How to do you ask for a drink at a restaurant? Do you order soda, pop, a soft drink, or a Coke? In some parts of the country, a request for a Coke is interpreted as simply asking for a carbonated beverage, not necessarily Coca-Cola. That can be confusing.
The same thing is sometimes true in the federal benefits world. For example, the term “annuity” is often used to describe a retirement or survivor benefit. But annuity also can be used to describe a life insurance product or the TSP annuity withdrawal option. These are all very different benefits, but what they have in common is a lifetime stream of income, so they each can be referred to as an annuity.
Other terms describing federal benefits can be equally hard to sort out. Let’s look at some of them.
Medicare and Medicaid
Medicare is health insurance for people age 65 and over and certain people with disabilities or end stage renal disease. Original Medicare is made up of Part A (hospital insurance) and Part B (doctor’s coverage or outpatient care). Medicare also has Part C (also known as Medicare Advantage) and Part D (prescription drug coverage). Many federal retirees enroll in Medicare A and B along with one of their Federal Employee Health Benefits Program options.
Medicaid is a joint federal and state program that helps with medical costs for some people with limited income and resources. According to the Kaiser Family Foundation, Medicaid covers six out of 10 nursing home residents.
Disability Insurance and Long Term Care Insurance
Disability insurance helps provide replacement income when you can no longer work due to a physical or mental impairment that prevents you from being employed. The Social Security Administration provides federal disability insurance, and insurance companies also offer policies. Most federal employees can’t purchase a disability insurance policy as part of their federal insurance benefit options, but long-term disability benefits are payable as a disability retirement benefit under the Civil Service Retirement System and the Federal Employees Retirement System.
Long-term care insurance provides a resource to be used to pay for personal care for someone who needs help with the activities of daily living. The Federal Long Term Care Insurance Program and other long term care policies provide a daily dollar amount of benefits to pay for care in a home setting, adult day care, assisted living facility or nursing home.
Cost of Living Adjustment and General Pay Adjustment
Federal retirees (usually) receive an annual COLA in order to maintain the buying power of their retirement benefits. This is prescribed by law in Title 5 of the U.S. Code. The COLA applies to Social Security benefits, military retired pay and CSRS retirement and survivor benefits. The FERS retirement and survivor benefit receives a less generous COLA.
Pay adjustments for current federal employees, on the other hand, are more complicated because they can be influenced by politics and are administered through the budgeting process every year. Although federal law prescribes a formula for setting the pay for federal workers under the General Schedule, the president can choose to differ from this formula, and Congress can ultimately propose and pass any raise it wants.
Government Pension Offset and CSRS Offset
The Government Pension Offset reduces and often eliminates the entitlement to receive Social Security spouse’s and widow’s benefits for retirees who are receiving a pension from work not covered by Social Security—such as a CSRS benefit. It was enacted in 1977. A related restriction, the Windfall Elimination Provision, was created in 1982.
CSRS Offset, on the other hand, is the retirement coverage for employees who had a break in service after completing five years of coverage under CSRS and returned to federal service after 1983. These employees pay the full Social Security tax which “offsets” their 7 percent contribution to CSRS. Likewise, at retirement, the Social Security retirement benefit earned from CSRS Offset service will reduce the earned CSRS retirement benefit for those qualified to receive Social Security retirement.
Given terminology like this, it’s no wonder federal retirement planning can be complicated. You not only need to understand the relationship between benefits earned through CSRS or FERS, Social Security and the Thrift Savings Plan, but also comprehend the language used by an employee benefits specialist in the retirement division of a federal agency. By the way, would such a place be called the “personnel office,” the “human resources office,” or the “office of human capital?” Well, that depends!