OPM had to process nearly 36,000 retirement applications in January 2023. With another surge expected, here's what prospective retirees should be aware of.

OPM had to process nearly 36,000 retirement applications in January 2023. With another surge expected, here's what prospective retirees should be aware of. Catherine Falls Commercial / Getty Images

End of the year retirement: Now what?

As OPM readies for its influx of new retirement applications, here are some insights on the early ins and outs of the retirement process.

The Office of Personnel Management prepares for the end-of-the-year “surge” of new retirements that will be arriving at OPM next month. 

In January 2023, OPM received more than 12,000 new claims to be processed along with more than 24,000 claims waiting to be processed in the existing inventory.  

It is not known how many new claims will be received next month, however, there are around 8,000 fewer claims waiting to be processed than there were last year at this time. That should be good news for those preparing to retire this month as this may indicate that the final retirement process may be completed in a timelier manner. No promises, but wishful thinking!  Here are some common questions that new retirees want answered:

How is my lump sum annual leave payment computed and when will I receive the payout?

The payout of your annual leave balance is computed based on your hourly rate of basic pay. For example, if your final salary was paid at the GS-13, Step 10 rate in Washington, DC, your final salary was $145,617. The hourly rate would be $69.77 ($145,617 / 2087 hours). 

On Jan. 14, 2024, that salary will increase when the 2024 federal pay raise goes into effect. The lump sum annual leave payout will equal the pay you would have received if you had remained employed until the expiration of the period covered by the annual leave. 

An employee who is cashing in 448 hours of unused annual leave hours (240 hours carried over from 2022 plus the 208 hours accrued and not used in 2023), would receive a lump sum payment of 80 hours paid at the 2023 pay rate and the remaining 368 hours paid at the rate that takes effect on Jan. 14, 2024, which is the beginning of the 2024 leave year for most federal workers. 

Both the House and Senate passed the fiscal 2024 National Defense Authorization Act, which is expected to be signed by the President, which authorizes a 5.2 percent pay increase for military service members and civilian federal employees. If you had gone on leave instead of retiring on Dec. 31, 448 hours of leave would have lasted over 11 weeks.  

Before you get too excited, this payment is subject to taxes (federal, state, FICA and Medicare, as applicable), but not subject to withholdings for retirement (FERS, CSRS or TSP) or insurance (FEHB, FEGLI, FLTCIP or FEDVIP). This is the final payment you will receive from your payroll provider. It may come as soon as the pay period following your final paycheck or it can take months, depending on the policy of your payroll system. Check with your retirement specialist at your agency for guidance.

How will the 2023 retiree cost-of-living allowance increase affect my retirement if I retired on Dec. 31, 2023?

Unfortunately, you won’t receive any of the 2023 increase of 3.2% for those under the Civil Service Retirement System or 2.2% for those covered by the Federal Employees Retirement System. That’s because if you retire on Dec.31, 2023, you weren’t retired during any of the 2023 rating period, which ran from December 2022 through November 2023. 

Your first COLA will be granted on Dec. 1, 2024, and paid in your January 2025 retirement payment as 11/12 of the 2024 COLA amount. Because you weren’t an annuitant until January 2024, your adjustment is prorated to reflect 11 months rather than the full annual COLA. Most retirees are eligible for COLA starting at the age of 62 under FERS except for survivor annuitants, disability annuitants and certain special groups (i.e. law enforcement, firefighters, air traffic controllers, etc.) who receive immediate COLAs. CSRS retirees receive “immediate” COLAs during the annual adjustment each year following their retirement.  

When will I receive my first retirement check?

That depends on several factors. The first is when your retirement application leaves your agency and arrives at OPM. Generally, this is shortly after you receive your last paycheck or within 30 days of your last workday. 

Within days of receiving your retirement package at OPM, you will be assigned a Civil Service Active number that will identify you as an annuitant. OPM will ask for this number in any communications, so keep it handy. If you haven’t received your CSA number yet, then any questions related to your retirement processing should be directed to the retirement specialist who processed your retirement at your former agency.

