Reemployed Annuitants Not Subject to FERS Supplement Earnings Test?
1/9/24 UPDATE: SEE UPDATE AT BOTTOM OF ARTICLE NOTE: THERE are two from 1/9/24 Make sure you read the second one.
2/22/24 Update concerning “confirmation and guidance” from OPM.
3/12/24 UPDATE: Why someone was denied reinstatement of RAS
5/6/24 UPDATE: Another LEGAL REPRESENTATIVE AT OPM STATED THAT REEMPLOYED ANNUITANT EARNINGS DO NOT COUNT TOWARD THE SUPPLEMENT EARNINGS TEST
Could this be true? Are there thousands of reemployed annuitants out there who have had their Retiree Annuity Supplements (RAS) reduced erroneously? And are now due a lot of back pay?
Let’s get into it.
This first came to my attention in December of 2023. I was assisting a subscriber with a question they had about their supplement. They are retired under FERS. But they took a job teaching at FLETC under one of the reemployed annuitant programs. They have the dual compensation waiver that allows them to earn their full salary in addition to their pension, like many do. So far so good.
When this subscriber turned 57, they understood their FERS Retiree Annuity Supplement (RAS) to be subject to the earnings test. As we all do. They reported their earnings on OPM Form RI 92-22 as they are supposed to do in April of 2023. OPM reduced their RAS as they are supposed to do in July of 2023. Again, so far so good.
However…
The retiree received a letter from OPM in December of 2023 stating that their earnings in 2022 were $0. The retiree knew this not to be true, so he called OPM to inform them of their mistake. Here is where it gets weird.
OPM stated that the supplement should never have been reduced in the first place because rehired annuitant earnings DO NOT count towards the earnings test.
Specifically, OPM stated IN WRITING, “We do not count any government earnings whether you just retired or if you are a reemployed annuitant.”
Say what?!
OPM claimed that if you are a rehired annuitant, your earnings do not count toward the supplement limit. Meaning, you can earn unlimited earnings in your rehired annuitant job and not lose your supplement.
Obviously, the retiree thought this was incorrect. Why? Because there is NO EXCEPTION in law ANYWHERE that says this anyone I know can cite except for rehired Air Traffic Controllers under very specific circumstances (5 USC 8421 a(c)). Law Enforcement and every other position does not have this exemption.
That’s number one.
Number two is that we all know plenty of people that have had their supplement reduced because of earnings as a rehired annuitant. So the practice is well established. Earn over the limit, even as a rehired annuitant, and the supplement gets reduced or goes away.
At this point, the rehired retiree is frustrated. Because OPM is going to reinstate his supplement back to the full amount. Which would be nice. Extra money is always good. But he’s concerned he’ll eventually get a letter from OPM once they realize their mistake and ask him for years of supplement paid back. And who wants that?
So he elevates it and eventually gets to a supervisor in the OPM Retirement Services and Retirement Inspections Branch. She told him the same thing. That reemployed annuitant salaries do not count toward the earnings test. And that they will be reinstating his supplement and paying him back what they took from him. In fact, this supervisor said that reemployed annuitants should not have their supplements reduced and that there are approximately 9500 rehired annuitants who will still be getting their supplements even though they are past their MRA and over the earnings limit. This is a VERY specific detail if this is not correct.
On 1/1/24, the retiree received the full back pay for the supplement and is getting the full supplement moving forward. He is still a rehired annuitant earning over the limit.
I have checked with Dan Jamison, who agrees with me that this is wrong. He has reached out to people at OPM that have not returned his email to date. I have checked with rehired annuitants at FLETC and other places. All of them that have responded to me have advised me that their supplements were reduced once they were at their MRA and earning over the limits from their rehired annuitant jobs.
So where are we now?
Frankly, I don’t know.
OPM seems to be doing two different things. I know many, many rehired annuitants with their supplements reduced. I know of ONE that has not had their supplement reduced—the subject of this article. But there is a supervisor at OPM that states that over 9500 rehired annuitants are exempt from the supplement earnings test.
What should you do? I know what I would do if it were me! If I were a rehired annuitant, I’d write to OPM and ask if my supplement should have been reduced. And if not, where is all my back pay?!!?!?
If I were a rehired annuitant whose supplement is not being reduced, but I think it should be, I’d be writing OPM and asking for something IN WRITING that my wages are exempt. So that when OPM comes looking for their money 5 years from now, you don’t have to pay back $50k worth of supplement for their mistake.
Summary
I can find NO LAW stating that rehired annuitant salaries are exempt from the supplement earnings test, with the exception of the aforementioned Air Traffic Controllers
The supervisor at OPM stated herself that it is not in the law (Title 5), but it is OPM policy
We have PLENTY of proof that OPM is certainly not applying this policy to many, many rehired annuitants, regardless of this supervisor’s claim
OPM’s own form, RI 92-22 specifically excludes ONLY rehired Air Traffic Controllers from the supplement earnings test. Because they are so specific with that one job, that would indicate to me that is the ONLY job that is exempt as a rehired annuitant.
RI 92-22 states, “Regardless of what income is called or who receives it, if it is actually wages for services you performed or net earnings from self-employment you secured, it must be included in applying the earnings test.”
