Federal Employment Benefits

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Learn More About Federal Employment Benefits

Understanding federal retirement plans can be complex. , Let the team at Advanced Capital Management  help you plan for retirement with an experienced Certified Federal Retirement Consultant (FRC), who understands the system and how to get the most out of your Federal retirement.

FEGLI

The Federal Employees’ Group Life Insurance Program (FEGLI) is available to federal employees. FEGLI is term life insurance at group rates. Federal employees who elect to have this coverage give permission to pay the premiums as a payroll deduction automatically.

Federal employees who do not want this insurance coverage must elect to waive basic coverage, and if they do so, they cannot apply for any optional FEGLI coverage separately.

Key Points About FEGLI Basic Coverage

  • Premiums increase every five years.
  • Premiums double every ten years.
  • FEGLI is term life insurance that does not build cash value.
  • Death benefits are paid to beneficiaries.
    Basic coverage includes Accidental Death &
  • Dismemberment at no additional cost.
    The federal employee receives dismemberment benefits for an accident causing limb loss.
  • The federal government pays one-third of the basic coverage cost for most federal workers.
  • Basic coverage is free for U.S. Postal Service workers.
  • Basic coverage cost does not depend on age.
  • The basic coverage amount is the employee’s annual salary, rounded up to the next higher thousand dollars, plus two thousand dollars.
  • Basic coverage includes Extra Benefits for those under age 45.
  • Extra Benefits are double the death benefit if the employee dies at age 35 or younger.
  • Extra Benefits decrease each year by 10%, starting from age 36, becoming zero by age 45.
    For those who do not waive coverage, basic coverage starts from the first day of duty as a new hire or when otherwise eligible.

Optional Coverage

  • Optional coverage cost depends on age, and federal employees pay the full amount.
  • Optional coverage A is $10,000 of life insurance.
  • Optional coverage B is one to five times the employee’s salary.
  • Optional coverage C is family insurance with coverage for the employee’s spouse and eligible dependent children.

A Qualifying Life Event Opens an Enrollment Opportunity

A qualifying life event (QLE) for the FEGLI program is a marriage, divorce, spouse’s death, or adding an eligible child. If a QLE occurs, the employee may elect to have basic coverage and optional coverage. If they already have basic coverage, they may increase optional B or C coverage up to five times the basic coverage level.

Enrollment may be possible during rare Open Seasons for the FEGLI program, but FEGLI enrollment is not available during the annual Federal Benefits Open Season.

Disadvantages of FEGLI

The main disadvantages of FEGLI are the rising premium costs as a federal employee gets older. For those who have FEGLI, premiums may become very high as they get older, making this life insurance too costly, right at the time when it is most needed in the later stages of life.

NO cash value accumulates.

Life benefits are limited to dismemberment under the Accidental Death & Dismemberment coverage. There is no living benefit for a critical, chronic, or terminal illness.

FEGLI Stops After Leaving a Federal Job

FEGLI coverage continues for free for 31 days after separating from federal employment. FEGLI does not continue after that. However, a former federal employee has the right to convert FEGLI coverage to an individual non-FEGLI policy.

Alternatives to FEGLI

Better coverage is available, such as coverage with steady premiums that do not increase over the policy’s life. Alternatives to FEGLI may build cash value and include living benefits paid to the insured for those who experience a critical, chronic, or terminal illness.

To learn more about your FEGLI benefits and FEGLI alternatives, call 727-542–7659 or send an email to contact us for an in-depth insurance review of your existing coverage and a complimentary evaluation, including our expert recommendations for you and your family.

FERS BASIC

Congress passed legislation creating the Federal Employees Retirement System in 1986 and it became effective as of January 1, 1987.

It replaced the Civil Service Retirement System and is the primary retirement plan for civilian U.S. federal employees.

