The voluntary contributions program allows CSRS employees to contribute up to 10 percent of their lifetime civilian government earnings to an interest bearing account. While the contributions are made in after-tax dollars, the interest they earn is tax deferred. The total amount can be withdrawn at any time and for any purpose or it can be used at retirement to purchase additional retirement benefits, including those for a survivor.

All along it has been possible for VCP account holders closing their accounts to have the interest portion rolled over into a traditional IRA and the after-tax principal sent to them in a check. The big question is this: Does OPM’s issuance do anything other than allow both parts to be moved simultaneously into an account that will accept it? Let’s see.

According to OPM, a lump-sum payment may be rolled over into a traditional IRA or an eligible employer plan. It “cannot be rolled over to a Roth IRA, a SIMPLE IRA, or a Coverdell Education Savings Account (formerly known as an education IRA).” It further notes that if you have a TSP account, “you may roll over the taxable portion of your lump sum into that account.” However, the TSP “will not accept non-taxable [after-tax] monies.”

So, to my mind, the only thing that has changed is the ease of moving all the money at one time. However, there is a small problem with rolling over after-tax and deferred-tax dollars. You will need to keep good records so that the after-tax dollars can be segregated when it time comes to pay interest on the deferred-tax amount. Fortunately, OPM will provide you with a statement that shows both numbers. Don’t lose it!

Okay, I can hear the gears whirling in your head. You’re wondering if you can roll the after-tax dollars into a traditional IRA and then convert that amount into a Roth IRA. Sorry to say, I don’t know. You’d have to check with the IRS to see if that would meet the conditions set forth in the tax code. The same is already true if you accept the after-tax money in a check. Either way, good luck!

If you are an employee covered by FEGLI Basic or Option A-Standard insurance, you receive accidental death and dismemberment (AD&D) coverage at no additional cost. AD&D insurance is a source of additional money if you have a fatal accident or one that results in the loss of a limb or eyesight. The death or loss must 1) occur within 90 days of the accident and 2) be a direct result of injury sustained in that accident, not from other causes. (Just to refresh your memory, Basic insurance is equal to your base salary rounded up to the nearest $1,000 plus $2,000. Option A-Standard insurance is worth a flat $10,000. These are your principal amounts of coverage.)

If you lose your life as a result of an accident, your survivors will receive the Principal amount of your insurance coverage plus an equal amount of AD&D. For example, if you were covered by Basic insurance in the amount of $70,000, the total payment from FEGLI would be $140,000 ($70,000 plus $70,000). If you were enrolled in Option A-Standard, the payable amount would be $20,000 ($10,000 plus $10,000). If you have both kinds of coverage, you'll get both payments.

If you survived that accident and lost a hand, foot or the sight in one eye, you would receive half the amount of your Principal coverage. For example, in the above example, if you lost one limb you would receive you $35,000 if covered by Basic insurance and $5,000 if covered by Option A. If you lost two or more limbs, you would receive the full amount, $70,000 or $10,000 (or both, if you have both kinds of coverage).

Of course, there is an upper limit to what can be paid under AD&D. For all eyesight or limb loses resulting from any one accident, you may receive no more than an amount equal to the Principal. Note: There is no lifetime limit on coverage. If you suffer a loss in a subsequent accident, payment may be made again.

While AD&D is generous in its coverage, there are some limitations on the circumstances under which it may be paid. The Office of Federal Employees' Group Life Insurance (OFEGLI) will not pay AD&D benefits if your death or loss is in any way the result of, is caused by, or is contributed to by:

• physical of mental illness;
• the diagnosis or treatment of physical or mental illness;
• ptomaine or bacterial infection, unless it is caused by an accidentally sustained external wound;
• hernia, no matter how sustained;
• a war (declared or undeclared), any act of war, or any armed aggression against the United States, in which nuclear weapons are actually being used;
• a war (declared or undeclared), any act of war, or any armed aggression or insurrection in which you are in actual combat at the time the bodily injuries are sustained;
• suicide or attempted suicide;
• injuring yourself on purpose;
• illegal or illegally obtained drugs that you administer to yourself.

