retirees likely to get lowest
COLA in many years
By Mike Causey
Published June 24,
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
Up to 8,000 postal clerks are
likely to be offered the chance to
take early retirement between now
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
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
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
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
•Mike Causey, senior
editor at FederalNewsRadio.com, can
be reached at 202/895-5132 or
OPM Publishes New
‘Early Out’ Regs
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
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
will be informed of the specific
steps to be followed.
information becomes available, it
will be shared in a future update.
June 4, 2003
OPM Approves Early Retirement
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
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
As more information is received, it
will be shared in an update.
BRING ON THE EARLY OUT !
Switching to Part-Time
Late in Career Can Trim Size of
John R. Smith APWU Retirees Director
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
Before the law was
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
1986 legislation has cheated
long-time workers out of
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
Law Changes Calculations
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.
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
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
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.
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
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.
you feel you are being adversely
affected by this law, write to your
senators and congressional
representatives to encourage them to
introduce corrective legislations.
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
Retirement Benefits: Modification of
Civil Service Retirement Benefits
for Part-Time Work PEMD-86-2
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
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
has received communication from OPM regarding the Postal
Service's request for early out retirement authority -5/1/03
April 14, 2003
Retirements Delayed for Union Members
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
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
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
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.
Postal Workers in Turbulent 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
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
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
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
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.
Update: Early Retirement Regulations Awaiting Final Approval-
Postal Workers Await Early-Out
1992 Postal Rumors,
May 9, 2003
Retirement Regulations Awaiting Final Approval
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 )
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
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.
soon as a new approximate date is provided, we will announce it.
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
Postal Workers Await Early-Out
1992 Postal Rumors,
Burrus Update # 6-03-APWU website
Early Retirements Delayed, Pending Publication of
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.
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
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.
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
rulemaking-Voluntary Separation Incentive Payments
**Links added by postalreporter
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
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
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.
Update: Early Retirement Regulations Awaiting Final Approval-
Supporting Postal Workers in
1992 Postal Rumors,
Feds should know magic day to obtain best
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
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
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
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
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)
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
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
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
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
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
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.
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
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
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
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
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
Authority for Early Outs
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.