I don’t see how it can be clearer than this.
If it is true that OPM does NOT count rehired annuitant salaries as part of the earnings test, then I know there are a LOT of you out there that deserve your supplement reinstated. With a LOT of back pay.
That’s all I know at this point. If any of you have anything else to add for the good of the rest of us, please post it below.
If you are successful when you contact OPM in getting your supplement reinstated, please let us know that as well. Exactly who you talked to, what the process was, etc.
Personally, I believe OPM is wrong, but they are so specific that I would give it a shot if I were in that position. It’s certainly not covered by any law anyone I know can cite. And OPM has never put out a policy on it or everyone would know. And rehired annuitant jobs would be more popular than ever.
You guys let me know.
Good luck!!! Some of you may be getting some serious money back!
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1/9/24 UPDATE
I received an email back from OPM. NAMES REMOVED.
That email is posted in full below. OPM responses to my initial questions are in BOLD and ITALICS.
“Ms. ,
I am a retired FERS employee that currently operates a CPA business representing federal employees and annuitants. There seems to be some confusion related to the reduction of the Retiree Annuity Supplement for federal annuitants who are rehired as federal employees.
A recent client forwarded an email from you stating that government earnings do not count towards the supplement earnings test as income, even for reemployed annuitants.
I know of dozens, if not hundreds of rehired annuitants who have had their supplement reduced due to their rehired annuitant earnings over the limit.
1. Can you confirm that these earnings do not count toward the earnings test? That is correct if a retired annuitant is hired as a re-employed annuitant, their Federal Government earnings does not count against the earnings test for the FERS Annuity Supplement. However, if the individual is a contractor this does not apply.
2. If so, what is the procedure for those that have lost their supplement (some of them for years), to reinstate their supplement and receive their back pay? They must provide their SF-50 from their agency with the appointment clearly stating re-employed annuitant and contact our Legal Reconsideration office in writing with this request at.
OPM
Retirement Services
Legal Reconsideration Branch
1900 E Street, room 2H31
Washington, DC 20415
Their telephone number is 202-606-0555. They will not take any information for this request over the telephone only in writing.
Two individuals have told me that they must request SF-50's from their new agency to be sent to OPM. Is this true? And if so, is there any particular policy or method OPM would prefer in receiving these SF-50's? That is correct the annuitant must have their HR contact OPM HR with their hire information and OPM will code the individual in our system as re-employ. The annuitant is flagged in our tool that we process this workload, and we will not confirm their earnings. Their HR would need to contact OPM HR for an particular policy or method I do not know what else is required however the HR Specialist are aware of this process.
3. Is there anything else the reemployed annuitants must do? see above
4. I would strongly recommend OPM revise Form RI 92-22 to include reemployed annuitant earnings to the list of excluded income, similar to the Air Traffic Controllers to avoid this confusion in the future. Thank you for your input we are currently working on this revision.”
You reemployed annuitants know what to do—get those SF-50’s to OPM showing you are an actual federal employee and not a contractor. Your supplement that was reduced should come back to you and should not be reduced in the future, at least for your rehired annuitant earnings.
Post your experiences below when/if you are successful.
1/9/24 ADDITIONAL UPDATE FROM OPM CLARIFYING WHAT IS A VERY IMPORTANT POINT:
”I also would like to add the only re-employed annuitant that are paying into the retirement fund earnings are not tested. If they are FICA their earnings are tested because they are not paying into the retirement fund.”
My interpretation: OPM is reducing the supplement for those that are FICA reemployed annuitants. Those are typically reemployed annuitants who are getting a dual compensation waiver. If you do NOT get a dual compensation waiver, then you are paying into FERS again in retirement and will NOT have your supplement reduced.
Seems a bit arbitrary to me, but that appears to be what OPM is doing.
However, even this isn’t consistent in practice, because I KNOW of at least one individual who is on a DCW and OPM has ruled their rehired annuitant earnings don’t count.
2/22/24 UPDATE:
In mid-February, due to an abundance of inquiries from rehired annuitants to OPM (according to them), this matter was sent over to the Policy and Methods and Procedures office. Where, presumably it would be revisited and official policy would be issued, clarifying what is going on.
On 2/22/24, OPM contacted a rehired annuitant and provided this email:
We have received confirmation and guidance on this process. There is a lot of confusion, and we must be following the law and regulation. Because you are a re-employed annuitant and not a contractor for the agency you are entitled to receive your FERS Annuity Supplement benefit until age 62 or you have outside agency earnings that are over the minimum level of earnings.
Ms. [name redacted] is working on providing you a one-time payment for the retro funds we owe you from 07/01/2023 – 01/30/2024. Your FERS Annuity Supplement has been restored.
If you have any other questions or concerns, please contact [Name Redacted], I have cc her on this email.
We thank you for your patience regarding this matter.
Please understand who this rehired annuitant is:
Over MRA
Working at FLETC
On a Dual Compensation Waiver
Over the RAS earnings limit for 2022, 2023 and will be for 2024 from agency earnings only
Does not believe they are entitled to the RAS due to their over earnings and has repeatedly told OPM such