This Notice is intended as a resource document for career Foreign Service employees covered by the "old" Foreign Service Retirement and Disability System (FSRDS) or the "new" Foreign Service Pension System (FSPS).  A separate retirement planning guide is issued for Civil Service employees.  We ask that personnel offices destroy copies of the previous Retirement Planning for Foreign Service Employees Department Notice and retain extra copies of this year’s Department Notice to counsel employees.  This information is also available through the Department’s Intranet at http://hrweb.hr.state.gov/ret/index.html.

 

A.  PLAN AHEAD

1.  Virtual Locality Pay

The FY 2002-2003 State Department Authorization Act includes a provision that allows FS employees assigned abroad who participate in the FSRDS or the FSPS to have their annuity benefits calculated as though they received Washington, DC based locality pay in the computation of their high three average salary.  This provision is not retroactive.  It only applies to salary/service on or after December 29, 2002.

2. Retirement Planning Seminar

Employees in the Retirement Planning Seminar will learn about their annuity, financial and estate planning, tax issues, health and well-being in retirement, volunteer work, continued employment and more.  Experts in these fields will answer questions during a week of sessions, held six times a year at the Foreign Service Institute (FSI).  Spouses are also welcome to attend the seminar.

To attend the seminar an employee must be within 5 years of eligibility for voluntary retirement.  Management and Human Resources (HR) officers who may find information imparted at the Retirement Planning Seminar useful for counseling employees abroad are also welcome to participate at any convenient time.  All employees attending the seminar are on duty status during the days they attend.  Eligible employees traveling/transfer orders to an assignment other than Washington, DC or on home leave/return orders will be authorized per diem to attend the seminar.  Any questions about per diem should be addressed to the appropriate HR technician in the Bureau of Human Resources, Office of Career Development and Assignments, Assignments Division (HR/CDA/AD).  Employees who plan to attend the seminar while in the United States on R&R, personal, or official travel other than Post Assignment Travel, may be authorized per diem, which must be requested through the employee’s Career Development Office (CDO) in HR/CDA.

3. Job Search Program (JSP)

Employees who are interested in seeking full or part-time employment after retirement may wish to consult the Career Transition Center (FSI/CTC), Room E 2101, SA-42, Telephone: 703-302-7407, FAX: 703-302-7416), about attending the Job Search Program (JSP).  Employees in the program will receive assistance deciding what they want to do next, assessing skills, values and interests, preparing resumes, developing a network of people who can help in seeking a job, sharpening interviewing skills, and learning how to negotiate for compensation and benefits.

Foreign Service employees of the State Department may participate in the JSP during the last 60 days before retiring.  Civil Service employees may participate during their last 30 days. The formal classroom part of the Program lasts about 4 weeks.  All participants may use the Career Transition Center facilities for one year after retirement. 

Before beginning the Program, participants must agree to retire when the program ends.  Those who have not attended the Retirement Planning Seminar (RPS) must do so at the beginning of the program.  Those who already have retired may attend the JSP during their first year of retirement, but they must formally apply prior to retirement.  Per diem will not be authorized for the RPS when taken in conjunction with the JSP.  

4.Talent Bank

Those wishing to receive periodic lists of job leads may register in the Talent Bank by completing a registration form and sending it to the Career Transition Center.  The lists can be sent to home addresses.  Retired employees may retain active status in the Talent Bank for two years following retirement, during which time they may continue to receive the newsletter and job leads. From time to time registrants may be contacted directly concerning possible employment opportunities.  This service is open to all employees.

5. How to Apply

Employees who wish to apply for the Retirement Planning Seminar or Job Search Program should contact their CDO, who will register them for the requested programs. 

Employees who apply for the RPS must include approval from a supervisor.  Those who apply for the JSP should include the scheduled retirement date.  Schedules are announced periodically via Department Notice, cable and they are posted on Career Transition Center (CTC) Home Page.

The Talent Bank forms are available from the Career Transition Center at FSI, or from the Management or HR Officer at post.

Employees who will be receiving Post Assignment Travel orders should advise HR/CDA of their plans to attend these Programs by including the information in the TMTWO - Proposed Itinerary.

For more information, see 3 FAM 6100 or call the Career Transition Center at 703-302-7407.

6. Estimating Your Annuity 

(a) Credit for Service

Employees may receive full credit for any civilian service in the U.S. Government, provided the employee was hired by an appointment, rather than by contract.  Service for this purpose includes temporary and Christmas appointments with the US Postal Service, periods as a Peace Corps or VISTA volunteer, and service with other Federal agencies.  Service under a personal services contract (PSC) is not creditable for retirement purposes unless the employee specifically applied by January 8, 1990 for retirement credit for the PSC service under PL 100-238, and the application was approved. 

Many employees had temporary appointments in the U.S. Government before beginning their careers in the Foreign Service.  Service under these appointments is generally creditable without depositing retirement deductions for that service, but there is a small reduction in the annuity.  Any service for which an employee received a refund of retirement deductions is not creditable unless the amount of the refund, plus interest is repaid, except as explained below.  If a refund of retirement deductions was paid prior to November 1, 1983, interest only accrues at the rate of 3% per year, so there is no urgency to make a redeposit (repayment).  A new provision of law allows employees to receive credit for a period of CSRS/FSRDS service for which a refund of retirement deductions was paid (before October 1, 1990), without making repayment.  Under this provision, the annuity is reduced on an actuarial basis by the value of the redeposit, causing only a modest reduction in the annuity.  For example, failing to redeposit a refund of $7,000 would cause a monthly annuity reduction of only $32.

Military service performed on active duty is also creditable in the retirement benefits.  If the employee is receiving military retired pay when he or she retires under the FSRDS or the FSPS, the military service is not creditable unless the employee waives the military retired pay.  Military retired pay based on a disability incurred in combat, or reserve retainer pay which is payable at age 60, need not be waived for the military service to be credited.

