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Burrus : General Time line for EARLY OUTS expected to take effect during October 2003 & February 2004- A specific date for the initiation of the process will be determined at the area level, & expected to begin by the 2nd week of July. Early Outs will be for all APWU represented employees ----

BRING ON THE EARLY OUT ! Discussion| Excerpts of USPS Early Out Petition| OPM EO Approval Letter to USPS

Postal Early Out Offer Almost in the Mail|EO Regulations |Early Retirement Made Easier| CSRS EO Estimates

Switching to PT Can Trim Size of Annuity| USPS Retirement Manual-EL-502-| Military Service Deposit Election

Application for Retirement  (CSRS) (FERS)|

APWU Local VP Don Cheney offers helpful tips on early out retirement

• Please think long and hard about the early out. The USPS offered no incentives. We had many in 1992 regret they took the early out and the USPS offered incentives in 1992. The penalties are very significant on early outs.
Bobby Donelson-APWU National Maintenance Assistant Director


Federal retirees likely to get lowest COLA in many years

Washington Times

By Mike Causey
Published June 24, 2003

Thanks to record low inflation and fears of deflation, retired federal workers, military personnel and people getting Social Security are seeing their January 2004 cost of living adjustment melt before their very eyes.

This time last month — just halfway through the complex COLA countdown — retirees were due a 1.8 percent raise next year. But after the May Consumer Price Index (which measures living costs) came out last week, the projected 2004 COLA had shrunk to 1.6 percent.

The final amount of the January, 2004 COLA for retirees will be based on the increase in living costs (as measured by the CPI) from the third quarter of this year over the third quarter (July, August, September) of last year. It is possible, indeed likely, that living costs will go up and that will boost the value of the COLA.

But for now lower prices for key items points to one of the lowest retiree raises in many years.
Unfortunately for federal retirees, low COLAs don't guarantee that their health insurance premiums for 2004 will not increase, as they have each year. Generally speaking, low inflation is good for retirees, but when it produces a minimal inflation adjustment and health premiums continue to skyrocket it's a hardship.

Postal workers
Up to 8,000 postal clerks are likely to be offered the chance to take early retirement between now and October.

The new early retirement program (ReShaping VERAs, outlined here last week) make it possible for the largest federal agency to "rebalance" its work force by permitting selected workers in the clerk (as opposed to letter carrier) craft to take retirement well before age 55. VERAs in government lingo stand for voluntary early retirement authority.

Unlike regular VERAs, the new reshaping authority — which came with the creation of the Department of Homeland Security — doesn't require layoffs or downgradings, both of which the USPS has pledged not to do via union contract.

But they do make it possible for the Postal Service, which is being hammered by the public use of e-mail as opposed to regular first-class mail, to rebalance its work force. It needs 16,000 fewer clerks and more high-tech employees. Hence the long-awaited early outs.

Back to school
The Bush administration is encouraging federal agencies to send workers back to school (with Uncle Sam paying the tuition) to get higher degrees in skills the agency needs.

It's part of a new "flexibility" program being pushed by the Office of Personnel Management. Under the plan, workers who are sent back to school for higher education would have to agree to work for the agency for a fixed period of time.

Just how binding that promise would be (in the past it hasn't been enforced) is yet to be determined.

Flexible spending account
Remember, you have until Friday to sign up for inclusion in this year's FSA program.

It begins July 1 in many agencies, but some will delay it until August or September and at least one — Government Printing Office — won't get going until January.

Under the FSA program, you can put $250 to $3,000 in a medical (or $5,000 in a dependent care) FSA account via payroll deduction. The money is pretax so it will cut your take-home pay and your taxes. Unspent money in the account at the end of the year is forfeited. So plan your likely expenditures carefully.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or mcausey@federalnewsradio.com.    

OPM Publishes New ‘Early Out’ Regs

June 13, 2003

Burrus Update -#09-03

 The Office of Management and Budget has given final approval to new regulations governing Voluntary Early Retirement Authority for federal agencies, and the Office of Personnel Management published the revised rules in the Federal Register today, June 13, 2003.  The regulations take effect immediately.

 The Postal Service’s Jan. 23 request for authority to grant voluntary early retirement to APWU-represented employees, which has been pending publication of the new rules, will now be considered by OPM.

 I will meet with USPS officials June 20 to review the procedures for offering early retirement opportunities to our members. 

 Local unions will be informed of the specific steps to be followed.

 As additional information becomes available, it will be shared in a future update.

June 4, 2003
Update #8-03

OPM Approves Early Retirement Rules
Personnel Agency Forwards Regs to OMB for Final Approval

The director of the Office of Personnel Management has approved new draft regulations governing Voluntary Early Retirements (VERA) and forwarded them to the Office of Management and Budget for final approval.  Once OMB approves the regulations, it will determine how to charge early retirements against the federal budget. The next step will be publishing the new regulations in the Federal Register for public comment. The APWU has been informed that the rules will take effect as soon as they are published.

