7/15/2013. Benefits. Annuity offering guaranteed lifetime retirement income with a survivor benefit annuity option. Employee Contributions

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1 Injured Workers Retirement Options Presented by: Heather M. Nichol, HR Specialist Department of Veterans Affairs Objectives Ensure that employees have their rights preserved in the event OWCP benefits are terminated Understand retirement benefits Identify retirement options to determine eligibility. Demonstrate an understanding of retirement options to help employees make informed decisions Describe coordination of benefits between OWCP and retirement. The Conundrum Disabled employees unable to return to work get to choose between receiving higher-paying workers compensation benefits or the lower-paying federal retirement plans. 1

2 There is no time or age limit on receipt of Federal Workers Compensation benefits. Some injured Federal workers receive compensation on the Periodic Roll for the rest of their natural lives. A GAO Report found that in 2010, 31,880 of all Workers Compensation beneficiaries were long term, full time recipients Of those, 10,873 were at full retirement age.¹ ¹GAO R, Federal Employees Compensation Act. Why? Why would an injured worker choose retirement? 2

3 To Avoid Medical Examinations OWCP is required by regulation to request annual medical evaluations of injured Federal workers who receive medical and monetary benefits as a consequence of the injury sustained while working for the Federal Government. Compensation Is Not Guaranteed Compensation and/or medical benefits can be terminated at any time. If the injured worker ever recovers enough to work at least a sedentary job, or if their accepted condition resolves, OWCP attempts to get them back to work or terminates their benefits. Ongoing Legislation There is legislation currently being considered which would prevent receipt of Workers Compensation benefits past Social Security retirement age. 3

4 Limited Benefits Benefits to survivors are limited under Workers Compensation A Side Note If an injured employee recovers from their workplace injury and has cashed out their retirement out, there is no entitlement under the Federal Retirement System. Retirement Options 4

5 CSRS/CSRS Offset/FERS Overview Calculating Retirement Annuities Determining a High-3 How CSRS and FERS annuities are calculated Disability Retirement Eligibility How Disability Retirements are calculated Benefits Survivor Benefit FEHB FEGLI TSP Leave CSRS Overview Generally, all federal and postal employees hired before 1984 (unless they opted for FERS coverage in one of the open seasons in 1987 or 1998). Benefits Annuity offering guaranteed lifetime retirement income with a survivor benefit annuity option Employee Contributions 7.0% to CSRS Retirement & Disability Trust Fund 1.45% to Medicare There is no contribution to Social Security and no entitlement unless credits have been earned under other employment. CSRS employees can contribute up to $16,500 (in 2009) of basic pay per year. There are no matching contributions to the TSP from the government for CSRS employees. CSRS Offset Overview An employee having five or more years of CSRS coverage prior to Jan. 1, 1987, a break in service exceeding 365 days, and was rehired by the government following the break (after Dec. 31, 1983) Benefits Covered by CSRS annuity and Social Security Employee Contributions 0.8 % basic pay into CSRS 6.2% of first $106,800 of wages (in 2009) to Social Security (FICA) 1.45% to Medicare Thrift Savings Plan same as regular CSRS 5

6 Retirement Eligibility CSRS/CSRS Offset Voluntary Age Years of Service Early Out Any Age 25 Deferred 62* 5 Disability Any Age 5 * At age 62, annuity, based on annuity earned at the time of separation. FERS Overview All federal and postal employees hired after January 1, 1984 (or CSRS- covered employees that opted for FERS coverage in one of the open seasons in 1987 or 1998) Benefits Annuity offering guaranteed lifetime retirement income with a survivor benefit annuity option Employee contributions 0.8% to FERS Retirement & Disability Trust Fund 1.45% to Medicare 6.2% of first $106,800 of wages (in 2009) to Social Security Thrift Savings Plan FERS employees can contribute up to $16,500 (in 2009) of basic pay per year. The government automatically contributes 1% of employee's basic pay to the TSP; up to 5% of basic pay depending on the amount of the employee's contribution Retirement Eligibility FERS Optional MRA 30 years years 62 5 years MRA 10 years* Deferred Any age 5 years Disability Any age 18 months Early Out Any age 25 years years *Reduced 5% for each year under age 62. 6

7 FERS Minimum Retirement Age Birth Date MRA Before mos mos mos mos l0 mos mos mos mos mos l0 mos. Calculating Retirements High-3 Highest rate of basic pay in effect over any thirty- six months of service. It does not include overtime, Sunday premiums, or shift differential. It starts and ends whichever dates give the highest 3 years of basic pay. 7