Military personnel began paying social security benefits on January 1, 1957.  To offset the double credit for military service in both social security and Federal retirement benefits, the law requires payment of a military deposit, which is 7% of military earnings for service credited under FSRDS and 3% of military earnings for service credited under FSPS.  If the employee joined the Foreign Service prior to October 17, 1983, the military deposit is required for periods of military service performed on or after January 1, 1977.  If the employee joined the Foreign Service on or after October 17, 1983, the military deposit is required for periods of military service performed on or after January 1, 1957.  A summary of details on deposits for military service credit is provided in Appendix IV.  Employees who wish to make the military deposit should contact HR/RET.

(b) Extra Service Credit at Unhealthful Post

Any American Foreign Service employee who received either a new assignment or an extension of a new assignment, either of which was effective on or after February 16, 1990 is not eligible to elect extra service credit in lieu of post differential.  Any valid extra service credit election made prior to that date will continue to apply for the duration of the current assignment.  Likewise, any valid election made for a prior assignment will continue to be honored in the annuity computation.  Employees under the FSRDS who made valid extra service credit elections will need to ensure that the post properly certifies and promptly submits OF-140, Election to Receive Extra Service Credit in Lieu of Post Differential, to HR/RET.  No extra service credit can be allowed until this form has been received.  Employees under the FSPS were never eligible to elect extra service credit at an unhealthful post, but those who transferred from FSRDS to FSPS will receive credit for any valid extra service credit elections made under FSRDS.

(c) Approximate Annuity Computations - FSRDS

Once seriously considering retirement, the employee can easily figure his/her own approximate annuity computation, using pay records (not taxable income, which may be different).  To determine the average high three years of earnings (normally the last three years), determine the total salary earned for the 36 months preceding the anticipated retirement date, and divide by three.  The annuity is based on basic salary, including authorized locality pay, which is the salary of the employee’s class/step; it does not include overtime, post differential, danger pay or any other allowance.  The employee should adjust the salary for service abroad on or after December 29, 2002 by a factor available from your HR office, which represents the addition of the Washington, DC based locality pay to the high three average salary.  Using the service computation date found in latest PAR printout, determine total time of creditable service and add earned hours of sick leave.  A rule of thumb is 176 hours equals one month of service and 2087 hours equals one year.  For an employee retiring under the FSRDS, multiply the total by 2%(.02).  Then multiply the result by the average high-three figure.  For instance, 20 years of service times .02, equals a figure of .4, or 40%.  An average high-three earnings of $30,000, would indicate an annuity of $12,000 per year (.4 times $30,000).  If the maximum survivor annuity is chosen, the annuity is then reduced by approximately 10%.

(d) Approximate Annuity Computations -FSPS

Those who have switched to FSPS should use the FSRDS formula for the service prior to the date of change.  This benefit should then be added to the FSPS benefit, which is computed as follows.  Each year of service under FSPS is credited at the rate of 1.7% of high 3 average salary (up to 20 years of FSPS service) and at the rate of 1.0% of high 3 average salary for any service performed under FSPS in excess of 20 years.  (In other words, the 1.0% rate does not apply until the employee has worked for over 20 years under the FSPS.  An employee who had 20 years under FSRDS and 5 years under FSPS has the annuity computed at the rate of 2.0% of high 3 average salary for each year of service under FSRDS and 1.7% of high 3 average salary for each year of service under FSPS.)

The amount of unused sick leave the employee had at the time of the transfer to FSPS may be credited in the FSRDS portion of the annuity, provided the employee had at least that amount at the time of retirement.  If the maximum survivor annuity is chosen, the annuity is reduced by 10%.

Employees retiring under FSPS with an immediate annuity, except a Minimum Retirement Age (MRA) annuity payable at age 55-57, will be eligible to receive an annuity supplement until age 62.  The supplement (currently estimated at $30 per month for each year of service under the FSPS) approximates the Social Security benefit.  Eligibility for the supplement is subject to the Social Security Earnings Test. (Detailed step by step procedures for estimating annuity benefits are provided in the worksheet in Appendix III.)

(e)  The Alternative Form of Annuity (AFA)

What is the AFA or Lump Sum Payment at Retirement?

The AFA provides an eligible employee with an option of electing a lump sum payment equal to the employee’s unrefunded retirement deductions and a reduced monthly annuity, in lieu of a regular unreduced annuity.  (There is no reduction for the AFA in the rate of annuity payable to surviving spouse.)   In general, the annuity of one who is eligible to elect the AFA is reduced by about 10-l5%.

Who is eligible to elect the AFA?

(1)  Only Foreign Service and Civil Service employees who are suffering from a life threatening illness or disease (who do not retire on disability) may elect the AFA in one installment.

(2)  All other employees are INELIGIBLE. 

How is the lump sum payment distributed?

Employees under the FSRDS or the FSPS who have a life threatening illness are paid the AFA in one installment at retirement.

(f)  Obtaining your Record of Retirement Deductions

Some retirees may wish to obtain the record of their retirement deductions while employed at the Department of State.  In order to obtain this information, employees must write the Bureau of Resource Management, Retirement Account Division (RM/RAD), providing their name, date of birth, social security number, and dates of employment.  Since the top priority of RM/RAD is to authorize benefits to those who have already retired, employees who are requesting the amount of their retirement deductions should allow sufficient time for response (four weeks or more).

(g)  Taxation of Annuity Benefits

Under the law, employees who joined the Foreign Service prior to 9/25/75 and who retire on disability are not subject to Federal income tax.  The annuity of all other employees who retire is fully taxable by the Federal government, but each employee is entitled to a tax deduction equal to the amount of the employee’s retirement contributions.  This tax deduction is distributed over the lifetime of the annuity, so only a portion of the total contributions can be deducted from the taxable income each year.  For example, if a single employee had a life expectancy of 20 years at retirement, 5% of the retirement contributions could be deducted from the taxable portion of the annuity each year.