I cannot predict a specific time frame for OMB to complete its review, but it is expected to be acted upon expeditiously. 

I attended a meeting last week with postal management to review the USPS process for offering early retirement opportunities to APWU-represented employees.  The process will include the identification of eligible employees and notice to those employees of their eligibility.  Once employees express an interest in retiring, they will have a minimum of 45 days to revoke their decision.

Upon the approval by OMB, postal management will begin the VERA process.  The APWU & USPS have agreed that local unions will be informed of the specific steps to be followed.

As more information is received, it will be shared in an update.

William Burrus


Switching to Part-Time Late in Career Can Trim Size of Retirement Annuity

By John R. Smith APWU Retirees Director

In 1986, a federal law was changed, with the intent of being to fix an inequity in how retirement annuities were calculated for part-time postal and federal employees. It seems, however, that Congress wound up replacing one problem with another, instituting a fix that has come as a shock postal workers whose retirement benefits are being drastically reduced because they finished out their careers by working part-time.

Before  the law was changed,  federal retirement annuities were based on the amount of money employees earned during their "high three" years of service. Logically, for most full-time employees, these are their last three years before retirement.
The 1986 legislation has cheated long-time workers out of benefits

Government accountants pointed out that employees who worked part-time most of their careers could "game" the system by switching to full-time status for their last 36 months of work: Their pension annuity would be based on their average annual salary during the "high three" years- they would get credit for full-time work for each of the years they worked even if all but three were only part-time.

Law Changes Calculations

The law Congress passed in 1986 (P.L. 99-272) has changed the way federal annuities are calculated for part-time employees. Under the new rules, the "high three" years of salary are still used in the calculation, but annuities are pro-rated with the calculation based on the actual number of hours worked. This accounts more accurately for periods when employees worked part-time.

The new problem is the reverse of one that existed before 1986: Employees who switch to part-time status at the end of their careers can find their annuities substantially reduced because their "high three" years no longer are their last three.

Working part-time lowers the new multiplier  used for calculating annuities based on the average number of hours worked during the years since 1986.

Placing the Blame

Congress often passes vague laws, the leaves it to federal agencies to figure out what the laws mean and to develop regulations to properly implement them. In this case, many blame the Office of Personnel Management (OPM) for today's convoluted annuities.

The main complaint is that OPM solved only half of the inequities identified in the General Accounting  Office's report (GAO/PEND-86-2, "Retirement Benefits Modifications of Civil Service Retirement Benefits for Part-Time Work"), which Congress  relied on in drafting the new law. While OPM ended part-time workers ability to game the system, it perpetuated and exacerbated existing injustices for employees converting from full-Time to part-time.

The way it has worked is that employees who convert from long- time full-time  work to part-time status for a few years get roughly the same retirement annuity as those who worked as part-timers their entire careers. Since most part-time employees are women, insult has been added to injury. The glass ceiling that has kept many women out of management is complemented by a "glass wall" for part-timers.

Conversion's Negative Effect

The 1986 law essentially cheats long- time workers out of retirement benefits in some cases by as much as 25 percent. Needless to say, many full-time workers made the conversion without knowing how it would affect their annuities, which last the rest of their lives.

If you feel you are being adversely affected by this law, write to your senators and congressional representatives to encourage them to introduce corrective legislations. (postalreporter: Legislation that will help part-time federal civilian employees collect retirement benefits reflecting their service was reintroduced in Congress May 21.)

source: The American Postal Worker May/June 2003 issue pg. 34

Public Law: 99-272
-Subtitle B: Civil Service Programs
Sets forth the method of computing the retirement annuity for part-time employee

Retirement Benefits: Modification of Civil Service Retirement Benefits for Part-Time Work PEMD-86-2  Summary

GAO reviewed the current retirement rules used for calculating civil service benefits for federal employees and developed a modification to bring retirement benefits in line with work actually performed during a career. A similar provision has been included in the proposed Civil Service Pension Reform Act covering employees hired after 1983.

GAO found that retirement benefits for federal employees hired before January 1, 1984, are based on the highest average salary earned during any 3 consecutive years. The benefit formula has two major effects: (1) in some circumstances, employees with differing total hours of service are eligible for the same initial benefits; and (2) employees who want to reduce their working hours per week during the last few years of their careers lose a portion of their benefits. GAO developed a benefit formula modification that would calculate: (1) the retirement benefit as though the employee had worked full-time during all years of service; (2) the percentage of full-time hours worked during each year of service; (3) the average percentage for all years; and (4) the basic annuity by multiplying the full-time benefit by this average percentage. This would decrease benefits for part-time employees who switch to full-time before retirement and increase benefits for full-time employees who switch to part-time. GAO estimated the modification's financial effect and found that the government's retirement costs would be: (1) reduced for employees who phase their retirement without, in aggregate, either increasing or decreasing their years of service; (2) increased for employees who used phased-employment retirement to reduce their total years of service; and (3) substantially reduced for employees who use the proposed modification to increase their total years of service.

