Delivered on: Thursday, October 28, 2021
Federal Employees & the Vaccine Mandate
Helping Feds Navigate Options to Leave Service Early
- Effect on federal employees who are already eligible
- Options for federal employees who are NOT already eligible
- How all benefits are affected by the decision to leave service
- Getting clear on your numbers before making a decision
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Prefer to read instead? Below is a transcript from the video:
Hello, and welcome to today’s webinar on the vaccine mandate. This a hot topic, and one we are getting loads of questions about, and so we’re doing this special episode of our webinar. We normally do our webinars once a month, but we decided to add this extra one because the timeline that you all are faced with making decisions about whether you’re continuing in federal service is fast approaching, and so we’re delighted to have you here today.
For our audience, I suspect most of you are here because you are debating whether to get the vaccine and be able to stay working or perhaps get an exemption and you’re wondering if things don’t quite work out, what are the consequences to leaving federal service early. We have lots of different types of employees registered. We have thousands of you on the registration list, and so we’re delighted to have each of you here.
We have our Q&A area open by chat. Our support team is standing by to be able to answer those questions. So just like we do in all of our webinars, I’m going to stay focused on delivering the content and our support team will be standing by to answer your questions. All that we ask is that the questions that you are asking today have to do with the vaccine mandate, not random questions, because there are so many of you we want to be sure to get to as many questions as we can and so we want to stay nice and narrowly focused on the topic today.
Handouts are available for download. You can either go to the handout section of the webinar platform or go to the very bottom of your screen and you’ll see a link to download those as well.
This session is being recorded. We will send the replay to everyone who was registered. So, if you have to step away, if you need to re-listen to something, all of this will come to you shortly after this session is done.
Do me a favor; stay until the end, because just when you think the government makes things simple, they don’t. We want to share with you a couple of special pointers to make sure that things work smoothly for you as you make this decision.
I’m your presenter, Chris Kowalik. We’ve been doing these webinars for some time now. I think that we strike a nerve with every session that we do because it’s affecting people in different ways, and so I’m very glad to be able to do this special session for you today.
Like I said, today’s session is all about the vaccine mandate and helping you to navigate your options to leave service early. Many of you planned to work many more years for the federal government, and now this came out and you’re really debating, what am I supposed to do, and what are the financial consequences of leaving earlier than I originally thought?
For today’s agenda, we’re going to talk about the effect that the vaccine mandate has on feds who are already eligible to retire, some options for those of you who are not already eligible to retire, and we want to see how all of these benefits are affected by the decision to leave federal service. Of course, with all of our information that we give with federal employees, getting clear on your numbers should be your very top priority when it comes to thinking about retirement or anything retirement related. If you are not clear on your numbers, you’ll likely make decisions based on poor information, and that does not serve you well. So, we want to help you to be able to get your head wrapped around this today.
The mandate: I’m going to avoid the political thoughts on the mandate. There’s plenty of those going around. Each of you who are here are probably of the mindset that, “Hey, the vaccine is not something that I should ever be mandated to do, and now I want to see what my options are.” We’re happy to be able to show you what those are and not focus so much on the political aspect of things and the constitutionality of these things, but focusing more on what are the real consequences at hand that we need to help you think through so that you don’t make a decision that you can’t take back.
With the vaccine mandate, of course, employees are to achieve full vaccination status by November 22nd. You can apply for an exemption. We’ll throw the link to those exemption forms in the handouts area as well so that you have them. But do me a favor; don’t spend time while we’re on the webinar today filling out these forms. Just save them so that you can access them later if you haven’t already received them. We’re just going to try to make it nice and easy for you. The website that has been developed by the government for all the vaccine protocol and rules that agencies are following is SaferFederalWworkforce.gov. If you want to dig into the mechanics behind all of this, feel free to go to that website, but we’re going to stay more focused on the financial aspects of the decisions that you’re making.