Now let's consider your emotional situation. You know, it's not enough to be happy about leaving your current job. You need to be revved up about what you are going to do next, whether that's accepting another job, taking up or perfecting a hobby, getting involved in volunteer work, or whatever. Remember, your job provides structure to your life, and that structure will be gone when you retire. You need to figure out what will replace it.

Supposing that you have the financial and emotional security needed to retire, you need to be sure that you will have appropriate insurance coverage. In general, you may keep your Federal Employees Health Benefits (FEHB) program coverage in retirement but only if you are currently enrolled and have been enrolled for at least five years or from your earliest opportunity to enroll. OPM's authority to grant waivers is quite limited.

If you aren't eligible to carry your FEHB coverage into retirement, you'll be given a 31-day extension of coverage at no cost to you. After that you can drop your coverage, covert to an individual contract or request Temporary Continuation of Coverage (TCC). The later will allow you to keep your FEHB coverage for up to 18 months. However, you'll have to pay the full premium plus 2 percent to cover administrative costs.

The Federal Employees' Group Life Insurance (FEGLI) program has the same five-year rule and 31-day extension of coverage as the FEHB program. However, if you are not eligible to continue your coverage in retirement, your choices are limited. You can drop the coverage or convert all or part of your insurance into a private policy at your own expense. OPM has no authority to waive the five-year requirement.

Not satisfied with that, one clever employee did a little arithmetic and concluded that he would be better off financially if he "burned off" his sick leave instead of having those hours used in his annuity computation. Financially speaking, he was right. That's because each sick leave hour would be paid at his current hourly rate of pay, whereas the increase in monthly annuity benefits would be small in comparison. However, morally and legally speaking, he was wrong. Let me explain.

Sick leave must be used for legitimate purposes, not dishonest ones. The reasons for an agency granting sick leave are listed in the Code of Federal Regulations (See 5 CFR 630.401a). Among the more common reasons are medical, dental, or optical exams and treatment, incapacitation for the performance of duties, providing care for a family member who is incapacitated, and absences related to the adoption of a child.

Added to that, the regulations in 5 CFR 630.403 make it clear that if an absence is over three workdays, an agency should get "a medical certificate or other administratively acceptable evidence" of need. Therefore, burning off sick leave without a valid reason would involve the employee and the agency in a fraudulent expenditure of government funds.

While trying to squeeze every possible dollar out of Uncle Sugar has its appeal, here a case where it's better to curb your appetite and do what's right. Especially, since you can get burned if you don't!

FEGLI
If an employee/retiree is covered by Federal Employee Group Life Insurance (FEGLI), the proceeds generally go to the surviving spouse. If there is no surviving spouse, they usually go to the designated beneficiary or, if there is none, to the children, who are next in the next in line under the standard order of precedence. To put this in perspective, here is the standard order of precedence:

• Your widow or widower;

• Your child or children in equal shares with the share of any deceased child being distributed among the child's descendents, if any;

• Your parents in equal shares or the entire amount to the surviving parent;

• Your duly appointed executor or administrator of your estate;

• Your next of kin under the laws of the state you lived in at the time of your death.

Note: This sequence is mooted if a court has issued a decree of divorce, annulment or legal separation that calls for the benefits to be paid to someone else.

FEHB
If an employee/retiree dies while enrolled in the Federal Employees Health Benefits Program (FEHB) with self and family coverage, all survivors who meet the definition of "family member" will be able automatically to continue enrollment as long as any one of them receives a survivor annuity. If there is only one survivor annuitant and no other family member is eligible for continued coverage, the enrollment will be changed automatically to the less expensive self only coverage.

A child may continue to be covered under a survivor parent's FEHB plan until he or she reaches age 22. If there is no surviving parent, coverage ends when the annuity ends, generally at age 18. In that point, the child may convert to an individual policy (with lower benefits) or apply for temporary continuation of coverage (TCC) (with FEHB-level benefits) for up to 36 months. In either cases, the child will have to pay the full cost and, with TCC, an additional 2 percent for administrative expenses.

