Injured Workers Retirement Options NICOLE KELSCH WORKERS COMPENSATION PROGRAM MANAGER NORTH FLORIDA/SOUTH GEORGIA VETERANS HEALTH SYSTEM Objectives Identify retirement options to determine eligibility Understand retirement benefits to ensure employee have their rights preserved in the event OWCP benefits are terminated. Demonstrate an understanding of retirement options to help employees make informed decisions Describe coordination of benefits between OWCP and retirement. Retirement System Overview Federal Employees Retirement System (FERS), Federal Employees Retirement System Revised Annuity Employees (FERS-RAE) or Federal Employees Retirement System Further Revised Annuity Employees (FERS-FRAE) Civil Service Retirement System (CSRS) or CSRS- Offset Civil Service Retirement and Disability Fund Social Security Thrift Savings Plan 1
CSRS Background August 1, 1920 Single defined benefit based on high-3 average salary, length of service multiplied by a formula 7% or 7½% deposited into fund Social Security Amendments Act created CSRS Offset 8% or 1.3% deposited into CSRS fund and 6.2% of first $117,000 wages (2014) to Social Security (FICA) Thrift Savings Plan no agency matching contributions but eligible to save up to $17,500 per year (2014) FERS Background Social Security Amendments Act 1983 Effective January 1, 1987 Three Tiered Retirement System Defined benefit Employee contributions Immediate, deferred or postponed annuity Annuity Formula based on high-3 average salary x length of service x appropriate formula (1% or 1.1%) Social Security Not eligible until age 62 under normal circumstances Employee contributions = 6.2% up to $117,00 of wages Thrift Savings Plan Eligible immediately with or without penalty FERS Coverage FERS contribute.8% or 1.3% Employees first hired on or after January 1, 1984 CSRS employee rehired after more than 365 day break in service and less than 5 years creditable civilian service Employee that elects FERS FERS RAE contribute 3.1 or 3.6% BAL 13-102 Employee first hired on or after January 1, 2013 FERS Employees rehired after a break in service with less than 5 years creditable civilian service on 12/31/12 FERS FRAE contribute 4.4 or 4.9% BAL 14-102 Employee first hired on or after January 1, 2014 FERS employee rehired after a break in service with less than 5 years creditable civilian service on 12/31/12 2
Creditable Service Civilian Service Covered Non-Deduction Service Redeposit Service Military Service Unused Sick Leave CSRS and FERS unused sick leave added to length of service but can not use this to become eligible for retirement Covered Service Federal civilian service when retirement contributions were withheld from wages Counts for eligibility and computation Break in service less than 4 days LWOP aggregate 6 months in calendar year Intermittent service Part-time service OWCP Deposit Service CSRS Prior to 10/01/82, service is creditable for eligibility and annuity computation, however if a deposit is not made annuity will be reduced 10% of amount owed + interest. Interest is at the rate of 3% compounded annually After 09/30/82, deposit must be made for non-deduction service to be included in the annuity. Interest is charged annually at a variable interest rate. FERS Non-deduction service performed before 01/01/89 must make deposit to count for any retirement purpose. Service on 01/01/89 or later is not eligible for retirement purposes. 3
Redeposit Service CSRS Refunded service before 3/1/91, redeposit not required (actuarially reduced) Refunded 2/28/91 or after, counts for eligibility but redeposit must be made to be used in annuity computation FERS Refunded service is included for length of service in annuity computation with or without a deposit but NOT computation If the redeposit is made, fully creditable for both eligibility and computation. CSRS rules applies to CSRS time if there is a CSRS component Military Service Performed prior to separation upon which title to an annuity is based Military Retired generally must waive military retirement pay for time to be creditable FERS All Post-56 service requires a 3% deposit for military time to be creditable CSRS Post-56 (hired before 10/01/82) creditable for retirement eligibility but have a Catch 62 Annuity recomputed at age 62 if no deposit made If hired after 10/01/82, must complete 7% plus interest deposit before military time is creditable Sick Leave Used to increase service, not for meeting minimum length of service requirement (getting out the door) Can have more than 2087 hours Example: Retirement Date: 2014-12 - 31 Retirement SCD: 1978-09-01 Creditable Time: 36 years, 03 months, 30 days Add unused SL: 897 hours = 05 month 05 days Retirements are computed on full years and months only 35 days adds an extra month making computation based on 36 years 09 months, dropping the 05 days 4
