Planning for Retirement

What is the best time to retire under CSRS?

If you retire voluntarily under the Civil Service Retirement System (CSRS), you can set your retirement date for the first, second, or third day of the month, and your annuity begins to accrue the following day. For example, assuming your retirement is effective April 3, your annuity will begin to accrue April 4, to be paid May 1. If you retire voluntarily on the fourth day or after, you will not begin to accrue an annuity until the following month.

What is the best time to retire under FERS?

If you retire under the Federal Employees Retirement System (FERS) your annuity will begin to accrue the first day of the following month that you retired. For FERS, if you were to retire on April 1, you will not start to accrue an annuity until May 1, to be paid June 1. However, if you set your retirement date on March 30, your annuity will begin to accrue on April 1, to be paid May 1.

Lump Sum Annual Leave Payment

The lump sum annual leave is based on the rate of pay you receive at the time of separation. You are also entitled to an adjustment to your lump sum annual leave payment whenever the law changes the pay you would have received during your projected leave period. For example, if the pay adjustment were effective January 2, projected leave on and after that date would be paid at the higher rate. Deductions of Social Security (if applicable), Medicare, Federal, and State tax will be taken out.

Some consideration should be taken if, upon retirement, you will be receiving a large lump-sum payment for annual leave. Taxes are applied to lump-sum payments in the year in which you receive the money. For example, an employee retiring September 30 could incur a larger tax burden by collecting almost a full year's salary plus a large lump-sum payment for unused annual leave.

Leave can only be earned during complete pay periods (when you have completed your scheduled tour of duty). Retiring on any day of a pay period, except the last day, will prevent you from earning leave for that pay period. Thus, your lump-sum payment could be less than you had anticipated.

What’s included in an Annuity Payment?

Under CSRS, the total creditable civilian and military service combined with credit for sick leave, is used in computing the annuity payments. The total is then rounded down to include full years and full months (excluding the days). For example, an employee with 30 years, 6 months, 28 days of service can increase the total service to 30 years, 7 months by delaying the retirement date by two days (30 days equals one month). However, we advise that you consider all aspects closely, keeping in mind that the Office of Personnel Management (OPM) computes your official length of service. In most cases, one month of service increases your annuity by one-sixth of one percent of the high-three average salary. If you elected FERS, you will receive credit for sick leave in the CSRS portion of the annuity computation, based on the lesser of (1) the amount of sick leave at the time of retirement or (2) the amount of sick leave when FERS was elected.

Life insurance coverage can be transferred into retirement if you have had coverage since the first opportunity to enroll or for five continuous years immediately preceding the date of your retirement. You must continue your Basic life insurance in order to keep any of the Optional coverage. Unless you choose otherwise, your Basic life will automatically begin to reduce at the end of the month after the month that you reach age 65 (or when you retire, if later).

As a retiree, you will have three options:

1. 75% Reduction: Cost before age 65 = $.3250 per $1,000 of Basic Insurance Amount (BIA); after age 65 = $0. The amount of your insurance reduces 2% per month after age 65 to a minimum 25% of your BIA.
2. 50% Reduction: Cost before age 65 = $1.0350 per $1,000 of BIA; after age 65 = $.71 per $1,000. The amount of your insurance reduces 1% per month after age 65 to a minimum of 50% of your BIA.
3. No Reduction: Cost before age 65 = $2.4550 per $1,000 of BIA; after age 65= $2.13 per $1,000. The amount of your insurance will equal 100% of your BIA and is retained after age 65.

*You will continue to pay premiums for life (unless you cancel or subsequently elect 75% reduction).

You will pay the full cost to continue optional insurance:

Option A

Standard: Effective at the end of the month after the month that you become age 65, this option will reduce by 2% of the pre-retirement amount per month until it reaches 25% of the pre-retirement amount. After age 65, no premiums are withheld.

Option B

Additional: You may elect either full reduction or no reduction. If you elect full reduction, until you reach age 65, premiums (based on age) will be withheld from your annuity at the same rate as active employees. After age 65, there is no cost, but the insurance value begins to reduce 2% per month for 50 months, at which time this coverage will end.

If you elect no reduction, you will continue to pay premiums at the same rate as active employees and you will retain the full amount of your Option B Additional insurance.

