Feeling Special: Q&A

In last week's column, I invited you to submit questions on special retirement provisions for law enforcement officers, firefighters and air traffic controllers. Here are some of your submissions, along with my responses.

Computation of the Basic Retirement Benefit

Q: I worked as a regular federal employee for 13 years under the Federal Employees Retirement System (FERS), and at the age of 37 obtained a position as a law enforcement officer. I plan to retire after the mandatory 20 years at age 57. I understand how to calculate the benefits after the 20 years of LEO service, but what happens to the 13 years of federal service prior to becoming a LEO?

Here's a variation: I had 10 years in a non-LEO position before becoming a LEO. How are those years factored into the calculations?

A: The requirement for the special computation is 20 years of covered law enforcement (or air traffic controllers or firefighter) service. The author of the first question, for example, would meet this requirement at age 57. The computation for the 20 years would be:

1.7% x high-three x 20

The following computation would apply for any additional years of service beyond 20. It would apply regardless of whether you spent those extra years in military or civilian jobs, and it would even apply if you spent the additional years in law enforcement.

1% x high-three x additional service (beyond 20 years)

For law enforcement officers and firefighters in the Civil Service Retirement System, the answer is the same, although you would use the CSRS formula for your computations.

Avoiding the Tax Penalty on Distributions

Q: I am a 23-year veteran of the FBI, and will turn 55 on Dec. 16, 2010. I am interested in working until the calendar year in which I turn 55 (2010) to access my Thrift Savings Plan funds without penalty, and I also want to cash out the maximum annual leave payment.

A: The additional 10 percent tax on TSP distributions generally does not apply if you wait to retire until the year you turn 55. So in your case, if you retire any time in 2010 (even on Jan. 1), you won't need to worry about paying the early withdrawal tax penalty on your TSP distributions. Keep in mind that if you are retiring under FERS, you want to retire on the last day of a month, if possible. If you retire any other day of the month, your salary will stop, but your retirement won't start until the following month. So if you are planning an end-of-the-year retirement so that you can maximize your lump sum annual leave payout, you could retire Dec. 31 following your birthday.

Not Enough Special Time to Qualify

Q: Thanks for your very informative articles, especially your latest. I have 32 years of federal service, five and a half of which (1981-1986) I spent as an FBI agent in the 1811 series. My current position is in the 1801 series. Will there be a different formula used to compute the 1811 service, and will it be added into my retirement computation?

A similar question: If an employee has a combination of federal law enforcement and civilian service, how does this affect the retirement calculations? For instance, what if the employee only had five years of law enforcement service and 25 years of civilian service?

A: If you didn't complete 20 years of covered service, then your investigator service will count as regular federal service and will not be treated with the special computation rules. You paid the required extra 0.5 percent into the retirement fund during that time, but that won't make any difference to your retirement computation unless you meet all of the requirements for the law enforcement retirement.

Other Special Service

Q: What about federal employees who have spent time working on Capitol Hill?

A: Members of Congress receive an unreduced annuity at age 50 with 20 years of service, or at any age with 25 years of service. Congressional staff members must meet the same age and service requirements as other employees.

If you have at least five years of congressional service, your annuity under FERS would be:

1.7% of high-three average pay x years of congressional service up to 20
+
1% of high-3 average pay x any additional years of service

Your CSRS annuity with at least five years of congressional service would be:

2.5% of high-three average pay x all years of congressional service
+
Up to 5 years of military credit

The basic annuity cannot exceed 80 percent of the high-three average salary. Other service is computed under the general CSRS formula, substituting the congressional formula for the years of special service.

FERS Supplement

Q: In your recent column on the benefits for special retirement, you stated that the supplemental check (Social Security) is reduced based on earning limitations. I recently attended a law enforcement (FERS) retirement training program. I was told there are no earning limitations from age 50 to 57, and then the limitation takes effect until age 62. Could you clarify? A: This is true. Review my previous columns from earlier this year: "Supplementary Information" and "Supplementing FERS"?

The supplement is never payable after age 62, whether or not a retiree is entitled to or applies for Social Security benefits at that time. For some, it will end sooner. If a retiree's earnings exceed an annual earnings limit, the supplement will be reduced by $1 for every $2 that is earned above that amount. The earnings limit for 2007 is $12,960. The Office of Personnel Management asks each retiree who has reached the minimum retirement age for a statement of earnings each year he or she is eligible to receive the annuity supplement.

The reduction for excess earnings does not apply to employees who retire under the special provisions for law enforcement officers, firefighters, air traffic controllers and military reserve technicians until they reach the minimum retirement age (55 to 57, depending on year of birth). This OPM chart will help you figure out your minimum retirement age: http://www.opm.gov/retire/html/faqs/faq11.asp Eligibility

Q: I will have 28 years of service in the Bureau of Prisons when I'm 49. If I retire from this position, what would my Social Security supplement be and what percentage would I receive from the government?

A: If you retire under FERS with a total of 28 years of service and with at least 25 years of covered law enforcement service, you would be eligible to immediately receive a FERS basic benefit of 42 percent of your high-three average salary: (1.7% x 20 years) + (1% x 8 years)

Your supplement would equal about 70 percent of your age 62 Social Security benefit.

Q: I am 42, covered under FERS with 17 years of service in a primary LEO position. I have seven years of military service for which I have paid a deposit. My question is, can I retire in three years at age 45 with 20 years LEO service and seven years of military credit under the 25 years/any age rule?

A: Military service generally cannot be used to meet the minimum service requirement. Under certain circumstances, however, an individual entering military service directly from a civilian position is entitled to have that period of service treated as if it were civilian. If the individual was in a law enforcement or firefighter position at the time of entry into the military, the period creditable as civilian service may be used toward satisfying the minimum service requirement.

Air Traffic Controller Requirements

Q: How does Section 226 of the Vision 100-Century of Aviation Reauthorization Act (Public Law 108-176, adopted Feb. 10, 2004), affect air traffic controller retirement?

New provisions were added that apply only to retiring air traffic controllers and former controllers who meet certain criteria. Under 5 U.S.C. 8412(a), retirement is permitted at minimum retirement age, which is between 55 and 57, depending on your date of birth, and with 30 years of service. If an individual meets the provisions as stated or has at least five years of air traffic control service (as defined by 5 U.S.C. (a)(1)(A)(i): actively engaged in the separation and control of air traffic), the retiree's annuity will be computed at a rate of 1.7 percent for all years of service in lieu of the 1 percent after 20 that would normally apply. There has been much discussion, but nothing definitive from OPM. Have you heard anything that this law is being applied by OPM?

A: Good question, but this is one that I'm not familiar with. I would love to see a comment from someone who can help.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.