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2020 COLA and the 2019 Health Care Open Season

Posted on Sunday, 15th September 2019 by

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We can look forward to a COLA increase for 2020 of between 1.6% to 1.8%, a significant decrease from last year’s 2.8%. The Social Security Administration estimated a 1.8% increase and the July issue of Kiplinger magazine suggested it may be lower at 1.6% based on their projections.

The Social Security Act specifies a formula for determining each COLA. According to the formula, COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics. According to the Socials Security Administration, a COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective. The fourth quarter isn’t used to determine the upcoming year’s COLA because that number isn’t available from the Bureau of Labor Statistics until mid to late January. Our COLAs are adjusted on January 1 before the 4th quarter data is available.

Health Care Open Season The 2019 Federal Employees Health Benefits (FEHB) open season will run from November 11 through December 9, 2019.  Each year Open Season runs from the Monday of the second full workweek in November through the Monday of the second full workweek in December. Health care service providers are required to submit benefit and rate proposals for the contract term beginning January 1, 2020 on or before May 31, 2019. OPM generally completes negotiations in August so we should have updates and new rates shortly. When they are published, I will send out a message to all subscribers.

OPM encourages all carriers to thoroughly evaluate options every year with a focus on improving affordability, reducing costs, improving the quality of care, and protecting the health of their enrolled populations. Any proposed benefit enhancements must be offset by proposed reductions so that premiums are not increased due to benefit changes. Premium increases are inevitable for most participants again this year.

Retirees can Connect to FEHB Open Season Online to review brochures, pricing and submit changes starting in early November. You can actually chat with a Customer Service Representative using their “Live Help” feature.

Jobs Update (Retiree Opportunities) 

Employers continue to recruit federal retirees and post their job vancancies on our Jobs Board. You will find listings for both part and full time positions at locations nationwide. Those with security clearances also have many opportunities to consider. With an unemployment rate of 3.7% the country is at full employment. The only way for companies to find more employees is to attract those who voluntarily stopped working, including retirees. We recently added a part-time Business Development Manager postion for Sams Inc at their College Park, MD location.  Visit our jobs board to explore opportunities in your area.

Request a Federal Retirement Report Retirement planning specialists provide a comprehensive Federal Retirement Report™ including annuity projections, expenditures verses income, with a complete benefits analysis. This comprehensive 27-page benefits summary will help you plan your retirement.

Request Your Personalized Federal Retirement Report™ Today

Find answers to your questions: The best time to retire, retirement income vs expenditures, FEGLI options and costs, TSP risks and withdrawal strategies, and other relevant topics. Determine what benefits to carry into retirement and their advantages. You will also have the opportunity to set up a personal one-on-one meeting with a CERTIFIED FINANCIAL PLANNER. Helpful Retirement Planning Tools / Resources

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Returning to Work – Rehired Annuitants

Posted on Sunday, 1st September 2019 by

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I often receive questions from retirees desiring to return to work and from agency HR departments interested in hiring former federal employees.  Agency recruiters are trying whatever they can to fill critical positions.  With an unemployment rate of 3.7% the country is at full employment. One of the ways to fill critical positions is to hire those who voluntarily stopped working, including retirees.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Returning to work can supplement your Annuity, Social Security, and TSP payouts down the road. Federal retirees can go back to work in the private sector without any impact on their federal annuity. You will continue to receive your full annuity and all benefits if you decide to work in the private sector after retiring from federal service. This includes working for contractors that provide services to the federal sector. However, if you should return to work with a federal agency your pay will be reduced by the amount of your annuity in most cases. There are exceptions to this for certain critical positions. The rules for rehired annuitants are outlined below for CSRS and FERS retirees.

There are instances where your annuity will be stopped under certain conditions and you will be covered as a regular employee. The rules are complex and if you are considering returning to federal employment review the guidance listed above. Discuss any concerns you may have with the hiring HR department. They can obtain clarifications from OPM if needed.