For employees who do not comply, you can be subject to disciplinary action, like counseling, suspension without pay, so that’s a two-week suspension, and ultimately termination. All of these are designed to help agencies not go high right out of the gate, but to help employees to understand more about the vaccine, the process. I suspect if you’re not convinced to take the vaccine by now, you’re probably not going to be convinced by someone at your agency, but there are little stepping stones that they’re supposed to follow before ultimately terminating employees in this situation.
If we have an employee who indicates to the agency that it is their plan to leave, they’re going to go ahead and retire or simply leave service and they are on leave during that time, they do not have to comply with the vaccine mandate. So, if you say, “Hey listen, I am planning to retire at the end of the year. I’m going to be on leave between now and then,” then you are off the hook from the vaccine mandate because the agency knows they’re just ushering you out. So that’s a little bit of an exemption, but we want to make certain that we’re really clear on the financial effect of the vaccine mandate itself and what this can ultimately do to you.
When we think about the financial effect of all of the federal benefits that you have, we have to look at each of the pieces individually, because based on your scenario, as far as how old you are and how many years of service you have, these benefits might be affected in different ways. And so, you could imagine it’s a little bit tough for us to put together all of these different scenarios and try to do it in 30 minutes. I’m going to do my very best, but no promises today. There’s a lot at stake here, and I want to make sure to give every bit of information that I can to make this a helpful session for you.
The biggest determining factor in seeing how these benefits will be affected by the decision to leave service is if you are already fully eligible to retire or not. If you are already fully eligible to retire, things are so much simpler for you. You can just say, “You know what? It’s my time. I’m going to go ahead and go.” But if you’re not already fully eligible to retire, then things get more complicated and there’s a lot more consequences to the decision to leave. We refer to this as group one and group two. Group one; nice and easy, you’re already fully eligible, you just decide to go. Group two; of course, there’s going to be lots of different types of people in this group that we’re going to explore, but it’s important to know which of these groups you are in so that you’re listening to the right information about how your benefits are affected.
To know whether you are fully eligible to retire or not, we have this chart which we use in our workshop, and you’ve probably seen this in several of our other webinars. I’m going to assume that most of our CSRS employees that are still sticking around are already fully eligible to retire. It’s actually unusual to find a CSRS employee who’s not already hit one of these gates just based on how long ago they had to have been hired.
In today’s session, I’m not going to really focus on CSRS, as we’re going to focus really on the FERS employees. For full eligibility under FERS, you would need to be at least age 62 with at least five years of service, at least age 60 with at least 20 years of service, or have hit your minimum retirement age (which is somewhere between 55 and 57, depending on the year that you were born) with 30 years of service.
To find your MRA, please go to the table on the right-hand side, find the year in which you were born, move to the right-hand side of that table and you will find your MRA. It is somewhere between age 55 and 57. Have that date in mind because I very well may be referring to it for your scenario as we dive into them.
Let’s briefly talk about group number one. These are employees who are already fully eligible to retire. In this group one, if you decide to leave federal service, either because of the vaccine mandate or something else, you have the ability to retain all of your benefits because you’ve met the mark in time to qualify to do so. Of course, if you were planning on working several more years for the federal government and this just accelerated your retirement timeline, all of those extra years won’t be included in your calculation. I’m not going to pretend that you don’t have a financial impact; you do, but it is far different than the other group that we’re going to talk about that aren’t eligible to retire yet and may lose a lot of the benefits. So, everyone in this group one, who is already eligible, you have a great deal of flexibility in how you respond to this vaccine mandate. You are squarely in the driver’s seat of this decision.
Since everyone in this group is already eligible to retire, I want to give an overview of what happens to each of your benefits. For your pension, if you’re fully eligible, your pension will begin immediately. You can select a survivor benefit to protect a portion of your pension, up to 50% for your surviving spouse. The supplement is that program that kind of looks like Social Security, but it’s paid prior to the age of 62. If you are fully eligible to retire and you are under the age of 62, the SRS will simply begin.
