How Retirement Works for CSRS Employees.mp3: Audio automatically transcribed by Sonix

How Retirement Works for CSRS Employees.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Well, welcome back to the Federal Retirement Show. I'm your host, Val Majewski, with American Benefits Exchange. And I appreciate you joining us for another episode. And today, we're going to be talking about the older system, the CSRs civil service retirement system, how to qualify for retirement, and then to go over the calculation. Now, if you recall from a previous episode, we did talk about fers and I said, most of you are the bulk of you are going to be in the first system, right? Because they're not making new CSRs employees. This is the older system, the original system. So we're going to dive in and show you or give you a look behind the curtain, even if you are a first employee of what the older system looked like. So you can compare and contrast and see what was different when the government came out with the new and improved, as they call it, first system, you can decide which one is better. So let's dive in and we're going to talk about what the CSRs system is, what it looks like, who is in this system and go over as much of the ins and outs in our time two together today. So the CSRs system, I said, is the older system. Why? Because these are employees that were originally hired prior to 1984. Now, if you talk about the first system that came out and these are employees that were hired after that, after 1983. So if you were hired prior to 1984, you are a civil service retirement system employee.

Speaker1:
And how did this one work? What was involved? What was a lot simpler system because these employees were not automatically covered under Social Security like FERS employees are in fact FERS employees. If you go back to our previous episode or covered on a three part plan, which means FERS Retirement Pension or FERS retirement annuity, Social Security and TSP are the three forms of income that a first employee can rely on in retirement. The CSRs employee relying on one retirement income source their pension. Now they put a lot more towards that pension. And you can see here contribute seven whole percent out of every paycheck goes towards a CSRs system. If you recall again from the firs video or first episode that we did. A first employee does put seven whole percent away, but only a fraction of that goes towards the first system and the other percentage going towards Social Security. So still the contribution amount is the same between the two systems except CSRs. All 7% is going towards the CSRs retirement system. Now, when TSP came out, CSRs employees were eligible to contribute to that but do not receive any matching funds. So again, CSRs system this is meant are really relying on one retirement income source your pension. Now there is a different set of CSRs employees and this is called CSRs Offset. Now, what does this mean if you're a CSR's offset employee? You were hired originally before 1984, so you're a CSR employee.

Speaker1:
You had at least five years of service and then you left the CSR system or you left the government entirely. And when you came back or got rehired, you were still in the CSR system, but you're considered offset because you are now covered under Social Security. Now, when you retire under the same credentials or the same requirements as a CSRs employee, your benefits are going to be offset by the amount of Social Security that you're now entitled to. We'll get into that here in a little bit. When we talk about the pension calculation, if you did not have if you were a CSRs employee and you did not have at least five years of service before leaving the government, when you came back or got rehired after 1984, then you're now covered by the first system and your previous CSRs time just stayed put. So you get a little bit of both systems. So returning employees eligible for CSRs could have at that time also chosen just fers. So instead of being offset, so to speak, you could have said, you know what, I just want to transfer completely from CSRs to FERS. Most people probably did not do that. And I bet even if you were hired as a CSRs employee originally and when the first system came out, you probably got pushed pretty hard to go to the new and improved system. I say new and improved because a lot of times the government will try to sell you on that.

Speaker1:
But those folks that were pushed as a CSRs to go to the first system and stayed put, I'm assuming are extremely happy. And you may be nodding your head behind your video screen here saying, yeah, I'm very happy that I stayed with CSRs and did not transfer all of my time over to FERS. So what does it look like to retire as a CSRs employee? What is the eligibility? Well, you'll see that two of these requirements are exactly the same as the first system, and that's the second two that are listed here be age 60 with at least 20 years of service and 62 with at least five years of service. The only difference in eligibility requirements is that you can retire as a CSR employee when you are 55 years old and have at least 30 years of service. Now, these are the only ways in which you can retire. There is no voluntary early retirement option as a CSR employee as there is in FERS. These are the three requirements or the three eligibility benchmarks that you need to hit to satisfy at least one of these in order to retire as a CSR employee. Now there are times at which the government has offered early outs and things of that nature. But generally speaking, if I meet a CSR employee today, since you were hired prior to 1984, you should be immediately eligible for retirement. At least 99.99% of all CSR employees I'm going to meet today are immediately eligible for retirement.