Days 1 Day 1 Mth 2 Mths 3 Mths 4 Mths 5 Mths 6 Mths 7 Mths 8 Mths 9 Mths 10 Mths 11 Mths 0 0 174 348 522 696 870 1044 1217 1391 1565 1739 1913 1 6 180 354 528 701 875 1049 1223 1397 1571 1745 1919 2 12 186 359 533 707 881 1055 1229 1403 1577 1751 1925 3 17 191 365 539 713 887 1061 1235 1409 1583 1757 1930 4 23 197 371 545 719 893 1067 1241 1415 1588 1762 1936 5 29 203 377 551 725 899 1072 1246 1420 1594 1768 1942 6 35 209 383 557 730 904 1078 1252 1426 1600 1774 1948 7 41 214 388 562 736 910 1084 1258 1432 1606 1780 1954 8 46 220 394 568 742 916 1090 1264 1438 1612 1786 1959 9 52 226 400 574 748 922 1096 1270 1444 1617 1791 1965 10 58 232 406 580 754 928 1101 1275 1449 1623 1797 1971 11 64 238 412 586 759 933 1107 1281 1455 1629 1803 1977 12 70 243 417 591 765 939 1113 1287 1461 1635 1809 1983 13 75 249 423 597 771 945 1119 1293 1467 1641 1815 1988 14 81 255 429 603 777 951 1125 1299 1472 1646 1820 1994 15 87 261 435 609 783 957 1130 1304 1478 1652 1826 2000 16 93 267 441 615 788 962 1136 1310 1484 1658 1832 2006 17 99 272 446 620 794 968 1142 1316 1490 1664 1838 2012 18 104 278 452 626 800 974 1148 1322 1496 1670 1844 2017 19 110 284 458 632 806 980 1154 1328 1501 1675 1849 2023 20 116 290 464 638 812 986 1159 1333 1507 1681 1855 2029 21 122 296 470 643 817 991 1165 1339 1513 1687 1861 2035 22 128 301 475 649 823 997 1171 1345 1519 1693 1867 2041 23 133 307 481 655 829 1003 1177 1351 1525 1699 1873 2046 24 139 313 487 661 835 1009 1183 1357 1530 1704 1878 2052 25 146 319 493 667 841 1015 1188 1362 1536 1710 1884 2058 26 151 325 499 672 846 1020 1194 1368 1542 1716 1890 2064 27 157 330 504 678 852 1026 1200 1374 1548 1722 1896 2070 28 162 336 510 684 858 1032 1206 1380 1554 1728 1901 2075 29 168 342 516 690 864 1038 1212 1386 1559 1733 1907 2081 CSRS Retirement Options Voluntary Retirement Age 55 30 years of service Age 60 20 years of service Age 62 5 years of service Disability 5 years civilian service Deferred 5 years civilian = annuity begins at age 62 (may not re-enroll in health/life insurance) Early out age 50 with at least 20 years. or any age with 25 years of service. OPM Authority required. FERS Retirement Options Voluntary Retirement Minimum Retirement Age (MRA) with at least 30 years of service Age 60 20 years of service Age 62 5 years of service MRA + 10 years of service (permanent annuity reduction 5% per year for each year under age 62) Disability 18 months civilian service Deferred 5 years civilian = annuity begins at age 62 (may not re-enroll in health/life insurance) Early Out Age 50 with at least 20 years or any age with 25 years of service. OPM Authority required. Postponed Meet MRA+10 but collect annuity at age 62 without penalty. Option to re-enroll in health/life insurance 5
FERS Retirement Age Year of birth: Before 1948 1948 1949 1950 1951 1952 1953 to 1964 1965 1966 1967 1968 1969 After 1969 Your MRA is: 55 years 55 years, 2 months 55 years, 4 months 55 years, 6 months 55 years, 8 months 55 years, 10 months 56 56 years, 2 months 56 years, 4 months 56 years, 6 months 56 years, 8 months 56 years, 10 months 57 years High-3 Average Salary Average of the highest rates of basic pay Employee receives credit for the length of time served in a rate of pay Must be 3 consecutive years of service Example: if retirement date is 12/31/2014, and last three years are the highest three years salary, beginning dates for calculation would be 01/01/2012 Basic Pay Includes Regular Pay Locality Pay WG Night Differential Premium pay Market Pay Does not include Bonuses Overtime Allowances Special pay for recruiting & retention purposes 6
General Formula CSRS 1.5% x 5 years + 1.75%x 5 years + 2% x service over 10 years FERS 1% or 1.1% x years of service Retirement Factor Retirement Factor General Formula 30 Years Total Service, High 3 Salary of $60,705 CSRS 1.5% x 5 = 7.5% = $4,552.87 1.75% x 5 = 8.75% = $5,311.68 2.0% x 5 = 40% = $24,282.00 56.25% = $34,146.55 or $2,845.54 per month Maximum annuity = 80% (41 years, 11 months). Additional sick leave balance may increase your annuity beyond the 80% FERS Retire under age 62 1% x 30 = 30% = $18,211.50 or $1,517.62 per month Retire age 62 or older 1.1% x 30 = 33% = $20,032.65 or $1,669.38 per month FERS Annuity Supplement Provides supplemental income for retirees under age 62 provided they meet the following requirements: Voluntary Retirement at MRA with at least 30 years of service or age 60 after at least 20 years of service Early Voluntary Retirement at their MRA Discontinued Service - at their MRA Earnings Test = $15, 780 Annuity supplement offset by $1.00 for every $2.00 over this amount earned in 2015 7
