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End of NSPS, FERS Flu, And More From The Defense Authorization Bill

Dorothy Ramienski | Internet Editor | FederalNewsRadio

October 29, 2009

President Obama signed the Defense Authorization bill on Wednesday, which means many federal employees will see changes in their pay & benefits.

On this week’s Your Turn, Mike Causey spoke with Jessica Klement of the Federal Managers Association, who broke down some of the more significant aspects of the bill.

Listen to the audio at FederalNewsRadio

“[It] will credit FERS employees for unused sick leave at the time of retirement. It will be phased in over four years. If you retire prior to Jan. 1, 2014, you will receive credit for 50 percent of your sick leave. After [that], you will receive full credit for your unused sick leave.”

Currently, this affects 80 percent of the federal workforce; and, Klement added, it will affect more than 95 percent in 2014.

The bill also phases out cost of living adjustments (COLA) for residents of Alaska, Hawaii and the U.S. Territories. These feds currently don’t get locality pay the way employees in the continental U.S. Do, so the bill phases out COLA and phases in locality pay.

There are also provisions in the bill for those under the Civil Service Retirement System (CSRS) to transition out of the federal government by working part time.

FERS employees are already able to do this. . . . So, when I talk about this, it’s going to be equal for FERS. Right now, if CSRS employees go part time towards the end of their career, that part time is treated as their high-3, so it’s a disincentive for you to go part time towards the end of your career because you’re not getting your full salary. So, what the bill would do is allow CSRS employees to go part time towards the end of their career, and then their high-3 would be calculated before they went part time. That part time salary wouldn’t be included in their high-3.”

Klement gave the following example: Assuming during one’s last five years of service, he or she worked part time for the last two. The three years prior to that, assuming those were the high-3 years of the federal employee, would be used to calculate annuity.

The bill also allows retired feds to return on a part time basis without an offset to their annuities.

“Right now, outside of the Department of Defense . . . if you retire with the federal government and want to come back to work, your salary is reduced by the annuity that you’re currently receiving. If you come back to work part time, the bill eliminates that.”

There has been talk around Washington about the death of the National whatever (NSPS) in the bill, as well.

Klement told Causey, that’s not exactly true.

“What [the bill] does is transition all NSPS employees back to their previous personnel system by Jan. 1, 2012. So, it’s going to take a couple of years — about two years to transition them back, but that’s how it’s going to work.”

There is also a provision in the bill that allows the Obama Administration to come up with another plan — the so-called ‘NSPS fix’ — within six months of signing the Defense Authorization Act.

“The Administration can do that if they so choose, and they have to present it to Congress and then Congress would have to approve that. So, I think it’s safe to say to do such a grand change is likely very difficult.”

When to Retire?

Federal employees often ask Mike Causey about the best time to retire.

During the second half of the show, Causey talked with Tammy Flanagan of the National Institute of Transition Planning, who explained that there are different times during the year that are best for different people.

“The people who retire at the end of the year — the main motivation for that is, people who want to save up a lot of annual leave. Most employees, as we all know, are limited to carrying over 240 — or some employees have a higher carry over — in that last year that they work. Many times employees will not take any annual leave that whole last year and they may save up the 208 hours they accrue. So, you add that to the 240 and, by the end of the leave year, they’re cashing out 440 hours of annual leave. So, those are the people who want to go out Dec. 31 if they’re FERS, because all FERS retirement start on the first of the month. With CSRS employees — or CSRS off-set employees — they can go out on the 1st, 2nd, or 3rd of the month and still have their retirement start the next day, which gives them the ability to wait until the end of the leave year.”

Flanagan said, for the next two years, many FERS and CSRS employees planning to retire might leave on the same date because the leave year and the calendar year end almost concurrently.

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