In general, about 85% to 90% of the lump sum payment under the AFA is fully taxable the year in which it is received.  However, legislation (PL 102-3l8) provides that if this payment is dated on or after January 1, 1993, the taxable portion of the AFA payment as well as any interest payable (on the second installment) can be "rolled over" to an Individual Retirement Account (IRA).  In addition, interest on any refund (dated on or after January l, l993) of retirement deductions withheld after 35 years of service can be rolled over to an IRA.  Any lump sum benefit that is not rolled over to an IRA shall be subject to automatic Federal income tax withholding of 20% of the taxable portion of that payment.  The retiring employee has 60 days to roll over the payment to an IRA.  Thus, if the payment is not sent directly to an IRA, the 20% tax withholding applies, but the employee can, within 60 days of the date of the payment, roll over the payment to an IRA and recover any taxes due when the tax return is filed.  

Employees who retire before the year in which they reach age 55 and elect the AFA are subject to a tax penalty of 10% of the amount of the taxable portion of the lump sum payment.  Details about taxation of annuity benefits or the AFA are explained in IRS Publications 575, 590, and 721, which are available from the IRS.

RM/RAD will withhold Federal income tax at the withholding rate applicable for a married employee with 3 dependents (total of 4), unless the employee requests another rate of withholding.  Each retiree must estimate his or her own state income tax liability and specify the amount of state income tax to be withheld.  Some states have no income tax, while others exempt all or a portion of Federal annuity benefits from state income taxes.  A list of these states is available in HR/RET.

(h)   Preparation of Annuity Estimates

HR/RET will do whatever it reasonably can to assist retirees in planning for retirement.  We will provide an annuity estimate for those who are seriously considering retirement.  We have provided a worksheet at the end of this notice that you may find helpful in estimating your own benefits.

(i)  Annuity (Estimate) Calculator

   

Employees can now use an online annuity calculator, available in e-Phone, to calculate their annuity (estimate) benefits.  In order to use the Calculator, you will need to enter a retirement date and your survivor election (maximum, minimum or none).  The survivor election is a benefit payable to your surviving spouse after your death.  The calculator will then verify that you are entitled to an annuity on a given date and estimate your annuity.  If the calculator does not work for you, you can submit an Application for Annuity Estimate, DS-5000, to HR-RET for processing.

7.  Lump-Sum Payment of Annual Leave

Retirees will be paid a lump sum for any unused annual leave.  Generally, a lump-sum payment will equal the pay the employee would have received had he or she remained employed until expiration of the period covered by the annual leave.

Lump-sum payments are calculated by multiplying the number of hours of accrued annual leave by the employee’s applicable hourly rate of pay, plus certain other types of pay the employee would have received, as specified by regulation.  Such other types of pay include locality pay, post allowances, special differential, and certain types of premium pay, but do not include post differentials, retention allowances, or physician’s comparability pay.  To compute an hourly rate of pay, divide salary by 2087.

 

8.  Thrift Savings Plan

(a)  Contributions

All employees under FSRDS and FSPS are eligible to participate* in the Thrift Savings Plan (TSP), which provides an opportunity to make tax-deferred investments in five investment accounts: a stock fund, a bond fund, a government securities fund, a small capitalization index fund and an international fund.  There is 60-day enrollment period for new employees. In 2004, employees under FSRDS may contribute up to 9% of their salary to the TSP, but they do not receive any government contribution towards the TSP account; employees under FSPS may contribute up to (a) 14% of their salary, or (b) a ceiling set by the IRS of $13,000 in 2004. In addition, employees age 50 or over (by December 31, 2004) can make catch-up contributions of $3,000.00 to the TSP.

FSPS employees receive an automatic government contribution of 1% of salary, and the government also matches the first 3% of their contributions $1.00 for $1.00, and the next 2% of their contributions $.50 to the $1.00.  Thus, an employee under FSPS who contributes 5% of salary to the TSP will receive government TSP contributions of 5%.

*Unlike participants of the Civil Service Retirement System (who are eligible to make voluntary contributions to the CSRS), Foreign Service participants are ineligible (Public Law 94-350, July 12, 1976) to make voluntary contributions to the FSRDS or the FSPS.  Participation in the TSP is the only government-sponsored investment option available to Foreign Service employees.

Investment Fund Options

There are five investment funds: the Government Securities Fund, known as the Government or (G) Fund; the Common Stock Fund, known as the Stock or (C) Fund; the Fixed Income Fund, known as the Bond or (F) Fund, the Small Capitalization Index Fund or (S) Fund and the International Fund or (I) Fund.  Employees are free to allocate their TSP investments (and agency contributions) to any fund.  An employee can change investments by filling out a form, making a change on-line (http://www.tsp.gov/.), or by calling the TSP Service Office in New Orleans. 

Borrowing Options

Employees who participate in the TSP can borrow from their own contributions for any reason.  Interest begins to accrue on the loan at the rate of return on the Government Securities Investment (G) Fund at the time the loan application is received at the TSP Service Office.

TSP Lost Earnings

Employees are reminded that the regulations now allow employees to be reimbursed for "lost earnings" due to administrative errors in processing valid TSP elections, errors in retirement code, etc.  Any employee who believes he or she is entitled to lost earnings under the TSP should write HR/RET and provide as much documentation as possible.  RM/CFSC will determine whether lost earnings are payable, notify the employee and coordinate processing of any amount due.

