navigating-the-complexities-of-federal-retirement-benefits

Navigating the complexities of federal retirement benefits

Federal employee benefits are one of the top incentives that keeps people in government jobs throughout their careers. And those benefits don’t end when they retire; some of the best federal benefits are specifically geared toward retirement, or follow those employees for the rest of their lives. But federal retirement benefits are also complex, requiring specialized knowledge and advice to get the most out of them.

Here are six benefits that affect a federal employee’s retirement, as well as a brief overview of what to consider about each when planning to retire:

Pension

There are actually two federal employee pension systems: The Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS). Most federal employees these days are on FERS; only federal employees who began their service before January 1, 1984 are on CSRS. CSRS offered feds an annuity that amounts to a percentage of the average of their three highest-earning years of employment. FERS offers a pension that is a lower percentage of their high-three, but combines it with Social Security benefits and the Thrift Savings Plan, the government’s version of a 401k plan.

The FERS pension formula is 1% of your high-three average salary, multiplied by your years and months of service. If you retire at age 62 or older and have 20+ years of service, that percentage becomes 1.1%. So someone who is 62, with 20 years of service and a high-three average of $70,000 would receive an estimated annual pension of around $15,400, or about $1,283 monthly.

Social Security

Federal employees pay 6.2% of every paycheck into Social Security, the second leg of the FERS retirement income tripod. The government matches that, which means 12.4% of every paycheck is going toward their retirement. It’s more complicated with CSRS employees, who should consult a financial adviser who specializes in federal retirement to see if they qualify for Social Security.

FERS retirees need 40 quarters of qualified employment to earn Social Security benefits, which will then be based on their highest 35 years of earnings. They can begin taking Social Security at age 62, but that’s technically considered early retirement. Feds who chose to do that will receive the smallest payments, but will also receive the most payments over time. The payment amount goes up a percentage every year until age 70, when it maxes out. Feds who retire at 70 will get the biggest payments, but the fewest. It does not grow after 70; feds who don’t claim Social Security at age 70 are leaving money on the table for no reason.

TSP

Finally, there’s the TSP. The government’s version of a 401k plan consists of five core funds: G, C, I, F and S. Then there are the Lifecycle funds, which consist of a blend of each of the core funds targeted at a specific retirement year.

The TSP is one of the most important and beneficial government benefits. While it is one of the simplest 401k structures, it can do a great job of accumulating retirement dollars while you work if used correctly. The biggest reason for that is the matching contribution: The government will match up to 5% of each paycheck if you invest that much in your TSP.

Another benefit is that unlike the pension or Social Security, TSP has liquidity. Retirees have far more control over how much they withdraw from it. Finally, the contribution limits are huge; federal employees and retirees can find out what those limits are and keep up with yearly changes at TSP’s website.

While TSP is a great accumulation tool, it has limitations in the pre-retirement and income phases because of the lack of diversification. It is vitally important to consult with a financial professional who truly understands TSP, its options and the rules that apply to it so you can Maximize it later in your career and into retirement.

FEHB

The Federal Employee Health Benefits (FEHB) program is the government’s health insurance, of which it pays 72%; employees only pay 28% of the cost. Feds can take their FEHB into retirement as long as they were covered for five consecutive years, up to their retirement date. That also includes qualified family members, who can also be added during major life events or any Open Season.

One common myth about the FEHB in retirement is that it gets more expensive. But what’s actually happening is the same yearly deduction is being split across 12 pension payments, rather than 26 paychecks. So the payments are larger, but fewer. However, the deductions do come out after taxes in retirement, unlike when feds are working.

Survivor benefits

If a retired federal employee passes away before their spouse, that spouse does get some benefits. However, those are difficult to calculate and generally require the help of a qualified financial adviser to determine. In addition, there are differences between how that’s calculated between FERS and CSRS.

FEGLI

Finally, there’s the Federal Employee Group Life Insurance (FEGLI). This is often the most confusing because most people don’t know which option they have or what they’re paying. Those options are:

  • Basic: Costs $10-30+ per pay period. It’s very inexpensive while you work but the price increases dramatically in retirement. It pays your adjusted base salary rounded to the next thousand, plus $2,000.
  • Option A: Cheapest at $2 per pay period, then $6 per pay period once you turn 60 (regardless of if you’re retired). It pays $10,000.
  • Option B: Pays up to five times your salary. It’s generally a good deal while you’re young but becomes expensive as you get older because the cost rises every five years. This can create a life insurance trap as you get older if you don’t understand the price increase and plan accordingly.
  • Option C: Optional family coverage with up to five multiples. Each multiple is $2,500 for children or $5,000 for spouses.