SPECIAL Early Retirement News FROM postalreporter :  postalreporter has received communication from OPM regarding the Postal Service's request for early out retirement authority -5/1/03
Published: April 14, 2003

Early Retirements Delayed for Union Members


Federal Times

The early retirement promised to members of the American Postal Workers Union, which had been scheduled to begin April 1, will be delayed until nearly the end of the month.

APWU President William Burrus said on the union’s Web site April 4 that the Office of Personnel Management cannot approve the early retirements until new regulations are published in the Federal Register.

The Homeland Security Act, which President Bush signed into law in November, modified procedures for the approval of agency requests for buyouts and early retirements. Under the new rules, agencies can now offer early outs for restructuring. Early outs had been available only for downsizing.

Burrus also said the APWU rejected overtures from the U.S. Postal Service to offer early retirement to employees in areas most in need of a work-force reduction.

“They’re trying to change the terms of their agreement in midstream,” Burrus told Federal Times in an April 1 interview.

Postal Service spokesman Gerry Kreienkamp said the proposal was a way to begin at least some early outs until the new regulations are printed. The limited early outs would not have precluded anyone else’s retirement, Kreienkamp said.

Artie Sutcliffe, who works as an expediter, ensuring mail is placed on the correct trains at the New Jersey International and Bulk Mail Center in Jersey City, eagerly awaits his early retirement. Sutcliffe, an APWU member, had the necessary paperwork filled out and ready to turn in by April 1, only to be disappointed by the delay.

“It seems so unfair to everybody,” Sutcliffe said. “Now there’s all kinds of ifs, ands or buts.”

Early retirement was negotiated in December as part of the APWU’s contract extension. The early outs were intended to begin April 1 and continue until the Postal Service’s fiscal year ends Sept. 30, according to a Jan. 23 letter from Postal Service Chief Operating Officer Pat Donahoe to OPM. The Postal Service will have about 16,000 more APWU members than needed by Sept. 30, Donahoe said. About half of those are expected to leave through normal attrition.

Donahoe said about 58,000 APWU members will be eligible for early retirement, 3,000 of which are expected to take the early out.

Those interested in taking early outs must do so by the end of the fiscal year. Workers will not be offered incentives to take early retirement.

Supporting Postal Workers in Turbulent Times


Federal Times

posted May 9, 2003

As the U.S. Postal Service faces many challenges — declining first-class mail volume, threats of bioterrorism and sweeping reforms that could arise from a presidential commission — American Postal Workers Union President William Burrus must make sure the 370,000 clerks, maintenance workers and drivers his organization represents are not left behind.

Burrus expressed concern in a recent interview over the delay in offering union members early retirement, which the union had negotiated in a December contract extension. The early outs had been scheduled to begin April 1, but the Office of Personnel Management has not yet given its approval.

“It appears the Postal Service is trying to change their commitment after the fact,” Burrus said. “They want to limit [retirements] to geographical areas.”

Postal Service spokesman Gerry Kreienkamp said the proposal to offer the first early outs to workers in overstaffed areas was a way to begin the early outs before the new regulations are published and would not have precluded retirements of workers in regions not initially designated.

On April 4, Burrus posted a letter on the APWU Web site saying OPM cannot approve the early outs until new regulations are published in the Federal Register. The new regulations had not been published at press time.

Burrus, who began his postal career in 1958 as a distribution clerk, was elected APWU president in November 2001. He had been the union’s executive vice president for 21 years. He is the first African American to be directly elected president by the members of a national union in the United States and was named one of Ebony magazine’s Most Influential Black Americans in May 2002.

Burrus spoke of APWU’s relationship with the Postal Service and his concerns about the president’s commission in an interview with Federal Times Staff Writer Stephen Losey at APWU headquarters in Washington, D.C. Following are edited excerpts of that interview:

Federal Times: When the president’s commission was created in December, you were concerned it would dismantle the Postal Service and eliminate programs such as universal service. Do you still feel that way?

Burrus: Yes, absolutely. Even stronger. The presidential commission cannot achieve its stated objective. It’s a political approach to resolving what they state as the problem of technology eroding first-class mail. There’s nothing they can do to increase first-class mail. We think first-class mail is temporarily declining as a result of a bad economy, more so than electronic diversion.

But I think it’s a political approach to the underlying attempt to privatize the Postal Service. That’s [the Bush administration’s] ultimate goal. I don’t think they’ll achieve that, now, but it gives the right wing the opportunity they’ve been seeking for years to privatize the Postal Service. I think the presidential commission is just a mask of that effort to change the very nature of government services. Now that they’re two months into their study, I think the record is fairly clear, who they are entertaining as witnesses, who has had the opportunity to submit testimony. They’re not looking to extend that to the average citizens of this country, those that are the recipients of all mail in this country, or most mail in this country. The evidence and the data that’s been submitted to the commission has been one-sided.

FT: Who would you recommend testify to give that other side?

