The Most Common Retirement Questions for Federal Employees

10.27.23: Audio automatically transcribed by Sonix

10.27.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Val Majewski:
Well, welcome back to another episode of the Federal Retirement Show. I'm your host, Val Majewski with the American Benefits Exchange. Really appreciate you taking the time out of your schedule to see the information that we are providing to you as a federal employee. We feel there's a lot of information that you need to know, and we want to bring it to you. Now, today's episode, we're answering more of the frequently asked questions. And these are questions that are asked by federal employees just like you, through various presentations that we're giving across the country, one on one consultations that are happening with federal employees in different pockets, but questions that are coming to our attention that are common and questions that sometimes are a little unique. And maybe you have a similar question and you'd like to know the answer to it. I will encourage you if you have a question that we have not yet answered, reach out to us. You can go to our website, FederalRetirementShow.com. Fill out our form. One of our representatives, if it's not myself, will be reaching out to you and we can make sure to get your question answered. And heck, if it's a question that we think everybody else should know or should have the answer to, we'll present it on one of our future episodes. But with that, let's go into today's Frequently Asked questions. This is our sixth version of that. So let's dive into the information today. Now again, these are questions that came out of conversations that we've had with federal employees just like yourself, and questions that I know are important to people.

Val Majewski:
That's why they're asking them. And we want to bring them to your attention. Some of these also are misconceptions, right? These are things that federal employees have gotten confused about. Maybe they got misinformation about maybe they googled the wrong thing and misinterpreted something. We want to make dollars and cents out of all of this so you can make the best decisions for you, your family, and your career. Question number one. Today, our federal employee health benefit premiums paid on a pre-tax or post-tax basis. The answer is actually both. So while you're working and typically now when you're hired as a federal employee and you're actively working, you're on what's known as premium conversion. When it comes to your federal employee health benefit costs, that means that you are paying premiums generally while you're working on a pre-tax basis. Now, you can opt out of this, but typically, federal employees will pay for their federal employee health benefit premium while they're working on a pre-tax basis. This shifts when you go into retirement. So once you retire, you now pay for your health premiums post-tax basis. So while you're working generally pre-tax in retirement post tax, which is why our answer on whether premiums are pre or post tax, it's both depending on where you are in your career. The question I've gotten recently, this was a husband and wife that I was personally talking to, going over their benefits situation and really looking into what happens if the federal employee were to pass away while still employed.

Val Majewski:
They had a big question. If I pass away while still employed, what do my survivors receive? Because they were thinking that, well, I'm not yet retired and I didn't choose the survivor benefit yet, so maybe they get nothing. Maybe it's just any kind of life insurance that I had. Maybe there's there's nothing else to give since I passed away, unfortunately, while I was still working. Well, the general answer is that if a federal employee passes away while still employed by the government, their beneficiary, their loved one, their spouse will receive a number of things. Number one, there's a lump sum death benefit that they'll receive from either retirement system, the CSRS or Fers. There's also a survivor reality. So the survivor annuity, if you're married at the time of death while employed, the survivor annuity will be paid out to your spouse. You also would have had, if we mentioned about life insurance, if you've got any phegley or additional life insurance outside the government, your beneficiary would receive those death benefits. They'll also be able to keep, if again married at the time, a spouse or spouse and eligible children will be able to keep your federal employee health benefits. There's also Social Security that they can get, assuming that your Social Security is greater than theirs, or your future Social Security would have been greater than theirs.

Val Majewski:
They can keep yours. And then if there's funds in your TSB, you've named a beneficiary for that as well, and they can get those monies in the event that you died while employed by the government. So there's a number of things. Right. And a lot of these are in effect for when you're employed or when also when you're retired. But the lump sum the. Survivors annuity. The ability to keep the health benefits are big ones for you, just to make sure that your family is taken care of in the event that you pass away while still employed. Question number three do catch up contributions also get matched. Now this is part of that misconception, right? This is where some federal employees that I've talked to, believe it or not, have thought that they get a 5% match on their contributions and then also a 5% match on their catch up contributions. And that is not true. I apologize, I wish it was true to give you more matching funds, but hey, 5% matching is still pretty good compared to plans out there in the private sector, but you are matched up to the first 5% of the amount that you are deferring out of your paycheck to go towards TSB. That's the maximum matching 5% total. Now, if you put anything above and beyond the 5% or go above and beyond it with ketchup contributions, those funds unfortunately are not matched. The government will only match up to 5% of the contributions that you're putting towards TSB.