8 CSRS CREDITABLE CIVILIAN SERVICE CAREER APPOINTMENT CONTRIBUTATIONS WITHHELD NONCAREER APPOINTMENT (NON-DEDUCTION SERVICE NO DEDUCTIONS WITHHELD) Contributions Contributions Non-deduction Non-deduction Not Refunded Refunded Service Prior to Service on or after Credit for Eligibility Credit for Eligibility (RCD) and Annuity (RCD) and Credit for Annuity if refunded Deposit Deposit Not Deposit Deposit Not service ended before Made Made Made Made (annuity Actuarially reduced). Otherwise, not Credit for Credit for Credit for Credit for creditable for annuity Eligibility Eligibility Eligibility Eligibility unless redeposit is (RCD) and (RCD) and (RCD) and (RCD) no Made Annuity Annuity. Annuity credit for Annuity Annuity reduced by 10% of deposit due Annuity Computation CSRS/CSRS Offset Factors Affecting The Annuity 1. Length of Service Civilian Military Sick leave 2. High -3 Average Pay 1.5% X High-3 for the first 5 years Civil Service Retirement Service (CSRS/CSRS/Offset) Computation Formula 1.75% X High-3 for the next 5 years (Years 6-10) 20%XHi 2.0% High- 3f for all years and months over 10 years Includes credit for unused sick leave. Maximum Annuity - 80% of High-3 You will reach this percentage after 41 years and 11 months of service, although sick leave can increase your annuity over 80%. 8

9 CSRS Offset CSRS Offset Employees receive full CSRS Benefits until they become eligible for Social Security. After CSRS Offset Employees become eligible for Social Security, their pension is offset by the lesser of: 1) Social Security Benefit attributable to offset service. 2) SS Benefit X Total Years of Offset Service 40 FERS Computation Formula Factors Affecting The Annuity 1. Length of Service Civilian Military (if MSD Paid) 2. High-3 Average Pay FERS CREDITABLE CIVILIAN SERVICE CAREER APPOINTMENT (Contributions Withheld) NON-CAREER APPOINTMENT (Non-deduction Service-Deductions Not Withheld) Contributions Not Refunded Credit for Eligibility (RCD) and Annuity Prior to FERS* Contributions Refunded After FERS Prior to Deposit Deposit Not Made Made On or After Deposit Credit for Eligibility (RCD) and Annuity Deposit Not Made No Credit for Eligibility (RCD)) or Annuity, unless Redeposit is Made No Credit- Deposit is Not Allowed Credit for Eligibility (RCD) ** and Annuity NO Credit for Eligibility (RCD) or Annuity Unless Deposit is Made No Credit- Deposit is Not Allowed 9

10 FERS Computation Formula 1% X High-3 Average Salary X Years of Service Exception: If the retiree is 62 or older and has 20 or more years of service: 1.1% X High 3 X Average Salary X Years of Service *An annuity supplement, where applicable FERS Annuity Supplement The supplement is a proration of the expected age 62 Social Security (SSA) benefits - to provide retired employees with a temporary source of SSA income until age 62. FERS employees are eligible for the supplement at or after the minimum retirement age. Disability Retirement Eligibility CSRS/CSRS Offset Any age with 5 years of Federal civilian service creditable under CSRS FERS 18 months of Federal civilian service creditable under FERS 10

11 Additional Considerations Disabled, because of disease or injury, for useful and efficient service in your current position. The disability expected to last at least one year. Your agency must certify that it is unable to accommodate your disabling medical condition. CSRS/CSRS Offset Disability Retirement Calculation Guaranteed Minimum: 1. The annuity you have earned, based on your service to date Or the lesser of: percent of your high-3 average salary 2. The regular annuity obtained after increasing your service by the time between your retirement and your 60th birthday. FERS Disability Retirement Calculation Under Age 62 For the first 12 months After the first 12 months When you reach age 62 your annuity will be recomputed as if you had continued working until the day before your 62nd birthday and then retired under FERS. Formula 60% of your high-3 average salary minus 100% of your Social security benefit 40% of your high-3 average salary minus 60% of your Social Security benefit. 11

12 Some Limitations Must apply before your separation from service or within one year thereafter. CSRS Offset and FERS Employees must apply for social security disability benefits and their benefits will be offset. Retirement Benefits Survivor Benefits FEHB FEGLI TSP Leave 12

