Saturday, November 24, 2012

The Hidden Benefit of Postal Service Retirement

Question: When does $16,638 actually equal nearly $30,000?

Answer: When a U.S. Postal Service employee compares the retirement annuity the USPS says he will receive to the payments he will actually get. Ignorance of the additional payments has hindered employees from accepting early-retirement incentives that are so crucial to the Postal Service’s cost-cutting efforts.

Consider the case of “Joan”, an APWU member who is eligible for Voluntary Early Retirement (VERA) and a $15,000 incentive to quit as part of a major USPS downsizing effort. In early October, as part of the incentive program, USPS sent her a notice that her retirement annuity would be $16,638 annually.

After factoring in her other potential income sources, Joan at first decided she couldn’t afford to quit her $53,000-per-year job. But fortunately, she dug a little further and talked to experts in the arcane world of USPS retirement benefits.

An additional $13,000
That’s how Joan learned that if she took the VER she would be eligible for an additional “FERS annuity supplement” of $13,020 annually when she turns 56 in a few years, says Don Cheney, who for years has been helping fellow APWU members understand their various retirement benefits.

“With this new information, she is taking the VER,” Cheney says.

The FERS annuity supplement is “a quasi-Social Security payment prior to the start of the actual Social Security benefit at age 62,” writes Robert Benson, who runs the FedBens web site that calculates FERS annuity supplements and other federal benefits. (USPS has declined to license the software.)

Contrary to USPS strategy
Although thinning its ranks is one of the Postal Service’s major strategic thrusts, USPS does not tell employees how much their FERS annuity supplements will be until after they make an irrevocable commitment to retire.

“Who in their right mind would sign a Statement of [Retirement] Irrevocability before getting all the facts needed for a decision to retire?” Cheney asks. The failure to provide such information, says Cheney, is dampening response to the current early-out program aimed at approximately 115,000 clerks, mechanics, and other APWU-represented employees. If successful, the buyout program could save USPS more than $1 billion annually, as explained in New Poll: How Many Postal Workers Will Take the USPS/APWU Buyout Incentive?

APWU members who were hired before 1984 “are leaving in droves,” says Cheney. As participants in the CSRS retirement program, “they get accurate annuity estimates.” “FERS postal employees were hired after January 1, 1984 and are hesitant to leave. They get incomplete annuity estimates that omit the monthly FERS annuity supplement.”

“The FERS annuity supplement typically ranges from $700 to $1,000 per month from age 56 to 62,” Cheney says. “It dwarfs the measly $15,000 incentive the Postal Service offers. Employees want to know: Are they eligible for it? When will they start getting it? How much is it?”

Afraid to retire
"I'm always surprised at the incredible misconceptions that our employees have about their retirement plan,” writes Roseanne Jefferson, a retired USPS benefits manager who pens the Postal Retirement column for PostalMag.com. “Particularly in the last years of their employment, they are so sure of their retirement benefits, and are so surely wrong. It has always amazed me how our organization is OK with the understanding that employees are afraid to retire, because they don't trust the HRSSC to get their retirement correct."

Jefferson wrote recently that she is being deluged with emails from APWU-represented employees workers who are considering the buyout. Many are confused about their benefits.

This message exemplifies the confusion, “Roseanne, I am leaving with the early out, I am a FERS employee and I am 58 and have 25 years. I don't know if I can afford to retire, my annuity is only going to be $1400 per month, I have to wait until I am 62 to collect my social security, and then I still have to wait until I am 59 and a half to begin my TSP [Thrift Savings Plan payout].”

Wrong on all counts, Jefferson replied. Immediately upon retirement, this particular employee is also eligible for a FERS supplement of about $800 per month and TSP payments of $397 per month, Jefferson wrote.

Unlike most federal agencies, the Postal Service does not offer individual counseling to employees who are considering retirement, even when it is using incentives to encourage them to retire. What it’s offering retirement-eligible APWU members, says Cheney, is “a group phone seminar with ten people plus their spouses that covers general questions only, not the specific ones that people have.”

