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Federal Employees Benefits Q &A

Do you have questions about your federal employee CSRS or FERS pension/annuity or federal employee retirement planning? Concerns about your Thrift Savings Plan (TSP) account or what about federal employee pay and leave issues?

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MDKidd  
#1 Posted : Monday, November 05, 2018 7:18:55 AM(UTC)
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Ed,
I will be retiring Dec 31, 2018. This is the middle of my final pay period (last pay period ends Saturday Dec 22). This raises a couple of questions.

1. How will my TSP contribution and government matching component be handled for this final paycheck? I have a fixed dollar amount from each paycheck going to the TSP. Will this entire amount (and gov match) still be sent to the TSP, just a pro-rated portion of it, or no contribution at all?

2. How is my salary determined for this last pay period? Is it 9/14ths of my normal salary (i.e. 9 days out of 14), or is it based on actual hours worked? I work a flex schedule - 36 hours week 1 (9-9-9-9-0), then 44 hours week 2 (9-9-9-9-8). So on this final pay period I will have worked 36 hours week 1, and 9 hours for Monday only week 2. This comes out to 45 out of 80 hours or 9/16ths of my normal salary.

3. Do these final 9 days get added in to the High 3 average calculation?

Thanks in advance for any help you can provide.
Ed Zurndorfer  
#2 Posted : Monday, November 05, 2018 6:28:49 PM(UTC)

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In answer to your questions about retiring Dec. 31, 2018: (1) You will be able to contribute to the TSP the maximum possible (your entire paycheck less certain deductions such as FICA and Medicare Part A payroll taxes, employee FERS contribution, and insurance premiums). This your payroll check will be dated in January 2019. You will also receive agency automatic and matching TSP contributions. (2) You will receive a full payroll check for pay period 26. This is because you would have worked for 45 of the hours and for the other 35 hours you did not work you will be charged annual leave and paid for the 35 hours accordingly.
Ed Zurndorfer  
#3 Posted : Monday, November 05, 2018 6:31:22 PM(UTC)

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Yes, the last 9 days you work will be included in the calculation of your high-three average salary.
MDKidd  
#4 Posted : Tuesday, November 06, 2018 5:40:00 AM(UTC)
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Thanks for the quick reply. Very informative. So, correct me if I'm wrong, since my final paycheck will be dated in January, that final paycheck AND the corresponding TSP contribution will be a 2019 contribution. Therefore, I should be able to max out my yearly 2018 TSP contribution with the previous paycheck (pay period ending Dec 22), and still contribute as much as I want - including the amount paid to me for the 35 hours of annual leave - to the TSP (minus the deductions you mention), since that will be a 2019 contribution.
Ed Zurndorfer  
#5 Posted : Tuesday, November 06, 2018 5:47:18 AM(UTC)

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Yes, you are correct.
MDKidd  
#6 Posted : Tuesday, November 06, 2018 7:25:57 AM(UTC)
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Thanks once again. Very helpful.
Ed Zurndorfer  
#7 Posted : Tuesday, November 06, 2018 8:12:06 AM(UTC)

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You are most welcome.
mc0111  
#8 Posted : Tuesday, November 06, 2018 12:51:16 PM(UTC)
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Thanks: 20 times
I have a question: If he is retiring on Dec. 31 (middle of pay period), how can he get paid AL for the final days of the pay period? If he is no longer an employee? Or is that just how it works, as long as someone has AL to cover it, and it will not delay his first payment from OPM which should come Feb. 1?
Ed Zurndorfer  
#9 Posted : Tuesday, November 06, 2018 2:51:35 PM(UTC)

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Assuming the retiring employee has unused annual leave hours remaining at the time of retirement, the retiring employee will get paid in a lump sum payment. The remaining hours of pay period 26 (35 hours) the employee will come from the employee's unused annual leave hours and the employee gets paid for them as part of the employee's final paycheck. The other remaining unused annual leave hours will be paid separately in a lump sum payment.
MDKidd  
#10 Posted : Wednesday, November 07, 2018 12:16:37 PM(UTC)
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So putting it another way, I will not be earning AL for the remainder of the week, I will just be receiving an advance of 35 hours from my annual leave lump sum payout.

I do have a brief follow-up question however. Instead of contributing my entire final paycheck to the TSP, would it make better sense to contribute only 5% (to receive the full government match), then the remainder as a 2019 HSA contribution? If this is allowed, I believe it makes more sense since the TSP is only tax deferred, whereas the HSA is tax free (if used for medical expenses).
Ed Zurndorfer  
#11 Posted : Wednesday, November 07, 2018 2:49:31 PM(UTC)

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You actually could put almost all of your final paycheck into the TSP and make a 2019 contribution to your HSA. This is because HSA contributions are not made from an employee's gross salary. HSA contributions can be made from an outside bank account and even after one retires from Federal service, assuming the retired employee remains enrolled in a high deductible health insurance plan associated with an HSA. Also, the retired employee cannot be enrolled in Medicare.
MDKidd  
#12 Posted : Thursday, November 08, 2018 7:50:50 AM(UTC)
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This is very interesting. You are quite correct that, unlike TSP contributions, I can continue to make HSA contributions after retirement. That is an important consideration. The downside, however, is that post retirement HSA contributions will have to be made with post-tax monies - still tax deductible, but not pre-tax. Conversely, my most recent paycheck shows FEHB, HSA, and FSA contributions all to be non-taxable wages, therefore, any HSA contributions made with my final paycheck will likewise be made through payroll deduction, and thus will be made pre-tax (i.e. before FICA and Medicare taxes).