Under FERS, employees acquire retirement benefits in three ways:

  • Social Security benefits
  • A Basic Benefit Plan for which employees a charged a minimal fee
  • A Thrift Savings Plan (TSP) that includes automatic government contributions, voluntary employee contributions and matching government contributions

Under the FERS, employees need to pay towards the Basic Benefit and Social Security components in each pay period via withholdings by the federal agency that is the employer.

After you retire, benefits are paid out monthly as an annuity payment for the rest of your life.

The Basic Benefit Plan, also known as a defined benefit plan, pays out a benefit based on the last consecutive three years of service and total years of service. Workers accrue a benefit of 1 percent per year of service, while those who retire at age 62 or later with more than 20 years of service receive 1.1 percent per year.

The TSP, administered and managed by the Federal Retirement Thrift Investment Board, works differently. Each pay period, the employer deposits 1 percent of the employee’s basic pay into an investment account. Employees also make contributions, which are matched. The level of required contributions varies depending on when the employee was hired.

The TSP contributions are all tax-deferred.

Eligibility Requirements

The FERS eligibility requirements vary, based on the employee’s age, contributions to the plan and years of service. The plan is considered less generous than the Civil Service plan that preceded it, but more generous than many corporate retirement plans.

There are four types of benefit payouts:

  • Immediate: For those who retire at the minimum retirement age with at least 10 but fewer than 30 years of service, the benefit is reduced by 5 percent a year for each year before you turn 62. However, if you have 20 years of service and you start receiving this benefit when you turn 60 or later, this restriction does not apply
  • Deferred: The same timing and age provisions as with the immediate benefits apply here
  • Disability. If you are disabled while working in a FERS-eligible position, and is expected to last one year or more, you are eligible for disability benefits. The agency needs to confirm that it cannot accommodate you in the present position and that you have been considered for other positions at the same level and pay rate within the same commuting area
  • Early: Under certain involuntary separation cases, or when voluntary separation is made during a reduction in force or significant reduction in force, an early retirement benefit is available

When a federal employee dies, their spouse and other survivors may be eligible for a monthly or lump-sum payment.

Understanding federal retirement plans can be complex. , Let the team at Advanced Capital Management  help you plan for retirement with an experienced Certified Federal Retirement Consultant (FRC), who understands the system and how to get the most out of your Federal retirement. To learn more, contact us today.

FERS MRA

FERS and MRA 

A substantial benefit for federal employees is their participation in the Federal Employee Retirement System (FERS). The FERS offers a Basic Benefit Plan and a Thrift Savings Plan, along with standard Social Security benefits for federal employees. The FERS Basic Benefit Plan is a defined-benefits plan.

For federal employees who become vested in the Basic Benefit Plan, it provides a pension at a certain age. Vesting occurs after having at least five years of creditable service as a federal employee. This creditable service as a federal employee includes civil service jobs, federal agency positions, and military service.

Minimum Retirement Age

After a federal employee retires, the FERS pension comes as monthly annuity payments. Your minimum retirement age (MRA), years of service, and age determine the eligibility for the retirement benefits from federal employment.

Your MRA depends on the year that you were born according to this schedule:

  • The MRA begins at 55 years old for those born before 1948.
  • The MRA increases incrementally, from age 55, by two months for each birth year from 1948 to 1952.
  • For those born from 1953 to 1964, the MRA is 56 years old.
  • The MRA increases incrementally from age 56 by two months for each birth year from 1965 to 1969.
  • In 1970, and every year after, the MRA is 57 years old.

How the MRA Impacts Retirement Benefits Qualifications

There are four categories of retirement benefits: immediate, early, deferred, and disability. The MRA determines eligibility in most categories.

Immediate Benefits

Immediate benefits are “effective” 30 days from the date you retire. This effective date does not mean you will get a retirement check within 30 days because the Office of Personnel Management (OPM) must process your retirement paperwork first before sending any payments. Depending on how busy the OPM is when you retire, it can take months for your first check to arrive. It is usually only 80% of your estimated monthly retirement benefit. Your actual monthly payment is determined when the OPM finishes the full evaluation.

