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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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The Q&A forum is moderated by Ed Zurndorfer -- an expert on federal employee benefits -- and a Certified Financial Planner, chartered life underwriter and chartered financial consultant in Maryland.

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The HalfBreed  
#1 Posted : Tuesday, August 27, 2019 3:09:42 PM(UTC)

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Back in the mid-early 1980's, CSRS retirees withdrew all of their contributions tax free first, which took about 2-3 years.

Then came the change, and those funds were doled out to the CSRS retiree depending on ones lifespan. Mine is scheduled to be paid to me in 310 equal monthly installments
which are then not taxed by the IRS. In effect, I'm paying taxes on approx. 95% of my income.

Reading this article in FedSmith, OPM looks at it one way, whereas the IRS another as shown here.

https://www.fedsmith.com...d-on-a-survivor-annuity/

To quote the end of it -
"But, as you suspected, there is a catch. As I discussed in my article, the IRS views you as recouping your already taxed contributions back little-by-little, based on your life expectancy for tax purposes. OPM, however has different rules when looking at refunds, You are viewed as recouping your contributions dollar for dollar from the beginning for refund purposes. Basically, in OPM’s eyes, you will have recouped contributions in no longer than three years from your retirement."

So, effectively, if I die prior to 310 months later (Recouping all of my contributions), there will be nothing left to distribute to my children, as I'm single with no spouse ???
RETIRED 12/19/2012 @ age 57
Good Bye Tension...Hello Pension !
Ed Zurndorfer  
#2 Posted : Tuesday, August 27, 2019 4:29:55 PM(UTC)
Ed Zurndorfer

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You have misinterpreted the IRS’ Simplified Rule which determines how a CSRS or FERS receives back during retirement his or her after-taxed contributions. If you fill out and submit Form SF 2808 (Designation of Beneficiary of CSRS Retirement Contributions) naming your children as beneficiary of your CSRS contributions, then any contributions left over upon your death will go to your children. For more information obtain the FEND Publication “Taxation of Federal Retirement Benefits”.
The HalfBreed  
#3 Posted : Thursday, August 29, 2019 10:07:45 AM(UTC)

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I just spoke with OPM and they clarified everything for me.

THEY(OPM)consider my entire contributions already paid out once I have been retired and the total amount of my pension exceeded my contributions.
(i.e. My contributions were $100,000, but to date, I've collected $300,000) so end of story for collecting my contributions.

They told me that the intention of the SF 2808 form is to pay my survivor/survivors a percentage of what I should have gotten in the month I died.
For instance, in a 30 day month, if I die on the 15th, my pension will be paid to those I designate on SF Form 2808. In this case, 50% of my pension divided by 1,2 or 3 survivors.

So, as of now, My CSRS contributions have already been paid back to me.
However, I did look through my records and indeed have already filled out form 2808 when I retired in 2012. Thank You again.
RETIRED 12/19/2012 @ age 57
Good Bye Tension...Hello Pension !
Ed Zurndorfer  
#4 Posted : Thursday, August 29, 2019 1:14:21 PM(UTC)
Ed Zurndorfer

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If OPM told you that you have received all of your CSRS contributions ($100,000) back and you retired (under the regular retirement rules - you not receive the "alternative" form of annuity under a medical retirement) at age 57 in 2012, then OPM did not give you correct information. According to the IRS Simplified Rule, at age 57 you have a single life expectancy of 310 months. $100,000/310 equals $322.58. Since 2012 (7 years or 84 months), you have received as part of your monthly annuity approximately 84 times $322.58 or $27,097 of the $100,000.
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