Following are some questions and answers about the shutdown’s impact on federal retirement.
All but a few percent of retirees receive their payments by direct deposits. Those payments are electronically deposited with financial institutions, and paper checks are delivered to addresses on file on the first business day of each month.
Incidentally, while OPM authorizes the payments, the Treasury Department actually processes the direct deposits and paper checks. Treasury’s main office for issuing retirement annuities is in Kansas City, Mo.
Q. What about other services to retirees, such as issues with missed payments or questions?
A. OPM’s Retirement Services office employees are excluded from the shutdown because that office gets its operating money from the federal retirement trust fund. The Retirement Information Office at 1-888-767-6738 is open.
Q. What about processing of retirement applications?
A. OPM has struggled for years with a backlog of applications that causes some retirees to go many months with reduced “interim” payments until the benefit is finally calculated. This is another function of the Retirement Services office that is continuing to operate as normal.
However, processing applications often involves back and forth between OPM and the employing agency. “If your agency or payroll center has not yet submitted your retirement application or the application is incomplete, you will likely experience some delay as OPM must wait on other agencies to submit all of the information needed to process your retirement. Some of these agencies may not be operating during a government furlough,” OPM guidance says.
Q. Will the shutdown affect the eventual benefits of current employees?
A. Not unless it lasts a very long time. The civil service retirement benefit is based on two parts: service time and the “high-3” salary, meaning the highest 36 consecutively paid months in an employee’s federal career.
The policy is that up to six months of unpaid leave in a calendar year counts as creditable service time. Similarly, the high-3 is based on the salary rate, not the salary actually received, for up to six months of unpaid leave in a year.
Q. Are Social Security payments going out?
A. Yes. Most current federal retirees worked under Civil Service Retirement System, which doesn’t include Social Security. However, Social Security is part of the Federal Employees Retirement System.
The Social Security Administration has said that payments will go out on schedule. Most other services also are continuing.
Q. Is the Thrift Savings Plan operating?
A. Yes. The TSP is self-funding and not affected. All account holders can continue to manage their accounts by moving money among the available investment funds.
Q. Can furloughed employees borrow from their TSP accounts?
A. The TSP has said that while in general, investors must be in pay status in order to take out a loan, loans are allowed in shutdowns because shutdowns typically are brief and the investor likely will be back in pay status on time to begin making repayments through payroll withholding within two months, as its rules require.
Investors also could request a financial hardship withdrawal, although various conditions would have to be met before they would qualify, and there would be potentially severe tax consequences.
Q. What happens to employee investments?
A. Employees invest in the TSP based on a dollar amount per pay period or based on a percentage of salary. For those using the percentage method, the percentage invested will be of the actual pay, not the regular salary, so the TSP investment would be lower than normal.
Employees under the FERS system also would face a reduction in the employer contributions to their accounts. Their automatic 1 percent of salary contribution is based on pay earned during each pay period, and matching contributions of up to another 4 percent are based on the amount the participant actually invests. Employees under the CSRS system, which generally covers those hired before 1984, get no government contributions.
Investments based on dollar amounts would be unchanged, if the employee received enough salary during the pay period to make that investment after certain other required deductions are taken out. For FERS employees, that would mean the matching contributions would stay the same; but the automatic agency contributions would be based on the reduced salary rate.
Q. Will missed investments and agency contributions be made up?
A. Once funding is restored, employees who are kept on the job during a shutdown will be paid for that time and their investments in the TSP will be made out of that pay; they also would then receive make-up agency contributions, if under FERS. This will be automatic.
The funding measure would decide if furloughed employees are to be paid retroactively as well. If they are, the same policies would apply.