Agencies can also hire retired federal workers under Personal Service Contracts that will not impact your annuity. These contracts are designed for completing specific tasks for a predetermined compensation rate within a set time limit.

An agency HR department recently hired a retiree and they questioned why the individual couldn’t suspend his FEHB plan he had in retirement and take the FEHB plans they offered. The rehired annuitant wanted to take advantage of the FEHB Premium Conversion feature. Retirees don’t get the same FEHB premium tax break that active federal employees have. Federal employee’s contributions to the Thrift Savings Plan (TSP) and their FEHB premiums are excluded from gross pay before Federal Income taxes are applied. 

If you are reemployed in Federal service in a position that conveys FEHB eligibility, you may have the opportunity to participate in premium conversion. If you participate in premium conversion, your enrollment can be transferred from your Retirement System to your employing agency. Your FEHB premiums will be deducted from your pay on a pre-tax basis as an employee not from your annuity. When you separate from reemployment, your retirement system will transfer in your enrollment. You wouldn’t suspend FEHB coverage you would transfer coverage to your new employer. Review the following reference for additional guidance. 

CSRS / FERS Hanbook Chapter 100  (page 51- 53 and 55 – 57)

You can only suspend FEHB coverage under the following conditions:

If you suspend your FEHB enrollment because you are now covered by a Medicare Advantage plan, TRICARE, CHAMPVA, Medicaid or similar State-sponsored medical assistance program, or Peace Corps Volunteer coverage, you can restart your FEHB in the future. These are the only exceptions that allow retirees to suspend FEHB coverage. The following links provide additional information on the FEHB suspension process:

If you are interested in going back to work for Uncle Sam contact agency HR departments in your area to determine if there are any openings in your specialty. You can return to work at any agency, not just the one you retired from as long as you have the required qualifications for the position applied for. There are other advantages to going back to work, especially for those who wish to start a small business. You can Return to Work and Receive a Tax Break! Use our Jobs Board to explore all opportunities in your area.

Scheduling A Retirement Benefits Seminar

Federal Employee Benefits Advocates (FEBA) provides comprehensive benefits briefings for Federal employees so they can make informed retirement decisions. Briefings include information on CSRS or FERS Retirement Annuities and all insurance programs including Medicare, the Thrift Savings Plan (TSP), Social Security, disability and other relevant retirement planning topics. 

Schedule A Seminar in Your Area

Benefits Administration Letter 11-104 requires agencies to educate employees on how to plan for retirement. FEBA assists Federal agencies to comply with this directive. HR departments can Contact FEBA to schedule briefings for their area.

Helpful Retirement Planning Tools / Resources

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, EMPLOYMENT OPTIONS, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Alert – New TSP Withdrawal Options

Posted on Saturday, 17th August 2019 by

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On September 15th the TSP will implement new withdrawal options for all participants. I published an article last March titled TSP Changes & Required Minimum Distributions (RMDs) discussing the pending changes and how RMDs will be handled under the new rules.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections.

You will have more options for how and when you can access money from your TSP account. These options fall into the following categories:

  • After you separate from service, you can take multiple post-separation partial withdrawals.
  • If you’re 59½ or older and still working in federal civilian or uniformed service, you can take up to four in-service withdrawals each year.
  • You’ll be able to choose whether your withdrawal should come from your Roth balance, your traditional balance, or a proportional mix of both.
  • You will no longer need to make a full withdrawal election after you turn 70½ and are separated from federal service. (You will still need to receive IRS required minimum distributions (RMDs).
  • If you’re a separated participant, you’ll be able to take monthly, quarterly, or annual payments.
  • You’ll be able stop, start, or make changes to your installment payments at any time.
  • You’ll have enhanced online tools to help you make withdrawals in the My Account section of tsp.gov.