Burrus: You have many organizations that represent consumers, average citizens. You have the [Ralph] Nader group [Public Citizen], you have Jesse Jackson’s group [the Rainbow Coalition], you have retirees’ associations, you have those organizations that have membership of individual citizens. Those organizations have not been requested to testify. They have not been given the opportunity to express their views of the value of mail services, universal service, uniform rates.

FT: Do you think anything positive can come out of this commission?

Burrus: I don’t think anything more than has been tried in the past. They can and probably will make recommendations that will be positive for the Postal Service. You don’t need a presidential commission to recommend, perhaps, changing the pricing mechanisms, or the Board of Governors, or the Postal Rate Commission. And while this commission may make recommendations in that regard, they are standard recommendations. So they will not be reinventing the wheel. It’s already there.

FT: Are you concerned the commission will encourage the abolishment of collective bargaining or binding arbitration?

Burrus: Yes, absolutely I’m concerned about that. One would believe that in a free society, any presidential commission that hopes to support the Constitution would recognize the rights of its citizens to collectively engage in activities, and that’s the heart of collective bargaining. It would be a means of the right wing to reduce the opportunities of workers to have some say in their conditions of employment. We would oppose with all the strength at our disposal [any effort] to take away from postal employees the rights they achieved over the past 32 years, having some say in their own fate, their wages.

FT: The APWU maintains that the discounts offered to bulk mailers for work sharing far exceed the savings to the Postal Service. Have you had any luck focusing attention on this issue?

Burrus: The General Accounting Office is presently conducting an investigation [requested by Sen. Joseph Lieberman, D-Conn., and Rep. Henry Waxman, D-Calif.] into the rate discount. I do not expect any major revelations from their report. Our position, as we expressed in the testimony I gave to the postal commission March 18, was that we just want it to be cost avoided [discounts should not exceed the amount mailers save the Postal Service through services such as presorting or affixing bar codes to envelopes]. It should be embarrassing for the mailing community to receive up to 9 cents for fixing a bar code on a letter. That is way beyond the cost avoided. They have turned the Postal Service into their cash cow. If they can do it cheaper than the Postal Service, APWU’s position is they should be able to do the work. But only if they can do it cheaper.

FT: Do you agree with the concept and tactics of work-force reduction? And how small a work force is too small?

Burrus: Whatever it takes to perform the service we perform for the American public. Certainly, as a labor union, we’d like to have as large a union as we possibly can. We understand competition and the need to control an increase in rates, so if that means our work force is reduced, that’s capitalism. We understand that. But it should be a level playing field if they’re going to perform collection, transportation, processing and delivery. Whoever’s going to do it should do that at the cheapest possible price. So if we can do it cheaper than others, we ought to get the work.

FT: What’s your top-priority issue for this year?

Burrus: Our top issue would be to get some stability. We are going through the throes of realignment of the operations that the employees that we represent work. And that’s putting the lives of those individual employees in constant flux. They don’t know where they’re going to be working a day from now, a week from now, a year from now. We have a continuing desire to have a better working relationship with the Postal Service. That’s always an objective.

FT: How would you rate postal and labor relations right now?

Burrus: It’s bad. We have decent personal relationships; there’s no personal animosity. But in terms of the institutions, it’s bad. The Postal Service does not see the need to convince their subordinates to comply with our contracts. We have agreements, no different than the one you just raised about early-out retirements. We have agreements — comply with them. Don’t make up the game as you go along and you have different needs.

FT: What are your thoughts on the Postal Service’s intention to consolidate facilities?

Burrus: I think the Postal Service should have as efficient an operation as it possibly can. If that results in consolidation, so be it. That’s normal business.

We’ve been waiting for consolidation plans for the last six months. They committed to providing us a copy of that plan in our contract extension no later than the end of December, and we’re now in April and they’ve not been forthcoming. So I’m disappointed. Once again, they can’t live up to their agreement that says they will provide us with a consolidation plan.

FT: What role do you see the union having in the Postal Service in the future?

Burrus: We’ll have the right to collective bargaining and we will represent the employees, no matter what the configuration of the Postal Service will be. There will be workers. And those workers have the right to be represented by a union, and the union will be representing their interests.

Burrus Update: Early Retirement Regulations Awaiting Final Approval-  APWU

Postal Workers Await Early-Out  | 1992 Postal Rumors, Fears-Mike Causey

May 9, 2003

Update #7-03

 Early Retirement Regulations Awaiting Final Approval

 A meeting was conducted today, May 9, 2003, with USPS officials to discuss the agreement to offer voluntary early retirement to all eligible APWU-represented employees.  As we reported last month, the USPS request to the Office of Personnel Management (OPM) for authority to offer early retirement cannot be approved until OPM finalizes new regulations. (See Burrus Update #6-03 )

 The union has been informed that the new regulations have been drafted and await approval by the OPM director. Once the director approves them, they will be sent to the Office of Management and Budget for further review.