See a fiduciary

These are just basic overviews of very complicated federal benefits. Unfortunately, federal agencies don’t have retirement officers anymore, and call centers don’t offer personalized advice on benefits. Meanwhile, fiduciaries are financial advisers required to act in your best interests. Only 11% of financial advisers are fiduciaries. However, of those, few are trained in the intricacies of federal benefits, which require deep and specialized knowledge.

Justin T. Pierce and James M. Campbell are fiduciaries as well as federal retirement consultants (FRCs). They are the managing partners of Federal Employee Benefit Advisors and have a whole team of FRCs. Join Justin T. Pierce and James M. Campbell in their next complimentary webinar.

Maximizing Your Federal Retirement Benefits!

Thurs., Oct. 31 at 1 p.m. ET

Free 60-minute webinar with Q&A following

Register here 
  • Forms Needed for Retirement
  • FERS/CSRS Pension
  • Special Retirement Supplement
  • Survivor Benefits
  • FEHB (Health Benefits)
  • FEGLI (Life Insurance)
  • Social Security Maximization
  • TSP Maximization

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Pentagon Unveils CMMC Program Final Rule

Photo by NicoElNino / Shutterstock.com

The Department of Defense has issued the final rule for a certification program that seeks to verify whether defense contractors comply with existing cybersecurity protections for federal contract information and controlled unclassified information.

DOD said Friday the final rule for the Cybersecurity Maturity Model Certification program is expected to be published in the Federal Register on Tuesday, Oct. 15. 

According to the Pentagon, the follow-on rule change to the Defense Federal Acquisition Regulation Supplement to implement the CMMC program will be published in early to mid-2025.

Once the rule takes effect, DOD will incorporate CMMC requirements into solicitations and contracts.

Under CMMC 2.0, the number of assessment levels has been reduced from five to three to streamline the compliance process for small and medium-sized businesses.

Self-assessments will be required for the basic protection of FCI and the general protection of CUI. For some CIU, third-party assessments at CMMC Level 2 and Level 3 will be required for contractors.

DOD has introduced plans of action and milestones, which will be issued for specific requirements to allow a vendor to secure conditional certification for 180 days while working to meet the National Institute of Standards and Technology standards.

Register now for the Potomac Officers Club’s 2025 Defense R&D Summit on Jan. 23, and hear from leading defense researchers, experts and decision makers about the cutting-edge technologies shaping the future of the U.S. military.

POC - 2025 Defense R&D Summit

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Sean Vineyard Named VP of Business Development, Military and Veteran Health at Tria Federal

Sean Vineyard / LinkedIn

Home Executive Moves Sean Vineyard Named VP of Business Development, Military and Veteran Health at Tria Federal

Sean Vineyard was appointed vice president of business development for military and veteran health at Tria Federal, according to the executive’s announcement via a LinkedIn post.

The senior leader has nearly two decades of experience in business strategy, business development and customer success gained from working as a risk management, financial management, and management advisory professional.

Vineyard joined Tria through the integration of Federal Advisory Partners, Favor TechConsulting and Universal Consulting Services to form the middle-market information technolody and advisory services provider.

Prior to serving as a vice president at FAP, Vineyard was a partner at 11th Hour Service responsible for assisting in the development and implementation of its corporate strategy.

The new Tria VP, in his new role, will help advance the company’s service offerings and expand its presence in the military and veteran health market.

Vineyard’s career also includes time working at Kearney & Company and Deloitte.

In addition to Vineyard, Tria recently named Gina Gallagher as senior vice president for business development and Katie Webb as executive VP for public health.

About Tria Federal

Tria Federal provides technology and services to federal health, defense and public safety customers. It supports the Defense Health Agency, the U.S. Air Force and the Navy by tracking active-duty readiness and operationalizing healthcare services, among other efforts.

Register now to learn more about the transformative trends and innovations shaping the future of the health care sector at the Potomac Officers Club’s 2024 Healthcare Summit on Dec. 11.

POC - 2024 Healthcare Summit

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US Approves $1B Weapon System FMS Deals With Saudi Arabia

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Home News US Approves $1B Weapon System FMS Deals With Saudi Arabia

The Kingdom of Saudi Arabia has received clearance from the U.S. State Department to purchase missiles, ammunition and other weapon systems via three foreign military sale transactions worth potentially $1.05 billion.

The Defense Security Cooperation Agency said Friday KAS requested to buy 2,503 AGM-114R3 Hellfire II missiles and related equipment for $655 million approximately, with Lockheed Martin (NYSE: LMT) as the principal contractor.

The other requests are worth $251.8 million for AIM-9X Block II Sidewinder missiles and related elements of logistics and program support; and $139 million for ammunition for artillery systems, machine guns and tanks and related equipment.

RTX (NYSE: RTX) will serve as principal contractor on the Sidewinder deal.

The proposed sales are intended to boost Saudi Arabia’s capability to address current and future threats and support its self-defense and regional security missions in the Middle East region.

The DSCA has notified Congress of the FMS.

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Astrion Elevates Paul Everson to VP of Business Development Quality

Paul Everson / LinkedIn

Home Executive Moves Astrion Elevates Paul Everson to VP of Business Development Quality

Paul Everson has assumed new responsibilities as vice president of business development quality at the government and defense services provider Astrion. He confirmed his new role in a LinkedIn post Saturday. 

According to Everson, as VP of business development quality, he will work with Astrion Chief Growth Officer Ronald Hahn to develop and implement new frameworks that would support the company’s continued growth. 

The executive previously served as VP of business development within Astrion’s Navy division, where he oversaw the execution of long-term growth strategies and led efforts to opportunities to enter new markets. 

Before Astrion, Everson held roles of increasing responsibilities at Systems Planning & Analysis, a defense company based in Alexandria, Virginia. 

He also served as an associate at Booz Allen Hamilton (NYSE: BAH) for nearly 5 years. 

Prior to his career in the private sector, Everson was a submarine officer for the U.S. Navy for over 8 years. 

Everson’s appointment follows a string of leadership shifts at Astrion after its purchase of Axient in September. 

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GovCon Index Sustains Weekly Gain Streak, Q3 Earnings Season Underway

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Home Financial Reports GovCon Index Sustains Weekly Gain Streak, Q3 Earnings Season Underway

Executive Mosaic’s GovCon Index closed higher at $5,505.35 (+1.44%) after recovering from a steep 1.05% decline on Thursday. The index, which tracks the stock performance of 30 major government contractors, posted a 0.65% week-on-week gain, maintaining its winning run.  

Wall Street’s major stock indexes also finished strong before the weekend and for the week as the Q3 2024 earnings season kicks off. For the year, the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average are up 22.2%, 21.9%, and 13.7%, respectively. On the other hand, the GovCon Index is up 17.93% year-to-date.

V2X (NYSE: VVX) popped 7.67% Friday and was the week’s top GCI gainer with +9.31%. Second placer Palantir Technologies (NYSE: PLTR) gained 8.75% in five days and was the best performer from Tuesday to Thursday.

Defense stocks gained increased attention and rallied to start the month as the Middle East conflict escalated. The top defense contractors will parade their latest quarterly results on Oct. 22, starting with Lockheed Martin (NYSE: LMT) and RTX (NYSE: RTX). 

Plane maker Boeing (NYSE: BA) will present its Q3 2024 earnings on October 23. According to Anderson Economic Group, the ongoing union strike has cost the aircraft maker around $5 billion already. Also, on Friday, Boeing announced it will lay off 17,000 employees or 10% of its workforce over the next several months.

Regarding rate cuts, market analysts believe the pace until year-end would be gradual. They predict 25 basis point cuts by the U.S. Federal Reserve in November and December.

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Chris Owen Promoted to VP of Defense App Development & Networking at Peraton

Chris Owen / LinkedIn

Home Executive Moves Chris Owen Promoted to VP of Defense App Development & Networking at Peraton

Chris Owen has been elevated to the role of vice president of defense application development and networking at Peraton, the executive announced on LinkedIn Saturday.

Prior to his promotion, Owen was Peraton’s senior director for the U.S. Air Force and Army.

Owen was with Perspecta when it was acquired by Veritas Capital and then combined with Peraton. He served as senior program director responsible for some of the company’s Air Force contracts, overseeing multiple teams tasked with managing Network as a Service, Secret Internet Protocol Router Network, Electronic Warfare contracts and other programs for the Department of the Air Force.

Before joining Perspecta, Owen worked at AT&T (NYSE: T) for more than 12 years. He was associate director for government, senior tech project manager, transition manager, bureau service manager and director.

Some of his responsibilities at AT&T included spearheading the growth of commercial and innovative offerings to the Air Force, supervising large global enterprise deployments and commercial delivery models and serving as the “as-a-service” subject matter expert within the company’s Defense organization.

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Paul Nakasone to Headline Interos’ Risk Intelligence-Focused Event

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Home News Paul Nakasone to Headline Interos’ Risk Intelligence-Focused Event

Interos will bring together the brightest minds in supply chain risk management for a one-day event this October to discuss pressing issues across artificial intelligence, cyber, geopolitical risks, ESG and more.

One of the sessions at Interos’ 2024 Risk Intelligence Summit will be featuring Paul Nakasone, a retired U.S. Army general who served as commander of U.S. Cyber Command and director of the National Security Agency.

The former Central Security Service chief and seven-time Wash100 awardee will engage in a strategic dialogue with Click Here podcast host and managing editor Dina Temple-Raston to explore how geopolitical factors impact global security and stability.

In addition to General Nakasone, thought leaders from government agencies and companies such as Accenture (NYSE: ACN), Nvidia (Nasdaq: NVDA), Bechtel and L3Harris Technologies (NYSE: LHX) will join panel discussions to share their insights on how to address supply chain risks across various sectors.

Attendees will also get the chance to earn 5.8 Continuing Professional Education credits. Carahsoft will administer the CPE certification at the summit. Click here to know more about the CPE credits.

Register now to join the Interos Risk Intelligence Summit on Oct. 29 in Washington, D.C., to connect with decision-makers across sectors and learn how to make the right supply chain risk investments in today’s risk environment.

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State Department OKs UAE’s Proposed $1.2B Purchase of GMLRS, ATACMS Munitions

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Home Contract Awards State Department OKs UAE’s Proposed $1.2B Purchase of GMLRS, ATACMS Munitions

The State Department has cleared a potential $1.2 billion foreign military sales request from the United Arab Emirates for Guided Multiple Launch Rocket Systems, Army Tactical Missile Systems, related equipment and support services.

The Defense Security Cooperation Agency said Friday Lockheed Martin (NYSE: LMT) will serve as the prime contractor in the proposed FMS deal, which covers 259 GMLRS M31A1 unitary pods and 203 ATACMS M57 unitary missiles.

UAE also asked to buy personnel training and training equipment, publications, software development support, program and technical support, U.S. government and contractor engineering assistance and logistics services.

The FMS request will enable the Middle Eastern country to enhance its capability to counter current and future threats and improve interoperability with the U.S. and other partners.

To execute the proposed transaction, the U.S. should deploy four government and four contractor representatives to UAE for a period of 10 days to support the stockpile reliability program and software equipment training efforts.

DSCA notified Congress of the FMS request Friday.

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Space Force Seeks Proposals for Radar Missions Support IDIQ

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Home News Space Force Seeks Proposals for Radar Missions Support IDIQ

The U.S. Space Force has begun soliciting offers for an indefinite-delivery/indefinite-quantity contract to provide radar, computer and communications support for the service branch’s missile warning, missile defense and space domain awareness efforts worldwide.

According to a solicitation published Saturday, the IDIQ contract covers non-personal operations, maintenance and support services for the radar missions of USSF and Space Operations Command at six geographically separated units. 

Those six GSUs are the Cape Cod Space Force Station in Massachusetts in Massachusetts, Beale Air Force Base in California, Cheyenne Mountain SFS in Colorado, Pituffik Space Base in Greenland, Clear SFS in Alaska and Royal Air Force Fylingdales in England.

Proposals are due Dec. 11.

IDIQ Contract Scope

Mission and service areas of the contract include radar operations support, system upgrades and modifications, radar maintenance, mission computer maintenance, technical assistance, site or installation physical security, simulation trainers, training development, exercises and testing support, military satellite communications, communications-electronics, Secret Internet Protocol Router Network, Non-Classified Internet Protocol Router Network and Joint World-Wide Intelligence Communications System.

The contract may also direct vendors to provide environmental, occupational health, civil engineering, vehicle and traffic management, medical and public health, lodging management, information management, operational security and support for transition activities. 

The military branch requires security classification up to the Top Secret/Sensitive Compartmented Information level to support site Sensitive Compartmentalized Information Facility and communications requirements.