Reg Jones Expert's View

The other day someone asked me when the rules for being vested in the retirement system changed from 10 years to 5, the number required under both CSRS and FERS to retire on either an immediate or deferred annuity at age 62. The answer was simple: it didn’t. Only members of Congress and certain judges can retire with 10 years of service at age 60 on either an immediate or deferred retirement. And that’s been the rule all along.

However, the question got me thinking. Has the five-year rule been the standard for federal employees all along? The answer to that question is no. Up until 1956, the minimum amount of service required to retire on an immediate annuity was 15 years, with five years being enough to qualify for a discontinued service retirement. Aren’t you glad you’re working for the government now instead of then?

Researching that change got me to thinking about another change. Back when there was only one retirement system – CSRS – employees were contributing 6.5 percent of their base salaries to the retirement fund. That changed in 1969 when the contribution rate was increased by 0.5 percentage points to the current 7 percent. The main reason for the increase was to cover the cost of allowing employees to get credit for their unused sick leave in their annuity computations when they retire, a benefit that they’ve enjoyed ever since. Before that change was enacted, employees were burning off sick leave at an alarming rate. After that, those who were able to do so have been storing it up like squirrels anticipating a harsh winter.

Having low sick leave balances at retirement is a commonplace event for FERS employees, who get no credit for their unused sick leave when they retire. Still, all the blame for low balances can’t be laid at the feet of their not having an incentive to save it. Whereas in 1969 sick leave could only be used if you were ill or for other personal medical reasons, these days there are multiple approved reasons for using it–for example, caring for a child with serious health problems, adoption, bone marrow or organ donation, and care or bereavement purposes.

Although one bill has been introduced in the House that would give FERS retirees a financial incentive to save their sick leave, no companion bill has been introduced in the Senate. Only time will tell whether this or something we haven’t even thought of will be the next change. Stay tuned.

Next week I’ll fill you in on COLAs, which have endured a greater number of changes than any other area in retirement.