Speaker1:
So just like when the first system or when we talked about the first system, the second question we get asked is, okay, what can I expect? How do I calculate my pension? Now, this is an easier calculation than, say, the first system. It's less math because you really just need to know what your high three is. And that's the average of your highest three consecutive years of total base pay. And then you need to look at this chart and see how many years of service you have in the CCS system and multiply your high three by the appropriate percentage. So if we look at, let's say, somebody that worked 35 years as a CSRs employee and their high three was $100,000, let's just keep the numbers round. We look at the chart. Okay, 35 years of service is 66 and a quarter percent that person is going to earn in their retirement pension 66 and a quarter percent of that high three, which is 100,000. So that person would make $66,250 per year as a CSRs employee, again relying solely on one pension check in retirement. Now, if you look at the chart here, you see that the percentages stop growing when you hit 42 years of service. What does that mean? As a CSRs employee, you can cap out your pension. You cap out at 80% of your three. I've got a person I'm working with that has 53 years of service.

Speaker1:
They're my current record record holder, my personal best as far as years of service for a federal employee, 53 years of service as a CSRs employee. How does theirs work? Well, they don't credit or they don't get credit for any additional service time when it comes to their pension calculation. By working beyond 42 years, they're still contributing to the CSRs system. So you're maybe thinking, well, why pay into the system? Still, if I'm not getting any more service time when we calculate their pension, it's still going to be 80% of their high three and they will get a refund at that point of all the additional contributions beyond the 42nd year, and they'll get that back when they retire. They're still putting in the 7% towards the pension system. But all of that time or all of those funds above and beyond the 42 years are going to be refunded back to them. Now, there is a way in which a CSRs employee can get more than 80% in their pension calculation, as that is by adding their sick leave time. So just like with the first system, additional sick leave time or leftover sick leave time at the time of retirement is going to be added on to your service years and it can actually bump you up above 80% in that pension calculation, same as in the first system. Any left over annual leave time that you have is going to be converted to a lump sum payment and paid to you at the time of retirement, generally speaking, by the next pay period after you retire.

Speaker1:
Now, a question we get asked also is when is the best day of the month to retire? When should I retire? Now, a lot of federal employees will retire at the end of a calendar year to try and maximize the amount of leave accrual for that that year. But generally speaking, as a CSRs employee, the best day to retire to minimize the amount of time you go without a paycheck and they maximize the amount of earnings you're going to have. It's usually on the third day of the month now. It's different in the first system. But as a CSRs employee, if you retire on the first, second or third day of the month, your effective retirement date is the following day. Let's say you're retired on December 4th. So I said the best days were first, second or third of the month. If you retired on the December 4th, your effective retirement date would not be until the first of the following month. With this January 1st, you go at least two months without receiving your pension. That's worst case scenario. So to try to minimize the amount of time you go without a paycheck, it's advised as a CSRs employee that you retire in the first, second or third day of the month. You can certainly retire on the fourth or any day thereafter. Just understand, you may go a little longer before receiving your first pension check.

Speaker1:
And it's important to note also when it comes to your pension checks, whether you're in the CSRs system or the first system, it's going to take a little bit of time before you start receiving that full pension check, talk to your friends, talk to people who have recently retired and ask them how long until you receive your full pension check everything that you're owed. The typical answer I'm seeing now is 4 to 6 months. Why is that? Because OPM will start to give you what's known as interim pay, and that's a percentage, usually not a overestimate, an underestimate of what you're supposed to receive. And you're going to receive that until they finalize your application for retirement, until they figure out exactly how much they owe you. Generally speaking, as I'm seeing now, it's about 4 to 6 months until they play catch up and get you what they're supposed to pay you. They will backpay you everything that they owe you, but it doesn't mean that you still don't have bills to pay. You still don't have or need money to live on. So just be prepared for. That you're going to go some time before you see your full retirement paycheck, whether you're in the first system or the CSRs system. Now on top of this pension calculation, you're also going to have a survivor benefit option. But generally speaking, within your pension or when it comes to your pension, the deductions that are going to come out, you're really going to pay taxes, maybe some state tax, depending upon what state you decide to retire in.

Speaker1:
Your federal employee health benefits, if you choose to keep those can still come out. You may pay a little bit of fig leaf for a period of time and you may see a reduction depending on the spousal benefit election you choose. So when it comes to CSRs and retirement, we're seeing less and less of them because why they're not making any new CSIS employees. So that was a general overview of the older system. Even if you are a first employee and you just want to get an idea of what that used to look like and what those employees experience in retirement. I hope you enjoy the information. I hope you found it extremely valuable. If you do have any questions, things you want to clear up, you want me to expand upon, you want me to go into further detail about or if you want to get your personal benefits and retirement estimate run, whether you're in the CSIS system or the first system, reach out to us, we'd be happy to do a full benefits and retirement analysis for you. Answer your questions, let you know exactly where you stand so you can be properly prepared when that time comes to retire. So thank you for joining me again. My name is Val Majeski with American Benefits Exchange, and look forward to seeing you all on a future episode. And.

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