Option C

Family: You may elect either full reduction or no reduction. If you elect full reduction, until you reach age 65, premiums (based on age) will be withheld from your annuity at the same rate as active employees. After age 65, there is no cost, but the insurance value begins to reduce 2% per month for 50 months, at which time this coverage will end.

If you elect no reduction, you will continue to pay premiums at the same rate as active employees and you will retain the full amount of your Option C Family insurance.

Note: OPM will provide you another opportunity shortly before you reach age 65 to elect either full or no reduction for Options B and C.

Your Federal Employees Health Benefits (FEHB) insurance continues if you have been covered since your first opportunity to enroll or for five continuous years immediately prior to the date of your retirement. The cost will remain the same as if you were a current employee, however, your deduction will be paid on a monthly basis. You will still be entitled to the same privileges as a current employee in making life event and open season changes. The Office of Personnel Management will notify you of the open season periods.

If you are not in receipt of cash benefits from Social Security at age 65, you must register for Medicare by contacting your local Social Security office. During retirement, Medicare becomes the primary payer at age 65 and FEHB is secondary. Even though Medicare becomes primary, consider that it may be to your benefit to keep your FEHB coverage.

Your spouse is eligible to continue FEHB coverage after your death only if you have self and family coverage and you elect to provide a survivor annuity at the time of retirement.

Long Term Care (LTC) is portable; therefore, if you are currently covered by LTC, coverage will continue. You will need to make arrangements with LTC Partners to ensure premiums are not interrupted. Premiums may be withheld through your annuity payment.

If you are not currently covered by LTC, you may apply for this coverage directly with LTC Partners via the website for The Federal Long Term Care Insurance Program. You will be required to apply using the full underwriting application. Applications may be submitted at anytime.

If you retire before the end of the Plan Year, the balances in your Dependent Care FSA (DCFSA) and Health Care FSA (HCFSA) are treated differently. Your HCFSA will terminate as of the date of your retirement. There are no extensions. Any health care expenses incurred prior to the date of separation will still be reimbursable but those incurred after the date of retirement will not. You can continue to use the remaining balance in your DCFSA to pay for eligible dependent care expenses until the end of the Plan Year or until your account balance is used up, whichever comes first. Balances remaining in the two accounts cannot be dispersed through a lump-sum payment to you. For additional information on the FSA program refer to FSAFEDS website.

If you are enrolled in TSP when you retire, you will be given information about the options available. You are not required to make a decision about your TSP at the time of retirement. You may leave your money in your TSP account. By doing so, you will continue to accrue interest and will continue to have the opportunity to make inter-fund transfers. Your Participant Statements will continue to be available on the TSP website; or if you prefer you can request TSP mail your personal Participant Statement. Please ensure that TSP always has your current address on file.

TSP provides several ways to withdraw your account:

1. If you separate from federal service, you can take multiple post-separation partial withdrawals.
2. If you are 59½ or older and still working, you can take up to four in-service withdrawals each year.
3. You can withdrawal from your roth balance, your traditional balance, or a proportional mix of both.
4. You do not need to make a full withdrawal election after you turn 70½ and are separated from Federal service, but you will still need to receive the IRS-required minimum distributions.
5. If you are separated from the federal government, you can take monthly, quarterly, or annual payments.
6. You can stop, start, or make changes to your scheduled installment payments at any time.

For more information concerning TSP’s withdrawal options, contact TSP’s ThriftLine directly at 1-877-968-3778. For withdrawal forms, TSP Publications and to read the TSP Highlights for up-to-date information visit the Thrift Savings Plan website.

You will be required to complete a retirement application and other forms and documents. Your servicing personnel office will review your application and will verify your service history, prepare an annuity estimate, and gather all of the required forms from your OPF. These forms and the retirement papers will be forwarded to USDA. Prior to submitting the package to USDA, your specialist will call you to discuss your final annuity estimate or any other issues you may have. (If the specialist is unable to reach you, he/she will still submit your papers by the effective date of your retirement.)

USDA will submit your retirement forms and your final retirement record (SF2806/SF3100) to the Office of Personnel Management (OPM). USDA will notify you once your papers have been forwarded to OPM. Upon receipt of your retirement documents, OPM will send you a civil service annuity number (CSA number). Please allow 7 to 10 business days, after receipt of your CSA number, for your first interim annuity payment.