On a side note, there’s no direct effect on Social Security if you decide to leave now versus two or three years from now. Of course, there’s an indirect effect, which is if you stop continuing to work, you are no longer contributing to your ultimate Social Security benefit. I won’t say there’s no effect, but there’s no direct effect. You don’t lose Social Security or anything crazy by deciding to go ahead and retire from service.
Next is FEGLI, which is your life insurance, and FEHB, which is your health insurance. If you’re fully eligible to retire, you get to keep both the FEGLI and FEHB, as long as you are currently enrolled and you’ve had that coverage for at least five years immediately prior to retiring. So, two requirements; you have to be enrolled now, and you had to have had this program for at least five years, both the FEGLI and/or the FEHB, depending on which you’re trying to keep. If you want to keep both of them, of course, you have to be enrolled in both of them for five years.
For the federal long-term care program, there is zero effect on long-term care coverage that’s already in place through this program. So, you are free to keep it and no interruptions there.
For the Thrift Savings Plan, there is no direct effect to go ahead and retire. You will have all of the withdrawal options available once you are separated. So, all of the normal withdrawal allowances that the TSP affords retirees, you will have access to that. If you are under the age of 55, or 50 if you happen to be a law enforcement, firefighter or air traffic controller, when you separate that’s the mark in time that we’re looking at your age, if you’re under 55 or 50 in this special category, when you separate, there will be a 10% early withdrawal penalty that will apply to all of the distributions that you make from the TSP prior to the age of 59 and a half. So, chances are, if you are fully eligible, you are not affected by this because by virtue of how old you have to be to be able to go, you have surpassed this age, but want to have this caveat just so we’re all aware.
Group one’s the easy group to talk about. Group two is way more complicated because everybody that is on the session today is all different ages, all different amounts of service, even different scenarios. We have law enforcement officers on here, and we have regular employees, and we have firefighters, and air traffic controllers, and all these different groups that really complicate matters. But we’re going to try to break it down super simple for everybody so that it’s easy to follow.
For everybody in group two, who is not fully eligible to retire yet, if you leave service voluntarily or because you’re terminated, you can suffer pretty significant consequences to your benefits. Let me first start by saying, even if you are fired because you are not getting the vaccine, you do not lose your benefits. I want to clarify that statement a little bit, because there are lots of different scenarios here, but if you are vested in CSRS or FERS, they’re not taking your pension away. You would’ve had to have committed a crime against the United States; treason, espionage, those types of big things to have your pension actually forfeited. I want to dispel that myth.
A friend of mine, Chris Barfield, wrote a great article on this very topic. He’s got such a wit about him in the way he described this. He, just like us, is getting tons of questions about how all of this works, and if I’m fired, do I lose my pension, all of that. So, we’re going to dispel all of that today.
We’ve got four different scenarios of employees at different ages and with different service years, and you’re going to fall under one of these four scenarios.
[NOTE: For all of our Law Enforcement Officers, Firefighters and Air Traffic Controllers, if you are not fully-eligible to retire when you leave federal service, you will be treated like a “regular” employee for eligibility and in the calculation of the pension.]
The first scenario is scenario A is your any age, but less than five years of service. Scenario B is you’re under the age of 62 with between five and nine years of service. Scenario C is you haven’t quite reached your minimum retirement age, but you have at least 10 years of service. And then scenario D; you’ve reached your minimum retirement age, and you have between 10 and 29 years of service. Those are the four scenarios.
Please do us a favor; figure out which scenario you are in, and when you submit a question over to the support team, please tell us which scenario you are in. It will keep us from going back and forth trying to get the right information from you to be able to answer your question correctly. You’ll have this in the handout. If we’re past this slide and you need to refer back to it, please open up the handout and tell us what scenario you are in when you submit your question.