 In March and again in early April, OPM notified the union that the new regulations would be completed by the end of April. April has now passed and no further approximate date has been provided.

 As soon as a new approximate date is provided, we will announce it.

 The union has requested that postal management initiate a review of the number of employees who are interested in early retirement, so that when the regulations are issued postal officials will have a reasonable estimate of the number of employees who will be eligible.

 Further information will be made available as it is received.

 Supporting Postal Workers in Turbulent Times-Federal Times

Postal Workers Await Early-Out  | 1992 Postal Rumors, Fears-Mike Causey


April 4, 2003

Burrus Update # 6-03-APWU website

Early Retirements Delayed, Pending Publication of New Regulations

 The implementation of the agreement to offer early retirement opportunities to APWU-represented employees has been delayed, pending the issuance of new regulations governing the authority of federal and postal agencies to offer early retirement.

 As a part of the Homeland Security Act (HR 5005), the president signed into law modifications of procedures for the approval of agency requests for buyouts and early retirement.   The Office of Personnel Management (OPM) has responded to the Jan. 23 request by the USPS to offer early retirements to APWU-represented employees, informing management that “it cannot be approved until the new regulations are printed in the Federal Register.” 

 OPM has informed the union that it expects the new regulations to be published in approximately three weeks, at which time OPM will respond to the USPS request for authority to offer voluntary early retirement.

 Meanwhile, the union has rejected overtures by the Postal Service to offer early retirement opportunities to employees in limited geographical areas, which OPM could approve while the new regulations are being drafted.  The Memorandum of Understanding between the APWU and USPS required management to seek authority to offer retirement opportunities to all APWU-represented employees, and the union has no interest in restricting the offer.

  I have requested copies of all written communications between OPM and the Postal Service on this subject, so that the union can understand the specific exchanges regarding the original USPS request.

OPM Federal Register documents -Watch this page for updates

 Interim rulemaking-Voluntary Separation Incentive Payments

**Links added by postalreporter

 Postal Workers Await Early-Out , Buyout Letters

by Mike Causey 5/05/03

A favorite yet serious game played by working folks everywhere is guessing what their department, agency, bureau or company is going to do---either to them, or for them---next! At times it is very serious because jobs, promotions and pay can be on the line.

Nowhere is the "what's-happening?" exercise more intense than in the U.S. Postal Service, where roughly one in four feds works. Because of its unusual status, the USPS sometimes acts like a private business and sometimes like a federal agency. Postal workers are under the same retirement plans, FERS or CSRS as other federal employees. And they have the same health coverage, although they pay (for now) a smaller share of the total premium than nonpostal feds, or retirees.

For many postal employees the big issue is early retirement, or buyouts. Or both. And the rumors are flying...

The confusion started when the USPS signed a contract with the American Postal Workers Union. APWU represents "inside" employees, mostly in the clerk craft. Other major unions like the National Association of Letter Carriers and the Mail Handlers bargain separately with management.

As part of the APWU contract, postal management agreed to ask the Office of Personnel Management for permission to offer employees early retirement. That would mean they could retire at any age, on immediate annuity with at least 20 years of service at age 50, or at any age with 25 years of service. Many employees assumed it was a done deal and began making plans to leave. The USPS asked OPM for permission in mid-January. In April the APWU informed members that it had been told by OPM that early-outs couldn't be approved "until new regulations are printed in the Federal Register."

It now appears the the OPM decision on early outs (for clerk craft employees) will come later this month or early in June. It will probably okay them, but that's a guess. USPS would like to make the early-out offers on a geographic basis. The union says every eligible employee should get an offer.

Meantime some mail handlers and letter carriers are askng the obvious question: What about us? The answer, apparently, is that they won't be part of any blanket, or geographic, early retirement offer.


While early retirement is likely for thousands of USPS employees, the odds of getting a buyout are slim and none. Make that less than slim and closer to none. Main reason: The Ghost of the 1992-93 postal buyouts is still haunting postal brass. During that anything-goes period, the service paid buyouts equal to SIX MONTHS SALARY to 23,000 postal managers and 25,000 craft employees (the folks who handle the mail). After the dust settled the USPS realized it had made a big (and expensive) mistake, and eventually wound up with more employees than before the buyout.

Most of the USPS officials and the Postmaster General that oversaw the massive buyout operation are gone. But the memory (and the bills) linger on.