Estimate the FERS Supplement 1. Check SSA benefit statement showing benefit at age 62. Example: $1,400 2. Compute number of calendar years of FERS civilian service. Do not include military buy back or CSRS time. Example: 30 years 3. Divide FERS years of service by number 40 to obtain a fraction. Example: 30 divided by 40 =.75 4. Multiply fraction by age 62 SSA benefit amount above. Example: $1,400 x.75 = $1,050.00 $1,050 = estimated FERS supplement per month FERS supplement is not included during interim payments Disability Retirement Benefit provided to protect an employee who is no longer able to provide useful and efficient service due to a medical condition Requirements Must be covered by and disabled while in a covered position Must have completed minimum civilian service 5 years CSRS, 18 months FERS Must meet disability criteria Application and extensive supporting medical documentation submitted to OPM for approval Periodic medical reviews Medically recovered Restored to earning capacity CSRS Disability Retirement Higher of the regular annuity formula (earned annuity) or guaranteed minimum The guaranteed minimum is the lesser of the following: 40% of your high-3 average salary, or Regular annuity obtained after increasing your service by the time between your retirement and your 60th birthday. Disability annuity reductions Survivor Benefits Unpaid Deposits Service before 10/1/82 no deposit necessary but reduced by 10% of deposit; service after 10/1/82 full deposit required Unpaid Redeposit CSRS Offset 8
FERS Disability Retirement First 12 months = 60% of high 3 salary minus 100% of Social Security Disability (if approved) After the first 12 months = 40% of high 3 salary minus 60% of Social Security Disability (if approved) Re-computed at age 62 as if the individual was employed for the entire time Survivor Benefits CSRS Survivor receives 55% of the base elected by retiree 2 ½ % x $3600 + 10 % x Amount of base in excess of $3600 FERS Full survivor annuity (50%) 10% of annuity Partial survivor annuity (25%) 5% of annuity Death Benefits CSRS Spouse receives 55% of higher of: Annuity under general formula or Guaranteed minimum which is lesser of: 40% of deceased employees high-3 or Regular annuity obtained after increasing deceased employees length of service to age 60 FERS Basic Death benefit $31,786.21 50% employee s final annual pay + $15,000 Monthly survivor benefit if employee had at least 10 years creditable service and died while under FERS Spouse may only retain FEHB if employee had family coverage on date of death 9
Commencing Date of Annuity CSRS First day of the month after separation from service and meets the age and service requirements Can work up to 3 days in the month and annuity will commence day after separation FERS First day of the month after separation from service and meets the age and service requirements Exceptions Disability and discontinued service retirements Cost of Living Adjustments (COLAS) CSRS Begins the first December after retirement First COLA is prorated FERS Generally not applied until the December after 62 Exceptions Disability LEO/FF ATC 47 Cost of Living Adjustments (COLAS) CSRS Equals the percent change in the CPI FERS If the percent change in the CPI is: 0-2% the COLA equals the CPI increase 2-3% the COLA equals 2% Over 3% the COLA equals the change in the CPI - 1 48 10
Federal Employee Health Benefits Eligible to retain FEHB coverage into retirement as long covered for the 5 years prior to retirement either under your own FEHB policy or as a family member under your spouse s FEHB plan or under Tricare and enrolled in FEHB on date of retirement Options: Self Only coverage or Self and Family FEHB premium costs are shared by the government and the employee/annuitant Government contribution =72% of the weighted average cost of all plans, not to exceed 75% of the cost of any specific plan Federal Employees Group Life Insurance Optional Eligible to retain FEGLI coverage into retirement as long as covered for the 5 years prior to retirement. Option A, at age 65 and retired, premiums end and insurance reduces 2% per month until value is $2,500 Option B and C Elections No Reduction: pay premiums for life and value never reduces or Full Reduction: discontinue paying premiums at age 65 and retired and value will begin to decrease at the rate of 2% per month until there is no Option B or C insurance value. Federal Employees Group Life Insurance Basic No Reduction: Value remains same as on day retired $2.265/thousand per month until age 65 or until retirement if working at 65, then $1.94/thousand per month 50% Reduction: Value remains same until age 65 or until retirement if working at 65, then decreases 1%/month until 50% is gone. It takes 50 months to reduce to half. Cost $.965/thousand per month until 65 or until retirement and then $.64/thousand per month 75% Reduction: Value remains same until age 65 or until retirement if working at 65, then decreases 2%/month until 75% is gone, taking 37.5 months to reduce to one-quarter. Cost $.325/thousand per month until 65 and then no cost (free) after 65 11