(b)  Withdrawals

When an employee retires, he or she may immediately withdraw the amount in his or her TSP account, or defer withdrawal of the account.  The TSP will be notified that the employee has retired and HR/RET provides the employee with the forms necessary to withdraw monies from the TSP.  An employee may withdraw the TSP account in many ways, including a single lump sum payment; a series of equal lump sum payments; a monthly annuity with or without a survivor benefit, and with or without a cost-of-living adjustment.  TSP withdrawals are fully taxable, but an employee may defer taxation by rolling over a TSP account into IRA.  An employee who retires before the year in which he or she reaches age 55, and who withdraws a TSP account in single payment or a series of equal payments, will be subject to a tax penalty on amounts withdrawn before age 59 1/2.

Additional information on the TSP may be obtained by contacting the National Finance Center at (504) 255-6000 or by visiting the TSP website: http://www.tsp.gov/.

B.  ONCE YOU DECIDE

1. Get Prepared

Retiring involves a series of actions, required by statute, by various offices within the Department and by outside agencies.  Designated forms and documents have to be fully and accurately completed by the retiring employee, and by the Department before final salary and annuity payments can begin.

2.  Retirement Counselors

Foreign Service employees have a retirement counselor (determined by alphabet) in HR’s Office of Retirement (HR/RET).  That counselor provides employees in the Washington area the forms that need to be completed to begin retirement processing, and serves as a guide throughout the retirement process.  The counselor works closely with HR/CDA (Office of Foreign Service Career Development and Assignments), which, after retirement is approved, initiates the separation orders that allow travel and shipment of effects.  Additional questions concerning the retirement process may be directed to HR/RET at (202) 261-8960.  Our office is located in Room H-620, SA-1 (Columbia Plaza).  Our FAX number is (202) 261-8988.

3.  Employees Abroad

Once Foreign Service employees serving overseas have decided on a firm retirement date, they should obtain forms DS 5004 (Application for Retirement) and OF-126 (Residence and Dependency Report) and pouch them to HR/RET, together with a copy of their latest earnings and leave statement.  The employee should cable HR/RET the date of pouching and a travel itinerary so that HR/RET will know where to send the initial retirement letter indicating formal approval of the retirement, and the required forms necessary to initiate the annuity.  This cable should also be sent to HR/CDA/SL, HR/CDA/ML or HR/CDA/EL as appropriate.

4.  Choosing a Retirement Date

(a)  FSRDS Annuitants

In order for FSRDS annuities to start the day following retirement, the date of retirement must be one of the first three days or the last day of a month.  Selection of any other date causes the annuity to be delayed until the first day of the month following retirement.  Salary is payable on a normal workday basis, while an annuity is pro-rated on a 30-day month regardless of the number of days in the month.  Therefore, if the first falls on a Friday, that may be the best date to retire, since the annuity would start on Saturday, the second.  However, if the third is a Friday, that would be a better date since the employee would be receiving salary rather than annuity for two more days.  Also, if the last day of the month ends a pay period, that may be a better date.  The selection of a date also figures into the service credit time, and may affect the reduction under the alternative form of annuity, which is based on the age at retirement.  Each individual case is different, but the retirement counselors in HR/RET can advise as to what date is best as far as service time is concerned.

(b)  FSPS Annuitants

In general, the annuity of employees who voluntarily retire under FSPS will begin the first of the month after the month in which the employee retires.  Therefore, FSPS retirees should plan to retire on the last day of the month so that their annuities will begin the next day.

5.  Annuity Payments

A Foreign Service retiree can normally expect that the first annuity payment will be sent 30 days after retirement--if all the required forms in HR/RET’s initial retirement letter (see No. 3 above) are returned to HR/RET before the 5th of the month following retirement.  For example:  If retirement is effective 6/30/03, the annuity commences 7/1, and the first payment is dated the first business day of the following month, 8/1.  The monthly payment should be via Electronic Transfer of Funds to a bank account. 

6.  Retire Abroad?

Those employees retiring abroad, who do not stop in Washington, will need to contact their retirement counselor and arrange for all out-processing, including physicals.  Employees retiring from abroad are eligible for the Job Search Program during the first year after retiring, but they must formally apply prior to retirement.

7.  Separation Address

A Foreign Service employee’s final separation address documented on the Residence and Dependency Report (Form OF-126) can be anywhere in the United States and its territories.  The choice must be made before the effective date of retirement and before travel orders are processed.  No changes can be made after the last day in pay status.  The address indicated in Block 8 of the OF-126 is the location to which separation travel orders will be issued and is not necessarily the same as your correspondence forwarding address.  If the employee’s last duty station prior to retirement is Washington, D.C. and an address in the Washington, D.C. metropolitan area is listed in Block 8, no separation travel orders will be issued.

8.  Travel and Shipment of Effects (Reference 6 FAM 133.2-2)

(a)  Time Allowed to Travel and Ship

When an employee is separated from the Service and qualifies for travel and shipment of effects, the actual departure of the employee, the departure of the employee’s eligible family members and the transportation of all effects shall not be deferred more than 12 months (6 months if separation is from a domestic assignment). The time limitation will be calculated from the employee’s last day in pay status, unless an earlier or later limitation is specified in the travel authorization. An extension may be granted; however, the maximum time limit including an extension cannot exceed 18 months from the employee’s last day in pay status, regardless of whether separation occurs from a domestic assignment or from an assignment abroad.  Requests for extension of the time limitation to travel and ship effects should be submitted to the appropriate HR technician in HR/CDA/AD.  No exceptions beyond 18 months can be made.

If travel or transportation of effects is interrupted for personal convenience, the final departure of travelers and effects from any point(s) of interruption must take place within the time limitation specified in the separation orders.

(b)  Travel Orders and the End of the Fiscal Year

If your retirement date falls near the end of the fiscal year (September 30), it may affect the issuance of your travel orders.  For retirement travel beginning overseas, an expense (packing of effects, purchase of an airline ticket, etc.) must be incurred in the fiscal year in which the orders are issued and travel must commence within the first two weeks of the new fiscal year.  If orders are issued and no expense is incurred by September 30, the orders would have to be cancelled and reissued in the next fiscal year.  If you plan to delay the beginning of your travel more than two weeks into the new fiscal year, your orders should be issued in October rather than in September.  Early submission of your travel plans will assist in determining which fiscal year should be charged and preventing an unnecessary obligation of funds.