Your specialist will provide you with the "Notice of Agency Processing of Application for Retirement " which will explain "What to expect " and provide key information to assist you with tracking the progress of your retirement. He/She will also send you a copy of your annuity estimate, and copies of some of the required forms that are sent to OPM with your application. If you have not received this package within 10 business days after your retirement effective date, please send an email to rabaservices@cbp.dhs.gov or call RABAS at 202-325-6180.

You should receive your last paycheck on the normal schedule. After OPM has received your retirement papers, you should receive an interim payment equal to approximately 80% of your full annuity. This process should take about 8 weeks following your retirement date. During the interim period, no deductions will be taken for health or life insurance. The interim payment schedule will continue until all records have been verified by OPM. At that time, you will receive a full annuity check including any additional back pay owed for the interim pay cycle minus FEHB, FEGLI, and other appropriate deductions.

CSRS retirees: The first COLA is prorated by using the following formula:

COLA rate * Number of months of annuity roll = Prorated COLA

FERS retirees: Do not receive a COLA until age 62, unless retired under special provisions (such as, law enforcement, firefighter, or air traffic controller). If retired prior to age 62, the first cost-of-living increase will not be prorated if you reach your 62nd birthday before Dec 1. The increase is normally 1% less than the increase in the Consumer Price Index (CPI) as determined by law.

Permanent Address: The current address that payroll has will be forwarded to OPM. Many people move after retirement. When completing the retirement application, the address should be the same as on file at your payroll office. If that address is changing due to a move, change the address with payroll. OPM will send your retirement information to the address of record.

Direct Deposit: When your records are transferred to OPM, current allotments will stop. The electronic funds transfer (EFT) information will flow to OPM from payroll and will be used by OPM to send your retirement annuity. All Federal payment recipients are to receive their payments by EFT if possible. The only exception is for those individuals who certify in writing that they do not have a checking or savings account into which their payments could be directly deposited, and that accounts have not be established on their behalf by authorized payment agents. In this situation, your payments will be mailed to you in the form of a check.

Tax Withholding: OPM has agreements with some states to allow the withholding of state income taxes from annuity payments. Contact OPM for additional information.

Unless otherwise specified, Federal income tax will be withheld at the married with three allowances rate. You may change this election by completing a W-4P, Withholdings Certificate for Pension or Annuity Payment, and submitting it with your retirement application.

Information about the taxation of your annuity is explained in IRS Publication 721, Tax Guide to U.S. Civil Service Benefits, which may be obtained free by calling 1-800-TAX-FORM, or through the IRS website.

Visit the following OPM website for additional tax information: OPM Calculators.

Once you receive your Civil Service Annuity (CSA) number, you may contact OPM by calling their Retirement Information Office at either the nationwide toll-free number, 1-88 US OPM RET (1-888-767-6738) or, for customers within the Washington, DC calling area, 202-606-0500, or for hearing impaired customers, 1-800-878-5707 (TDD). When you call, you can use the automated phone system, which is available 24 hours a day, seven days a week, or talk to a Customer Service Specialist from 7:30 a.m. to 7:45 p.m. Eastern time, Monday through Friday.

To use the automated phone system's features, you will need your CSA number and your Personal Identification Number (PIN). After OPM completes processing your retirement, they will send you a PIN. You can also obtain a PIN by calling a Customer Service Specialist, who will arrange to have a PIN mailed to you.

Some of the things you can do by using the automated system include:

• Report a missing payment
• Change your address
• Change Federal and State income tax withholding amounts
• Request verification of your income
• Request the current value of your life insurance
• Request verification of the survivor benefits you are providing
• Request retirement forms and brochure

OPM is continuing to add features to the automated system to permit you to take actions yourself. The automated features are not available if you call OPM on a rotary telephone. You would need to speak to a Customer Service Specialist.

You can also contact OPM and make retirement changes through their online web service at www.servicesonline.opm.gov. OPM's main retirement web site is www.opm.gov/retirement-services.

If you need to write to OPM, the mailing address for general correspondence is:

U.S. Office of Personnel Management
Retirement Operation Center (ROC)
Post Office Box 45
Boyers, Pennsylvania 16017