Eligibility begins at age 60 for those with 20 years of service or 62 for those with at least five years of service. Eligibility begins at the MRA for those with 10 to 30 or more years of service.

If you retire at your MRA with at least ten but fewer than 30 years of service, the immediate benefits are reduced by 5% per year for each year under 62. The exception is when you have 20 years of service, and your benefits start at age 60 or older.

Early Benefits

An early retirement benefit may be available for voluntary separation and certain involuntary separation cases during a major reduction or reorganization of forces. In such circumstances, retirement benefits are available for those with 20 years of service at age 50. For those with 25 years of service, retirement benefits are available at any age.

Deferred Benefits

This category is for a delayed benefit until meeting certain age-related criteria. If you have at least five years of service, you must wait until age 62 for your retirement benefits to start.

If you have 10 to 30 or more years of service, you must wait until your MRA to receive benefits.

If you retire at your MRA with at least ten but fewer than 30 years of service, the benefits are reduced by 5% per year for each year under 62. The exception is when you have 20 years of service, and your benefits start at age 60 or older.

Disability Benefits

For those with at least 18 months of service, disability benefits are available at any age. The certification from your healthcare provider is that the disability will last at least one year. You must be disabled while employed in a job subject to the FERS. Due to injury or disease, your agency must certify that you cannot work in your current position or in a suitable reassignment position that accommodates your disability.

Death Benefits

A spouse, or other qualified survivors, may become eligible for a lump-sum payment or monthly annuity payments upon the death of a federal employee who already met retirement criteria.

Talk to an Experienced Certified Federal Retirement Consultant for More Information.

To learn more about annuities as part of your retirement planning, contact Advanced Capital Management using the webform or call 727-542-7659 to get an annuity quote.

TSP

The thrift Savings Plan (TSP) is a retirement plan for federal employees. Understanding how the TSP works and how to maximize your contributions is a smart way to build your retirement account and plan for your future.

What is a Thrift Savings Plan?

Similar to a 401(k), the TSP allows employees to contribute a portion of each paycheck to the plan, with the federal government contributing as well. The Federal Employees’ Retirement Security Act of 1986 established the plan.

Like a 401(k), the TSP is the world’s largest defined contribution plan, with more than $558 billion in assets and more than 5 million account-holders.

Federal employees and military members may enroll in the plan. Contributions to your account can be invested in various fund types. Investing in a TSP also has considerable tax advantages, depending in the investment path you choose.

In 2022, employees can contribute up to $20,500 annually to the TSP. Employees 50 and over can contribute $27,000.

TSP Plan Options – Traditional and Roth

Employees opening TSP accounts have two options for investments – traditional or Roth. It’s also possible to invest in both types, although the total annual limit remains the same.

Here’s a look at the two types.

Traditional. Contributions to traditional plans are made before taxes are computed. That approach lowers your adjusted gross income.

Contributions made to a traditional TSP grow tax-deferred until you make a withdrawal.

Roth. Roth contributions are taken from after-tax income. That means your take-home pay is reduced and your gross income is not changed.

However, when you make qualified withdrawals from a Roth TSP account, they are tax-free.

To be a qualified withdrawal, the Roth TSP account must have been opened at least five years. The account owner must be either 59½ or permanently disabled. If the account owner makes a non-qualified withdrawal, they pay a 10 percent penalty.

Roth TSP account holders do have to pay taxes on the earnings made on the withdrawal amount.

Roth TSPs are a good choice for those who may have a higher tax rate in retirement.

Employer Matches

If you are a member of either the Federal Employees Retirement System (FERS) or Blended Retirement System (BRS), your agency or service wing will make contributions to your TSP account.

The employer contributes 1 percent of your pay, either immediately or after 60 days of service, depending on the system you are in. Whether you contribute anything, the employer makes the 1 percent contribution.

After two years of employment, you are eligible for a match of your contributions. The government matches 1:1 for the first 3 percent you contribute and 50 cents for each dollar for the next 2 percent.