Burrus Update: Early Retirement Regulations Awaiting Final Approval-

 Supporting Postal Workers in Turbulent Times-Federal Times

1992 Postal Rumors, Fears-Mike Causey

Feds should know magic day to obtain best retirement pay

Mike Causey
 April 29, 2003

     Picking the best day to retire can save federal and postal workers a lot of money in taxes and increase the cash-in value of their unused annual leave (vacation) by thousands of dollars.
     The idea is to pick a time when you can carry over the maximum amount of unused annual leave, get paid for it at the highest hourly rate possible and still push that lump-sum payment check into the following year when your income (and tax bracket) as a retiree are usually lower.
     The good news is that while the so-called magic day to retire (there is one for each of the major federal retirement systems) can and does change from year to year, it almost always happens in late December and early January. Those are about the most popular times to retire.
     So feds looking for the magic moment to bail out should circle two dates on the calendar: Dec. 31, 2003, and/or Jan. 2, 2004.
     The December date is best for the majority of retirement-age feds who are under the old Civil Service Retirement System (CSRS). The January date is best for the roughly 10 percent of federal workers eligible to retire who are under the newer Federal Employees Retirement System (FERS). Here's why:
     Retiring on the right date ensures that most of the maximum amount of annual leave they can carry over during that period will be paid to them at the rate that would be in effect at the time they would have taken it.
     Since the January 2004 pay raise (amount unknown) will be effective at the start of the first pay period beginning on or after Jan. 1, that means most of the annual leave payout will be at the higher 2004 rate. For a highly compensated worker with several hundred hours of annual leave, the add-on pay raise is a surprise bundle.
     The rule of thumb is that workers under the FERS plan should retire near the end of the month. That's because their annuity begins on the first day of the month following retirement. So if you retire on the 31st, your annuity calculation begins the following day, on the 1st of the month.
     Timing is different for CSRS workers. They can either retire at the end of a month or within the first three days of a month. That's so their annuity check picks up where their salary check ends.
     That's why employees under the FERS plan should think about retiring Dec. 31 this year, if they are planning a December or January departure.
     Workers under the old CSRS program, who want to retire in late 2003 or early 2004 should retire on Jan. 2. Most of the unused annual leave they carry over will be paid at the new, higher (2004) pay scales.
     And that income will be counted as income for 2004 when income — because the annuity is lower than salary — should be lower and taxed at a lower rate.
     The decision to retire — including the month and day — are your business. But if you want to leave this winter, and all other things are equal, picking the magic date for your retirement plan can boost your last payment, and cut your taxes.
     How do I know these things? Simple, Tammy Flanagan of the Rockville-based National Institutes of Transition Planning discovered the quirk some years ago, and was kind enough to share it with me — and you.
     Wide open promotion spaces?
     Although the predicted federal brain drain turned out to be a bust (actually the number of quits and retirements is well below normal), retirement-related openings provide the most chances for promotion. So keep an eye out for news reports (here) about agency buyouts and early-retirement offers.
     And hold this thought: According to government data, about one in five nonpostal federal workers is expected to retire between now and 2005. The number could be lower if the economy stays sour and the stock market (where many feds have their 40(k) investments) remains feeble. But it could jump if the outside-of-government job market and the stock market each get hot.
     Pay raise equity
     Military personnel have little trouble getting the highest percentage pay raise proposed — whether that plan comes from Congress or the White House. But for federal workers it takes a little more work.
     In the last two years, President Bush proposed smaller percentage pay raises for civilians than for military personnel.
     This year the House and Senate got what they hope is a head start on the pay-raise-parity issue. They each introduced a nonbinding resolution — called a sense of Congress — that says they want both groups to get the same percent.
     It doesn't have the force of law, but it does put the White House on notice that a bipartisan majority in both the House and Senate will give the civilians the same as military personnel.
     Cold feet, warm heart ...
     The Pentagon has banned personal electric heaters that some employees had been using to fight off the chill. But it told workers it will "consider waivers for documented medical reasons" or in areas that are temporarily without heat.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132

 Your Benefits Statement: Don't Believe It!

Mike Causey's Federal Report

For most workers the annual earnings-and-benefits statements from Social Security are a blessing.

The statements, which usually arrive a couple of months before your birthday, tell you how long you've paid into Social Security, the amount, the number of quarters credit you have (it takes 40 to qualify for a minimum benefit and 160 or more to qualify for the maximum) and estimates the size of your Social Security check when you start collecting benefits.

As a retirement tool the Social Security statements are invaluable. Social Security represents the primary and often the only retirement benefit for about half of all Americans.

But for federal workers, especially the hundreds of thousands still under the old Civil Service Retirement System, the statements are worthless.

Actually worse than worthless. Reason? They are misleading. They tell you that you will qualify for a benefit that in fact you will never see. Why? Because the statements don't take into account that because you are a fed under the CSRS system you are subject to the so-called "Windfall Elimination Provision", known as WEP or Windfall.

The Windfall formula was devised by Congress years ago because many high-paid feds were fiddling with the system. They were qualifying for substantial civil service retirement benefits based on their high salaries and long service, and also benefiting from the "welfare tilt" in Social Security. It rewards people who worked and paid into Social Security for a short-time, or with a low salary, with a higher benefit return. Some of the government executives were collecting higher Social Security benefits based on work they had done as teenagers or in low-paying jobs they had before coming into government. A few were caught in back-scratching deals. Meaning, two feds "hired" each other to work perhaps doing yard or house work for minimum pay and minimum Social Security tax. Eventually, they qualified for a higher benefit based on their low-income, short-service work history.

