- The Washington Times - Tuesday, October 5, 2004

Taking early retirement from government and voting in a presidential election have one thing in common: A lot more people talk about it than do it.

In most private companies, early retirement means the employee leaves before age 65. In the government, early retirement, also known as VERA (for voluntary early retirement incentive), means a worker can leave on immediate annuity at any age if he or she has 25 years of service, or any time if he or she is at least age 50 with at least 20 years of service.

That takes in nearly half the federal establishment. The advantage of taking early retirement is that the annuity begins immediately and the retiree can keep health insurance coverage for life. For the majority of retirement-eligible feds, that annuity — unlike private-sector pensions — is fully indexed to inflation.

But like lots of other options — such as more horsepower for your car — wanting it and using it are two different things.

Surveys have shown that most feds — especially those thinking about retirement — would like to have the early-out option. But hard statistics show that unless the VERA is accompanied by a buyout worth up to $25,000, or voluntary separation incentive payment (VSIP), fewer than 2 percent of those eligible retire early.

Oct. 1, the start of the new fiscal year, is traditionally the beginning of the VSIP season. It is most cost-effective for federal agencies to buy out high-salaried employees early in the fiscal year.

Buyouts and early outs benefit two groups of feds: older employees who are eligible for them, and younger workers for whom the early departures can mean promotion opportunities. VSIPs and VERAs, if enough people take them, also mean that the younger, short-service feds won’t be hit by another reduction in force. Under reduction-in-force rules, non-veterans and short-service employees are the first to go.

Many feds aren’t aware of the scope of buyouts and early outs. But early outs are being offered agencywide by the General Services Administration and the U.S. Postal Service (the largest single federal agency), U.S. Department of Housing and Urban Development, and the Social Security Administration. Limited early outs are being offered at the Armed Forces Retirement Home, and in three Internal Revenue Service distribution centers and all IRS mailrooms.

More than 60 different buyout programs were approved during the just-ended fiscal year, and a new round is expected shortly. Advisers say that anyone who is even remotely interested in a buyout or early out should crunch the numbers now because the buyout offer could come out of the blue, and be for only a limited time.

The key to planning for a buyout or early out is your health-insurance eligibility. Generally speaking, feds must have one of the federal health plans for five years prior to retirement. But there are many instances in which that five-year rule can be waived if the employee is taking a buyout or early retirement, as opposed to regular retirement.

The health insurance open season — when feds can sign up for coverage or switch plans or options — begins Nov. 8 and runs through Dec. 13.

Health insurance

Although it is considered the best cradle-to-grave health insurance program in the nation, tens of thousands of feds don’t belong to the Federal Employees Health Benefits Program. Many are covered by a spouse’s private-sector health plan. But that coverage generally ends when the spouse working in the private sector retires. In addition, some companies are dropping health coverage, and some mates are dropping their partners.

To ensure that you will have federal health insurance coverage in retirement, remember the five-year rule. Get coverage now so that you can take it into retirement. Retired feds with Medicare have the best coverage around. And they pay the same premiums, in the same plans, as young, active workers. Check us out during the open season. There is no one “best” plan, but there are several that are the best buy for you — depending on your age, family status and health. We’ll have that list of best buys in columns appearing during the open season.

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

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