Let’s start by talking about the effect on the pension. We’ve got those four scenarios, A, B, C and D, across the top of this slide. We’re going to start from left to right. Pay attention to the scenario in which you belong. Maybe not so much on the scenario you don’t belong in, just so you don’t get confused.
Regardless of your age, if you have less than five years of service, you are not vested in the pension program. So, there’s no pension payable to you. It is worth noting that your sick leave will be forfeited if you leave voluntarily, or you are fired without being entitled to an immediate pension. For this particular group, although there’s no pension payable, you are allowed to request a refund of the contributions that you made to the first program when you separate.
The next scenario, scenario B, is if you are under the age of 62, with between five and nine years of service. In this case, you are vested, and you are eligible for what’s called a deferred pension. Meaning it’s going to come to you later. In this scenario, sick leave is still forfeited, and your pension will be payable at the age of 62. I do want to point out, in this scenario, there is not an option to receive your pension, even if you’re willing to take a penalty. It is automatically deferred until a later date, in this case 62, because of the number of years of service that you had.
Scenario C: If you are under your minimum retirement age but have at least 10 years of service. In this case, you are vested, and you are eligible for a deferred pension. Just like before, your sick leave will be forfeited. Your first pension is payable, and you get to choose from two different scenarios of when it’s paid.
The first is you could go ahead and draw your pension when you reach your minimum retirement age, and you’ll suffer a permanent penalty. That penalty is 5% for every year you are under the age of 62. So, for instance, if you are 57, you will suffer a 25% permanent penalty to your pension if you begin to draw it at your minimum retirement age.
The other option is you could avoid the penalty. You could wait all the way out to the age that is appropriate based on the number of years of service that you had. So, if you have less than 20 years of service, you can begin drawing your deferred pension at 62 and not have any penalty. If you have between 20 and 29 years of service, you can draw your pension at age 60. If you have at least 30 years of service, you can begin to draw your pension at your minimum retirement age.
All of those three options cause you to avoid the penalty, which is great, but of course the real penalty is you’re not getting paid for several years as you’re waiting to turn on your pension. So again, there are consequences to this decision to leave at this time.
Scenario D: This is where you’ve reached your minimum retirement age again, somewhere between 55 and 57, depending on the year that you were born or older, and you have between 10 and 29 years of service. In this case, you are vested, and you are eligible for an MRA plus 10 pension. Sick leave is treated a little bit differently in this scenario than the others. Sick leave would be added to your pension. So, if you had 10 years of service and three months of sick leave, then 10 years, three months would be put into the pension calculation for you.
Of course, that pension is payable to you, and you get to choose from two different scenarios of when to draw. You could draw it immediately. Again, there’s a permanent penalty for every year you are under the age of 62. Or to avoid the penalty, if you have less than 20 years of service, you could begin drawing at age 62. If you have between 20 and 29 years of service, you can draw at 60.
So definitely there are a lot of consequences when it comes to your pension. Of course, your pension isn’t the only thing that you have going for you with respect to your government benefits. Let’s take a look at the next topic, which is survivor benefits. This is a way to protect a portion of your pension for your surviving spouse.
For survivor benefits, if you are in scenario A, so you have less than five years of service, since there is no pension, there is nothing to protect for the spouse. That’s pretty cut and dry. Under the age 62, with five to nine years of service scenario, you can select a survivor benefit up to 50% of your pension being protected when your pension begins at 62. That’s when you’ll make that election. If you are retiring under the age of your minimum retirement age with at least 10 years of service, whenever you choose for your pension to begin, your election for survivor benefits would be made at that time. Same scenario with the MRA plus 10 scenario that you see on the far right-hand side, you are making that election at the time that you wish for your benefits to start. That might be immediately with a penalty or perhaps later to avoid the penalty.
