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.”