Feeling Special

Most federal employees fall under either the Civil Service Retirement System or the newer Federal Employees Retirement System. But within these systems there are special retirement provisions for law enforcement officers, firefighters and air traffic controllers. For these employees, the rules to qualify for retirement are different, as are the calculations used to compute benefits.

This week, I'll look at some of these differences. If you have specific questions that aren't answered, please add your thoughts in the comment section that follows the column and I will address them in a future column.

Rules and Requirements

First, let's look at the specific factors affecting law enforcement officers, firefighters and air traffic controllers.

• An employee in one of these special groups must meet both the age and service requirements at the time of separation to be eligible for retirement. For example, if Lydia decides to resign at 42 with 20 years of law enforcement service, she will be eligible for a deferred annuity at 62 if she is covered under CSRS or at her minimum retirement age if she is covered under FERS. She is not eligible to begin receiving her benefit at 50 since she left federal service before she reached her 50th birthday. Her benefit would be computed under regular CSRS or FERS computation rules, not the more generous law enforcement computation.
• Mandatory retirement does not apply to employees who are eligible for retirement under the special provisions but who are not currently occupying a law enforcement officer, air traffic controller or firefighter position.
• There is no reduction for age for special group retirements.

Here are some online resources on eligibility requirements:

• CSRS and FERS Handbook, Chapter 46, Special Retirement Provisions for Law Enforcement Officers, Firefighters, Air Traffic Controllers and Military Reserve Technicians.
• Law Enforcement and Firefighters, CSRS, Retirement Facts #14
• Federal Employees Retirement System: An Overview of Your Benefits

FERS Computation

Law enforcement officers and firefighters contribute an extra 0.5% of salary toward CSRS and FERS to qualify for their enhanced benefits. So do air traffic controllers covered under FERS.

Here's a chart on calculating your benefits if you're in one of these types of positions under FERS:

A very quick way to estimate the supplement is to use the following formula:

You can get an annual Social Security personal benefits estimate at the Social Security Web site.

For more information on the special supplement, see Supplementing FERS (Jan. 26, 2007) and Supplementary Information (Feb. 2, 2007).

Also remember that you are entitled to an annual cost-of-living adjustment on your FERS basic retirement benefit, regardless of your age.

CSRS Computation

For air traffic controllers, the general formula for CSRS retirement is used to compute the basic annuity; however, a minimum benefit is guaranteed. Once a controller has completed 20 years of service, he or she is guaranteed to receive the greater of:

• 50 percent of high-three average salary; or
• The basic annuity computed under the general formula based on all years of service.

A controller who owes a redeposit of retirement contributions will not be entitled to the guaranteed 50 percent unless he or she pays the redeposit.

For law enforcement officers and firefighters under CSRS, the following formula applies:

Since there are tax issues related to Thrift Savings Plan withdrawals, be sure to take the time to understand the tax consequences of your decisions. If you receive a TSP distribution before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty equal to 10 percent of any portion of the distribution not transferred or rolled over. The additional 10 percent tax generally does not apply to payments that are:

• Paid after you separate from service during or after the year you reach age 55.
• Made because you are totally and permanently disabled.
• Paid as substantially equal payments over your life expectancy.
• Annuity payments.
• Ordered by a domestic relations court.
• Made because of death.
• Made in a year in which you have deductible medical expenses that exceed 7.5 percent of your adjusted gross income.

You might want to postpone your TSP withdrawal until you reach 59½ or later, unless you are covered by one of the exceptions listed above. If you are going on to other employment, you may want to transfer your TSP account to your new employer's retirement plan so that you could access the money without penalty if you retire from your second career during or after the year you reach age 55. If you would like to estimate your monthly payments based on substantially equal payments over a life expectancy or an annuity payout, use the calculators located on the TSP Web site.

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.