Congress lowered the boom and the "windfall" formula was born. In essence it said that people who didn't pay into Social Security for a full 30 years, who qualified for an annuity or pension based on non-covered employment would have their Social Security benefit reduced.

The maximum reduction for someone retiring this year is $300 per month, because of the windfall formula. Many feds -- especially those who don't understand its history -- find it outrageous. Since it also affects many school teachers, a growing number of House and Senate members want windfall and its evil twin, the so-called "Offset formula", modified or repealed. Windfall hits the Social Security benefit earned by a fed. Offset can wipe out the Social Security spousal or survivor benefit of a fed who gets his or her own civil service retirement.

Even though they seemed like a good idea at the time, many people think windfall and offset have outlived their usefulness and now punish people unfairly. Federal, postal and retiree groups made an all-out drive during the Easter/Passover recess to get co-sponsors for bills to modify or repeal offset and windfall. They are getting close to the magic number that would guarantee passage. What they haven't gotten yet is a promise of hearings before the House and Senate committees that deal with Social Security and taxation matters.

Until windfall and offset are modified (to exempt a portion of combined federal and Social Security monthly benefits from the formula) or are repealed outright, don't make any financial plans based on the benefit statement you get from Social Security.

Coming Buyouts Designed With Different Purpose

Mike Causey 3/24/03

Would you take this deal? Upside: Immediate retirement, with immediate annuity benefits. Health insurance coverage for life. The chance to do whatever you want—new job, vacation, build bird houses—plus to sleep through rush hour. And to top it off, a check for $16,000 to $18,000.

Downside: You will give up a paycheck every two weeks for a much smaller retirement check every month. You will lose out on pay raises of at least 2 percent, and sometimes 5 percent or more each year. And for each year you work (in addition to earning more money) you increase your eventual annuity about 3 percent.

Some people would take the deal in a heartbeat. The chance to retire early, with a buyout. Bring it on, they say.

For others, perhaps the majority of people, it’s a much tougher call. But it’s one you should consider if you’re 50 or older. Or if you’re young and new to government and itching for a promotion (and more pay), that isn’t going to happen unless an older, more senior coworker has the decency to leave the scene one way or another.

During the 1990s buyouts were handed out like promotional items at a major league baseball game. Especially in the Defense Department. The idea was to decodger the government. Avoid layoffs while eliminating around 300,000 jobs. Many of the positions were contracted out to the private sector. Others were consolidated or went unfilled (remember the size of your HR office then vs. now?). In order to prevent the layoffs of women and minorities (who either lacked seniority, veterans preference or both) buyouts were targeted to older (50 plus) white males. That preserved the "diversity" gains of the government even while downsizing. The number of women and minorities actually decreased but their percentage of the workforce went up slightly. It’s called creative bookkeeping.

Also during the downsizing of the 1990s, nearly 200,000 people got buyouts averaging just over $24,000. Only about 30,000 people were actually laid off. Firing that many people may sound tough. But feds who have worked in the private sector—or who read the business section of their hometown paper—know different. If the government acted like a bottomline private company, it would have reversed the numbers. That is it would have fired 200,000 people and paid buyouts to a much smaller number of people: Most of them would have been top-paid executives.

The next round of buyouts will have little in common with the 1990s variety, except for the value of the buyout. They will remain at $25,000— before deductions. But the cost to agencies will be less and the motives for them will be different. And those two factors: Lower cost to the agency, and buyouts for a different reason, will make them very different.

For example, the new buyouts will be for purposes of "reshaping." That means to help agencies adjust to the 21st century, to high tech, to homeland security, to new or changed missions. The FBI of the 1980s and ‘90s, for example, was very different from the FBI of today...and tomorrow. The Department of Homeland Security didn’t exist a year ago. Today it’s one of the biggest agencies, with a mandate to change things around—big time if it wants—in under a year. The TSA is new too. Both are big. And will get bigger.

The reshaping buyouts—approved almost as an after-thought by Congress late last year—will spare agencies from paying 15 percent of an employees salary into the civil service retirement fund if that employee takes a buyout. That’s a ton of money.

The new buyouts (authorized Feb. 4) also allow agencies to fill slots—anywhere in the agency—even as they pay people to leave. In previous buyouts, agencies often lost a slot for each buyout. There was little incentive to pay people to leave in order to make the agency get smaller.

Finally, the kind of people who will get buyouts are likely to be different from a decade ago. They may turn out to be mostly white, 50 plus males. But that’s not the goal. Diversity is important to this administration and it would like to expand its power base, which is grounded in white males. But it has had almost no luck with unmarried women, or blacks, and feels it has better chance building a case with the fast-growing (and now dominate minority) Hispanic community.

The number and kind of people who take the reshaping buyouts also could ease, if not eliminate, the socalled brain drain. Buyouts of longtime employees, coupled with proposals to forgive student loans in stages, could make government very competitive. Since the dot.com meltdown and the recession, the government is already the employer of first choice in terms of job security.

