Q: In previous responses, you indicated that when a lump-sum payment is made, federal and state income taxes and Medicare will come out of the payment. You also indicate Social Security can be taken out. As a Civil Service Retirement System employee, I do not pay into Social Security, so does that mean that no CSRS retirement payments will be taken out? Also, the lump sum will be close to $80,000 and should be paid in my last paycheck; are there any limitations on payouts?
A: Social Security deductions would only be made for those who are covered by Social Security, such as CSRS Offset or Federal Employees Retirement System. Neither CSRS nor FERS contributions to the retirement system will be taken out of the lump-sum payment. There is no dollar limitation on the amount of a lump-sum payment.