If you visit the TSP site the current withdrawal options are still listed, this will change on or about September 15th.  To fully understand the new withdrawal options, download the TSP’s “Questions and Answers About Changes to the TSP Withdrawal Options.”  Print a copy of this document for your records so you will have it available when it comes time to withdraw your first RMD at age 70 ½ or require funds at any time from your account. I withdrew my first RMD this past month. If you call the TSP at 1-877-968-3778, they will provide the amount you need to withdraw for your RMD to avoid an income tax penalty. Before leaving the TSP evaluate your options. Here is a list of articles and resources that you may find helpful when considering leaving the Thrift Savings Plan.

Jobs Update (Retiree Opportunities) Employers continue to recruit federal retirees and those soon to retire. A number of companies post job vacancies on our Jobs Board and you will find listings for both part and full time positions at locations nationwide. Those with security clearances also have many opportunities to consider. The good news for anyone that wants to work is that “For Hire” signs are posted everywhere today. With an unemployment rate of 3.7% the country is at full employment. The only way for companies to find more employees is to attract those who voluntarily stopped working, including retirees. Wages are increasing so that is good news for anyone interested in supplementing their retirement income. We recently added a Senior EHS Specialist position with AECOM. They need specialists at West Point, PA, Durham, NC and Elkton, VA that may interest some of our newsletter subscribers. Visit our jobs board to explore opportunities in your area.

Helpful Retirement Planning Tools / Resources

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in ANNUITIES / ELIGIBILITY, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS

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Should I Defer Social Security Until Age 70?

Posted on Saturday, 10th August 2019 by

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Many think why wait, I don’t know if I’ll live to 70! Others simply need their benefit at 62 just to make ends meet. For those who are healthy and have several decades of retirement to look forward to, and have sufficient income to see them through those early retirement years, it makes sense to hold off and apply at your full retirement age or 70. That’s what I did this year, my first check arrived this past May. Currently, only 4% of those claiming Social Security held out for the highest benefit.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

I waited for a number of reasons, first if I applied for Social Security at 62, my Windfall Elimination Provision (WEP) would have consumed a large chuck of my payment. CSRS retirees are subject to the WEP reduction. I had 14 substantial earnings years paying into Social Security then. When I retired in 2005, I continued to work in my publishing business. By waiting until this year, I accumulated 28 substantial earnings years, dramatically reducing my WEP penalty.

In 2019 Social Security multiplies the first $926 of average monthly earnings by 90%. This is the first of three factors they use to determine your basic benefit. WEP impacts this first factor for CSRS annuitants and with 20 years or less they reduce the $926 by 40%. Essentially reducing your Social Security benefit by $463 a month in 2019.  By waiting, my WEP reduction was only $92.

Secondly, I wanted my wife to collect my larger full spousal benefit when I pass since her survivor annuity would be reduced to 55% of what I was collecting while alive.

Finally, by waiting my benefit more than doubled. My Social Security estimates from back then show the progression and they were spot on. Essentially, just by waiting until your full retirement age, in my case 66, your benefit would have increased by 30%.  Full retirement age for those born in 1960 and later is 67.

The huge benefit of waiting until age 70 is that for each year you delay applying for Social Security your benefit increases by 8%! Plus, your benefit can grow even more from adding other income you may have made either at your current job or though other employment after retirement.  Throw in the annual COLAs and it just keeps getting better. The higher your income the less you have to worry about running out of money in retirement.

By the way, those 4 years between 62 and 66 will fly by, I’m 70 and it seems like yesterday I was 62. I wrote “70 and Counting” last May that talks about issues like this and just how time flies. When you arrive at 66 and later at 70 many will think, “Why didn’t I wait!”  It all comes down to perception; early Social Security eligibility is best looked at from the perspective that you will be receiving the absolute minimum benefit that you are entitled to.