(c)  Ship Effects Only to Final Destination

Warning:

An employee should not ship effects against the separation orders unless he/she is certain the place of separation specified in the orders is the final destination.  While he/she is authorized to attend the RPS and is allowed to change the place of separation prior to the actual date of separation, the employee will be allowed shipment only from his/her old post to the final destination.  For example, an employee in Canberra identifies Washington, D.C. as the separation address; the orders will authorize shipment to Washington.

(d)  Temporary Storage:  (Reference 6 FAM 176.1d)

In connection with the separation of an employee from the Foreign Service, temporary storage is authorized for an aggregate period of three (3) months for each separate lot of household effects.  For effects already in storage in the United States, the three-month authorization commences from last day in pay status.  For effects originating abroad or in the United States (other than from storage), the three months authorized may be applied to storage in-transit and/or storage at destination.  An additional period of up to 90 days may be authorized in extraordinary circumstances.  Extensions may be requested through the employee’s HR technician in HR/CDA/AD.  The request must include the reason an extension is needed and it should be submitted prior to the expiration of the initial 90 days.

(e)  Weight Allowance for Shipment and Storage of Effects:  (6 FAM 163)

The combined shipment and storage of effects allowance has been established at the statutory limit of 18,000 pounds, net weight, for each employee, regardless of family status.  An employee departing a furnished, limited shipment post will be authorized the limited shipment allowance of 7,200 pounds in addition to the net weight of effects in storage not to exceed the statutory limit of 18,000 pounds.

(f)  Shipping/Moving Prohibitions (6 FAM 168.4 Prohibitions in Connection with Resignation, Retirement, or Separation)

Upon an employee’s resignation, retirement, or separation from the Service, everything need not be shipped at once.  However, shipments must not be deferred more than 12 months as noted in 8(a) above.  In addition, the Government only provides transportation for effects (including a privately owned car) that were the property of the employee or an eligible family member while the employee was in an active duty status in the Service.  Effects (or a car) acquired en route to a place of residence upon separation will not be transported at Government expense.

A certification of compliance with this section is required on the employee’s travel voucher.

(Please note: a separation travel authorization to move within a metropolitan area cannot be authorized.  Therefore, the Government cannot provide for the transportation of effects from an employee’s present residence to a new residence within the same metropolitan area.)

(g)  A Travel Voucher Must be Filed (4 FAM 465.1 Traveler’s Responsibility)

A travel voucher must be filed upon arrival at the retirement location.  Also, please refer to 6 FAM 113 Official Travel Expenses, and 6 FAM 115, Traveler’s Responsibility.  Send completed voucher to: Department of State, F/DFS/FO/PD/TV, SA-15, 1800 N. Kent Street Arlington, VA  22219.

(h)  Consultations in Washington

Retirees are normally authorized three consultation days in Washington, D.C. en route to the separation address.  No per diem can be paid for consultations in Washington, D.C. if the residence for service separation is within the Washington, D.C. metropolitan area (see 6 FAM 156.6-1c).  Eligible family members are not authorized consultation in connection with a separation order.  They may travel via any route; however, reimbursement for travel expenses will be based on the cost of transportation from the employee’s duty station to separation address only.  If the employee’s separation medical exam will be performed in Washington, D.C., it should be scheduled to take place during the consultation period.

C.  GET THE PAPERWORK DONE

1.  Start Early

Separation travel orders will not be sent until the retirement has been paneled and the employee has submitted a TMTWO-Proposed Itinerary (if retiring from an assignment abroad).  Panel action cannot take place until the retirement application has been approved and the final OF-126 is received.  HR/RET’s letter of retirement approval, enclosing all the forms needed to get an annuity started, is generally sent 1 to 3 months before the effective date of retirement.

This letter will also include information on benefits payable to the spouse or former spouse of the retiree.  The time it takes to complete the process can vary, depending on whether the Department’s records are up-to-date.  Employees can help by making a habit of reviewing the accuracy of their Earnings and Leave Statements and most recent Notification of Personnel Actions (SF-50).  Retirement counseling well before the requested date of retirement will also help speed the process.  Regulations require applications for retirement to be submitted 90 days before actual retirement.  However, HR/RET will strive to process late applications as quickly as its workload permits.  Last-minute applications may delay initial annuity payments.

2.  Other Forms

Submit to HR/RET: a mailing address for the annual leave lump-sum payment; the DS-8A, Administrative Clearance; the DS-8, Fiscal Clearance from the HR officer at post or the bureau executive office (needed to prevent delay in the annual leave lump-sum payment); and travel itinerary so HR/RET knows where to send the letter containing the annuity forms once retirement is approved.

3.  Medical Examinations/Disability Retirement

Separation medical examinations are required and should be initiated within 90 days prior to the planned retirement date and completed within 90 days after the retirement date.  Examinations may be completed at post if adequate facilities exist.  If medical exams are to be completed in MED in the Department while on consultation, make appointments with MED in advance via telegram (see State 008390).  Those posted in Washington, D.C. may call (202) 663-1779/1782 to schedule an appointment.

Retiring employee’s eligible family members – spouse, children up to age 21 - are also eligible for separation exams. However, since eligible family members are not authorized to travel to Washington, D.C., examinations may be completed at the separation address, or at post.  Each retirement letter contains a statement of intent, or no intent, to apply for disability retirement.  If disability retirement is not initially requested, application is possible within one year post-retirement provided it is determined that total disability existed on the date of separation from the Service. If one became a member of the Foreign Service prior to September 25, 1975, a disability annuity is exempt from Federal income tax.

