- The Washington Times - Tuesday, June 25, 2002

If your federal agency offers you one of those $25,000 buyouts, make sure you get it in writing. And you may want to have a notary public present to make it official.

Consider these two true buyout tales. Both involved Washington-area feds and both happened in the Defense Department:

•In January, the Army offered a civilian employee, a man with more than 30 years of experience, a buyout. He accepted, completed all the paperwork by Feb. 8 and was off the payroll by an April 3 deadline. He even had another job lined up.

So far, so good. But, and there's always a but

At his retirement luncheon, he was handed a piece of paper that said the Army hadn't, after all, decided on the buyouts and that if he retired before the final decision, he didn't get a buyout. "I am not sorry with my decision," he said. "But I'm annoyed that I didn't get the buyout, which was part of the reason for my leaving."

•Early this year, another Defense civilian took a buyout offer and promptly retired. He went on an extended vacation. Since he wasn't home, he didn't receive the letter from his old agency telling him that the buyouts had been canceled; therefore, his retirement papers hadn't been processed.

He came home expecting that his first and maybe second annuity payment would have been deposited into his bank account. Instead, he came home to learn he was overdrawn, not retired and not getting a buyout.

Retirement investing

When the Federal Employees Retirement System (FERS) replaced the old Civil Service Retirement System in the early 1980s, analysts predicted that 401(k) investments would provide about one-third of the income of FERS retirees. They need to invest more because their federal annuity payments are about half of those under the old CSRS formula.

But since then (thanks to the stock market boom of the 1990s), analysts now predict that investments in the federal Thrift Savings Plan will provide half, or more, of the spending money available to FERS retirees. That is, if tax-deferred contributions are maxed out and the stock market returns to its "normal" rate of return.

Both CSRS and FERS employees would get the chance to invest more, via catch-up contributions, in a bipartisan bill sponsored by Rep. Constance A. Morella, Maryland Republican, and Sens. Daniel K. Akaka, Hawaii Democrat, and John W. Warner, Virginia Republican. The bill would amend the TSP to allow federal, postal and military investors who are 50 or older to make annual catch-up contributions starting at $1,000 and rising to $5,000 in 2006 and each year thereafter.

The bill has been tied up because of a revenue question, but the Joint Committee on Taxation has said the bill looks good. Catch-ups already are permitted by many private 401(k) plans. This clears the way for the House and Senate to move the legislation to the White House, where President Bush is said to be itching to sign it.

Offset and windfall

Backers of bills to modify the Social Security check-eating Offset and Windfall formulas hope (make that pray) they can find a vehicle to zip one or both through the election-obsessed Congress.

The offset formula can wipe out the spousal or survivor Social Security benefit of someone who gets a benefit from work not covered by Social Security. The windfall formula reduces, but does not eliminate, the Social Security benefit of someone who has not paid into Social Security for the full (30 years) career.

The anti-offset bill would exempt the first $1,200 in combined monthly Social Security-Civil Service benefits from the offset formula. The bill to modify the windfall formula would protect the first $2,000 of combined monthly benefits from the windfall-reduction formula.

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