Issue 32-17
(for the week of August 5th – August 11th)
You’re too busy during the week to keep up on all the news around your employee benefits and pay. My weekly summary of some of the most interesting and relevant news stories could help and includes some of my insights. You might just refer to it as “What’s George been reading this week?”
By the way, if you’ve read something about your employee benefits that you think is important or interesting, send it to me. And, let me know about news sources that you follow. Have a great weekend.
George Ray
Federal Benefits Online
In this week’s news, one agency decides to give everyone an early retirement offer, someone needs to explain to Congress that your pension has already been paid for, and there are 3 things you may not understand about the TSP. I’ve also included my own recent blog post on how getting credit for non-deduction service could help you to retire sooner and with more money. Let’s get started.
Agency Jobs Watch: Widespread Early Retirement Offered at One Agency
From Govexec.com
This story updates a list of workforce changes that agencies are making or getting ready to make. The most striking announcement came recently from the Social Security Administration, which is the ‘One Agency’ mentioned in the headline. Social Security has decided to provide all its employees, except for 1,600 Administrative Law Judges, with the opportunity to take early retirement. About 15,000 employees are eligible according to OPM data – which is about 25% of the Social Security Administration’s workforce, and there is no limit to the number of employees who can accept the offer!
This is an unusual (and potentially destructive) decision because OPM’s own ‘Guide to Voluntary Early Retirement Regulations’ for agencies states that ‘The agency planning for a substantial reduction in force or other restructuring action should not open a VERA window to all eligible employees with the goal of counting the remaining staff after the window closes to see if any critical positions are now vacant. The “shotgun” use of VERA may complicate (rather than minimize) staffing shortages resulting from any organizational change. The final result may even hamper the agency’s immediate ability to carry out its mission.’ I couldn’t have said it better (which is why I quoted them).
This comes after years of the Social Security Administration warning us of the cumulative effects of sustained cuts at their agency, telling us that Congressional proposals would cause delays in retiree benefit processing, an increase in the backlog of disability claims, reductions in field office hours and longer wait times for those calling Social Security for customer service. So, will offering everyone early retirement fix any of those challenges?
The good news is that the SSA ranked 9 out of the 18 best large Federal agencies to work for (although its score dropped slightly from the previous year), so maybe not a lot of employees will take them up on their offer to leave.
Side note: If you’re interested in how your agency ranks, you can find lots of information at the Best Places to Work in the Federal Government web site sponsored by the Partnership for Public Service.
How Do You Take Away a Benefit That’s Already Been Paid For?
From FedSmith.com
John Grobe beat me to the punch with this article. As a former pension consultant (earlier in my career), I kept asking myself a similar question. Why would Congress take away a benefit that’s already been funded? You see, with pension plans (like FERS), an actuary does lots of complicated math to determine how much an organization must contribute into an account to be able to provide the retirement benefits the company (or government) is promising its workers. The reason we’ve seen some private sector plans and even public-sector plans (I’m looking at you CALPERS) have difficulties and terminate their plans is because the funding rules do have some ‘professional discretion’ in them (like using different assumed interest rates for the calculations). This has caused some organizations to get way behind on their funding obligations. And, then we read about their plans in the news (still looking at you CALPERS).
But that’s not the case for the FERS pension plan which was designed so that there would be no unfunded liability. That means that all the money that needs to go into the Civil Service Retirement and Disability Fund (which has a current balance of more than $875 billion) is already there to pay for all the retirement benefits that the Federal government has promised its current FERS-covered workers. That includes the Special Retirement Supplement, Cost of Living Adjustments (COLAs), and survivor benefits – some of which have recently been on the table for cuts in the current administration’s budget.
You pay for some of the cost of your pension benefit out of your pay check and your agency picks up the rest of the cost from its budget. OPM’s actuaries update the Cost Factors using 10-year historical averages and inform your agency how much it must pay. By the time you’re ready to retire, all the money needed to pay your FERS pension for the rest of your life (as well as an assumption for the COLA) is already sitting there in the trust fund for you. So, taking away benefits (like the COLA or Special Retirement Supplement) for those already in the plan won’t do anything to reduce the Federal deficit.
John argues that current employees and retirees should not be subject to any cuts to their pension benefits (I agree) and suggests that Congress is proposing to steal (that’s rather harsh) $875 billion from current employees and retirees. He says, ‘No onboard federal employee should be subjected to a reduction in promised retirement benefits.’ Someone needs to explain this to Congress.
3 Things You May Not Understand About the TSP
From Govexec.com
This column from Tammy Flanagan is a follow-up to her column last week about the Thrift Savings Plan and offers you some help with your TSP by answering the questions ‘How Does Matching Work?’, ‘What is a Full Withdrawal?’, and ‘Can You Really Catch Up with Catch-Up Contributions?’ She includes links to brochures about making withdrawals after leaving service, and a useful worksheet from the TSP to help you calculate your bi-weekly contributions to make certain that you don’t lose any of the matching contributions from your agency.
Get Credit for Non-Deduction Service ASAP
From federalbenefitsonline.com
One of the most troubling issues that I see when talking with Federal employees during benefits training sessions is a lack of awareness on how non-deduction service can be used to increase the amount of creditable service that may be used for their pension calculation and eligibility. Feds rarely know about non-deduction service and how to get credit for it. That’s unfortunate because learning about how to get credit for non-deduction service as early as possible in your career could save you thousands of dollars later if this issue affects you.
See you next week. Thanks.
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Issue 32-17
Published by Federal Benefits Online.
Copyright © 2017
Author: George Ray