FSRDS Disability Retirement: If you retire on disability under FSRDS, you will receive an annuity which is guaranteed to be at least the lower of (a) 40% of your high three average, or (b) your annuity computed under the regular formula, but projecting your service to age 60.

FSPS Disability Retirement: If you are under 62, but not eligible for regular (50/20) retirement, your annuity during the first year of disability FSPS Disability retirement is at least 60% of your high three average salary, less 100% of your social security benefits.  During the second year and until age 62, your annuity is at least 40% of your high three average salary, less 60% of your social security benefits.  At age 62, your annuity is recomputed as if you worked until age 62 and your average salary is increased by the FSPS cost-of-living adjustments.

4.  Annuity, Life Insurance, Health Insurance Coverage

HR/RET’s retirement letter will provide detailed information to assist retirees in making decisions about:  (a) choosing the full annuity or a reduced one with a survivor annuity; (b) the 18-month period in which to change a survivor election if the initial election provided less than the maximum survivor benefit; (c) choosing the regular or the alternative form of annuity, if applicable; (d) electing a health insurance change if returning from overseas or moving to an area covered by specific Health Maintenance Organizations. (As long as some FEHB coverage is maintained, retirees can change during regular health plan open seasons administered by RET.); (e) permitting all FEGLI life insurance coverage to continue as is into retirement or, using Form SF-2817, Life Insurance Election, keeping only selected options.

With respect to life insurance premiums, employees who are considering retirement may wish to note that an employee who is under age 65 will be required to pay a monthly life insurance premium during retirement ($.325 per $1,000 of coverage) for basic life insurance coverage.  The premium will continue until the employee reaches age 65, when the value of the coverage will begin to reduce by 2% a month until it reaches 25% of its original value.  Retiring employees who elect to have their basic life insurance coverage unreduced or reduced by 50% will continue to pay from retirement until death or cancellation an additional monthly life insurance premium.  Under a new law, employees can keep Option B life insurance (multiples of salary) after age 65, without a reduction.  Contact HR/RET for details.

D.  LAST DETAILS

1.  Getting Answers

HR/CDA issues separation orders based on the Foreign Service Residence and Dependency Report (OF-126) the potential retiree has submitted.  Any questions about these orders or shipment of effects should be addressed to the HR technician in HR/CDA.  All other questions will normally be handled by the Retirement Counselor in HR/RET.

2.  ID and Passport

If coming to the Department, one should turn in diplomatic passports and ID cards to a Retirement Counselor in RET, Room H-620 SA-1, for cancellation.  If not returning to the Department, one should check with the HR officer at post prior to departure for disposition of ID cards and diplomatic passports.

3.  Finishing Up

Submit final travel vouchers promptly to avoid delays in the lump-sum payment.  Remember that with the exception of health and life insurance, all current allotments from salary (bonds, loans, IRAs, CFC) cease the date of retirement.  Some will want to make other arrangements.

4.  Checking Out

Employees should check out with the Employee Services Center (ESC), Room 1252, Department of State, 2201 C Street, N.W., Washington, D.C. 20520, by providing, in writing, their separation address.  Also, advise the ESC whether Privacy Act information such as address and telephone number may be released.

E.  AFTER RETIREMENT

1.  Retirement Plaque and Pin or Charm

The Department provides each State retiree with an attractive walnut plaque, engraved with the retiree’s name and time of service.  In addition, women receive a charm and men a pin.  Retirement counselors will see to it that retirees receive these awards.

2.  Identification

All retiring State employees will get a courtesy "retirement" ID card from HR/RET, which can be used for general identification purposes.

3.  HR/RET Will Be Home Base

The Retirement Office (HR/RET) becomes the post-retirement HR office for Foreign Service annuitants, surviving spouses, and former spouses. HR/RET will process address changes, and changes in the annuity due to divorce or death of spouse.  Timely notification of marital changes is important in order for HR/RET to convey pertinent law and regulation information for retiree, survivor(s), and/or former spouse(s).  Please refer to Appendix VI for a summary of former spouse benefits.  

Annuitant Direct

RM, in partnership with OPM, implemented Annuitant Direct, an innovative automated system that puts you in control of processing your own discretionary changes such as:

      *Federal and State Tax Withholdings

      *Change or Establish Voluntary Allotments

      *Change or Start Direct Deposit

      *Request a Duplicate Form 1099R

      *Change Home Address

In order to access Annuitant Direct, you will need a touch-tone telephone, your Annuitant Direct PIN and your Social Security Number.  You will receive a confidential PIN from OPM after you retire.

4.  Reemployment Limitations

Because of the possible effects on lump-sum payments, salary, and life and health insurance, FS retirees should consult with a knowledgeable HR officer before deciding to accept reemployment as an annuitant with the Federal Government.  Complete information on reemployment is provided by HR/RET with their initial letter, and the retiree is required to sign an acknowledgment of receipt of the notice regarding reemployment.  Once reemployed, any questions concerning your salary/annuity limitations can be directed to the RM/RAD/APRC at 1-877-865-0760.  Details on the provisions, which govern reemployment of Foreign Service annuitants, are provided in Appendix V. 

(a)  Deferred Lump-Sum Payment

If one is reemployed within 3 days of separation and subject to a leave system, payment of the lump-sum annual leave is deferred.  Since the lump sum payment then will be based on the salary in effect at the time of the next separation, it may be lower than the original lump sum payment that would have been received.  Moreover, the retiree will have to repay all or a portion of a lump sum if re-employed with the Federal Government within the annual leave period covered by that payment.  Under OPM’s regulation, an employee’s appointment as WAE (When Actually Employed) would not delay or impact the payment for unused annual leave.

