Postponing retirement problems: Part 2
Federal law trumps what might seem to make the most sense.
Last week, we looked at three former federal employees who all made the same error when completing form RI 92-19, FERS Application for Deferred or Postponed Retirement – choosing the wrong date for their retirement to commence – which caused their retirement to be classified as "deferred" rather than "postponed."
Although these two key words have similar meaning in the dictionary, they have very different meanings in the law governing a type of retirement known as Minimum Retirement Age + 10. By filing for a deferred retirement, you will be denied the benefit of reinstating valuable insurance coverage. This is because to continue insurance (FEHB, FEGLI and FEDVIP) in retirement, your retirement must be an "immediate" retirement, not a deferred retirement. An employee who postpones the commencement of their retirement to avoid the age reduction for an MRA + 10 retirement is entitled to reinstate their insurance (FEHB and FEGLI also require that the employee had five years of coverage prior to their separation). However, an employee applying for deferred retirement is not entitled to reinstate their insurance.
Let's look at some key areas of the form RI 92-19:
Sections A through I are completed by all applicants and contain identifying personal information, a declaration of your federal civilian and military service, other claim information regarding Workers' Compensation, marital information, payment instructions and the applicants' signature.
Section I, the applicant's certification is a signature that certifies all statements are true to the best of your knowledge and that the applicant has read and understands all the information provided in the instructions for the application. The three individuals who were highlighted in last week's column thought that they understood the instructions, however, they made a devastating error when choosing the date that their retirement would commence when they completed Part 2 of Schedule B, For Applicants with Immediate MRA + 10 Eligibility (who may choose to postpone). Part 2 states "I want my benefits to begin accruing on mm/dd/yyyy.
The instructions for Schedule B, Part 2 of form RI 92-19 states the following:
You may choose to have your annuity begin on:
- The first day of the month following your separation from federal service; or
- The first day of any month which is at least 31 days after the OPM receives your application for retirement (but before your 62nd birthday).
Following these two options, the instructions continue by saying: You can avoid the age reduction entirely, if you choose the first day of the month that you reach age 62 as your annuity commencing date.
Mistake #1: The individuals last week who were denied reinstatement of insurance chose the first day of the month after they reached age 62.
The instructions for Schedule B, Parts 3 and 4 of form RI 92-19 states the following:
People who leave federal service after reaching the MRA with at least 10 years of creditable federal service are eligible to reenroll in the FEHB and FEGLI Programs if they had participated in the program for the five years of service immediately before their separation date or continually from their earliest opportunity. If you were enrolled in either of these programs when you left federal employment and you had already attained your MRA and had 10 years of creditable service, complete these sections.
Mistake #2: The individuals did not know that choosing the wrong date for their retirement to begin also made them ineligible to re-enroll in FEHB and FEGLI.
How did this happen not once, not twice, but three times (that I know of)? The reason could be that the instructions were not clear and did not correlate the retirement commencement date with the difference between a "postponed" vs. a "deferred" retirement and did not make clear that the only way to reinstate insurance was under an immediate retirement. A postponed MRA+10 is considered an immediate retirement; however, a deferred retirement is not. If only the form was written with some basic writing rules that apply to providing written instructions. After a Google search to find basic rules for writing instructions, these three rules stood out:
Rule 1: Know your audience.
The audience for this form is a former federal employee who left federal service before completing a full career.
- This audience generally received very little or no retirement counseling prior to resigning from their federal career. If they did, they may have avoided this mistake if someone had explained to them how to complete the RI 92-19 application.
- They left between the ages of MRA and 62. MRA or Minimum Retirement Age is an age between 55 and 57 when many federal employees become eligible for a FERS basic retirement benefit if they have 10 or more years of service. Some of these employees must postpone their application to age 62 to avoid the age reduction while others can apply at age 60 with no reduction because they had 20 or more years of service when they resigned. The time between separation and applying for this benefit could be as long as five years or more.