Val Majewski:
So I'm sorry if any of you thought that out there that they're also getting matched, but unfortunately, no, they are not. Pretty good if they did though, right. Question number four. Now this I got to lay out the land here a little bit. Lay out the situation. But let's say you worked for the federal government for some time. Now during that time, you know that what comes out of your paycheck to pay for your retirement system is what buys your time, so to speak. Right? Those contributions that you're making towards the pension system or towards your retirement system are what count as your contributions for service time. So let's say you worked for the federal government for some time and you left. You weren't eligible to retire yet. Maybe because of age or years of service, you got onto another opportunity or another career or whatever it might be, and you left service. Now, at that time, you have two options. You can leave your deposits that you made into the Fers or CSRS system, leave them there, or you can withdraw those thoughts. Right. All these are all of your contributions that you put into the retirement system. You can certainly when you leave service, if you're not eligible for retirement, withdraw those contributions. Let's say you did that. Let's say you left service and withdrew all of your contributions that you put towards the retirement system. But then down the road you get rehired, you rehired by the government, and you're thinking, oh, do I still get credit for all that time that I served previously? But I did take out my deposit.

Val Majewski:
So what does that mean? Well, when you take out the deposit, all of that time that you had before is no longer counting towards your future retirement eligibility, right? As far as years of service. So the question now is can I redeposit withdrawn CSRs and Fers retirement payments? The answer is yes, but you also have to pay interest. I'll give you an example. Had a federal employee that worked was in the older system of CSRS. And if you go back and watch our CSRs episode, you can see that CSRS employees put 7% towards the retirement system, 7% out of every paycheck go towards the CSRS retirement system. This person worked for the system for five years and then left service. So five years paying 7% out of every paycheck left service. Took the deposit out, then got rehired several years later as like ten years later. Got hired again and was able to go in as a CSRS offset, but wanted to get back those five years that they had put in or that they had worked, but they had withdrawn their deposits. So what happened? Well, they went back and said, well, how much do I owe in order to put back that money so I can get credit for that time? And let's just say I'm just going to use an arbitrary number.

Val Majewski:
Let's say the amount was $10,000. Okay. $10,000 is what they got out, and $10,000 is what needs to go in to pay back that time. However, there was interest charged to that. So since it took a little bit of time and they didn't make that deposit right away, when they first got hired, interest had accumulated on the 10,000. So by the time they decided to make payment, it was up to $30,000. Yeah, it had increased three times as much as the original amount that they took out. That's how interest can hurt. But it's understandable because over time, you know, they had gotten charged interest on the deposit that they withdrew if they wanted to pay it back and get credit for that time. So if you're in that kind of situation, I would highly recommend. Just like when we talk about purchasing back military time, pay it back as soon as you can so you can get credit for it, and you don't get charged much interest on the amount. The longer you wait, the more interest payment there's going to be, the higher the deposit. To get credit for that time, do I need to have a particular salary for an entire year for it to count towards my high three? Now, this is another misconception that's out there when it comes to your high three. I've heard this multiple times from federal employees who have said, and this was just as recently as a couple of days ago, that I've had a salary increase, but it only happened a little bit ago, a couple months ago, and I will not have it for the entire year for an entire calendar year.

Val Majewski:
Therefore, there it's not going to count towards my high three and I will tell you that that is incorrect. Incorrect. You do not have to have a certain salary for a certain period of time. In this case, the federal employee thought they had to have it for a full calendar year for it to count. The high three is actually the weighted average of your highest three consecutive 36 month period. I'll say that again. It's the average weighted average. And I'll explain that. The highest 36 month consecutive 36 month period. And now if you what I mean by weighted, let's say you've got a salary increase five months before retirement. Those five months will be weighted into the high three calculation. If you had a certain salary for a year and one month, then you had another salary for seven months and then another one for nine months. And all of that added up to be a consecutive 36 month period. It will be a weighted average of all of those salaries based on the amount of time you had that salary. That weighted average will go into your high three calculation. So it does not have to be a full calendar year before you'll get credit for a pay raise, and for it to count towards your high three. Again, it is the average of the highest consecutive 36 month period that's going to count towards your high three.

Val Majewski:
Well, I hope you enjoyed this episode. I hope these were questions that you were thinking of, and maybe it was information you already knew and you just got a refresher. As I said earlier, if you have a question that we've not yet answered through now, six episodes of Frequently Asked Questions, if there's an FAQ that you think others need to know about a question that you have that we haven't answered yet, a unique scenario that you want to discuss, or you just want to get your entire benefits review taken care of and out the way. Go to our website, FederalRetirementShow.com fill out our form. One of our reps, if it's not myself, will be in touch. We'll go over your full benefits review. Answer all of your questions. Hey! And at the end, if you want a copy of it, we'll send you a free complimentary copy of my book. There's No Excuse Your Guide to Maximizing your Federal Employee benefits. It's a great read. It's easy. If you like listening to me, you can understand me. I wrote it just how I talk, so it should be easy to understand. Easy reading and a good reference material for you as you're going through your working career. Again, I really appreciate you taking the time to join me on today's episode one about Frequently Asked Questions, our sixth installment. I look forward to seeing you on a future session.

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