Helpful Retirement Planning Tools / Resources

Attend a 2-Hour Benefits Briefing – Check Availability

Distribute these FREE tools to others that are planning their retirement

Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Protecting your Assets with Fixed Income Investments

Posted on Sunday, 28th July 2019 by

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Those approaching retirement and retirees often move to more conservative investments to avoid losing what they worked a lifetime to accumulate.  Many federal retirees live on fixed income from their annuity, Social Security, and Thrift Savings Accounts.  We only have a finite time on this earth and the older we get the less time we have for our accounts to recover from market downturns.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

The current bull market is now the longest in history running 10 years and many forget what it was like back during the dot com bubble in 2000 and again in 2008 and 2009 when the housing collapse dropped the S&P Index 55%. From March of 2000 to September of 2002 the Market dropped an average of 47% and it took 5 years to recover to its previous high. The TSP C Fund dropped significantly during these downturns. The S&P index was approximately 1525 in March of 2000 it didn’t reach and exceed that level again until March of 2013, thirteen years later; the market ran sideways, with peaks and valleys in between.

Those who are early to mid-career, up to your 50s, generally have time to  recover and can take more risks. It’s wise for the older generations to gradually reduce their exposure to the equity markets moving a percentage of their assets to fixed income vehicles: bonds including corporate, treasuries and municipals, Certificates of Deposits and plain vanilla cash. That’s the primary benefit of the Life Cycle Funds, they progressively reallocate your funds quarterly to fixed income (Bonds) as you approach your target retirement date. Many target date funds retain 20% in equities after reaching the target date to help counter the effects of inflation.

Bond funds have their own unique risks. When interest rates rise, bond funds decrease in value. The longer the fund’s bond duration the greater the drop in the fund ‘s value. Typically, the average duration of bonds in a fund indicates how much bond prices may change as interest rates vary. According to Investopedia, “As a general rule, for every 1% change in interest rates (increase or decrease), a bond’s price will change approximately 1% in the opposite direction, for every year of duration. If a bond has a duration of five years and interest rates increase 1%, the bond’s price will drop by approximately 5% (1% X 5 years). Likewise, if interest rates fall by 1%, the same bond’s price will increase by about 5% (1% X 5 years).”

When you purchase individual bonds, you only lose when interest rates rise if you sell your bonds on the secondary market before their maturity date. When held to maturity, there is no duration risk; the full value of your investment including interest is returned to the investor. That’s why financial planners often suggest purchasing individual bonds over bond funds.

A volatile stock market can keep investors, especially retirees, up at night. U.S. Treasuries can offer a safe haven for investors. Some may ask, why should I invest in Treasuries; they are the ultimate fixed income investment guaranteed by the full faith of the U.S. Government. Treasuries are one of the safest investments available and a good place to stash a portion of your fixed income assets. Treasuries and savings bonds can reduce your taxes; they are subject to federal income tax, but not to state or local income tax. The TSP G Fund is invested 100% in special issue U.S. Treasuries that are guaranteed never to decrease in value. For taxable accounts many choose tax-free municipal bonds for a portion of their fixed income investments. However, as with all investments, municipal bonds have their own set of unique risks and rewards.

You can buy Treasuries through Treasury Direct after establishing an account with them however you can’t buy Treasuries through them for your IRA. Banks and brokerage companies will purchase Treasuries for you through the Commercial Book-Entry System for IRAs or for your taxable brokerage accounts.

Many of the larger brokerage houses offer clients the ability to buy Treasuries on the secondary market or initial issue Treasury Bills, Notes, and Bonds just like you now buy stocks and bonds in your account. Fidelity and Vanguard offer this service and don’t charge for the transactions either way. You simply look up the Treasury auction dates for initial issue Bills, Notes, or Bonds of interest and place your order.  You can elect to have them automatically reinvest in a new initial issue treasury at maturity if desired. Investors can also buy Treasuries on the secondary market, from other investors.

Currently short-term notes that mature in as little as 4 weeks to one year are paying almost as much as the 10-year Treasury Bills.  These notes come with either 4 , 8, 13, 26, or 52-week maturities and you can ladder them, so a portion of your cash is available to you each month. If you are looking for a secure place to park a portion of your fixed income assets consider U.S. Treasuries. Each brokerage company’s Treasury purchase process is a little different. Call their fixed income department to become familiar with the process before initiating your first purchase. I called Fidelity and Vanguard earlier this year to make sure I was properly setting up initial issue Treasury purchases.