HSA rules state that you can contribute up to the entire yearly allowable amount at any time, so getting the maximum contribution possible from pre payroll tax money would seem to trump any tax deferred TSP contribution over the government match level. The advantage to tax deferred money is the time to accumulate greater earnings on a larger pot before taxes are paid, but my plan is to begin withdrawals immediately after retirement, eliminating that advantage. Thus, I believe at least in my case, the max HSA contribution would be the better choice. Thoughts??
Ed Zurndorfer  
#13 Posted : Thursday, November 08, 2018 1:39:03 PM(UTC)

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You should make every effort to maximize both your TSP contributions and HSA contributions for 2019.
nearlyDone  
#14 Posted : Friday, November 09, 2018 12:03:01 PM(UTC)
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Hello Ed,
I also am retiring on 12/31/2018 so this topic is very helpful for me. I had never heard that I would get the full pay for pay period 26, using some of my annual leave. Since Jan 1 is a holiday, would just 24 hours of my unused leave be used for this purpose ?
( I am in FERS and will have the maximum 240 + 200 -> 440 hours of unused annual leave assuming I do not get an additional 8 hours for pay period 26 )

And somewhat of a new topic:

Will the Lump Sum payment for Annual Leave be treated as income for 2018 or 2019 ? I read an article in FedWeek (i think) that suggested that this would be considered income for the year in which I retire (since it was earned in that year: 2018 ). If that were the case, this would put me over the cap on social security tax for 2018, and so I would not pay into ss for that remainder .. ? OR is it considered income for 2019 since I receive it in 2019 ( both for social security and for federal income tax ) ?
Ed Zurndorfer  
#15 Posted : Friday, November 09, 2018 12:22:49 PM(UTC)

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In answer to your questions assuming you retire Dec. 31, 2018: (1) You will be charged 8 hours of annual leave for Jan. 1, even though it is a Federal holiday; and (2) Since your lump sum payment for unused annual leave will be directly deposited into the same bank account you will get your final paycheck directly deposited sometime in the middle of or late January 2019, the final paycheck and lump sum payment will be taxable in 2019, not in 2018 (even though you earned it during 2018).
nearlyDone  
#16 Posted : Friday, November 09, 2018 12:38:40 PM(UTC)
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Just to clarify, I believe that when you are paid for unused annual leave, you are paid for holidays that occur during the period that your unused leave would include after your retirement date. ('as if you continued working for that period'. So with 440 hours of unused leave after 12/31/2018 this would include New Years Day, MLK day, and Presidents day, effectively adding 24 hours to my unused leave total.
Then you are saying that for PP26, I would have 48 hours worked ( 6 days ) and 32 hours leave (pulled from my balance) for PP 26 ?

So then the net effect would be that I would be paid for 440 hours + 24 hours (those holidays) - 32 hours for the four days in January pp 26... correct ?

Thank you !

Ed Zurndorfer  
#17 Posted : Friday, November 09, 2018 12:58:32 PM(UTC)

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Yes, your analysis is correct. The only thing that should be added is since your unused annual leave is being projected into the future as if you are working these days, then if there is a government-wide pay increase and locality pay adjustment, the annual leave payment for these days would include the pay increase. Note that the government-wide pay increase and locality pay increase take effect on the first day of the new leave year in early January.
bustaraven  
#18 Posted : Wednesday, December 05, 2018 10:10:48 AM(UTC)

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Hi Ed, On a follow up to annual leave including holidays...If I retired Dec 31 with 6 days worked...was paid an additional 4 days of annual to complete my 80 hrs for the work period, would I then need enough annual leave from where the 80 hr pay period would have ended (Jan 5) or from my retire date of Dec 31 to be able to be paid for New Years and MLK day? thanks
Ed Zurndorfer  
#19 Posted : Wednesday, December 05, 2018 11:42:01 AM(UTC)

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Yes, but even if you do have a sufficient number of unused annual leave hours to be paid for New Year's Day and the Martin Luther King Birthday Holiday, you still would be paid as "annual leave" pay and not as "holiday" day.
nearlyDone  
#20 Posted : Wednesday, December 05, 2018 6:59:20 PM(UTC)
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Not sure what you mean by paid annual leave, not holiday pay ?
I think you basically are paid as if you continued working until the day that your leave runs out. So for each holiday in that period, you just add another 8 hour day to that period, and so you get an extra 8 hours of pay.
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