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RETIREE VP VOICE

| BY LARRY COHEN

AFSA NEWS

THE FOREIGN SERVICE JOURNAL

|

JANUARY FEBRUARY 2015

49

Views and opinions expressed in this column are solely those of the AFSA Retiree VP.

Contact:

lawrencecohenassociates@hotmail.com

or (703) 437-7881

Making Sense of the FSPS Annuity Supplement

Most Foreign Service person-

nel today are in the Foreign

Service Pension System

retirement system. One of

its most confusing aspects

is the FSPS annuity supple-

ment.

If you have yet to par-

ticipate in the Retirement

Seminar or Job Search Pro-

gram, you may not ever have

heard an explanation of it in

plain English. I will try now to

describe it.

The FSPS annuity supple-

ment is a benefit—on top of

the monthly pension—pay-

able to certain individuals

who retire before age 62, are

in the “new” FSPS retirement

system and are entitled to

an immediate annuity. If this

applies to you—and it does

apply to many—read care-

fully.

The supplement’s pur-

pose is to provide a level of

income

before age 62

that

is similar to what an annui-

tant would receive at age 62

as part of Social Security

benefits. It is calculated as if

the annuitant is 62 (the earli-

est eligibility for full, though

reduced, Social Security

benefits) and fully eligible to

receive them on the day of

actual retirement. When the

annuitant actually reaches

62, any annuity supplement

ends.

The supplement is subject

to an annual earned income

earnings test, similar to the

one applied to Social Secu-

rity benefits. However, the

earnings test does not kick in

until the retiree reaches his

or her minimum retirement

age (MRA). For someone

born before 1965, the MRA is

56 years. The MRA ramps up,

gradually, to 57 for a person

born in 1970 or later.

In essence, then, as long

as you are under your MRA,

you should be able to earn as

much as you want in another

job without fear of reducing

your FSPS annuity supple-

ment. To show continued

supplement eligibility after

reaching their MRA, annui-

tants must submit an FSPS

Annuity Supplement Report

(DS-5026) to the HR Service

Center at the end of each

calendar year.

On this form the annuitant

declares earned income for

the previous year. The cur-

rent (2014) earned income

cap is $15,480, after which

the supplement is reduced by

$1 for every $2 of additional

earned income.

If you reached your MRA

and are receiving an annu-

ity supplement, don’t for-

get to send in the DS-5026

form by early January.

Oth-

erwise, the State Department

may ask for repayment of

any overpayment. Reduction,

termination or reinstatement

of benefits becomes e“ective

on Jan. 1 of the year following

the year of income reported.

By the way, earned

income includes all wages

from employment covered by

Social Security and various

other cash-based incomes.

It does not include pensions

and annuities, distributions

from a Thrift Savings Plan

or Individual Retirement

Account, unemployment

compensation, interest or

dividends not resulting from

a business or trade, or most

rental income.

For more information on

the FSPS annuity supplement,

visit the Retiree Services page

on the AFSAwebsite at www.

bit.ly/AFSA_AnnuitySupp.

While the FSPS annuity supplement is a nice financial benefit

for younger Foreign Service retirees, I do not recommend it as

the sole driver in determining whether to retire earlier than

you otherwise plan.

While the FSPS annuity

supplement is a nice financial

benefit for younger Foreign

Service retirees, I do not

recommend it as the sole

driver in determining

whether to retire earlier than

you otherwise planned to

do. Retirees who are initially

eligible often discover when

they reach their MRA that

they quickly surpass the low

earned income cap.

So make your retirement

plans, commit to fulfillment

of your dreams, and don’t fret

the annuity supplement.

n

REMI NDER :

ANNUAL HS ESSAY CONTEST

NOW ACCEPT I NG ENTR I ES

AFSA’s 2015 National High School Essay Contest is

now accepting entries.

All students who are U.S. citizens and whose

parents are

not

in the Foreign Service are eligible to

participate if they are in grades nine through 12.

The winner will receive $2,500, a trip toWashing-

ton, D.C., tomeet the Secretary of State and a full-

tuition scholarship for a Semester at Sea voyage. The

runner-up will win a full scholarship to participate in

the International Diplomacy programof the National

Student Leadership Conference.

The deadline for entry is 11:59 p.m. EST on March

15. Details and essay topic can be found at

www.afsa.

org/essaycontest.

ANNOUNCEMENT