CAUSEY: Retirement jackpot is signed into law

Federal retirees who would like to get back in government and current workers anxious to become retirees both hit the jackpot in the Defense Authorization Act signed into law last week.

The new perks were among half a dozen benefit improvements embedded in the giant defense package. The Obama administration initially opposed several proposals on cost grounds and stripped them from the so-called tobacco bill. But insiders say the White House agreed to accept them if unions agreed to go quietly along with 2 percent pay raise for federal workers next year.

In his budget, the president proposed a 2 percent raise for civilians and 2.9 percent for members of the uniformed military. Congress voted a higher (3.4 percent raise) for the military, but there has been no serious push to boost the amount for civil servants.

Here are the new benefits for current and former civilian federal workers:

• Workers under the Federal Employees Retirement System (FERS) will get credit for their length of service for unused sick leave. About eight of every 10 federal and postal workers are under FERS. Their office mates in the older Civil Service Retirement System (CSRS) won the incentive to save sick leave in 1969.

The program will phase in over the next four years. FERS employees retiring between now and Dec. 31, 2013, will get half credit for their unused sick leave. After Jan. 1, 2014, they will get full credit for unused sick leave.

Backers hope the new system will discourage FERS employees from burning up some or all of their (formerly) use-it-or-lose-it sick leave in the last year on the job.

• Current employees under the CSRS retirement program will be able to transition into retirement (by working part-time) without lowering their pension payments. Retirement benefits are based on length-of-service and the employees’ highest three-year average salary. Under the change, CSRS employees who go part time and see their salary drop by half, would have benefits calculated on their “deemed” salary — what they would have made had they remained full-time employees.

Supporters say this is a simple correction to an old mistake affecting CSRS employees, and it will encourage many of them to go part time yet be available to mentor their replacements.

• Federal civil servants in Alaska, Hawaii, Puerto Rico and various U.S. territories will gradually trade in their tax-free cost of living allowances (worth up to 25 percent) and instead get locality pay based on similar private sector jobs in Anchorage, Honolulu or San Juan. Most were eager to lose the tax free COLA because it wasn’t included as part of salary when their annuity was computed. When the phase-in is complete, workers will probably get pay raises, and the full amount of their pay will help boost their pensions.

Officials said that up to now, many Alaska-Hawaii based employees moved to federal jobs in the Los Angeles and San Francisco areas to boost their highest three-year average salary. Feds in both those areas are paid higher salaries than most other government employees get, including those in the Washington area. The locality pay rates are based on local private sector wages, not the cost of living.

• Federal agencies should find it much, much easier to persuade retirees with special skills and qualifications to come back into government, thanks to a change in law that will allow more agencies to pay the retirees full salary for their new government jobs. Before the change, nondefense agencies generally had to offset the federal salary of the re-employed annuitant by the amount of his civil service pension.

Officials hope this will encourage retirees with hard-to-find expertise to come back directly to the federal government rather than being forced to do an end-run around the salary offset by going to work for a federal contractor.

• Another key change irons out a wrinkle that occurred when the FERS system replaced the CSRS program in the 1980s. Before the change, FERS workers got back their retirement contributions when they left federal service. The glitch, however, was that if they came back into government they were treated as if they were brand new employees. None of their FERS service time could be counted toward retirement.

Now they will be able to “buy back” their previous service under FERS. That will make it possible for many more to eventually retire with a federal pension and health insurance and help many qualify for retirement earlier than they would under the old rule.

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