Does the first year of FERS Supplement need to be repaid?

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In January 2017, I began receiving a FERS Supplement payment in my pension. My current earned income is almost triple the exempt amount. Do I need to repay this? It seems that OPM doesn’t ask me about my income until January 2018. If I need to repay, I would rather stop the payment now.

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Posted by (Questions: 1, Answers: 0)
Asked on May 2, 2017 6:08 pm
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Private answer

To quote the CSRS FERS Handbook, Chapter 51, here is what it says regarding when the reduction is assessed: A reduction in the retiree annuity supplement in a given year is based on excess earnings in the previous year. The reduction is assessed beginning with the year immediately after the first year during which a retiree became entitled to the annuity supplement (or reached the MRA if already receiving the annuity supplement before the MRA). If you would like to read more about this, page 15 of the following link will provide regulation and examples on this topic: https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c051.pdf

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Answered on May 4, 2017 2:50 pm

Unfortunately, OPM publications are as easily read as IRS publications.

Maybe you can give simple answers to the questions that follow this hypothetical:

I retired at age 58 in July, 2018, having reached MRA, and eligible for the FERS Supplement, let’s say $1400/month.

OPM includes the supplement in annuity payments starting in September, 2018, continuing through present (April, 2019), (and perhaps beyond).

Following retirement, I earned $75,000 in 2018.

In 2019, I earned $60,000 through April, then ended my post-retirement employment adventure, with absolutely no future employment intentions. Ever.

Today’s mail produced OPM Form RI 92-22, which I dutifully completed and promptly posted, entering $75,000 on Line 4 in response to: “What were your earnings in 2018 after retirement?”

I expect to complete a 2019 OPM Form RI 92-22 next year, entering $60,000 on Line 4 in response to: “What were your earnings in 2019 after retirement?”

I expect to complete a 2020 OPM Form RI 92-22 the following year, entering $0 on Line 4 in response to: “What were your earnings in 2020 after retirement?”

I understand that at some point OPM will verify the figures with SSA.

Now, the questions:

1) How long should I expect payment of the FERS Supplement to continue? With which annuity payment (month and year) should I expect OPM to reduce my FERS Supplement?

2) Shall I assume the Supplement will be reduced to ZERO?

3) At any point will I be subject to claw-back of the Supplement already paid?

4) At what point (month and year) will I be eligible to apply for reinstatement of the FERS Supplement?

5) Just how tedious is the reinstatement application process, i.e. extremely easy (fill out and submit a form with accompanying documentation, and presto!, it’s all complete within a month); nigh on impossible (months and months of letters and phone calls to OPM and Congressional Representatives), or somewhere in-between? (Please say “Easy!”)

Thanks

( at April 30, 2019 4:30 pm)
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Private answer

steel: Hypothetical questions are not something I usually respond to however, since these could be very realistic, I will provide you the answers with the understanding that not all the information needed was provided and OPM has final authority and I cannot be responsible if your particular situation varies from this information.
#1 – In this situation, your supplement should end July 1, 2019, because you have exceeded the earnings limit.
#2 – Yes, you should assume the supplement to be zero. You lose $1 for every $2 you earn in earned income over the 2019 $17,640 earnings limit. In order to determine if your supplement will be phased out, double your supplement and add it to the earnings limit. If you make more than that amount, you have totally zeroed out your supplement.
#3 – Since the supplement is for the previous year’s earnings, no, they do not claw back what has already been paid.
#4/5 – If you stop working before age 62, you will be eligible to receive your supplement again after notifying OPM. Unfortunately, it is not an easy process and just as OPM stopped your supplement payments after you earned those monies, it will delay in re-staring your payments again. You will need to send copies of your most recent tax returns along with all related W-2s or 1099s. This information along with a letter requesting reinstatement of your supplement should be sent to Office of Personnel Management, Retired Surveys and Students Branch, 1900 E Street, NW, Washington, DC 20415-3562. In your example, your supplement should be eligible to commence again in January 2021. Do not assume OPM will just reinstate your supplement without you possibly having to follow-up, even more than once. It will be paid retroactive to when eligible, but stay on top of it!

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Answered on April 30, 2019 5:43 pm

Elaine:

Thanks for your prompt and informative response!

I understand that this scenario remains purely hypothetical; I just hope it seems semi-realistic and may possibly provide valuable information and guidance to other readers under similar circumstances. What other needed hypothetical information could I provide about this scenario that might fill the gap required for answers to the above questions?

Perhaps I’m fearing the worst from your words, but why should the onus of reinstatement fall on the retiree? Shouldn’t OPM both realize and assume an obligation for preemptive action on the retiree’s behalf?

How long does the reinstatement application process typically take? And when, in the above hypothetical, should it begin?

Thanks!

( at May 1, 2019 3:36 am)
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Private answer

Since it is hypothetical, none, but the date of birth and when the supplement ends are tied together. Since OPM pays you the supplement and earnings while collecting the supplement is what determines if the supplement remains or is reduced or terminated, it is your responsibility to prove you are no longer working so the supplement can be reinstated. With OPM, there is no typical. I have heard, although the supplement is paid retroactive, if needed, should earning drop below the earnings test limit, it can take 6 months of more.

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Posted by (Questions: 0, Answers: 461)
Answered on May 1, 2019 2:08 pm