A rare open season for enrolling in or changing coverage levels in the Federal Employees Group Life Insurance program will be held in September, marking the 50th anniversary of the program. FEGLI typically holds open seasons only when benefit levels or premium rates change. Neither will change in the upcoming opportunity, which will be open only to active employees and certain rehired annuitants-and not to retirees otherwise. The elections and resulting premium changes won't be effective until the first pay period of September 2005. FEGLI enrollees can cancel or reduce coverage at any time, but outside an open season they generally may only increase coverage by proving insurability or after experiencing certain life events such as marriage or the birth of a child. No proof of insurability will be required for elections made in the upcoming open season. Employees who do not wish to change their coverage will not have to do anything in the open season. (source: Fedweek)

You are if you are a former member of the Armed Forces who retired from a reserve component of the Armed Forces. And you are if your retired pay was awarded because of a service-connected disability either incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war.

When you fill out an application for retirement, you'll find a section on the form that deals with military retired pay: Schedule B - Military Retired Pay. There you have to check the appropriate boxes next to a series of questions about your receipt of (or application for) military retired or retainer pay. If you qualify under either of the dual credit provisions, you should check the correct "yes" box. Then you'll need to verify your claim by attaching a copy of your notice of award.

If you don't attach any proof, the Office of Personnel Management (OPM) won't be able to process your retirement application until it receives verification from the branch of the Armed Forces in which you served. That will delay your receipt of a retirement annuity until the issue is resolved.

To avoid such a delay, you should get your service history sorted out now. If you already have a notification of entitlement for retired pay as a reservist, make a copy and - when you get ready to retire - remember to attach it to your civilian retirement application. Likewise, if your retired pay is based on a combat incurred disability, be sure to attach a copy of the appropriate documentation. If you can't locate the necessary paperwork, don't despair. Your agency personnel office can help you find the correct place to get that information

While your agency will usually estimate your civil service retirement annuity and even process your retirement application without any proof of entitlement to receive dual credit for you military service, OPM won't. Therefore, it's up to you to provide that proof. Not only will it save time but also it could help you avoid a major surprise. It would be a real blow if you thought you were entitled to receive both military retired pay and credit for that service in your civilian annuity and then learned that you weren't

Let's look at some of those variables. First is the amount of unused annual leave you have to your credit. If it's more than you are allowed to carry into a new leave year, the date on which you retire would be critical because "use or lose" leave would be lost if you retired after the new leave year begins. And, since unused leave is projected forward, retiring just before the new leave year begins would yield the largest lump-sum payment. (For FERS employees, that would be no later than the last day in December; for CSRS employees, it would be no later than January 3.) However, it's important to understand that your lump-sum payment will be reduced by the same taxes that are taken out of your pay check. That's because the payment will be treated as earned income.

On the other hand, if you were permitted to run out your annual leave, you would be accumulating more annual leave even as you used it. For example, if you took 80 hours of annual leave in a pay period, you'd only be reducing your leave balance by 74 hours. That's because you would have earned six hours during that pay period. Furthermore, during the time you were running out your leave, you'd be increasing both your service credit for retirement computation purposes and your opportunity to sock more tax-deferred money into your Thrift Savings Plan account (and benefiting from Uncle Sam's additional contribution, for FERS employees). How much the tax-deferral feature would be worth would depend on your tax bracket.

Fortunately, the answers are straightforward and the treatment of such leave is often quite generous. Let's go through the effects one by one.

Retirement benefits: A total of six months of LWOP in any calendar year is considered to be creditable service. In other words, for calculating your length of service, it’s treated as if you had never been on leave. Further, your coverage continues at no cost to you. Therefore, you don't have to make a deposit to get credit for that time.

Health benefits: Your enrollment in an FEHB plan will continue for up to 365 days. The government's contribution to the premiums will continue during that period. It will also cover your share of the premiums. However, you must either pay that portion directly to your agency on a current basis or let the premium debt accumulate and have the amount withheld from your pay when you return to work.

Life insurance: The treatment of life insurance coverage is even more generous than that for health insurance. The coverage continues for up to 12 consecutive months you are in a nonpay status without cost to you or your agency.

Annual and sick leave: If you are a full-time employee who is on LWOP for 80 hours during a pay period, you will not earn and annual or sick leave during that period. At that point, the clock is reset and you will begin earning both annual and sick leave credit until you again accumulate 80 hours of LWOP, at which point no credit will be given for the preceding pay period. Note: Up to six months of LWOP in a calendar year is considered creditable service for setting annual leave accrual rates, i.e., determining when you are eligible to move from four hours per pay period to six or from six to eight. The treatment of part-timers is proportional to their tour of duty.