New issue Treasuries are offered at auction weekly. All bidders will receive the same rate, yield, or discount margin at the highest accepted bid.

I prefer purchasing initial issue Treasuries, they are new Bills, Notes and Bonds issued by the government. They publish a quarterly schedule listing the security type, announcement date, auction date, and settlement date.  To view the current quarterly schedule, click on the “auction schedule (PDF)” link that you will find on the published quarterly schedule page. You must place your buy orders on or after the announcement date and before the auction date arrives. Typically, initial issue short term Treasuries are announced on Thursdays and the auction takes place early the next week, most of the time on Mondays.

Currently, short-term Bill yields are just slightly below the 10-year Note yields. The chart of recent auction results shows that a 4 week Note issued on July 30 yielded 2.14% where the 10 year Bill issued July 15 was 2.34%, just .2% above the 4 week Note yield. After the Bills mature the funds are either returned to your account or you can elect, in many cases, to have them automatically reinvested in new initial issue Bills at maturity. The Federal Reserve may lower interest rates by at least a quarter point this comming Wednesday. If they do, the yield on new issue Treasuries, after that date, will decrease proportionally.

It’s natural to be overconfident in a bull market that continues to impress. For those who would be significantly impacted or distressed if their retirement accounts decreased dramatically, it may be prudent to explore the U.S. Treasury and municipal bond markets. It all comes down to how much is enough for retirement. Increasing your fixed income investments will moderate account fluctuations during extended market downturns.

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Helpful Retirement Planning Tools / Resources

Distribute these FREE tools to others that are planning their retirement

Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Flexible Spending Accounts (FSA)

Posted on Sunday, 21st July 2019 by

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I would like to welcome Shawn McCoy, President and Founder of Federal Employee Benefits Advocates, LLC (FEBA) an educational and training company, to our guest forum.  Mr. McCoy is an expert on Federal employee benefits and has spoken to over 19,000 Federal employees over the last 10 years.  This is his first of many artilces to come for our Retirement Plannng Blog. For more details about the training programs offered by FEBA check their website. They offer retirement benefit seminars nationwide.
 
With the Federal Open Season for benefit selection coming up in a few months this is a great time to review a benefit that is not widely used by Federal employees, the Federal Flexible Spending Account Program (FSAFEDS).
 
The first question most Federal employees ask is “What is the Federal Flexible Spending Account Program (FSAFEDS)?”
 
FSAFEDS allows you to save money for health care expenses with a Health Care or Limited Expense Health Care FSA. Think of it as a savings account that helps you pay for items that typically aren’t covered by your FEHB Plan, the Federal Employees Dental and Vision Insurance Program, or other health insurance coverage. Things like deductibles, out of pocket expenses, and other expenses that may not be cover by the medical coverage (FEHB) and Dental or Vision (FEDVIP)
 
FSAFEDS also offers an account for families with young children or elder care expenses – the Dependent Care FSA. This account allows you to set aside money to pay for your day care expenses.
 
Eligible employees can enroll in FSAFEDS each year during the FEHB Open Season, November 11th to December 9h, 2019. Contributions are made directly from bi-weekly pay on a pre-tax basis into the FSA. New and newly eligible employees who wish to enroll in this program must do so within 60 days after they become eligible, but before October 1 of the calendar year. Retirees are not eligible to participate in the FSA program.
 
The next question is “How does it work?”
 