Let’s talk about the FERS Retirement Supplement and Social Security. Pretty simple. If you are not fully eligible to retire when you leave service, there will be no Special Retirement Supplement payable to you. Period. Doesn’t matter which of these categories you are in. As far as Social Security goes, there is no direct effect on your Social Security benefits. Again, like I mentioned earlier, if you stop working, you are no longer contributing to Social Security, which may have an indirect effect on the actual benefit that you are receiving, but presumably if you’re leaving much earlier in life, you are continuing to work, just not for the federal government and continuing to contribute to Social Security in that respect.
Next step is the effect of FEGLI and FEHB coverage. If you retire under scenarios A, B or C, you will have a permanent loss of your life insurance and your health insurance. You will not get it back. The only scenario that we’re talking about here under which you can keep your FEGLI and FEHB is the MRA plus 10 scenario. That’s on the far right-hand side. If you have reached your minimum retirement age, and you have at least 10 years of service, but not the 30 necessary to be fully eligible to retire, then you are able to keep your FEGLI. So, if you begin a penalized pension right away, then your FEGLI and FEHB continue. There’s no gap in coverage.
But if you decide to postpone your pension, remember, to avoid that penalty that we talked about earlier, you will have a temporary loss of your life insurance and your health insurance coverage until you start your pension. So, it’s okay to delay, or in this case, what’s called to postpone receiving your pension, but there is a consequence here because you won’t have any life insurance or health insurance during that time.
Next step is the effect on the Thrift Savings Plan. In scenarios A, B and C that we’ve covered, there’s no direct effect on the TSP account, other than if you stop contributing to TSP. Of course, your balance is going to be lower. But in the event that you have less than three years of service, there can be a direct effect on your TSP. In that case, you would forfeit the automatic 1% contribution that was submitted by your agency. So, you still get to keep the other portion of the true match, which is the 4%, but the 1% you would give up.
All withdrawal options will be available to you once you are separated, regardless of which scenario you retire under or separate under. If you are under the age of 55 upon separation, there will be a 10% early withdrawal penalty on all distributions prior to the age of 59 and a half. So very important that if you happen to be on the younger side, under the age of 55, that there can’t be significant financial consequences if you access that TSP.
That’s it on the TSP. Pretty cut and dry. We hear lots of silly things like the TSP will be forfeited, or you have to give back all of your match or anything like that, and none of those things are true.
There are a couple of things that are important to know, because it’s not just enough to know about the benefits, but some other parts that might be helpful. The first is that when you give short notice to your agency that you’re planning to retire, it’s going to mean that it’s going to take longer to process your application. There are a lot of applications being submitted to OPM right now. We’re not only approaching the normal timeline where we have an influx of retirement applications, but this vaccine mandate is causing a lot of people to go ahead and jump ship, and so this is probably going to be a long process to get everything finalized.
Having said that, it insanely important to have cash on hand for this transition period. You do not want to be in a position where you don’t have any money and meanwhile your agency maybe have dropped the ball of notifying TSP that you’re retired or separated, and so TSP won’t let you access your money. There’s all sorts of craziness that happens in a situation like this, and so having cash on hand for that transition period is super, super important.
We talked a little bit about sick leave and how it would be paid out or not, but annual leave will be paid out regardless of whether you are eligible for a pension or not. The annual leave will be paid out within a few weeks of your separation. This comes directly from your agency, not the Office of Personnel Management, and so it’s paid much more quickly. Some agencies are even fast enough to get it into your final paycheck.
Next step, an administrative item to cover; you want to make sure to copy your entire EOPF. If you don’t, when you leave service, you won’t have access to it. Whether you’re terminated or you voluntarily leave, your EOPF doesn’t go away, but you no longer have access to it. So, get a copy of that whole darn thing so that you have it on your way out the door.
Just keep in mind that agencies are expected to start those enforcement actions; the counseling sessions, even the suspensions, as soon as November 9th, because remember you have to be fully vaccinated by the 22nd. So, agencies are going to start this process in anticipation of employees not being fully vaccinated by the 22nd, and so we don’t want you to be caught off guard or not really sure what to do at that point.