Thrift Savings Plan: The government is less generous when it comes to your TSP account. Unless you are on active military duty when on LWOP, neither you nor your agency may make contributions to your TSP account if you are in a nonpay status for one or more pay periods. Nor is their any opportunity to catch up when you return to work.

These are the areas that are of most concern to federal employees. However, I'd be remiss if I didn't at least mention a few others where the government treats LWOPers rather well. Here are two very generous ones. First, if you are on military duty or on workers' compensation, that time is treated as a continuation of federal employment for all purposes when you return to duty. Second, any LWOP is considered to be creditable service for meeting time-in-grade requirements for promotion consideration.

Moving down the scale, nonpay status time is fully creditable for the12-month continuous employment period needed to qualify for severance pay. However, for purposes of computing your actual severance payment, any time on LWOP not creditable for leave accrual purposes is excluded from your creditable service.

First in line is your birthday, which defines the date on which you will be eligible to retire, at least as far as age is concerned. What you probably don't know is that you will be eligible on the day before your birthday - not on your birthday. That's because you will have completed a full year on that day. Your birthday is the first day of the next year.

Next is the date on which you will have enough years of service to retire. Assuming that you haven't had a break in service along the way, you will have completed the time needed on the day before the one on which you were first employed.

Those two dates are personal to you. The next dates I want to talk about came out of the legislative sky but can have a profound impact on how you are treated. I won't try to capture them all, just the ones that will be of concern to most of you. I'll start with military service.

If you served in the military before December 31, 1956, you won't have to make a deposit to the civil service retirement system to receive credit for that time in determining your eligibility to retire or your annuity computation. If you served in the military after that date, what happens to that time depends on when you were first employed in the federal government. If it was on or after October 1, 1982, you will receive credit for that time only if you make a deposit before you retire. If you were first employed before that date, you have two options. You can make a deposit for that time or you can take your chances. If you retire and won't be eligible for a Social Security benefit at age 62 (or at retirement if you retire after age 62), nothing will happen. On the other hand, if you will be eligible for a benefit, those years of military service will be eliminated and your annuity recomputed downward.

That date also affects the creditability of any deposit you may owe to the retirement fund. However, the rules are slightly different. If you worked for the federal government on or after October 1, 1982, in a position from which retirement deductions were not taken, you will receive credit for the time in determining your eligibility to retire but the time won't be used in the computation of your annuity unless you make a deposit to the retirement fund before you retire.

A different date controls what happens if you left the government and took a refund of your retirement contributions. If you received a refund that covers a period of service that ended before October 1, 1990, you won't have to pay the redeposit to receive credit for that service when you retire. Instead you'll receive full credit for that time but your annuity will be actuarially reduced based on you age and the amount of the redeposit you owe, plus interest.

The WEP
The WEP reduces the Social Security benefit payable to nearly all CSRS employees who will be receiving an annuity from a retirement system where they didn't pay Social Security taxes. As a result, they'll have a modified formula used to compute their Social Security benefit. Only those with 30 or more years of "substantial" earnings under Social Security will receive a full benefit. The rest will receive a smaller amount, usually much smaller.

To see how you might be affected, let's look at the formula used to compute the benefits of employees who aren't affected by the WEP. For example, if you are a CSRS Offset or FERS employee who turned 62 in 2004, the formula would look like this:

• Your first $612 of average indexed monthly earnings (AIME) would be multiplied by 90 percent;
• Everything from $612 to $3,689 of the AIME would be multiplied by 32 percent;
• AIME above $3,689 would be multiplied by15 percent.

The total of these three multiplications when adjusted by your total years of Social Security coverage would be your monthly pension from Social Security.

However, if you are a CSRS employee, the WEP will reduce that 90 percent factor by 5 percentage points for each year of substantial earnings fewer than 30. Fortunately, the reduction bottoms out at 40 percent for those who have 20 or fewer years of substantial earnings, otherwise CSRS employees with limited Social Security coverage would get nothing. As it is, the maximum reduction works out to be just above $300 a month.

To meet the substantial earnings criterion, you must have earned a lot more per year than the amount needed to earn Social Security credits. For example, in 2003 you'd only have to earn $3,600 to get a full year's credit (four quarters) from Social Security. However, to receive credit for substantial earnings, you'd have to make $16,275.