There are three different Flexible Spending Accounts plans available:
 
Health Care FSA (HCFSA)
 
With a Health Care FSA, you use pre-tax dollars to pay for qualified out-of-pocket Health Care expenses. The money you contribute to a Health Care FSA is not subject to payroll taxes, so you end up paying less in taxes and taking home more of your paycheck. Used to pay for:
 
  • Eligible medical, dental, and vision care expenses not covered by the plans
  • Co-pays, co-insurance, and deductibles
  • Professional services: physical therapy, chiropractor, and acupuncture
  • Prescription drugs, insulin, and prescribed over-the-counter medicine
  • Over-the-counter health care items: bandages, pregnancy test kits, blood pressure monitors, etc.
Specifics
  • Can contribute up to a maximum of $2,700 (2019)
  • Access the full amount of your account on day one of the plan year
  • Can carry over up to $500 from one plan year to the next (You must sign up for a least $100 to be deducted for the next plan year)
  • Can be reimbursed by check or direct deposit into checking or savings account
 
Limited Expense Health Care FSA (LEX HCFSA)
 
If you’re enrolled in an HSA-qualified high-deductible health plan and have a Health Savings Account (HSA), you can increase your savings with a Limited Expense Health Care FSA (LEX HCFSA). This pre-tax benefit account helps you save on eligible out-of-pocket dental and vision care expenses while taking advantage of the long-term savings power of an HSA.
 
Specifics
 
  • Can contribute up to a maximum of $2,700 (2019)
  • Used to pay for eligible dental, and vision care expenses not covered by the plans Co-pays, co-insurance, and deductibles, Vision exams, LASIK surgery, contact lenses, and eyeglasses Dental cleanings, X-rays, fillings, crowns, and orthodontia
  • Access the full amount of your account on day one of the plan year
  • Can carry over up to $500 from one plan year to the next (You must sign up for a least $100 to be deducted for the next plan year)
  • Can be reimbursed by check or direct deposit into checking or savings account
 
Dependent Care FSA (DCFSA)
 
A Dependent Care FSA (DCFSA) is a pre-tax benefit account used to pay for eligible dependent care services, such as preschool, summer day camp, before or after school programs, and child or adult daycare. It’s a smart, simple way to save money while taking care of your loved ones so that you can continue to work.
 
With a Dependent Care FSA, you use pre-tax dollars to pay qualified out-of-pocket dependent care expenses for your child who is under age 13.
  • Before and after school care
  • Babysitting and nanny expenses
  • Daycare, nursery school, and preschool
  • Summer day camp
 
Care for your spouse or a relative who is physically or mentally incapable of self-care and lives in your home.
 
  • Can contribute to up to a maximum of $2,500 per year if you are married and file a separate tax return (2019), $5,000 per year if you are married and file a joint tax return or if you file as single or head of household. Both cannot claim $5,000 (2019)
  • When the account has the funds, you can use your balance to pay for eligible expenses
  • Can only use the funds that are available in the account, not the entire election amount
  • Funds must be used by March 15th, 2021 or lose it and claims must be submitted by April 30, 2021
 
As a rule, you can’t change your Health Care FSA (HCFSA), Limited Expense Health Care FSA (LEX HCFSA), or Dependent Care FSA (DCFSA) election amount during a benefit period (the plan year). That’s why it’s important to plan an election that suits your needs for your entire benefit period.
 
But there are circumstances – called Qualifying Life Events (QLEs) – when you can make changes.
 
The final question is “How do I calculate how much to contribute to the FSA?”
 
This question can be a tricky because it depends on the individual, the family, FEHB plan selected and the Dental or Vison plan selected. The amount can vary based on other factors such as the plan copayments, deductibles, out of pocket expenses, prescription drugs and planned medical or dental procedures.
 
A good starting point is to look at your 2 years of uncovered expenses. You can obtain that information from your FEHB and dental and vision insurance plan providers by looking at your Explanation of Benefits (EOBs). These can be obtained go going on the carrier’s website or contacting the carrier directly. Add up the two years’ worth uncovered expenses and subtract out any extraordinary expenses, i.e. broken foot. Then divide by 2. After you get that figure add in any planned expense for procedures you may have for the upcoming year, i.e. Lasik surgery. If you are unsure you can always just contribute $500 for the first year. And since you can carry over up to $500 remaining in either your HCFSA or LEX HCFSA account from one plan year to the next (must re-enroll each year), there’s no reason not to take advantage of the tax savings this year and every year.
 
