- The Washington Times - Monday, May 17, 2004

In the next 12 months, Uncle Sam will make thousands of fiftysomething federal workers an offer they can’t refuse, but many probably should.

The offer: Take early retirement — as early as age 43 in some rare instances — and a buyout payment of up to $25,000. It will be tempting for people who hate their jobs, bosses or commutes or who feel — probably for good reason — unwanted.

When the buyout/early retirement offers come, they often will be a surprise and be limited to specific parts of an agency, geographic locale or occupation and grade. Workers will have a short time to decide to accept and then to clean out their desks.

Rumors of an imminent buyout, often fanned and spread by wishful-thinking feds and bogus Internet reports, have circulated in just about every federal agency since 1993. During the 1990s, nearly 200,000 feds got buyout payments, and another 33,000 were fired as agencies, led by the Department of Defense, downsized or “reinvented” themselves.

The workers often had months to plan for buyout offers. Gone are those days.

Now that agencies no longer have to go through the long, loud congressional process to get buyout/early-out authority, the offers can come out of the blue, and they often are short-lived.

The National Institutes of Standards, for example, made the offer one week and gave employees another week to decide. Some employees have received notice that they will be part of a reduction in force (fired) if enough seniority-protected people decline the buyouts.

Feds need to know several things about themselves and their benefits to make intelligent take-or-decline decisions:

First is health insurance. For feds and spouses, health insurance is for life. They can take it into retirement and have the same benefits, options and premiums as young, healthy workers. But to be eligible, they must have been covered by any one of the federal health plans for the five years prior to retirement. If they have been piggybacking on a spouse’s private insurance, which won’t carry over into retirement, then they aren’t eligible to get federal coverage in retirement.

Feds looking at buyouts and/or early retirement need to check out the job market in their field, assuming they will seek other work, and have money saved up because both their annuity and their buyout payment could be delayed for weeks or months.

Finally, feds need to understand that the maximum buyout payment of $25,000 shrinks to around $18,000 after taxes and deductions. But if they decide to return to work for Uncle Sam, as many do, they may be required to repay the full $25,000 amount before they can begin work.

Bottom line: If you are old enough or have enough service time — age 50 with 20 years, or any age with 25 years of service — you are eligible for an early-out, if one comes along.

Crunching some numbers and talking with retired friends and the spouse who will have more of your company and less of your money might be a good idea. You may not be thinking about buyouts and early-outs, but chances are your agency is.

TSP loans

Thousands of federal, postal and military investors have taken loans from their Thrift Savings Plan, a perk that many private-sector 401(k) plans don’t offer.

But starting in July, the TSP will deduct a $50 handling fee from the amount of each new loan, and it no longer will permit employees to have two general-purpose loans outstanding at the same time. Some investors routinely take out another loan as soon as they have paid off one, and always have two outstanding.

The TSP is advising participants that it is a long-range investment plan, “not a checking or savings account.” Although this will irk many feds, and be a hardship to some, the TSP is simply acting more like a private-sector 401(k) plan.

Retiree COLA

Just more than halfway in the cost-of-living countdown, federal and military retirees and Social Security recipients are due a minimum 1.8 percent inflation adjustment in January. The COLA will be even higher if living costs rise between now and the end of September.

Mike Causey, senior editor at FederalNewsRadio.com, can be reached at 202/895-5132 or [email protected]

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