Group Page 127 Chapter Eight: Procedures for Making Military Deposits Post56 Military Service The time to consider your deposit option is now—the earlier in your civilian career is better. Military service is generally creditable as federal service, provided it was active duty and the employee received an honorable discharge. If your military service was performed prior to 1957, it is included in your Service Computation Date and in the computation of your annuity. Beginning January 1, 1957, military service became subject to Social Security. A 1982 change in the law states that CSRS employees 2012 Postal Benefits Group Page 128 hired after September 30, 1982 will receive Post56 Military Service credit only if they make a deposit covering the service. CSRS employees hired before October 1, 1982 can receive credit for Post56 Military Service without making a deposit, but will be subject to the elimination of this service if they become eligible for Social Security benefits at age 62. At this time, their annuity will be recomputed without the Post56 Military Service. Example 12: Post56 Military Service Sam had four years of military service covered by CSRS when he began his Department of Education career on May 1974. When he retired (with 34years of civilian service, plus his military service), he did not meet eligibility requirements for Social Security since he only had 20 quarters of coverage. He elected not to 2012 Postal Benefits Group Page 129 make a Post56 Military deposit, believing he would not work after retirement. At age 62 when Social Security reviewed his records, he had worked and was now eligible for Social Security. Since he had not made a deposit prior to retirement, his Department of Education annuity will be recalculated with only the 34years of civilian service. Under CSRS rules, Post56 Military Service deposits will be 7% of the basic military pay earned during the period covered by the deposit, plus interest, which is figured at a variable interest rate. Employees may have more than one period of military service covered by this rule and elect to pay a deposit for all, some, or none of the periods. 2012 Postal Benefits Group Page 130 FERS Military service that would be creditable under CSRS is also creditable under FERS, except all Post56 Military Service must be covered under a deposit to receive credit under FERS for any purpose. Under FERS rules, Post56 Military deposits will be 3% of the basic military pay earned during the period covered, plus interest, which is figured at a variable interest rate. If you transferred into FERS retirement system from CSRS, determination of whether military service is creditable under FERS rules or CSRS rules will depend on how many years of creditable CSRS service you had prior to transferring. If you had less than five years of CSRS service, all service is treated under FERS rules. If you had five years or more of CSRS 2012 Postal Benefits Group Page 131 service, this service plus your military service is treated under CSRS rules. Required Actions Employees must send a written request (Form RI 2097) to the appropriate DFAS Center for their branch of service. You must use a separate request for each branch of service with a copy of the appropriate DD214(s) attached to each request. Form RI 2097 may be requested at the following website: www.opm.gov/forms/pdf.fill/RI20.97.pdf. Addresses for the appropriate DFAS office may be obtained at the following website: www.dfas.mil.retiredpay/estimatedearning.htm l. 2012 Postal Benefits Group Page 132 After completion of the employee portion of the RI 2097, it should be mailed or faxed to the appropriate address/fax number. DFAS will return the RI 2097 to the employee, who then in turn should submit it to their HR Office for the computation of the required deposit. Once the deposit computation is complete, you will be given the options available for payment. Keep in mind, the interest will continue to accrue while payments are being made. Deposits must be paid in full prior to retirement. 2012 Postal Benefits Group Page 133 2012 Postal Benefits Group Page 134 Appendix A: FEGLI Election (Change) form Special note: if you need your own copies of the forms referenced here, you can find them all at www.Opm.Gov by searching for the form number as it appears on the forms enclosed. 2012 Postal Benefits Group Page 135 2012 Postal Benefits Group Page 136 Appendix B: FEGLI Designation of Beneficiary 2012 Postal Benefits Group Page 137 2012 Postal Benefits Group Page 138 Appendix C: Unpaid Compensation Designation of Beneficiary Note: This form is used if an employee dies between pay periods. There will be compensation the employee is owed but did not receive due to his/her death. This form designates who gets these funds. 2012 Postal Benefits Group Page 139 2012 Postal Benefits Group Page 140 Appendix D: TSP Designation of Beneficiary 2012 Postal Benefits Group Page 141 2012 Postal Benefits Group Page 142 2012 Postal Benefits Group Page 143 2012 Postal Benefits Group Page 144 Appendix E: FERS Pension Designation of Beneficiary 2012 Postal Benefits Group Page 145 2012 Postal Benefits Group Page 146 Appendix F: CSRS Pension Designation of Beneficiary 2012 Postal Benefits Group Page 147

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