For more details on eligible expenses or to enroll in the plan go to the Federal Flexible Spending Account Program (FSAFEDS) website at www.fsafeds.com.
 
K. Shawn McCoy is the President and Founder of Federal Employee Benefits Advocates, LLC (FEBA) an educational and training company located in Parker, Colorado. Mr. McCoy is an expert on Federal employee benefits and has spoken to over 19,000 Federal employees over the last 10 years. For more details about the training programs offered by FEBA check their website. www.febadvocates.com
 
Helpful Retirement Planning Tools / Resources
Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections
Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION, WELLNESS / HEALTH

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A Marriage of Convenience – Medicare & FEHB

Posted on Thursday, 11th July 2019 by

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Updated 11/11/2024

Many approaching 65 ask, “Why shouldn’t I simply sign up for Medicare A and B and cancel my FEHB plan?” They believe at first glance that Medicare A and B duplicate what our Federal Employees Health Benefits (FEHB) plans provide. I reply to this question many times throughout the year and refer those asking to the series of articles I wrote on Medicare enrollment. I thought it best to add another article just to discuss how the two programs work so well together.

 

 

Federal retirees with FEHB coverage typically opt for the Original Medicare Plan, Parts A & B, because it is available nationwide, and you can go to any doctor, specialist, or hospital that accepts Medicare.

Healthcare Costs

Medicare covers some, but not all of your healthcare costs, and you are responsible for the remainder unless you have supplemental coverage through a private insurance carrier. FEHB provides that additional coverage when it becomes your secondary provider after signing up for Medicare. Most FEHB plans also pay the majority of your copayments, coinsurance and deductibles for Medicare enrollees. Your FEHB plan also provides the same prescription drug coverage after you enroll in Medicare so you don’t have to sign up for Medicare Part D prescription drug coverage.

Section 9 of your FEHB plan booklet covers the different Medicare options and what costs they will waive and pay when you sign up.

If you opt out of your FEHB plan and sign up for Medicare A, B and D you may still need a Medicare Supplement policy that picks up some of the costs Medicare doesn’t cover. I’ve heard horror stories from several federal retirees that dropped their FEHB plan when they signed up for the Original Medicare Plan or enrolled in a Medicare Advantage Part C option and found the coverage inadequate. They had to pay excessive prescription drug costs, copayments and deductibles they couldn’t afford.

 

When you add up the additional costs for Medicare Part D and a supplemental policy it often makes sense to enroll in a lower cost FEHB policy when signing up for Medicare’s Original Plan.  By switching to a lower cost FEHB plan you can often save enough to pay your Medicare monthly premium. If you drop your FEHB plan you can’t go back at a later date unless you properly suspend your FEHB coverage. Suspensions are only available under certain conditions.

FEHB Benefits 

The simple fact is that after signing up for Medicare Part A and B, what Medicare doesn’t cover FEHB often does as your secondary provider and you retain the same prescription drug coverage you always had with them. My wife and I enrolled in the Original Medicare Plan ten years ago and we kept our FEHB coverage. We haven’t paid any substantial copayments, coinsurance or deductibles other than for prescription drugs since. Many FEHB plans are now offering Medicare Prescription Drug Plans (MPDPs). 

Other Options

There are other options that add to the confusion such as Medicare Part C, the Medicare Advantage plan.  With private Medicare Advantage Plans you wouldn’t require FEHB coverage however you have to be careful. They may not have the same benefits and coverage and that could be costly. Today, many FEHB plans offer Medicare Advantage Plans that require you to maintain your FEHB paln and they too reduce your cost and offer partical Part B subsidies. With this feature you may benefit from searching for a lower cost FEHB plan. 

In most Medicare Managed Part C plans, you can only go to doctors, specialists, or hospitals that are part of the plan.  Medicare Advantage Part C Plans provide all the benefits that Original Medicare covers. Some cover extras, like prescription drugs.

