Q: On Oct. 31, 2007, I reached mandatory retirement age of 57 and retired as a FERS law enforcement officer with more than 33 years experience. I have a blended retirement of both CSRS and FERS. For whatever reason, I did not receive my lump sum vacation pay of $25,742 until early January 2008. Just recently, I received notice from OPM that because I exceeded the Social Security earnings limit of $13,560 for 2008, I was overpaid in the supplemental security portion of my pension. I did not have any other earned income for 2008. Since I could not have controlled when I got my vacation-leave payout, I do not feel my annuity should be reduced. OPM is requesting repayment of $4,392, and it cancelled my FERS annuity supplement of $366 per month beginning March 1. I feel this is unfair. My situation could be duplicated by anyone in my circumstances that retires late in a calendar year and receives lump sum vacation pay in the next year. A nonauthoritative person told me that a lump sum leave payout is taxable but not counted in determining Social Security income limits. Is this true, or do you have another suggestion?
A: OPM has made a mistake. According to the Social Security Administration, “If you work for someone else, only your wages count toward Social Security’s earnings limits. If you are self-employed, we count only your net earnings from self-employment. We do not count income such as other government benefits, investment earnings, interest, pensions, annuities and capital gains.
“If you work for wages, income counts when it is earned, not when it is paid. If you have income that you earned in one year, but the payment was made in the following year, it should not be counted as earnings for the year you receive it. Some examples are accumulated sick or vacation pay and bonuses.” You can download a copy of the official document at www.socialsecurity.gov/pubs/10069.html.
