Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to email@example.com, and view his blog at retirement.federaltimes.com.
I’ll start the new year with a summary of benefit changes to federal pay, cost-of-living adjustments and Social Security benefits. In my next column, I’ll do the same for Medicare, death benefits, and children’s benefits.
If you are a federal employee, the good news is that you’ll receive a 1-percent pay increase. It ain’t much, but it’s at least as good as what you got last year. And it’s a lot better than what you experienced in 2011, 2012 and 2013, when there wasn’t any across-the-board pay increase. However, even during that three-year pay freeze, your take-home pay was still increased if you were entitled to a within-grade increase or were promoted.
If you’d like to see what you’ll make this year, visit the Office of Personnel Management’s online pay tables. They apply not only to GS employees, but also to those in the Senior Executive Service, senior level and scientific or professional positions, the Executive Schedule, and many other employment categories.
Social Security maximum wage base
The Social Security maximum taxable wage base has moved up from $117,000 in 2014 to $118,500. Once you’ve earned that much in a calendar year, Social Security taxes won’t be deducted from your salary for the rest of the year. However, taxes for Medicare Part A will continue to be deducted, even if you earn more than that amount.
Note: If you are a CSRS Offset employee who earns more than the maximum taxable wage base, you won’t see an increase in your take-home pay. That’s because full CSRS deductions will be taken from that pay. So, instead of 6.2 percent going to Social Security and .8 percent to CSRS, all 7 percent will go to CSRS. If you are a special category employee, the numbers are 6.2, 1.3 and 7.5.
For the second year in a row, the Consumer Price Index for Urban Wage Earners and Clerical Workers (the CPI-W) has gone up. Last year it was 1.5 percent for CSRS and FERS retirees. In 2015 it’s 1.7 percent for both.
If you are a CSRS retiree who has been retired for at least one year as of Nov. 30, 2013, you’d receive the full COLA in your January 2015 annuity payment, regardless of the age at which you retired.
If you are a FERS retiree, you’ll only receive that COLA if you meet one of three criteria: you are age 62, you retired under the special provisions for law enforcement officers, firefighters and air traffic controllers, or you are a disability annuitant. You will also receive the COLA if you are receiving a survivor annuity.
If you’ve been retired for less than a year when you become eligible for a COLA, the amount you get will be proportional to the number of months you’ve been on the annuity roll. For example, if you were on the annuity roll in June 2014, you’d receive one-half of the 2015 COLA; in September, one-third.
Note: If you are a FERS retiree with a CSRS component in your annuity, the latter will be increased under CSRS rules. In other words, you’ll get the full COLA on the CSRS portion regardless of your age.
Social Security benefits
Social Security benefits, like COLAs, are increased by the annual change in the CPI/W. However, unlike COLAs, there is no reduction for FERS retirees.
So, if you are eligible for a Social Security benefit, you’ll get the same increase as any other eligible individual. In 2015 it’s 1.7 percent. And, unlike the rules for COLAs, you won’t have to wait to get it. It will be included in your Social Security payment, regardless of the month in which you became eligible for that benefit.
Eligibility for a Social Security benefit begins at age 62, but with a reduced benefit. The amount of the reduction decreases until you reach your full retirement age, which ranges between 65 and 67, depending on your year of birth. For example, if your full retirement age is 65 and you apply for a Social Security benefit at age 62, the reduction will be about 20 percent. If it’s 67, the reduction will be about 30 percent.
Social Security earnings limit
The Social Security earnings limit for 2015 is $15,720, an increase from $15,120 in 2014. If you are a retiree who is receiving a Social Security benefit and you haven’t yet reached full retirement age, your Social Security benefit will be reduced by $1 for every $2 you earn over that limit.
In the year you reach your full retirement age, the reduction is $1 for every $3 above a different limit. In 2015, that’s $41,880. There is no reduction beginning with the month in which you reach full retirement age.
The special retirement supplement
The earnings limit also applies if you are a FERS retiree who is receives the special retirement supplement. The SRS, which approximates the amount of Social Security benefit you earned while employed under FERS, continues until age 62, when you are eligible for a Social Security benefit. However, as a rule, your SRS will be reduced by $1 for every $2 over the earnings limit, if you earn more than $15,720 from wages or self-employment in 2015.
However, there are two exceptions to that rule. You can earn as much as you want without your SRS being reduced, if you retired before your minimum retirement age (MRA) and were 1) employed under the special provisions for law enforcement officers, firefighters and air traffic controllers, or 2) were a military reserve technician who was separated because of a loss of military membership. However, in either case, when you reach your MRA, you’ll be subject to the earnings limit.