Questions & Answers
Q&A
THE FOLLOWING QUESTIONS & ANSWERS were compiled by NARFE’s Federal Benefits Institute experts. NARFE does not provide legal, financial planning or tax advice or assistance.
EMPLOYMENT
CONTRIBUTIONS TO THE CIVIL SERVICE RETIREMENT AND DISABILITY FUND (CSRDF)
Q
I had previously taken a refund of my civil service retirement contributions upon leaving federal service many years ago. However, I was rehired in 2018 and I have now paid that back (plus interest). Is the amount I paid back tax deductible?
Plan (TSP) account to buy an annuity after I’ve left government service? Later, I would like to buy another TSP annuity when annuity rates are more favorable. Can I purchase more than one?
A
A
The Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) retirement contributions that are deducted from your salary or that you pay as a deposit/redeposit into the CSRDF are paid with after-tax money. However, once you are retired and begin receiving CSRS or FERS retirement benefits, you will be able to claim a small portion of your benefit each year on a tax-free basis, as it represents money you are receiving that was already taxed. Once your retirement application has been fully processed and adjudicated and you file your tax return, the total contributions that you have paid to the CSRDF are recovered through a calculation based on your life expectancy. If you 18
NARFE MAGAZINE APRIL 2022
take a refund of your retirement contributions rather than collect a life annuity under CSRS or FERS, you will only report the interest, if any, as taxable income. You can learn more about reporting your retirement income in IRS publication 721, Tax Guide to U.S. Civil Service Retirement Benefits: www.irs.gov/forms-pubs/ about-publication-721.
THRIFT SAVINGS PLAN ANNUITY
Q
I plan to separate from federal service at age 57 with 22 years, but I will be postponing my FERS retirement benefit until age 60 to avoid a permanent reduction for early age under the MRA + 10 retirement rules. Will I be able to use money that I’ve saved in my Thrift Savings
Once your agency payroll office has notified the TSP that you have separated from federal service, you can exercise any of your TSP withdrawal options at any time. Be aware that an annuity is not the same as a TSP installment payment. Once you purchase an annuity, you will not be able to change that election; however, you are permitted to purchase more than one TSP annuity. The minimum amount required to purchase an annuity is $3,500. In addition to the amount used to purchase your annuity, there are other factors that affect the amount of your monthly annuity payments: • The annuity option you choose. For example, you can choose level payments or increasing payments that rise by 2 percent