The matched dollars will be taxed in retirement, whether you choose a traditional or Roth account.

Understand Your Options with a Trusted Financial Advisor

The TSP system is an invaluable way to save for your future while serving your country. At Advanced Capital Management, we help government employees and other clients with investment and retirement strategies to get the most out of your hard-earned dollars. To learn more, contact us today.

Fixed Index Annuities: A Safe Alternative to Low Paying Bank CDs, Risky Stocks and Mutual Funds

January 17, 2023

A fixed index annuity is a relatively new financial option offered by insurance companies. It was created in 1994 as an alternative investment to stocks, mutual funds, and CDs. When you invest in a fixed index annuity you get the attractive features of tax-deferred growth and a guarantee that you will not lose any of the money you put into the annuity.


Our money is safe


Today there is a surge in interest by life insurance companies to get into this lucrative market. Many companies that only used to offer variable annuities are now offering fixed index annuities to their clients. Unlike variable annuities that invest in different mutual funds, the performance of fixed index annuities are tied to a single index such as the S&P 500 Index.


Stock market alternative: Older individuals who are nearing retirement may be hesitant to put their retirement savings at risk in a volatile stock market. They do not have the luxury of time to recover from big losses in the market. Even those who are younger may be risk averse after the historic bear market that lasted for almost 18 months (October 2007-March 2009).


Mutual fund alternative: You get diversification through a mutual fund or group of mutual funds, but that does not protect you in a declining market environment. While mutual funds are less risky than owning an individual stock, you can still lose a lot of money in a bear market environment. You need only go back about 5 years to see that employee 401-K plans, which typically consist of mutual funds, dropped in value by more than 30 percent.


CD alternative: A certificate of deposit is a very safe investment, but in today’s low interest rate environment, where the 10 year Treasury Bill is paying well below 3 percent, CDs are paying less than half that amount. With a fixed index annuity, you are usually guaranteed a minimum rate of return; and if the underlying index does well, you can earn a substantially higher return on your investment.


Safe Money


Money that you cannot afford to lose should not be put at risk. A fixed index annuity is a suitable stock market alternative or mutual fund alternative for anyone who has the goal of preservation of capital. When you buy this type of annuity, your contractual agreement will guarantee that you will never lose a dime of what you invested and will also usually have a minimum interest rate that you earn each year while you hold the investment.


Making the extra money you want and need


A fixed index annuity is similar to CD in a retirement account without the potential to double, triple, or increase your interest rate by even more in a year. In addition to the base interest rate you earn, you can participate in the positive returns of the index.


While you typically only receive about 50 percent of the increase over the course of your investment year (a one-year period that starts from the day you purchase the annuity), that can make a substantial difference in your earnings for that year. You may also have a cap on the maximum amount of extra interest you can earn based on the performance of the index.


One of the best features of a fixed index annuity is that you do not lose any money in a year when the stock market and index fall. So, if you are tied to the S&P 500 Index and the stock market is down by 15 percent in one year, your interest for that year is the guaranteed minimum.

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Which way will the market go next?


While a fixed index annuity is not appropriate for everyone, it does make sense for people who want to invest in the stock market at a low risk. In good markets, you will not earn as much as an index fund outside of an annuity, but in bad or bear markets, you will still have all of your safe money.

Whether you’re planning your estate or considering options for your retirement, reach out to us for expert advice that maximizes your investment returns. Get your 20-minute Benefits Review today and leave the confusion behind.

Find Retirement Planning Strategies Today to Enjoy Life Tomorrow

Florida, Texas, Tennessee, Ohio, Pennsylvania. Michigan, Maryland, Wisconsin, & Nevada. Your ACM professional will work closely with you to create a comprehensive insurance based financial solution, that exceeds your financial goals. Drawing on a wide range of disciplines, we craft a long term personalized plan that ensures your assets work in concert, carefully preserving principal and maximizing return for you and your family. Call us today to get your 20-minute benefits review and get specialized access to guaranteed insurance-based financial solutions.

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