The GPO
The GPO only hits those who will receive an annuity from CSRS and have a spouse who will receive one from Social Security. In most cases, the Social Security benefit to which they would be entitled will be reduced or eliminated. If you are a CSRS employee - not CSRS Offset or FERS - the GPO will reduce your Social Security spousal benefit by $2 for every $3 you receive in your CSRS annuity.

So, if you are eligible for a monthly CSRS annuity of $1,800, two-thirds of that - $1,200 - will be used to offset your monthly Social Security spousal benefit. If that benefit was $1,300, you would receive only $100 a month from Social Security. That's because $1,000 subtracted from $1,100 leaves a positive balance of only $100.

The larger your CSRS annuity, the less you'll receive from your spousal benefit. For example, if you had a monthly CSRS annuity of $2,400 and a monthly spousal benefit of $1,200, you wouldn't get anything from Social Security. Two-thirds of $2,400 is $1,600. Subtracting that from $1,100 leaves you with zip. Because CSRS annuities are usually much greater than Social Security spousal annuity benefits, the GPO usually wipes out the latter benefit.

One of the most common changes for a retiree is a move. You'll need to let OPM know your new address so they can send your annuity checks, open season health benefits material, and 1099Rs to the right address. The same goes for "direct deposit" transfers if you'll be changing banks. If you are enrolled in a health benefits plan that serves a limited geographic area, you may need to change plans. And if you have been having state income tax withheld and are leaving that state, you'll need to stop the withholding. If you're moving to one of another state that is participating in the state tax withholding program, you'll have to make arrangements to start it up there.

If you get married, or divorced, have a baby, acquire a stepchild or foster child, or if your spouse dies, these events may trigger a need to change your health benefits coverage, either from "self only" to "self and family" or vice versa. In addition, you may want to change your designations of beneficiary for life insurance or retirement. You might also want to change your federal and/or state income tax withholding.

Or suppose your child reaches age 22 and is no longer eligible for health benefits under your plan (unless disabled). How can you arrange to temporarily continue their coverage until they get a job that provides them with their own health benefits? And what if you reach age 65 and become eligible for Medicare and don't need as expensive a plan as the one you're enrolled in now?

To make the changes you need to make without losing your mind, call OPM's Retirement Information Office at 1-888-767-6738 (202-606-0500 if you live in the Washington, DC area). The TDD numbers are 1-800-878-5707 or 202-606-0551.

Many of the transactions you may want to make can be completed (or at least initiated) through a phone call to OPM's Retirement Information Office. That office is staffed with customer service specialists trained to provide information and assistance to you in a wide variety of situations.

When you call, you will be greeted by an automatic answering system. It will guide you through a menu listing the most frequently asked about topics and allow you to record a number of requests for services (such as asking for the forms you need, changing tax withholding, or reporting a death -- features that are available 24 hours a day). All of them will require that you provide your claim number (CSA or CSF followed by seven digits), your date of birth, Social Security number and a telephone number where you can be reached. Some of them will require that you use a PIN number. These are provided to all retirees and survivors. Remember to keep your in a safe and easily accessible place.

If you want to speak with a customer service specialist, call between 7:30 a.m. and 7:45 p.m. (Eastern Time), Monday through Friday. Not surprisingly, OPM's phone lines can get very busy at certain times of the month and at certain hours during the day.

CSRS
If you were first employed under CSRS before October 1, 1982, you have a choice. You can make a deposit or not make a deposit. Either way you will receive credit for your military time both for entitlement purposes and in the computation of your annuity. However, if you don't make a deposit, retire, and become eligible for a Social Security benefit at age 62, those years of service will be eliminated and your annuity will be recomputed downward. The same is true if you retire after age 62 and are eligible for a Social Security benefit on the date you retire. If you are sure that you won't be eligible for a Social Security benefit at either of those checkpoints, you can forget about making a deposit.

If you were first hired under CSRS after September 30, 1982, you'll get credit for your post-1956 only if you make a deposit for that time.

The amount of the deposit is 7 percent of your basic pay for periods of active duty service prior to January 1, 1999 and after December 31, 2000, 7.25 percent for service in 1999 and 7.40 in 2000, plus any interest due.