(b)  Effect of Part-Time, Intermittent, or Temporary Reemployment on Annuity

In the event of reemployment on a part-time, intermittent, or temporary basis, the employee must notify HR/RET.  Re-employed annuitants under these types of appointments are entitled to the salary of the position in which reemployed plus that amount of the annuity, the total of which does not exceed, in any calendar year, the full-time basic pay of the reemployed position or the basic pay at time of retirement, whichever is greater.  (Locality pay is only used in this computation if actually received based on a US assignment.)  Upon termination of reemployment, payment of the annuity resumes with any intervening cost-of-living adjustments. (See Appendix V for further information.)

           

(c)  Effect of Full-Time Reemployment on Annuity

If one is re-employed on a full-time career basis, payment of the annuity is suspended. The reemployment service is covered service under the rules of the retirement system under which the appointment is made.  If re-employed by the Government, it takes 5 years to vest under a retirement system before an employee again becomes eligible to continue coverage into a second retirement.

(d)  Life and Health Insurance Coverage Related to New Employment

Retirees should discuss life and health insurance coverage with a personnel officer of the new agency or private employer and an HR/RET retirement counselor before accepting employment.  A retiree must elect to continue health and life insurance coverage during reemployment; otherwise, he or she will lose the health and life insurance coverage he or she had at retirement.

Any employee who has suggestions or recommendations for improving the retirement programs administered within the Department should contact HR/RET.  All suggestions are welcome and appreciated.

* Requires at least five years of service in the Foreign Service.

**An employee covered by FSRDS with five years of service is entitled to an annuity upon separation from service if then 60 or older.

***An employee covered by FSPS with five years of service is entitled to an annuity upon separation from service if then 62 or older.

****Minimum Retirement Age (MRA) eligibility provisions.

Notes on FSPS Benefits:

l.  More than 20 years of FSPS Service:  The l.7% factor only applies for the first 20 years of FSPS service; after 20 years of FSPS service, the service factor is l.0% of high-3 average salary for FSPS service (in excess of 20 years).  For example, if one has l0 years of FSRDS, and 25 years of FSPS, the factors are (l0 x 2%) plus (20 x l.7%) plus (5 x l%) = 59% of high 3 average salary.

2.  When the l.7% Factor Does not Apply:  If an employee under FSPS (a) does not meet the 50/20 requirement, and (b) is not separated involuntarily (age 65, time in class, or involuntary separation from Presidential appointment), the service factor is l% of high 3 average salary for all FSPS service.  For example, if one voluntarily retires at age 62 with l0 years of FSPS service, the annuity is l% (not l.7% of high 3 average salary).

3.  Each Employee Has Only One High 3 Average Salary:  The High 3 Average Salary is not computed separately for FSRDS and FSPS service.  The same High 3 Average Salary, usually the last 3 years, is used in calculating both the FSRDS and FSPS components to the annuity.

4.  Special Formula Under the MRA Provisions:  If an employee retires under the FSPS Minimum Retirement Age provisions, the basic annuity is 2% of High 3 Average Salary for the FSRDS service and l% of High 3 Average Salary for the FSPS service.  This basic annuity is reduced by 5% for each year the employee is under age 62.

5.  FSPS Annuity Supplement:  An annuity supplement is payable to employees retiring under FSPS who (a) meet the 50/20 age and service requirement and (b) are under age 62 and (c) whose earned income (excluding pensions) after retirement is less than about $20,000 a year.  The annuity supplement is approximately $35 per month for each year of service the employee has under FSPS.  For example, an employee with l5 years of FSRDS service and 5 years of FSPS service would receive an annuity supplement of about $l75 per month.  The annuity supplement terminates at age 62.

6.  FSRDS Offset:  If you retire under the FSRDS Offset plan, your annuity will be reduced, at age 62 (if eligible for social security) by the amount of your social security benefit attributable to your FSRDS Offset service.  This reduction applies even if you do not actually receive social security because you are under 65 and still working.

APPENDIX III

Basic Annuity Estimation Worksheet (PL 105-382)

A.  Enter high-three average salary.  (An estimate would be current basic pay, exclusive of allowances and differentials, less $3,000.00.)  Adjust this high three average salary for locality pay for overseas service on or after December 29, 2002.

B.  Add up service credits, including sick leave and any certified unhealthful post credit (1.5 times service performed).  If Service Computation Date (SCD) is known, an easy way to compute basic service, exclusive of sick leave and extra credit for unhealthful post, is to subtract the SCD from today’s date.  For example, if the SCD is June 1, 1966 and today’s date is December 1, 1996, the employee would have 30.5 years credit (30y 6m).

C.  Multiply total service in Step B (not to exceed 35 years, exclusive of sick leave) by 2% (.02).  For example, 24.5 years = 49%.  [If transferred to FSPS, use multiplier of 1.7% (.017) for each year of FSPS service instead of 2% (.02).]

D.  Multiply high 3 average salary in Step A, by factor(s) in Step C to obtain annual basic annuity benefit.  If transferred to FSPS add the FSRDS annuity to the FSPS annuity to produce a basic annuity benefit.  If not electing a survivor benefit, divide this amount by 12 to find the monthly annuity.

E.  If electing the maximum survivor benefit, multiply the amount in step D by 90% (.9).  If under FSRDS add $270.00 after multiplying by .9.  This will yield the annual basic annuity, after reduction for the survivor benefit.  Divide by 12 to find the monthly annuity.

F.  To obtain the annual survivor benefit, multiply the amount computed in Step D by 55% (.55).  If under FSPS, multiply that amount by 50% (.5) instead of 55%.  To obtain the monthly survivor benefit, divide by 12.

*If military deposit is not paid, post 1956/76 military service is not available for credit if employee is 62 and eligible for social security.

**If military deposit is not paid, post 1956 military service is not available for credit at anytime.

***If an employee voluntarily switched to FSPS (or FERS) after performing at least 5 years of civilian service under the old retirement system (FSRDS or FSPS), and the military service was performed before the change to FSPS (or FERS), the military service is credited under the rule "Military Service Credited in FSRDS Benefits".

