9 minute read

Countdown to COLA

an extension, your agency must notify you in writing of your mandatory date at least 60 days in advance. Action to separate the employee is not effective until the last day of the month in which the 60-day notice expires.

TRANSFER OF DECEASED SPOUSE’S TSP

QI’m an active federal employee. Last year my spouse, who has been retired under FERS, passed away at age 65 and I inherited his TSP account. I decided to transfer his TSP balance into my TSP account. I am currently 62 and plan to retire in a couple of months. Is there anything I should be aware of?

AInitially, your late husband’s TSP account was used to create a “Beneficiary Participant Account” (BPA) for you. For surviving spouses who choose to keep the inherited BPA, please refer to the Beneficiary Participant Account Guide booklet 33 available at https://www.tsp.gov/ publications/tspbk33.pdf.

For BPAs, the TSP will calculate any required minimum distributions (RMDs) to be paid in the year of the participant’s death using the deceased participant’s age, prior yearend account balance, and the IRS Uniform Lifetime Table. If your spouse was younger than 72 and would not have turned 72 before the end of the year, you must begin receiving RMDs by December 31st of the year your spouse would have turned 72. In the years following the deceased participant’s death, they calculate the annual amount of your RMD using your age, your prior year-end account balance, and the IRS Single Life Expectancy Table.

One major downside to a BPA from a tax standpoint is that death benefit payments made from a BPA must be paid directly to your beneficiary(ies). These payments are subject to certain tax restrictions and cannot be rolled over to an IRA or eligible employer plan. In addition, your beneficiary(ies) will have to pay the full amount of taxes on the taxable portions of the payment in the year it is received.

Now that you’ve moved this money to your TSP account, it is important to understand required minimum distribution (RMD) and other tax requirements that will apply to your entire TSP account. Please see TSP Publication 26, Tax Rules about TSP Payments here https://www.tsp.gov/ publications/tspbk26.pdf.

RETIREMENT

SURVIVOR BENEFIT FOR SPOUSE OF FERS ANNUITANT

LI am a retired Federal Employees Retirement System (FERS) employee. When I retired, I elected a full survivor benefit for my spouse. My spouse is currently receiving monthly Social Security payments based on her own work record. If I predecease my spouse, will my spouse’s FERS survivor benefit from OPM be affected by the money she receives each month from Social Security? Will the Social Security benefit that she earned for herself be affected by the FERS survivor benefit that she would receive?

AUpon your death, the FERS survivor benefit that you elected for her will never affect the Social Security benefit that your wife earned for herself, and vice versa. Her Social Security benefit will never have a negative impact on her FERS survivor benefit payment from OPM.

FEHB COVERAGE FOR NEW SPOUSE

QAlthough I am a federal retiree, I’m also a surviving spouse of a

COUNTDOWN TO COLA

MONTH CPI-W Monthly % Change

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPIW) increased 1.57 percent in June 2022. To calculate the 2023 cost-of-living adjustment (COLA), the 2022 third- % Change quarter indices will from 253.412 be averaged and OCTOBER 2021 271.552 0.92 1.17 compared with the NOVEMBER 273.042 0.55 1.72 2021 third-quarter average of 268.421. DECEMBER 273.925 0.32 2.05 The percentage JANUARY 2022 276.296 0.87 2.93 increase determines FEBRUARY 278.943 0.96 3.92 the COLA. June’s index, MARCH 283.176 1.52 5.50 292.542, is up 8.99 APRIL 284.575 0.49 6.02 percent from the base. MAY 288.022 1.21 7.30 The CPI represents purchases of food and JUNE 292.542 1.57 8.99 beverages, housing, apparel, JULY transportation, medical AUGUST care, recreation, education and communication, and SEPTEMBER other goods and services. For FECA COLA updates, visit narfe.org and search for FECA.

federal retiree. I had a choice to keep my FEHB coverage under my retirement or my survivor benefit from OPM. I chose the latter. I recently got remarried and was told by OPM that I could not put my new spouse under my FEHB plan. Is that true?

AUnfortunately, if you are receiving your FEHB coverage through a survivor annuity, a change in family status based on additional family members can only occur if the additional family members are family members of the deceased employee or annuitant. If you are also receiving an annuity based on your own federal career, you may be eligible to transfer your enrollment to your retirement annuity from your survivor annuity so that you can provide coverage to your new spouse and his/her children. For more information, see OPM pamphlet, Information for Retirees and Survivor Annuitants, RI 79-2 here https://www. opm.gov/retirement-services/ publications-forms/pamphlets/ ri79-2.pdf.

FERS SURVIVOR ANNUITY SUPPLEMENT

QWhat is a FERS Spousal Supplement?