FERS
The rules for those covered by FERS are the same as those for CSRS employees hired after September 30, 1982. The only way you can receive credit for your post-1956 military service is to make a deposit. However, the amount of the deposit is less than that for CSRS employees. It's 3 percent of your basic pay for periods of active duty service prior to January 1, 1999 and after December 31, 2000, 3.25 percent for service in 1999 and 3.40 in 2000, plus any interest due.

FERS with a CSRS Component
If you transferred to FERS and will have a CSRS component in your annuity, the rules on making a deposit will be the same as those for CSRS employees unless the military service was performed after transferring to FERS.

A court order can divide your retirement annuity, block or divide a refund of your retirement contributions, and provide for a survivor annuity if you die. In addition, it can allow a former spouse to continue coverage under the FEHB program, require you to assign your FEGLI benefits to that former spouse or your children, and even lay claim to some of the money in your Thrift Saving Plan (TSP) account.

The document that makes some or all of these things happen is called a Qualified Domestic Relations Order (QDRO). However, it is only binding if it conforms to the requirements set down in laws that apply to CSRS and FERS. That's because CSRS and FERS are exempt from the Employee Retirement Income Security Act (ERISA), which applies to everyone else. (As always, the federal government had to be different.)

Because of those differences, the U.S. Office of Personnel Management (OPM) has published a handbook for attorneys, RI 38-116, which you can download from www.opm.gov/asd/pdf/ri83-116.pdf. Regardless of whether you are on the initiating or receiving end of a separation, divorce or annulment proceeding, your attorney needs to have a copy of this essential document in order to protect your interests.

Under both CSRS and FERS disability benefits are payable if you have become so disabled that you are prevented from performing useful and efficient service in your current position. The length of service requirement for being eligible to apply for disability retirement is different for CSRS and FERS employees. A FERS employee only needs to have competed 18 months of creditable civilian service while a CSRS employee must have completed at least five years. Considering that CSRS was closed to new hires years ago and that anyone returning to the workforce as a CSRS Offset employee will already have five years under his belt, the latter rule is now meaningless.

If you want to apply for a disability retirement, you must send the paperwork to the U.S. Office of Personnel Management (OPM). Your agency can help you do this. At the same time, your agency must certify that it is unable to accommodate you in your present position or any vacant position in your commuting area that is at the same grade and pay. Note: Collective bargaining agreements prevent the reassignment of a disabled Postal Service employee to a position in a different craft.

CSRS Offset or FERS employees also will have to apply to the Social Security Administration (SSA) for disability retirement. SSA has different and much higher standard for determining if you are disabled. Under their rules, you must be so severely disabled that you cannot perform any substantially gainful employment.

If you are judged to be disabled, how much of a benefit will you receive? If you are a CSRS employee, you will receive either 40 percent of your "high-3" years of average salary or an amount that results from increasing your actual service from the date the disability retirement is approved to age 60. In effect, the 40 percent calculation is the guaranteed minimum you will get. If your service credit calculation entitles you to more, you will get that amount.

If you are a FERS employee who is under age 62, you will receive 60 percent of your "high-3" average salary - minus 100 percent of any Social Security disability benefit - for the first 12 months. After that, the figure is reduced to 40 percent minus 60 percent of the Social Security benefit.

If you aren't eligible to carry your FEHB coverage into retirement, you will be given a 31-day extension of coverage at no cost to you. After that you may drop your coverage, covert to an individual contract, or ask for a Temporary Continuation of Coverage (TCC). The later will allow you to keep your FEHB coverage for up to 18 months. However, you will have to pay the full premium plus 2 percent to cover administrative costs.

The second question you should ask is this: Will I need the same level of coverage that I had as an employee? The simple answer to that question is probably yes, at least until you reach age 65 and become eligible for Medicare Part A (hospital insurance). At that time you will have to consider your options. If you are enrolled in a fee-for-service plan, such as Blue Cross-Blue Shield, you may want to consider enrolling in Medicare Part B (medical insurance). That way, nearly all of your medical expenses will be covered. On the other hand, if you are enrolled in an HMO, which already covers most of your medical expenses, you may decide not to enroll in Part B. The best time to make that decision is when you are approaching age 65.