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Avoiding Tax Pitfalls

Will Rogers once said, “The difference between death and taxes is death doesn’t get worse every time Congress meets.” Many people today would probably still agree with this sentiment.

The obligation to pay taxes doesn’t end when your federal career ends. Federal retirees generally have to pay federal and sometimes state tax on their retirement income, including their Civil Service Retirement System or Federal Employees Retirement System benefit, income generated from their Thrift Savings Plan accounts and Social Security benefits.

Congress approved a major tax overhaul last December. It remains to be seen exactly what impact it will have, since the specifics of the implementation of the law are still being worked out. The IRS has been providing updates as information becomes available.

Federal retirees can use the following resources to find information about taxes on their TSP withdrawals, federal retirement benefits and Social Security benefits:

The Benefit That Already Can Be Cut

If you’re covered under the Federal Employees Retirement System and are potentially eligible to receive the FERS Annuity Supplement, you may have heard that proposals are circulating to eliminate it. But even if that doesn’t happen, you should be aware that the supplement can be reduced or eliminated if you return to work while you are receiving it. Many FERS employees have questions about how and why that happens.

Before I try to explain, here’s a quick overview of this benefit.

The FERS supplement serves as a monetary bridge between retiring under FERS and qualifying for Social Security retirement benefits. The income produced from the FERS supplement helps to fill in the gap of the missing Social Security retirement benefit.

Employees who retire under FERS with an unreduced, immediate retirement benefit and who are under age 62 are eligible to receive the supplement. This includes those who retire at the FERS minimum retirement age with 30 or more years of creditable service and also those who retire at age 60 with 20 or more years of service. In addition, the supplement is payable to “special provision” retirees, including federal law enforcement officers, firefighters and air traffic controllers...

The Benefits of Retirement Counseling

I recently received an email from an employee that highlights a key issue: the loss of the personal contact that used to be the norm for retirement counseling in most federal agencies. Starting in the 1990s, the consolidation and centralization of retirement services and pre-retirement counseling has become ever more common in agencies.

The email I received included a response from a federal human resources manager to a suggestion that someone from HR be made available for retirement counseling appointments at the agency’s Washington office:

Thank you for the suggestions but unfortunately they are not feasible due to budgetary constraints. As you are aware, our agency has 11 regions situated throughout the United States and we have Benefits and Retirement Specialists available to employees in every region. I would like to point out that in FY17 my team provided over 1,800 retirement estimates to customers throughout the agency and we processed over 380 retirements to OPM; and so far in FY18 we have provided over 770 retirement estimates and have processed 200 retirements to OPM. The excellent service we provide is not only for employees located in the DC area; we consider the needs of the entire agency...

Are You Ready to Spend Your Retirement Savings?

Have you started to think about how you’re going to use your Thrift Savings Plan investments once you retire from federal service? Are you already retired? If you’re among the many people who have accumulated a small fortune, what are you going to do with it?

Many federal employees have used some of their retirement savings during their career by borrowing from their accounts using the TSP loan program. According to recent statistics, more than 250,000 TSP loan transactions are processed every year. In addition, more than 120,000 in-service withdrawals are processed for financial hardship as well as age-based withdrawals for employees age 59 ½ and older. Over the past few years, only about 35,000 separated participants per year have initiated monthly payments from their TSP accounts. Meanwhile, the Office of Personnel Management processes about 100,000 federal retirement claims every year.

Over the years, you’ve had to decide how much of your salary to save in the TSP and in which funds to invest those savings. Considering the TSP had a balance at the end of January of $559 billion, the 5.2 million TSP participants have done an amazing job of accumulating retirement...

Change is Coming to Health Plans

News about changes to retirement and insurance benefits always gets the attention of employees who are planning to retire as well as those who already have. Sometimes the news is good, sometimes not.

There’s already news about the 2018 insurance open season that is causing some buzz, even though open season doesn’t start until Nov. 12 (and ends on Dec. 10).

Let’s look at some of the changes on the horizon.

Supplemental Dental Insurance

This change will be of particular interest to military retirees and family members. Delta Dental is no longer going to be available for military retirees under the TRICARE Retiree Dental Program after Dec. 31, 2018. That’s the bad news, but the good news is that retired service members and their families will be eligible to participate in the Federal Employees Dental and Vision Insurance Program. Many military retirees already have the option to participate in FEDVIP due to civilian employment, but there are those who have stayed with the TRDP even though they’ve had access to FEDVIP.

Delta Dental has been the TRDP dental insurance provider and is also available under FEDVIP in a high and standard option. But even though...