Weekend Reading on Your Federal Benefits 11-18.jpg

(for the week of March 10th – March 16th)

You’re too busy during the week to keep up on all the news around your employee benefits and pay. My weekly summary of the most interesting and relevant news stories could help you and includes my comments and insights.

By the way, if you’ve read something about your employee benefits that you think is important or interesting, share it. And, let me know about news sources that you follow. Have a great weekend.

George Ray
Federal Benefits Online

In this week’s Federal benefits news, we follow up on the retirement application backlog, learn where retirees will pay the lowest taxes, keep a watch on proposals to change sick leave and within-grade raises, and discover the cruelties of being an Oshiver. Let’s get started.

OPM Prepares for Surge as Number of Retirement Claims Double

From govmatters.tv

This is an update from our story last week about the missing retirement tsunami, although I believe the headline is a bit misleading. In this six-minute video segment from Government Matters TV, host Francis Rose gets it straight from the horse’s mouth, so to speak. Mr. Kenneth Zawodny, Associate Director of Retirement Services at OPM’s Retirement Processing Center says in this interview that people are just going to retire when they’re ready to retire. Although lots of political and budget challenges continue to happen in the background, he believes most people just like their jobs, feel fulfilled, enjoy the camaraderie, and want to keep working. Yes, 31% are currently eligible to retire, and they’ll get around to it when they’re good and ready.

What I found more interesting about Ken’s interview was that OPM doesn’t consider the cases they are processing to be a backlog. They call it a ‘working inventory’. This makes sense. There are always cases coming in, and always cases going out. There will never be a caseload of zero. Typically, they receive an average of 7,000-8,000 retirement applications per month. Of course, the number increases in January and February, but the cases are being processed in about 59 days on average. While they’re being processed, 80-85% of the employee’s final retirement pay is being paid as an interim payment and can begin as soon as within five days after OPM receives the retirement paperwork according to Mr. Zawodny.

OPM is also beginning to get more information in digital format which can speed up the process, but the challenges include receiving information from different agencies where someone may have worked many years ago and getting their information in different formats too. One exciting bit of news that came up at the end of the interview is that they are working on an online retirement application, but there is no timeline yet as to when it might become available.

Which States Have the Highest Income Tax Rates?

From Fedsmith.com

This question or a variation of it (like which states have no income tax? Or which states won’t tax my pension after retirement?) comes up frequently during benefits training sessions. As employees begin to think about retiring, one of the questions which need to be considered is do I want to move somewhere else for my retirement. Many retirees want to stay where they’ve lived for most of their lives, but others often want to go somewhere else, maybe where it’s warm and sunny like Arizona or Florida. Or they may want to move nearer to other family members, like their children. As I’m sure you know, there are many issues to consider besides taxes when it comes to retirement.

We likely know the income tax rate for our own state but could use an easy (maybe even visual) way to compare our state to others. Ian Smith at Fedsmith.com grabs the ‘How High Are Income Tax Rates in Your State?’ map from the Tax Foundation for his article. If you want, you can get just the image here.

And it’s not just income tax that should be considered. What about property tax and sales tax? They can certainly affect your standard of living in retirement. So, Ian also provides a link to a USA Today article with a table containing this information for each state and a Kiplinger article that shows which states tax your Social Security benefit. But I hate it when I have to click through 13 pages to get the information I’m looking for (I like the lists and tables) so I prefer this article, 13 States That Tax Social Security at The Motley Fool for this information instead. Where will you retire and why there? Let me know.

Proposed Combination of Annual, Sick Leave Would Reduce Total Time Off

Plan to Stretch Out Within-Grade Raises Would Add Year to Wait for Each

Fedweek.com

Both of these articles from Fedweek.com remind us to keep a close watch on pay and benefits proposals that could be making their way through Congress this year. The administration wants to merge your annual leave and sick leave into one form of leave to provide a similar plan to what many private sector companies offer to their employees. A 2016 report by the conservative Heritage Foundation, whose views have influence in the administration, said that following prevailing private sector practices would result in Federal employees receiving 10 to 12 fewer total paid days off than they receive currently.

Another proposal (this one from OPM) would lengthen the waiting period between GS within-grade raises by adding a year to the waiting period to each. The effect would be to lengthen the time it would take to advance from the first step of a grade to the top–where such raises end–from 18 to 27 years. OPM may believe that this could help the argument that these raises don’t have a performance element (the current administration is pushing for performance-based pay increases) and only reward longevity since they are paid in 99.7% of the cases.

Resigning Instead of Retiring

From govexec.com

If you were eligible to retire with your pension, why would you not take it? Tammy Flanagan deals with this question in her article for Government Executive this week by providing some reasons why.

One of the more common issues that I often encounter deals with FERS-covered employees who have reached Minimum Retirement Age (MRA) but have less than 30 years of service. Under the MRA+10 rule, you can receive your pension (after leaving service) if you have 10 or more years of service. The only problem with that is the fact that your benefit will be permanently reduced by 5% for each year that you’re under age 62. That often stops someone from taking a pension even though the rules currently permit it.

Tammy also explains that a Fed who retires may have the possibility of coming back into service as a reemployed annuitant. This requires your new salary to be offset by the amount of your retirement benefit, so you will only receive the difference (although there are some exceptions). If you feel the possibility is good that you may come back into service after leaving, simply resigning instead of retiring may be a better option.

Of course, divorces can get nasty and you may even see an employee quit without taking his or her pension rather than be subject to the court order which awards a portion of it to the former spouse. In other cases, an employee may continue to work well beyond being eligible for retirement in order to avoid giving up some of his or her pension to that former spouse.

As she did in her last article, Tammy took me down the rabbit hole and into the 1990 court case of Sylvia Oshiver vs. OPM. Mr. Oshiver apparently abandoned his wife and 3-year-old daughter and managed to disappear from the face of the earth by 1986. After being declared a missing person, Mrs. Oshiver tried to apply for his pension benefit, but the court said that it’s a personal right which cannot be delegated to a trustee or guardian. So, Mr. Oshiver went to some extreme measures to deny his wife and daughter (as well as himself) any of his pension. Now that’s pretty cruel. What an Oshiver!

See you next week. Thanks!

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