Preserving Retirement Rights CSRS and FERS Handbook, Chapter 102 Approval of OWCP claim does not automatically entitle an employee to a FERS or CSRS disability retirement Applying for retirement benefits is the only way to protect future retirement benefits for self and survivor Claimant may switch between compensation and annuity at any time. Decision is not irrevocable OPM will suspend annuity payments while OWCP payments are being received Generally OWCP provides a greater benefit Time Limits Disability Retirement Application: Separated injured worker has 1 year to file from date of separation Should OWCP terminate, failure to apply would result in No annuity entitlement No entitlement to apply for temporary continuation of FEHB Rights of survivor benefits to any death benefits would be lost Regular Retirement Application Serves to preserve rights of survivor with annuity and benefits OPM or OWCP Benefits When employee applies for both benefits OPM will begin annuity payments if OWCP has not awarded benefits by time retirement application is finalized If OWCP subsequently awards benefits, annuitant must reimburse OPM for annuity paid. OWCP withholds amount of annuity to be repaid from WC benefits Employee elects between OWCP or OPM benefits with the OWCP OWCP notifies OPM of the election Note Not required to file a retirement application to protect eligibility if eligible for annuity based upon age and time in service however, it is necessary to file application in order to preserve survivors rights to survivor annuity benefits and health insurance coverage should the claimant die from other than a workers compensation injury/illness 12
Election of Benefits OWCP Claims Examiner (CE) is responsible for determining: If the claimant qualifies for benefits If the claimant is receiving benefits from another Federal agency If that benefit constitutes a prohibited dual benefit and requires an election If an exception exists that will not affect the claimant s compensation entitlement Workers Compensation Benefits are elected OPM suspends annuity payment during period that the OWCP pays compensation benefits If compensation benefits end for any reason, OPM will reinstate annuity if the individual remains entitled OPM Benefits are elected Still entitled to medical expenses for treatment of the accepted condition(s) paid by OWCP Why Elect OPM Retirement? Avoid periodic medical evaluations. Compensation and/or medical benefits under OWCP can be terminated at any time Employee recovers enough for employment or terminate benefits Survivor benefits are limited Ongoing legislation proposed to cease OWCP benefits past Social Security retirement age Employee still entitled to have medical expenses paid for treatment of the accepted conditions. Concurrent Payable Benefits Injured worker eligible for both benefits may not receive both benefits at the same time. Injured worker receiving annuity may also receive: Schedule Award Medical benefits under WC May receive annuity if WC benefits are suspended to receive 3 rd party financial settlements Individuals receiving WC on account of the death of another person, may receive their own annuity. 13
Concurrent Payable Benefits Social Security Administration (SSA) benefits are payable concurrently with FECA benefits If SSA benefits are paid based on Federal service, compensation benefits must be reduced by the amount of SSA benefits attributable to Federal service ( 5 USC 8116(d)) OWPC death benefits will be reduced by the survivor s benefits paid under SSA attributable to the employees Federal service FECA Claimants may concurrently receive: Veterans Pension Fleet Reservist Pay Military Retirement or Retainer Pay Department of Justice Law Enforcement Officers Survivor Benefits Job Offers During job offer process, or other OWCP actions to reduce compensation, the claimant may elect OPM benefits Election of OPM should not stop the return to work process even in the event the claimant has already received OPM benefits. Agency workers compensation specialists should pursue the job offer until a decision has been issued by DOL. Termination of OWCP Comp If claimant declines the job offer and benefits are terminated by OWCP, any entitlement to collection of a schedule award is forfeited. If the Agency does not continue the job offer process and OWCP does not issue a termination of benefits, the claimant may return to OWPC at any time. Claimant may receive a schedule award concurrent with OPM benefits and then elect to return to OWCP and receive retroactive benefits minus any OPM benefits received if termination of benefits has not been issued by OWCP. 14
