How retirement benefits changed in 2012.
With all of this talk of cliffs and cuts and chains, it’s no wonder some federal employees are beginning to panic. While it’s still not clear what changes might come in the federal retirement world in 2013 as Congress and the White House seek to seal a deficit reduction deal, I thought we could at least take a look back at some of the things that happened in 2012.
Let’s start at the beginning, almost a year ago.
Civil Service Retirement System retirees (including survivor annuitants), Social Security recipients and military retirees received a 3.6 percent cost-of-living adjustment. CSRS retirees whose benefits began between Jan. 1, 2011 and Nov. 30, 2011, received a portion of this COLA based on the number of months they were retired before Dec. 1, 2011.
Federal Employees Retirement System retirees, eligible survivor annuitants and members of special groups such as law enforcement officers and firefighters received a “diet COLA” of 2.6 percent. FERS retirees who were entitled to the COLA, but whose benefits began between Jan. 1, 2011 and Nov. 30, 2011, received a pro-rated COLA.
The interest rate that applies to some CSRS civilian and military service credit deposits changed to 2.25 percent for 2012.
The FICA tax remained at 4.2 percent for employees and the maximum taxable wage subject to this tax increased to $110,100.
The earnings limit for retirees receiving the FERS supplement and for Social Security beneficiaries who are younger than their full retirement age increased to $14,640.
The annual limit for elective deferrals to the Thrift Savings Plan went up to $17,000, with the catch-up contribution amount set at $5,500. The Office of Personnel Management launched a plan to address delays in recent retirees receiving their benefits. The average processing time for a retirement case in December 2011 was 156 days. Some were (and are) backlogged much longer. In January 2012, OPM had a backlog of more than 61,000 pending claims. As of November 2012, the backlog had been cut to 31,704. OPM is working toward a goal of 60-day case processing by July 2013, with fewer than 13,000 cases backlogged.
The Thrift Savings Plan Enhancement Act of 2009 authorized the TSP to add a Roth feature. This benefit allows participants to contribute on an after-tax basis to their TSP accounts and receive tax-free earnings when they withdraw the funds (assuming certain criteria are met).
On July 6, President Obama signed the “Moving Ahead for Progress in the 21st Century Act” into law. It included a phased retirement option for federal employees to ease into retirement while continuing to work part-time and receiving partial retirement benefits. OPM Director John Berry said on Federal News Radio this week that regulations to implement the new option are on the fast track.
Also in July, OPM announced the 2012 Federal Employees Health Benefits Program open season. In its bulletin, OPM outlined the Affordable Care Act changes that will be implemented for 2013. Among them: The maximum annual election for health care flexible spending accounts and limited expense health care flexible spending accounts will change from $5,000 to $2,500.
On July 20, the Obama administration published a series of proposed rules extending certain health and retirement benefits to same-sex partners of federal employees.
President Obama told congressional leaders the two-year pay freeze for federal employees would extend until at least April 2013.
The Supreme Court agreed to take up the question of whether Congress can deny legally married gay couples federal benefits otherwise available to married people. A provision of the federal Defense of Marriage Act limits a range of health and pension benefits to heterosexual couples. The justices chose for their review the case of 83-year-old Edith Windsor, who sued to challenge a $363,000 federal estate tax bill after her partner of 44 years died in 2009.
And finally, federal employees waited on pins and needles for word on whether President Obama would declare a day off for federal employees on Christmas Eve. History suggested he would, but as fiscal cliff talks dragged on, it looked less and less likely.