If you decide to enroll in a non-FEHB Medicare Advantage Plan, Part C, instead of the Traditional Part A & B Plan you are able to suspend your FEHB coverage. If coverage is suspended you can enroll in a FEHB plan during the next open season if the Medicare Advantage Program you enrolled in doesn’t work out.

All of these programs are discussed in detail in the articles listed below.

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Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis.

Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Posted in BENEFITS / INSURANCE, EMPLOYMENT OPTIONS, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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FERS Retirement Options

Posted on Friday, 21st June 2019 by

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I receive many queries from FERS employees asking the question; When can I retire?  They aren’t sure what they would be entitled to and when they can start collecting their pension. A number of options are available depending on your years of service and age at the time you wish to leave.

When Can I Retire!
  • Request a Personalized 27-page Retirement Planning Report. Federal retirement specialists may be able to answer all of your questions and concerns. A one hour session with a Certified Financial Planner is included.

Essentially, you will be able to collect a pension from Uncle Sam as long as you have a minimum of 5 years of creditable service.  For those who leave federal service with at last 5 years of creditable service, and don’t withdraw their FERS contributions, can collect a deferred pension at age 62 with less than 20 years of service or at age 60 with at least 20 years of service. Benefits don’t increase if you delay applying for a deferred annuity beyond age 60 or 62 as noted above. Your federal annuity payment doesn’t increase like Social Security does when you wait to apply at age 70.

FERS immediate retirement eligibility is determined by your Minimum Retirement Age (MRA) and years of service. The FERS retirement system is comprised of three parts:

FERS Annuity Eligibility

Use the following chart to determine when you will be eligible for immediate retirement.

Immediate retirement benefits start within 30 days from the date you stop working if you meet one of the following sets of age and service requirements:

Federal Employee Retirement Benefit Seminars – Check Availability

Referencing the above charts, a FERS employees that was born between 1953 to 1964 and has 30 or more years of creditable service at age 56 is eligible for an immediate unreduced annuity. Many hold off applying for retirement to collect a higher monthly benefit. FERS employees receive 1% of their high-3 years average salary times years of creditable service if they retire under age 62. At 62 or later your high three average income is multiplied by a factor of 1.1% with at least 20 years of service, effectively increasing your annuity by 10%.

Those selecting an immediate retirement benefit under the MRA + 10 rule must have at least 10 but less than 30 years of service when they reach their MRA. If you retire under this rule, and select an immediate benefit, your annuity will be reduced by 5 percent a year for each year you are under 62, unless you have 20 years of service and your benefit starts when you reach age 60 or later.

You can avoid this penalty and postpone receipt of your benefit until you reach either 62 with between 5 and 19 years of service or as early as age 60 with 20 years or more of service.  If you postpone your benefit, you must contact OPM at least 2 months before you wish to start your benefit and complete their “Application for Deferred or Postponed Retirement” Form R1 92-19.

There are exceptions to these rules for Special Categories of employees with early retirement plans such as Fire Fighters (FF), Law Enforcement Officers (LEO) Air Traffic Controllers (ATC), Nuclear Weapons Couriers (NWC) and for those on FERS Disability. Employees that accept an early retirement under the VERA program or discontinued service retirements are not subject to early age reductions.  

When you retire before age 62 FERS annuitants may also be eligible for a Social Security Supplement. You can use our FERS Annuity Calculator to estimate your monthly benefit online or call your HR office and request estimates for several target retirement dates. HR must provide estimates if requested.

CSRS employees can determine their eligibility and estimated annuity payment using the information provided on our Retirement Planning Guide. There are many things to consider before turning in your retirement application. Research all aspects of your benefits when planning your exit.

Helpful Retirement Planning Tools / Resources

Request a  Federal Retirement Report™  today to review your projected annuity payments, income verses expenses, FEGLI, and TSP projections

Disclaimer:Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment adviser. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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