Employees should complete and send the Estimated Earnings During Military Service (form RI 20-97) along with a copy of the DD 214 to the pay office for each branch of service.  The pay center addresses are on the reverse side of form RI 20-97.  Forms may be obtained by visiting the OPM website: http://opm.gov/Forms/html/opm.asp or by contacting HR/RET.  Once in receipt of your earnings, submit them to HR/RET.

APPENDIX V

Summary of Provisions Governing Reemployment

of Foreign Service Annuitants

Q-1:  What provisions govern the reemployment of FS annuitants?

A-1.  There are two basic provisions for adjusting benefits when a FS annuitant receiving retirement benefits under FSRDS or FSPS is reemployed.  The first provision, suspension of annuity during reemployment, applies when the annuitant is hired in a full-time, career appointment on or after 1/1/87.  The second provision, continuation of benefits subject to the salary/annuity limitation, applies when the annuitant has been continuously reemployed from a date prior to 1/1/87, or when the annuitant is reemployed in a part-time; temporary (less than career); or intermittent (WAE) basis.

                 

Q-2:  What constitutes reemployment on a part-time, intermittent or temporary basis?

A-2:  An appointment is considered part-time when the regular tour of duty is less than a full-time appointment of 40 hours per week.  An intermittent, or WAE (When Actually Employed) appointment is an appointment without a regularly scheduled tour of duty.  A temporary appointment is understood for this purpose as any appointment which (1) is less than permanent or career in nature and (2)(a) imposes a time limitation or (b) excludes the individual from retirement coverage under a Federal retirement system.  In general, the appointment must be limited to one year or less, but some temporary appointments may exceed one year and still qualify as temporary for this purpose.

Q-3:  What is the "cap" on the salary/annuity earnings?

A-3:  The salary/annuity limitation or "cap" on earnings is the higher of (a) the salary at the time of retirement, or (b) the full-time salary of the position in which reemployed.  Please note the salary at the time of retirement is not adjusted for inflation, but the full-time salary of the position in which reemployed will change when an employee receives pay increases. 

NOTE: Locality pay is not factored into this computation unless actually received for a domestic assignment.

Q-4:  What types of earnings are considered in determining whether the salary/annuity limitation is reached?

A-4:  With regard to payment of annuity, any annuity that is received, or scheduled for receipt, within a particular calendar year is considered income for purposes of the salary annuity limitation.  However, the lump-sum payment under the alternative form of annuity (AFA) is not considered income for purposes of the salary/annuity limitation.

With regard to salary, any post-retirement income which is part of basic pay, and which is received or scheduled for receipt within a given calendar year, is considered income for purposes of the salary annuity/limitation.  Lump sum payments of annual leave, salary differentials, etc. are not considered income for this purpose.  Payments which are normally payable on a given date are considered income even if the check was lost or otherwise not negotiated during the particular calendar year.

It is also useful to note that the determining factor is whether the income was received during a particular period.  The date the income was earned does not affect the salary annuity limitation.

Q-5:  Do payments to former spouses, either by statute or court order, constitute the retired annuitant’s income?

A-5:  Yes, any payment or deduction that reduces the amount of annuity payable to the retired annuitant, or reduces the gross amount of annuity (for alimony, child support, etc.) is considered income of the annuitant. 

Reductions in the basic annuity, which are factored in computing the gross annuity payable to a retired employee, are not considered income of the annuitant.  For example, if the annuity were reduced by a factor of 10% to provide a survivor benefit, the amount of the reduction would not be considered in the annuitant’s income.  Likewise, if the annuity is reduced for an unpaid deposit, the rate of annuity after reduction for the unpaid deposit is the amount used in determining post-retirement income.

Q-6:  Over what period is the salary/annuity limitation applied?

A-6:  The salary/annuity limitation begins to take effect when the employee retires; therefore, income received prior to the commencing date of the annuity is not considered in the salary/annuity limitation.  The law provides that the salary/annuity limitation is determined on a calendar year basis; the salary annuity/limitation is not prorated during the first calendar year of retirement.

Q-7:  Does service under a personal service contract qualify as employment for purposes of Section 824 of the FSA, as amended?

A-7:  No.  Individuals who are hired after retirement under a personal services contract are not considered Federal employees; therefore, the annuity of such an annuitant is not adjusted.  If an appointment is effected through the contract and the individual is considered a (Federal) employee by the employing agency, the person is treated as an employee for purposes of Section 824 of the FSA.

Q-8:  Where may I obtain further information about reemployment of FS annuitants?

A-8:  Information about policies which govern the impact of reemployment upon the annuity may be obtained from HR/RET, Room H620 SA-1, (202) 261-8960.  Information about the adjustments made, or income received, in any particular case should be directed to RM/RAD, Room 6114A, SA-15, (703) 875-7110. 

APPENDIX VI

Summary of Benefits Payable to a Former Spouse Upon Divorce

If a participant in FSRDS/FSPS becomes divorced on or after 2/15/81, the former spouse may be qualified for benefits, provided that (a) the former spouse was married to the participant for at least l0 years during the participant’s federal creditable service, of which 5 of the l0 years occurred while the participant was a member of the Foreign Service), and (b) the former spouse has not remarried prior to age 55, and (c) the former spouse has not expressly waived the benefits described herein.  The former spouse is entitled to:

Note: Pro Rata Share means a share representing the amount, which accrued during the duration of the marriage.  The formula for determining a pro rata share is the

Years of Marriage During Federal Service

Divided by

Years of Federal Service

A divorced spouse who does not qualify for statutory benefits may still be entitled to a share of the participant’s annuity, or to a survivor annuity if a valid court order so provides.

The valid court order/notarized spousal agreement needs to be submitted to HR/RET as soon as possible after the divorce so that an official determination of benefits may be made.  Please consult with HR/RET for any additional information regarding benefits to former spouses.