- Federal employees generally are not familiar with "personnel" language and probably think that deferred and postponed mean the same thing. They don't. They are very different. One of the primary differences is that a postponed retirement can allow reinstatement of extremely valuable Federal Employees Health Benefit (FEHB) insurance (as well as life insurance and supplemental dental and vision supplemental insurance too). Deferred retirement is ineligible for reinstatement of insurance. Big difference!
Rule 2: Put yourself in the place of the reader.
Consider that the former employee who is completing an application for a postponed retirement has two primary goals:
- Avoiding the age reduction by delaying the application.
- Reinstating their extremely valuable insurance.
The instructions should be written so that the reader clearly understands that by choosing the wrong "commencement" date, they can change a postponed retirement into a deferred retirement and therefore, lose the entitlement to reinstate insurance.
Step 3: Use special notices to alert possible danger.
- There should be a bold, highlighted warning on Form RI 92-19 to let applicants know that the date they choose for their retirement to begin is critical to reinstating insurance. This date is the difference between a postponed vs a deferred retirement.
- Federal employees have been told that to be eligible for retirement they must attain their MRA and cannot retire prior to their birthday if they desire to be entitled to immediate retirement. The opposite is true, however, when choosing the commencement date for a postponed immediate MRA + 10 retirement. This date must be before your 62nd birthday.
Why doesn't common sense prevail in these situations? The decision made by the former employee was rational to choose a retirement date following the 62nd birthday based on the knowledge that normally you must meet specific age and service requirements to be eligible for retirement. OPM does not allow common sense to prevail as the rules are governed by federal law that says otherwise in the case of the commencement date for a postponed retirement. Although there have been employees who learned a very hard lesson by not completing the application for a postponed MRA + 10 retirement correctly, how can these examples help you if you are preparing to leave federal service at your MRA with more than 10 years but less than 30 years of service? There will be no forms to file until you are ready to apply for your deferred annuity. Your separation will be treated as a resignation, but form SF 50, Notification of Personnel Action, will note that you are entitled to a deferred or postponed retirement in the remarks section of the form.
1. There are instructions for form RI 92-19 available in companion pamphlet RI 92-19a. It is a good idea to read the form and instructions before you separate from federal employment and review the information with a retirement specialist in your human resources office. You should file the application directly with the Office of Personnel Management 60 days before you want your monthly annuity benefit to begin.
2. Request a retirement estimate for a deferred or postponed retirement from a retirement specialist in your agency's human resources office before leaving federal service. This will give you an idea of the value of this benefit at the time you are entitled to receive it.
3. If you are married when your annuity begins, it will be computed with a reduction to provide a maximum survivor annuity (50 percent of your unreduced annuity) for your spouse upon your death. You can choose to provide a partial survivor annuity (25 percent of your unreduced annuity) or no survivor annuity; however, you must get your spouse's consent.
4. If you separate from federal service, but die before receiving your deferred or postponed retirement, there would be a survivor annuity payable to your spouse if they were married to you at the time of your separation and you had 10 or more years of creditable service (and did not apply for a refund of your retirement contributions). Your surviving spouse may elect to receive a lump-sum payment of your retirement contributions in lieu of a survivor annuity.
5. You should keep personal copies of certain documents filed in your electronic Official Personnel Folder, because you will lose immediate access to this folder after your separation. These include:
- FERS Designation of Beneficiary Form (SF 3102)
- SF-50 forms showing appointments into federal service, prior separations from federal service, changes in your work schedule, changes in your retirement coverage, and pay changes over the last (or highest) three years of service, because they will be used to compute your high-three average salary for your future retirement benefit.
- FEGLI forms if you are retiring with an immediate retirement, including SF 2817 (Life Insurance Election) and SF 2823 (Designation of Beneficiary).
- SF 2809 FEHBP election forms or other evidence showing your health benefits coverage throughout your career, or at least for the last five years.
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