How it could affect your retirement situation.
For some (though not all) federal employees, the threat of furloughs as a result of looming budget sequestration is real, and agencies are beginning to prepare for the possibility. Here are some things you should be aware of and resources you might want to have at your disposal if the threat becomes a reality.
For purposes of retirement credit, a furlough is treated as leave without pay. The rules governing the Civil Service Retirement System and the Federal Employees Retirement System allow up to six months of leave without pay to be credited towards the eligibility for and computation of retirement benefits during any calendar year. You are not required to make a deposit (payment) to the retirement fund under such a scenario. The high-three average salary used to compute benefits will not be affected, since it is the salary rate that is in effect that is used to compute the high-three, not the pay actually received.
Here’s what the Office of Personnel Management says about leave: “The accumulation of nonpay status hours during a leave year can affect the accrual of annual leave and sick leave. For example, when a full-time employee with an 80-hour biweekly tour of duty accumulates a total of 80 hours of nonpay status from the beginning of the leave year (either in one pay period, or over the course of several pay periods), the employee will not earn annual and sick leave in the pay period in which that 80-hour accumulation is reached. If the employee again accumulates 80 hours of nonpay status, he or she will again not earn leave in the pay period in which that new 80-hour total is reached. (This means that a full-time employee who is in the six-hour annual leave accrual category and who has accumulated 80 hours of nonpay status in the last pay period of the year will forfeit 10 hours of leave accrual in that pay period.) At the end of the leave year, any accumulation of nonpay status hours of less than 80 hours is zeroed out so that the accumulation for the next leave year starts at zero. For part-time employees, leave accrual is prorated based on hours in a pay status in each pay period; thus, time in nonpay status reduces leave accrual in each pay period containing such time.”
You will continue to make retirement contributions while on furlough. Employees who have retired will continue to receive their scheduled retirement benefits. You will remain covered under the Federal Employees Health Benefits Program and your share of the premium will accumulate and be withheld from your pay upon return to pay status if your salary is not enough to withhold the premiums.
For those with flexible spending accounts, if your salary is not sufficient to withhold the allotted amount of your FSA contribution, then the amount will be recalculated when you return to a pay status. Your expenses incurred during this period will not be reimbursed until your allotments are restarted and recalculated.
Federal Employees’ Group Life Insurance coverage continues for 12 consecutive months in a nonpay status without cost to you or your agency. You will not incur a debt if you are in a nonpay status. If your salary payments are not enough to cover the premiums for the Federal Dental and Vision Program or the Federal Long-Term Care Insurance Program, then you will be billed directly and will be required to make payments in a timely manner to continue your coverage.
Here are additional rules on the order of precedence of withholdings from your salary during a furlough.
Thrift Savings Plan Loans
If you expect to be furloughed on a periodic basis (for example, one day per pay period), you can take out a TSP loan. But you will be responsible for keeping your loan payments up to date if you don’t earn enough per pay period for your agency to make each required loan payment. Employees furloughed for discontinuous periods may not have enough gross pay for their agencies to make deductions for TSP loan payments. Agencies are not permitted to submit partial loan payments. If you do not have enough gross pay for your agency to make a deduction for your TSP loan payments, you must submit loan payments from your personal funds directly to TSP.
Some people might want to take advantage of a furlough to pick up some extra cash with a part-time job. Be careful if you do this, since while you are on furlough, you are still considered a federal employee. If you decide to take a part-time job during a furlough period, consult with your agency ethics office to be sure that there is no conflict for you to perform outside employment.
Backlog of Retirement Cases
The backlog of retirement applications at OPM should not be hindered by furloughs. The retirement services operation at OPM is funded by the Civil Service Retirement and Disability Fund, so retirement services employees still will be working during normal operating hours. If your agency has not submitted your retirement claim to OPM, then a furlough could affect the processing of your application at your agency, though.