Advantages to retiring in 2010 and 2011


Retiring at the end of leave years 2010 or 2011 offers maximum advantage to employees who want to hold out for the maximum payment for unused annual leave and get the benefit of the pay increase that starts on the first pay period on or after Jan. 1 each year.

Keep in mind, however, the end-of-year avalanche of retirements will further challenge the Office of Personnel Management’s ability to process applications in a timely fashion. New applications will be on top of a backlog of 38,000 applicants, 40 percent of whom have been waiting three months or more to receive their full annuities. OPM has pledged to increase its staff to speed processing, especially for simple cases. And, instead of its long-time practice of making partial payments, it plans to make retirees’ initial annuity payments as close to the maximum as possible.

The 2010 leave year ends Saturday, Jan. 1, 2011. This is good news for both Civil Service Retirement System and Federal Employees Retirement System employees. FERS employees have to retire no later than the end of a month to be on the annuity roll in the following month.

While CSRS employees can retire up to the third day of any month and be on the annuity roll in that month, they lose 1/30th of that first month’s annuity payment for every day they are still on the payroll. By retiring at the close of business on Dec. 31, you’ll be on the annuity roll in January.

You don’t have to retire on Jan. 1, 2011, just because it’s the end of the pay period. When you’ve completed your work week, you are free to retire, no matter what day it falls on.

By completing a pay period, you’ll also get credit for any annual and sick leave you earned during that period.

The 2011 leave year ends on Saturday, Dec. 31, 2011. This is good news for both CSRS and FERS employees for the same reasons.

By retiring at the end of the leave year, most of you will get a lump-sum payment for all your unused annual leave, including the so-called “use or lose” leave you would have lost if you retired after the new leave year begins. I said “most of you” because there are limits on how much annual leave a U.S. Postal Service employee can cash in.

You’ll also reap the benefit of the 2011 pay increase — if there is one. That’s because your unused annual leave will be projected forward as if you were still on the payroll and paid at 2011 rates. The only potential pay change that won’t be factored in is any step increase you would have received. You have to be on the job and performing satisfactorily to get one of those.

There’s also a tax benefit if your income in the year after you retire, including any lump-sum annual leave payment or buyout, is lower than it was while you were working. Check IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, to see how much of your annuity will be nontaxable.

To assure that your retirement application is processed more smoothly and quickly, make sure it is complete and accurate. This year, you don’t have much time. When your agency personnel office reviews your application, ask if everything is in order. If it isn’t, work quickly to deal with whatever problems are spotted.

If you’re planning to retire next year, you’ll have more time to review your Official Personnel Folder to see if all your periods of service, whether civilian or active-duty military, are accounted for. If there are periods for which a deposit or redeposit to the retirement fund is needed to get credit for that time in calculating your years of service, in your annuity computation or both, find out if it makes economic sense to do that.

Check to be sure you are eligible to carry your health benefits and life insurance coverage into retirement. And ensure your designations of beneficiaries are up to date.

Then, well in advance of your retirement date, fill out Standard Form 2801 if you are covered by CSRS, or Form 3107 if you are covered by FERS. Give it to your boss or administrative officer.

With time to spare, you are more likely to be able to iron out glitches that may arise as your application makes its way through your personnel and payroll offices.


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  1. OPM may have promised to increase both staff and interim payments but I’m not seeing it. I’ve been waiting almost four months and I’m getting what (according to OPM’s own pre-retirement estimate) is about 30% of what I should be getting! When I spoke to Boyers PA last week the lady on the phone complained “unless they hire some people or start paying overtime you can expect it to be about six months”

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