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David Abbey said...

Please clear up a misconception I have about the FERS annuity supplement. Can you actually rcv this with less than 30 yrs of service but have reached your FERS MRA? Is there a penalty to the supplement amt. if you have less than 30 yrs of service? Thank you.

Anonymous said...

No penalty..you don't need 30 years just your MRA and if you're not at MRA you'll get supplement when you reach MRA

Anonymous said...

Do you think there will ever be a buyout for Rural carriers

Anonymous said...

I don't believe anon is correct. I retired this year at 60 yrs of age with 17.5 yrs of service and do not receive any supplement.

D. Eadward Tree said...

Regarding the question about a buyout for rural carriers: The prospects don't look good. With the number of delivery points increasing, it doesn't make sense for the Postal Service to induce a lot of carriers to leave -- unless maybe they can be replaced with employees with much lower pay and benefits.

Anonymous said...

You retired with 17.5 years without the VER. A VER is what makes the difference. If you retire with the minimum retirement age without the 30years with NO early retiremenet incentive then there is no supplement. Same rule applies in reverse if you have Minimum retirement age and no 30 years but fall under a VER then you receive the supplement at MRA.

Anonymous said...

You get a supplement, earlier than you would if there was a VERA. I think if and when we go to five day delivery, then the carriers will get their buyout. Let the top people who make the most go, and move the bottoms ones up, and then higher TE workers

Anonymous said...

Go to http://www.opm.gov/retire/pubs/handbook/C051.pdf for more info on eligibility and how to calculate the FERS supplement.

Anonymous said...

shell game, now you see now you don't
looks like you get the supplement until you reach the age 62, Than what? you will be stuck at same benefits you get at 62 for the rest of you life, If you work until full retirement you get full benefits,
plus addition years added to your postal retirement, plus extra money you can pay into your tsp. Not to mention the your paycheck more take home money.
than your retirement package.
If you can stay, it may be worth it.

D. Eadward Tree said...

Regarding the "shell game" comment: At 62 you become eligible for Social Security. The supplemental FERS annuity is meant to tide you over until then.

Anonymous said...

You still need 20 yrs MINIMUM for the supplement.

Anonymous said...

I work for usps as an rca been there about a year alot of people in front of me they say it takes 6 to 7 years to get full time is it worth staying with all this going on thanks

Anonymous said...

I would like to know why they never include any disabled workers under the age of 62 in their VER buyouts. I think many would go if they were included. They of course would have to haveva minimum age or time in service requirement also, but still be allowed to retire under te VER rules.

Anonymous said...

Also, be aware that your FERS supplement IS taxable.

mailman mike said...

retired as a rural carrier 8/31/12, to this date have not recieved my ben. I am not sorry about that, but the amount was way less than I thought. 12 yrs as a sub, no bu back on sub time, thank someone I do have SS, we all can't retire millionaires,all thro it looks like we all want to. I've found you can do a good life on whatever you get. Grow up we're not on Wall Street. Enjoy your kids and your grand kids and go on.

Anonymous said...

I am trying to go out on a disability. My 2 doctors have written reports and my lawyer has sent them in for a disability retirement. I am 53 and I have 27 years in. Can I still receive the FERS annuity supplement when I turn 56 if I receive the disability retirement?

Anonymous said...

In 2005 turned down first of eligible VERAS,because I was not close to MRA, now at MRA and with close to 30 years, goodbye!
How is it that employees do not know eligibility for pensions, supplement Just go to OPM.gov, all you want to know,my supplement will be around 1130.00 monthly along with a 1500 FERS monthly (minus medical, Ins. etc.)try postal websires, postalmag, postal reporter...

kanet said...

after separating from the po under fers before 591/2 yrs of age would i be able to withdraw some money from my tsp without penalty?

Retirement Annuity said...

Yeah mate am agree with you be aware people when FERS supplement is taxable.