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Pop Quiz: Can You Tell Truth From Fiction in Federal Retirement?

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I’ve been hearing a lot of false rumors lately, which tells me it’s time for another pop quiz to test your knowledge. Below are 10 statements I’ve heard recently from retirement specialists, financial advisers, federal employees and retirees. Some of them are true and some are false Can you tell which is which? If you get nine out of 10, that’s basically a perfect score, since statements three and four are specific to either the Civil Service Retirement System or the Federal Employees Retirement System.)

  1. If you continue to be employed, once you reach age 70, you no longer have to pay the FICA Social Security tax.
  2. If you are 65 and covered by the Federal Employees Health Benefits Program through your own or your spouse’s current employment (or any insurance through your spouse’s current employment), you should enroll in Medicare Part A, but can delay enrollment in Part B without penalty until you or your spouse retires. You will have an eight month special enrollment period following your or your spouse’s retirement.
  3. For CSRS (and CSRS Offset) retirees, on Jan. 1, 2019, you will receive the 2018 cost of living adjustment to your retirement benefit. If you retired on any date from Dec. 4, 2017 to Jan. 3, 2018, you will receive 11/12 of the 2018 COLA adjustment.
  4. For FERS retirees, on Jan. 1, you will be paid your December FERS retirement benefit. In order to receive the full COLA for 2018, you need to have been retired since November 2017 and be at your minimum retirement age or older. (There is an exception for special groups, such as law enforcement officers).
  5. It never makes sense for a federal retiree (or survivor annuitant) who has FEHBP coverage to enroll in Medicare Part C (Medicare Advantage) or Medicare Part D (prescription drug coverage).
  6. Next year the Thrift Savings Plan will implement new provisions that will provide more flexibility when withdrawing your retirement savings. Retirees who have already taken a partial withdrawal from the TSP will be able to request multiple partial withdrawals from their account even if they are receiving a series of monthly payments.
  7. Once you have purchased a life annuity from the TSP, you can change the dollar amount of the payments on an annual basis. If the interest rate increases in the future, your annuity payments will be increased to reflect the higher rate.
  8. If you marry after retirement, you can elect a survivor annuity for your new spouse within two years of the date of marriage. You will have an actuarial reduction to your retirement benefit based on your age and the date of your retirement or the date that the last survivor election reduction ended, in addition to the regular survivor election reduction.
  9. In order for a surviving spouse to be covered under your FEHBP coverage, they must be covered for five years prior to your death.
  10. You may file for Social Security benefits based on your spouse’s work record while delaying your own Social Security benefit to age 70 in order to take advantage of substantial delayed retirement credits if you were born on or before Jan. 1, 1954.

Answers:

  1. False. If you’re employed in a position subject to FICA tax, your age is not a factor. The Social Security tax rate is 6.2 percent each for the employee and employer, unchanged from 2018. The Social Security wage base limit is $132,900 for 2019.
  2. True. Medicare Part A has no monthly premium for most individuals and the only reason for an employee not to enroll is if you want to continue to contribute to a health savings account with a high deductible health plan.
  3. True. The first COLA will be prorated based on how many months you were retired during the previous year. The January CSRS retirement payment is the payment for the month of December. If you retired on any date after Dec. 3, 2017 to Jan. 3, 2018, your retirement didn’t officially commence until January 2018, which means you were only retired for 11 months before December 2018. Your retirement benefit payable on Jan. 1, 2019 will be adjusted by 11/12 of the 2018 COLA. Likewise, if you retired on Sept. 30, 2018, you will only have been retired for two months before Dec. 1, 2018, therefore you will be entitled to 2/12 of the 2018 COLA. (The COLA for 2018 was announced this week as 2.8 percent.)
  4. False. The first COLA for most FERS retirees won’t occur until after retirement and once they are age 62 or older. The FERS COLA is a “diet COLA” and is often delayed. As under CSRS, the amount of the COLA is determined by the percent change in the base quarter consumer price index from the previous year to the year in which the COLA is to become effective. Generally, FERS COLAs are 1 percent less than the increase in the CPI as determined under the law. However, if the CPI increase is between 2 and 3 percent the FERS COLA is 2 percent. If the increase is 2 percent or less, the FERS COLA matches the CPI increase. The COLA payable on Jan. 1, 2019 for eligible FERS retirees will be 2 percent.
  5. False. The word “never” should have been your clue. There are Medicare savings programs available for beneficiaries who meet certain conditions related to income or other special needs. To learn more about these programs, contact a well-trained volunteer at your State Health Insurance Assistance Program.
  6. True. As long as you have a balance of at least $200 or more in your TSP account, you will be able to take advantage of more flexible withdrawal options that will become available in about September 2019. The Securities and Exchange commission, along with the TSP, recently presented an informative webinar that outlines these changes.
  7. False. The TSP annuity is not the same as a TSP monthly payment. A monthly payment is one of the other full withdrawal options that you have when you leave federal service. If you have chosen an annuity, you can’t change either the annuity option or your choice of joint annuitant after the TSP has purchased the annuity for you.
  8. True. Retirees who marry can change their survivor election and their FEHBP election to cover their new spouse. For more information, see my previous columns, More Things to Consider When Making Your Annuity Election and 5 Things You Can Change After You Retire.
  9. False. In order for a surviving spouse to retain coverage under your FEHBP plan, they need to be covered on the date of your death and they have to be entitled to a full or partial survivor benefit (or a death in service benefit).
  10. True. Although the option of filing an application restricted to spousal Social Security benefits is disappearing, it is still available to those born on or before Jan. 1, 1954. To learn more about this option, visit Social Security’s website.

How did you do on the quiz? If you’re a regular reader of this column, I hope you scored well. To learn more about pre-retirement and retirement training opportunities, please visit my website.

Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at www.retirefederal.com and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement and the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on NITPInc.com.

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