AA surviving spouse may be eligible for a spousal annuity supplement if they are entitled to a FERS current spouse survivor annuity and are under age 60. This benefit is paid in addition to the FERS spousal survivor annuity if the surviving spouse is entitled to Social Security survivor benefits at age 60 based on the deceased annuitant’s employment under Social Security and if the surviving spouse is not presently eligible for Social Security mother, father or disability benefits based on the deceased annuitant’s account. Although the regular survivor benefit elected may continue for the life of the surviving spouse, the FERS Spousal Supplement is only payable until age 60, regardless of whether the surviving spouse claims the widow/widower benefit from Social Security. The spousal annuity supplement is not subject to the Social Security earnings test, and it is increased by FERS COLAs.

FERS SURVIVOR ANNUITY SUPPLEMENT

QI am retired under CSRS Offset* retirement coverage. My spouse retired under FERS and elected the maximum survivor benefit for me that will provide 50% of her FERS retirement if she dies first. My spouse is currently receiving a larger Social Security monthly payment than I am. If my spouse predeceases me, will my survivor benefit from her FERS annuity be affected by the money I receive each month from Social Security? Will my Social Security benefit be affected by the FERS survivor benefit that I would receive?

AUpon your spouse’s death, you will be entitled to the full FERS spousal survivor benefit that she elected for you. The FERS survivor benefit payable to you will not affect any Social Security benefit that you earned for yourself, or any Social Security benefit that she may have earned for you. If you are younger than age 60 upon your spouse’s death, you would also qualify for a FERS spousal annuity supplement in addition to the regular FERS survivor benefit until the Social Security widow’s benefit becomes available to you (see previous question regarding the FERS Spousal Supplement).

If you spent the last 60 months (five years) of your federal career paying Social Security taxes as a CSRS Offset employee, then you will be exempt from the Government Pension Offset (GPO) rule, which means that the Social Security benefit that your spouse earned for you will allow your Social Security benefit to increase if the widow’s benefit is higher than your earned Social Security retirement benefit amount.

Be sure to watch the webinar archived in the Federal Benefits Institute on the NARFE website titled, CSRS Offset: The Best of Both Worlds or a Nightmare? *CSRS Offset was created in 1987 and generally accommodates employees who had at least five years of prior creditable civilian service prior to January 1, 1987, covered under CSRS and were rehired after 1983 with more than a one-year break in service. CSRS Offset coverage requires paying the FICA tax along with a reduced CSRS contribution.

GOVERNMENT PENSION OFFSET

QI have been having an issue with not receiving spousal benefits when my husband claimed his Social Security retirement benefit last year. I am already receiving my own earned Social Security benefit. At 68, I am over my full retirement age for Social Security. I should be receiving 50% of my husband’s Social Security benefit, which is $110/month more than my own earned Social Security retirement benefit. Social Security has informed me that because I worked under CSRS in the 1980s, I am not entitled to this spousal benefit. They said that due to

the Government Pension Offset (GPO), my entitlement to spousal Social Security benefits is being reduced because I earned a pension from work not covered by Social Security. When I left the government, I took a refund of my retirement contributions, which forfeited my right to a CSRS retirement benefit. Why am I being penalized by the GPO? What can I do? For now, this is only a loss of $110/month, but should my husband predecease me, the amount will be much more substantial.

AThere is so much confusion about the “evil twins” (Government Pension Offset and Windfall Elimination Provision). From time to time, even the “experts” get confused. The GPO reduces the widow’s benefit based on your late spouse’s Social Security record by two-thirds of your CSRS retirement. Since you are not receiving a CSRS retirement benefit, you are exempt from the GPO reduction. Here is a reference to the Social Security Program Operations Manual System (POMS) regarding the GPO for someone who forfeited their retirement under CSRS by receiving a refund of their CSRS retirement contributions. GN 02608.400 Determining Pension Applicability and Pension Amount: Withdrawals from a defined benefit plan, before or after eligibility for the pension, of only employee contributions plus any interest (i.e., none of the employer contributions are included in the withdrawal), and whereby the employee forfeits all rights to a pension, are not pensions for GPO purposes. This rule applies even if the employer paid the employee contributions for the employee (i.e., some employers may pay for the employee’s contribution).

Perhaps you can provide this reference when you contact Social Security along with a copy of your receipt from your refunded CSRS contributions to show why you should not be impacted by the GPO.

To obtain an answer to a federal benefits question, NARFE members should call 800-456-8410 and select option 2 for the Federal Benefits Institute; send the question by postal mail to NARFE Headquarters, ATTN: Federal Benefits; or submit it by email to fedbenefits@narfe.org.

FEDERAL RETIREMENT BOOTCAMP

703-691-9200 keenpocock.com info@keenpocock.com KEY TOPICS COVERED:

Proper Asset Allocation

Tax-efficient investing & withdrawal strategies

Social Security claiming strategies

Roth conversion strategies

Stealth taxes

Beneficiary designations

FEHB and FEGLI in retirement

Retirement income projections Call TODAY for a complimentary meeting

Advisory services offered through Strategic Blueprint, LLC. Securities offered through The Strategic Financial Alliance, Inc. (SFA), member FINRA/SIPC. Strategic Blueprint and SFA are affiliated through common ownership but otherwise unaffiliated with Keen & Pocock.

This article is from: