Thousands of federal and postal workers are expected to retire this month to cash in on the popular lump-sum pension payment option that would disappear at the end of the month if the compromise budget plan becomes law.
The deficit reduction package calls for elimination of the lump-sum option after this month. But it provides no other details. Assuming Congress approves the package, workers who want the lump-sum option would have to retire this month. There are no details as yet because there is no legislative language yet spelling out congressional intent.
Most retirees take the lump sum even though doing so trims their monthly pensions for life, and even though most of the lump sum is taxed by federal and state governments. In addition, there is a 10 percent penalty tax on lump-sum payments taken before age 55.
The payments equal the retiree's pension plan contributions. Lump sums can be as much as $95,000 for longtime, top-paid workers. Here they average about $32,000.
Warning: Although the budget plan keeps the lump-sum option alive this month, it won't be official until signed into law and spelled out in black and white. It appears that individuals will be able to retire by Oct. 31. It also appears that the lump-sum payments will be in two stages. If so, retirees would get the first half shortly after leaving and the remaining 50 percent one year from the date of retirement.
Because of the time lag in processing the first lump-sum payment once a retiree has decided to take it, many people who retire this month will get their first payment in early 1991. They will get their second payment in October 1991. That would make for a heavier tax bite than if the payments were spread over two calendar years.
Workers will soon get the exact wording on the lump-sum plan and learn whether the budget agreement is approved or rejected. Meanwhile, if you are desperate to qualify for the lump-sum payment, be prepared to pull the plug this month.GWU Health Plan
Yesterday's rundown of the new 1991 health maintenance organization health premiums left out the George Washington University plan. Next year the GWU plan's single high option will cost individuals $25.09 per pay period, an increase of $8.30. The family high option will cost $55.18, up $6.27. The single standard option biweekly premium will be $15.66, up $1.94, and the family standard option will cost $33.59, up 79 cents. Aetna Plan
Although Aetna will not have a fee-for-service health plan next year for federal workers or retirees, it will have an HMO affiliate. It is Aetna's Mid-Atlantic Health Plan (formerly Partners). For 1991, its single high option will cost $17.95 per pay period, a decrease of $5.01. Its family high option will cost $62.25, down $10.80. The standard single option will be $16.45, down 32 cents. The standard family plan will cost $46.91, a decrease of $3.86 per pay period.