13 Survivor Benefits Allows you to provide a survivor annuity for your spouse. CSRS May elect a Survivor Benefit up to 55% of your annuity (or as low as 1%) before reduction. To provide for a survivor annuity, your annuity will be reduced by: 2.5 percent of the first $ 3,600 plus 10 percent of the annuity over $ 3,600 FERS Only 2 Options: A survivor benefit equal to 50% of your annuity, with a reduction in your monthly payment of 10% A survivor benefit equal to 25% of your annuity, with a reduction in your monthly payment of 5% Survivor Benefits (continued) The Spousal Equity Act of 1984 required spousal consent as to whether they wanted survivor benefits. You must elect a survivor annuity in order for spouse to continue health benefits after death of annuitant. Insurable Interest Annuity An employee retiring in good health may elect a reduced annuity to provide a survivor benefit for a person who has an insurable interest in the employee. An insurable interest may exist between the retiree and any other individual who has a reasonable expectation of financial benefit, which would terminate upon the death of the retiree. The reduction in the additional annuity depends on the difference in the ages between the retiree and the person named as the survivor. Percent: Older, same age, or less than 5 10% 5 but less than 10 15% 10 but less than 15 20% 15 but less than 20 25% 20 but less than 25 30% 25 but less than 30 35% 30 or more 40% 13

14 FEHB Eligibility You must retire on an immediate annuity Have been enrolled in any plan for at least 5 years (immediate preceding retirement) or if enrolled less than 5 years, from the date of your first opportunity to enroll. Cost varies according to plan; equals federal employee monthly rate. You will pay the same amount that you currently pay but in monthly (not bi-weekly) payments. Surviving spouse covered only if survivor annuity is elected and family coverage is in place at time of death. Federal Employee Group Life Insurance (FEGLI) Eligibility 1. Retire on an immediate annuity 2. Covered for the last five years of service or from first opportunity to enroll. You can carry up to the amount of insurance that you have as an employee; however, new elections will be made at the time of your retirement and you can reduce your coverage at that time. TSP Withdrawal Options Withdraw account in a single payment. One time partial payment. Withdraw account in a series of equal monthly payments. All or part of the payment may be transferred to an IRA or other eligible plan. Receive a life annuity. (To purchase an annuity, account balance must be at least $3,500). Defer until age 70½ 14

15 Another Side Note Payment of basic life insurance benefits if no beneficiary is on record. Order of precedence Designated beneficiary (SF 2823) Widow or Widower Children Parents Executor, Administrator of Estate Next of Kin Leave Sick Leave Under CSRS and CSRS/Offset, unused sick leave is added to the number of years and months of service for annuity computation purposes. Under FERS, unused sick leave is currently credited at ½ for annuity computation purposes. Starting in 2014, FERS employees will receive full credit for unused sick leave. Annual Leave A separating employee may receive a lump sum payment for accumulated annual leave up to 440 hrs. Post-Retirement FEHB and FEGLI benefits will continue uninterrupted. Once per year, retirees have open season,,j just like active employees. CSRS employees will receive COLA immediately after retirement. FERS employees will begin to receive COLA after the age of

16 Coordination of FECA and OPM Benefits Employee Election 5 USC 8116 provides that while an employee is receiving FECA wage-loss for total disability, that employee may not receive retirement payments from OPM. If an employee is eligible for both disability retirement and FECA wage loss, that employee must elect which benefit to receive. Exception: An employee may receive a Schedule Award concurrently with an OPM or disability retirement benefit. Why Apply? Separated injured worker receiving WC should apply for either a disability or regular retirement benefits. Applying for retirement benefits protects future retirement benefits for the employee and their survivors. OPM will suspend annuity payments while WC payments are being received. 16

17 Keep In Mind The election is not irrevocable. If benefits provided by the Federal Retirement plan are elected, the employee is still entitled to payment of medical expenses for the accepted condition. If FECA benefits are elected, the employee may concurrently receive any benefits payable from the Thrift Savings plan. Keep OWCP in the Loop When an Employee has established a retirement date with the Agency The Agency knows that a retirement application has been sent to OPM When the Agency receives notification that a disability retirement has been approved OWCP will determine whether a clamant has qualified for, or is receiving benefits from another Agency and whether that benefit will affect the claimant s FECA entitlement. 17

18 Questions? 18