Q: There are several of us around the office who are close to retirement (i.e., the next three or four years), and we’ve heard rumors that lump-sum settlements will change starting in 2013 and that the calculation will result in reduced lump-sum payment amounts. Are there any changes coming in 2012 and beyond that will affect our lump-sum payments? When I go to my Fidelity website and look at my projected lump-sum payments in 2012, 2013 and 2014, I don’t see any reductions. I’m wondering whether it has something to do with taxes changing on the lump-sum amounts starting in…
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Q: I am 65 years old and will have 30 years with the federal government as of January 2012. I previously worked for 15 years in the private sector and am covered by Social Security. I will be 66 in January 2011 and have been told that I can draw my full Social Security benefit while I am still working. Is this true? Besides taxes, is there a downside to drawing your Social Security while you are still working? A: There is no limit to the amount you may earn after you reach your full retirement age. The only downside…
Q: I read your recent article, “Dispelling the myth of an above-the-law Congress.” Another “myth” circulating is that years ago, members of Congress exempted themselves from paying income tax on their congressional salary. True or false? A: False.
Q: From 1968 through September 1978 I worked in the private sector and paid Social Security. My taxed Social Security earnings for those 11 years were $40,520. According to the Social Security Administration, seven of those years were “substantial earnings years.” Beginning in October 1978, I entered federal civil service as a federal law enforcement officer and paid no Social Security. In June of 1983, I left federal service and re-entered the private sector. From June 1983 through August 1985, I remained in the private sector. My total taxed Social Security earnings for those three years were $74,650. According to…
Q: A Civil Service Retirement System employee recently retired and was told by a representative of the Social Security Administration that because he qualified for Social Security after he retired under CSRS he would not be affected by the windfall elimination provision. The rep said that he is only affected by the WEP if he had his 40 quarters during or before his CSRS employment. I can’t find any documentation supporting this. A: The SSA rep was confusing the windfall elimination provision with what’s often referred to as “Catch 62.” The WEP applies to the Social Security benefit of anyone…
Q: I was told by an administrative person some 15 years ago that your initial retirement pay is not taxed until your retirement exceeds your cumulative retirement pay-in. Is this true? A: That hasn’t been true since the law changed in 1983. Before that time, retirees received the full amount of their retirement contributions before their annuities were taxed. Since then, a portion of each annuity payment is taxable. For information on how that amount is determined, read IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, available at http://www.irs.gov/publications/p721/index.html.
Q. I will be 62 years old in November 2010. I plan on retiring Dec 31, 2010. I will draw a FERS annuity from the government; I also will be drawing Social Security. My question is, will my FERS annuity be considered taxable income to Social Security and will my Social Security benefit be taxed for it ? A. Your FERS annuity will be taxable as regular income; however, a portion of it will be tax-exempt because it represents a return of the contributions you made to the retirement system, which have already been taxed. When determining if you have…
Q: Could you tell me if the payout on Base Closure and Realignment Leave and the payout for annual leave is the same? I was told that the BRAC payout is taxed at a higher rate. A. Both are taxed at the same rate. The IRS considers lump-sum payments to be regular income, with deductions being taken out for federal taxes and, where applicable, state taxes and Social Security.
Q: When I retire, I will have 2,203 hours of sick leave. I am under Civil Service Retirement System Offset. I believe 2,087 hours is the equivalent of one year of service when I retire. So when I retire at age 58, — at 30 years, 6 months of service — I will get an extra year added to my time, so I will have 31 years, 6 months of service that will apply for purposes of calculating my retirement annuity. Is this correct? My husband works a nine-hour schedule that gives him one day off every week. Does the…
Q: Is Base Closure and Realignment restored leave taxable when distributed? My CPO is telling me yes but cannot cite any regulation. I recall from an earier question you answered that you said that BRAC leave had already been taxed when earned and therefore no withholding would be imposed on the payout. Can someone give me the chapter and verse? Our installation closes in 2011, and many of us have built up large BRAC balances. A: I think your memory is playing tricks on you. Annual leave isn’t taxable when it’s earned, nor is it taxable when restored. Annual leave…