Once you are assigned a CSA number, you will be provided instructions for signing into OPM Services Online, where you should find information about the status of your retirement claim. Your first check generally will arrive about six weeks after your retirement date, but there is no guarantee. Also, the first check is usually a partial or interim payment that could be significantly less than you are expecting.

Interim payments do not include the FERS supplement that FERS retirees who retire under age 62 with immediate, unreduced for age benefits are entitled to receive. If you submitted a court order for OPM to pay benefits to your former spouse, this also could cause your interim benefits to be significantly less than you expect. OPM won’t know how much to withhold from your check until its Court Order Benefits Branch has reviewed the order. 

You will continue in interim status until the final adjudication of your retirement application. This can take 30 days, 180 days or, in rare cases, even longer. Delays could be due to errors in the application when you completed it, such as neglecting to sign one of the pages, leaving an item unanswered or failing to include a copy of your marriage certificate. 

Your HR office or payroll office also might make errors in completing their part of the application process. Processing at OPM can also be slowed by complications in your case, such as accounting for part-time service or when there is an unpaid deposit of refunded retirement contributions or service that may be creditable but didn’t have retirement deductions withheld. All military service credit deposits must be paid prior to your retirement. 

To learn more about retirement processing, see the OPM Retirement Quick Guide.

How do I apply for Social Security benefits?

In addition to your federal retirement benefit, you may also be applying for Social Security retirement benefits. You may file for Social Security retirement benefits up to four months before you want your benefits to begin, and you may receive benefits up to six months retroactively. 

Before applying for retirement benefits, remember that before you reach the Full Retirement Age (between age 66 and 67), your benefit payment will be temporarily reduced if you earn more than the annual earnings limit ($22,320 for 2024). You can work after Full Retirement Age and earn as much as you’d like without reducing your benefit payment.  You may also need to consider enrolling in Medicare Part B if you are retiring after age 65. 

You can apply for Social Security benefits and enroll in Medicare by calling 1-800-772-1213 (TTY 1-800-325-0778), Monday through Friday from 8 a.m. to 7 p.m. local time or visiting your local Social Security office. (Call first to make an appointment.)  

If you live outside of the United States, visit the Social Security Office of Earnings & International Operations page to find the office that serves your country of residence. For more information, go to Apply for Retirement Benefits and to Sign up for Medicare. You may also apply for benefits by creating a MySocialSecurity account or sign into your existing account.

What are the options for taking TSP distributions?

You have several options for how to use the money in your TSP account after you retire that include installment payments, a life annuity or partial or full distribution of your account. 

If you have other sources of income in retirement and don’t need money from your TSP account right now, you don’t need to request withdrawals until you reach a certain age and become subject to required minimum distributions (RMDs). To learn more about TSP Distributions and tax information, including required minimum distribution requirements, visit the TSP website or read publication 24, Distributions and publication 26, Tax Rules about TSP Payments.  

For your protection, the destination you wish to send your TSP payment must be on file for at least seven days before it can receive funds. This includes any postal address or any direct deposit information you’ve entered. Make sure this information is on file for at least seven days before you start your request. 

Lost, stolen, damaged or misdirected checks can take six weeks or longer to replace. The TSP will disburse partial and total withdrawal and distribution payments each business day. For participants who are separated from service and requesting installments, after the start date of an installment, subsequent installments are issued on the 15th (or next business day) of the month they’re due. Please allow a few days for payment processing. Be sure to keep your address current on your TSP account.

Final Tip:

You should be prepared for it to take more than 30 days to process your retirement claim. It also might take longer than expected to receive your first withdrawal from your Thrift Savings Plan account, because you can’t file for a post-separation withdrawal until the TSP has been notified by your former payroll office that you are no longer an employee. In addition to being patient with the whole process, it’s a good idea to have some cash on hand during the transition to annuitant status while you wait for the dust to settle.