Constructed LWECs Completion of Vocational Rehabilitation OWCP should identify two jobs the claimant can perform, WC specialist should request a constructed Loss of Wage Earning Capacity (LWEC) from OWCP Final LWEC determination by OWCP reduces the claimant s compensation benefits in the event that the claimant, when opting OPM benefits, decides to switch back to OWCP benefits. The claimant will only be entitled to receive the constructed LWEC and not full compensation benefits Reverting to an Annuity OPM will not allow credit for any period of workers compensation or Federal service that occurred after the individual separated from employment for retirement, even if they were receiving workers compensation benefits When an individual chooses to receive an annuity, OPM will compute the annuity based upon their service and high-3 average salary as of the date of separation from employment, plus all applicable cost-of-living adjustments. Survivor Benefits Surviving spouse and/or children of employee who dies as a result of a job-related injury or occupational illness may be eligible for both death compensation benefits from OWCP and OPM survivor benefits. Laws prohibit concurrent payment of workers compensation death benefits and a survivor annuity Survivor must elect which of the two benefits they wish to receive Beneficiary may receive concurrent benefits from OWCP and the Thrift Savings Plan Elections are made through OWCP 15
Survivor Benefits If surviving spouse elects workers compensation death benefits, they are not eligible for the FERS basic employee death benefit. Once OWCP determines that a surviving spouse is eligible for workers compensation death benefits, they remain eligible for life. The surviving spouse may elect to take a refund of the deceased retirement contributions If workers compensation death benefits terminate, receipt of the lump sum payment of the deceased retirement contributions irrevocably terminate any further survivor annuity entitlement. Reemployment Annuity Continues If OPM disability annuity has not ended due to recovery, medically or administratively, or restored to earning capacity they are subject to rules governing re-employed annuitants If a Re-employed annuitant: Time on comp rolls does not count unless they work an additional 5 years and elect a re-determined annuity Can earn a supplemental or re-determined annuity only if retirement deductions are withheld from earnings Return to Work Annuity Suspended Disability Annuity ends upon reemployment; Must establish entitlement to annuity based on retirement covered employment including all time on OWCP roles A CSRS/CSRS Offset former disability annuitant, who after crediting all OWCP time, meets optional retirement eligibility, may transfer to FERS upon reemployment and retire New retirement is under FERS rules If no transfer to FERS is made, employee must work at least 1 year to meet the 1 out of 2 year eligibility requirement under CSRS 16
No Annuity in Suspend Status If there is no annuity in suspend status and employee returns to work, time on OWCP rolls is creditable for retirement purposes as follows Credit for all periods in non-pay status. Six months per calendar year rule does not apply for OWCP Credit granted during separation if return to Federal Civilian service, even if returned to part-time duty status as long as separated employee received payments from OWCP Computing High-3 Average Salary If returned to work and work less than three years, use the full-time rate at the time compensation was awarded (Adjusted by regular pay raises) DO NOT use any compensation paid to a rehired employee that supplements the difference in compensation and salary actually earned If claimant did not return to work, and had a disability annuity in suspended status, annuity will be based on the individual s service and high-3 average salary as of date of separation, plus all applicable COLAs. BAL 04-105 Enhanced Annuity In limited circumstances, the law permits a 1% annuity enhancement for certain FERS employees receiving OWCP. This provision is designed to make up for FERS beneficiaries inability to participate in SSA or TSP during a period of absence from the workplace while receiving OWCP benefits FERS employees receiving OWCP benefits during qualifying periods of absence are eligible for the enhanced annuity computation if all qualifying periods of absence totals 2 months or more. 17
BAL 04-105 Enhanced Annuity Qualifying periods of absence include: A period of LWOP while employee is receiving OWCP and not working A period of separation from service while receiving OWCP benefits, if the former employee is later reinstated in Federal service and earns title to a FERS annuity; or A period of retirement while receiving OWCP benefits in lieu of annuity payments, if the annuitant is later reemployed in the Federal Service and earns title to a new FERS annuity. Questions? NICOLE KELSCH WORKERS COMPENSATION PROGRAM MANAGER NORTH FLORIDA/SOUTH GEORGIA VETERANS HEALTH SYSTEM 619 SOUTH MARION AVENUE LAKE CITY, FL 32025 EMAIL: NICOLE.KELSCH@VA.GOV 18