Let’s talk about getting some clarity. If there’s ever a moment in time to get super clear on your numbers it’s when you’re faced with a decision like this; where you weren’t expecting to retire or leave service, and there’s a lot of moving parts to all of these benefits. So, I could not encourage you more to get clarity on your numbers. Before you make any decisions about leaving service early, or perhaps sticking around to be terminated, be very, very clear on your numbers and how all of your benefits are affected.
We are partnered with financial professionals throughout the country who specialize in working with federal employees. We work hand-in-hand with them on all of the goofy benefits that you guys have to make sure that they’re helping all the federal employees that they work with to be crystal clear on how the benefits work so that they can make good decisions.
If you would like an introduction to one of our financial professionals who is licensed in your area, please click on the link. We’re happy to provide that introduction. We will ask for where you are located because we have to make sure we have proper licensing in place to be able to give advice, whether it’s financial planning advice or advice on how things work in the state, whatever that might look like. So, it’s very, very important that you answer the questions on the form so that we can pair you with the right person.
If you’re already eligible, they’ll be able to prepare a benefits report that will show you exactly how all these things work. If you’re not fully eligible, it may be simply a workup of some numbers so that you see how all these things fall into place, what benefits you give up, a lot of the things that we talked about today in the general sense, but seeing how they actually apply to you. Again, if you would like an introduction, please click on the link on the screen and we will be happy to provide one.
If after today’s session, you say, “Okay, now I get it. I think I’m going to stick around,” you might have enough time to attend one of our workshops. You might not. So that’s why you need to go see an advisor. But if you plan to attend a workshop, we do have virtual and live options available. I know time is of the essence here. And so don’t wait too long because your timeline for not only making a decision about the vaccine and your agency enforcement starting, but you also need time to be able to get all of your numbers together.
We want to make certain that each of you have an opportunity to attend one of our sessions, but also if the timing just isn’t right, at least get in and meet with one of our financial professionals. These are people who don’t work for us here at ProFeds, but we’re partnered with them because they’re licensed to be able to give advice in all of these different areas. They have our full support as far as the clarity on the benefits and making sure that we’ve got all the numbers correct. We work really closely with them, and we’d be happy to pair you if that is right. But certainly, if you wish to attend a workshop, please go to fedimpact.com/attend, and you will see a list of all of our open sessions that are free for you to be able to attend.
Like I promised, the handouts and the replay: Handouts are available for download right here in the webinar platform. If you haven’t already and wish to do so, do it quick, because we’re about ready to wrap up. Otherwise, they will be emailed to you along with the replay of today’s session.
For those of you who have stuck around all the way until the end, the next webinar that we will be doing, this is one of our regularly scheduled webinars, is on November 12th at 1:00 PM Central Time, which will be about the new FEGLI premiums. I know that doesn’t sound super exciting to talk about, but would you believe that lower costs in FEGLI just got more expensive? You’re going to find out how in this webinar. They made it great for one group and bad for another group. So, we want to make sure that everyone knows what’s coming down the track with respect to FEGLI and rising premiums in the future. You can sign up for that webinar, just like you did for this one, at fedimpact.com/webinar. Hope to see you then.
Thank you so much for joining us. Like I mentioned, to find a workshop, you can go to fedimpact.com/attend, or to register for the next webinar on FEGLI premiums, please go to fedimpact.com/webinar. If you would like an introduction to a financial professional in our network to get clear on your benefits before you decide to leave service due to the vaccine mandate, please complete the form. We’ll give you the link right here in the webinar platform to be able to complete that, and we will be happy to make an introduction.
Thank you all very much. Thanks for all of your great questions. We can see them pouring in. We’ll get to as many as we can before we have to shut down this session. Thanks for joining us and let us know if there’s something we can do to help.
For an introduction to a financial professional in our network: FedImpact.com/request-to-meet
Register for our next 30-minute webinar: FedImpact.com/webinar
Find a comprehensive retirement workshop for your area: FedImpact.com/attend