Many feds who had decided to hang on—because their TSP accounts have shrunk over the last 3 years—may yet revive their retirement plans. If their account balances benefit from what many expect to be a post-Iraq boom. If they do, they will open up the career ladder for promotion hungry subordinates.

Whatever happens the new buyouts won’t be what you’ve seen before. And it might be smart for you to do the numbers, in case somebody makes an offer you think you can’t refuse.--Mike Causey

USPS Requests Authority for Early Outs
by William Burrus
The union has received a copy of the Postal Service’s request to the Office of Personnel Management (OPM) for authority to offer employees represented by the APWU Voluntary Early Retirement.   The USPS seeks to offer “early outs” to APWU-represented employees from April 1 through Sept. 30, 2003.  The request is in accordance with the terms of the contract extension ratified by APWU members last month.
In a letter to OPM dated Jan. 23, Chief Operating Officer Patrick F. Donahoe wrote, “At this time, there are approximately 16,000 positions represented by the APWU excess to the needs of the service nationwide by September 30.  We anticipate that approximately 50 percent of these positions will be vacated through normal attrition.”  Voluntary Early Retirement Authority will help the Postal Service reduce a portion of the balance of that number, he wrote.
Approximately 58,000 APWU members are eligible for Voluntary Early Retirement (VER), Donahoe wrote, and the Postal Service expects “5 to 6 percent, or approximately 3,000 of those VER-eligible employees to opt for early retirement.”
“In light of the number of positions that we need to eliminate from the Postal Service during this fiscal year,” he wrote, “we respectfully request that you give this proposal favorable consideration so that we may use VER as a tool in our downsizing strategies.”
“The Postal Service has committed to an effort to take $5 billion in expenses out of our operating base over five years,” the letter said. “To accomplish this, we have begun to implement a number of specific measurers designed to improve operational efficiencies.  These efficiencies include efforts to automate our mail forwarding operations, to further automate the processing of large envelopes, magazines and packages, and to reduce our transportation costs, by focusing on ways to maximize our distribution/transportation network.”
“While the Postal Service’s efforts to date have been successful, certain external challenges have surfaced,” Donahoe wrote. “The recession, electronic diversion of first-class mail, and bio-terrorism have had an adverse impact on our mail volumes.  In fact, our first-class mail volume has decreased by 1.6 billion pieces in the past year.  Other classes of mail have sustained similar impact.  These business drivers require the Postal Service to review and adjust our complement requirements as we move forward.”
As expected, management’s application for Voluntary Early Retirement Authority does not include a request to offer incentives to employees who elect to retire early. 
Editorial: Mike Causey's Federal Report  (source Federal News Radio)
New Buyout Rules On The Way


Buyout and early retirement rules will change dramatically next month making it easier, maybe much easier, for agencies that are reinventing themselves to offer incentives to selected workers. Some of the big changes for executive branch agencies include:

  • Individual departments and agencies will no longer have to get approval from Congress to offer workers buyouts of up to $25,000, before deductions. Under current rules, Congress must approve buyouts on an agency-by-agency, case-by-case basis. Currently only five agencies and departments have authority to offer buyouts.


  • The need to "reshape" the workforce or correct so-called "skills imbalances" will be considered when agencies ask for authority to offer buyouts, early retirements, or more likely, both. Under current rules agencies must be facing (or undergoing) a major reorganization or downsizing that could result in significant layoffs.


  • Buyouts and early-retirements are likely to be offered in the same package under the new plan, but to a limited number of workers chosen by each agency. Now the two actions are separate. In practice, few employees take early retirement unless they also get a buyout. Early outs are possible at any age with 25 years service, or if the worker is at least 50 with at least 20 years of federal service.


  • The Office of Personnel Management and the Office of Management and Budget will now decide who gets "buyout/early out" authority. Currently, OPM controls the early outs, while Congress has the last word on buyouts. Under the new system, agencies will make their case to OPM/OMB and if they sign off, the buyouts/early outs will be authorized.

    Congress took itself out of the buyout-approval business when it passed, and the President signed, the Homeland Security bill. Among other things, it sets the stage for the "reshaping" buyouts.

    The authority is contained in section 13-13 (A and B) of the new law.

    So what does this mean for you? Well, if your agency couldn't get buyout authority from Congress before, it will have an easier time now. What it must do is convince OPM/OMB that it needs to be able to offer "X" number of buyouts in "X" number of offices or geographic locations either to "reshape" the operations, or, to correct "skills imbalances". A typical case would be an office or operation that had too many clerical and administrative employees and not enough professionals. Or vice versa.

    New regulations, spelling out how the new buyout/early out program is supposed to work will probably be issued in mid-February.

    The changes have given rise to lots of rumors that agencies have already been given secret approval for buyouts, or that the buyout pot is being sweetened beyond the current $25,000 limit. Equally important is what is NOT changing:

    Federal, postal workers face tax-break loss on retirement -Washington Times 1/21/03