Annuity Retirement Processing Time will get Worse

Many FedSmith readers have commented on the excessive time it takes OPM to process the paperwork for full annuity payments. It is likely to get worse instead of better. Here’s why.

Depending on who you listen to, the time for OPM to figure out the final determination of a retiree’s annuity is from four to seven months post-retirement. It is rarely better and frequently worse. Of course, while waiting, the retiree has his “interim” monthly payment, which is approximately 50-80% of the estimated full annuity. Some readers will say that is not very good, but tolerable, right?

Actually, the situation is worse than it appears.

Depending on salary and years of service, the FERS annuity supplement is generally from about $800 to $1,000 monthly. This “component” of retirement pay is not included in the interim
payment! That’s right. You may eventually get, say, $2,100 monthly, but the interim payment will be considerably less, because the amount for the supplement, in the interim, is $0.0.

Last year OPM announced the hiring of 40 new employees to process retirement claims. They were to start work in February of this year. Well, they were hired, and they did start work, but the next announcement was that it would take months to train them, etc.

The latest information is they hired 35, not 40, and they are not expected to be productive until 2012. Hmm. Well, it is taking longer than expected, but eventually they will be up to speed, processing times will drop, and we will all be happy. Right? Not really.

What is wrong?

Why are processing times getting progressively worse, despite the increased overtime, the recall of retired claims processors, the hiring of new employees, and the rest?

All employees newly hired since January of 1984 have been placed in FERS, rather than the “old” CSRS. (Most hired in the two years prior are also FERS.) As of October 2011, the earliest hires – not counting the small pre-1984 cohort – have just under 28 years FERS service. This means current employees cannot retire at the MRA of 56+ unless they also have military time bringing their total service up to 30 years or more. Or if they are 60 they need only 20 years service. Early out is another way to qualify.

So, although there are more FERS retirements each year, the train wreck has not yet arrived.

January of 2014 is the “drop dead” date. This is when FERS employees hired in 1984 start becoming 30-year incumbents, eligible for MRA retirement without military and without early out. A comparative trickle will turn into a veritable flood. OPM will be overwhelmed with calculations of the annuity supplement. This is the “worse” part of a bad situation.

The FERS annuity supplement is a bear. It is the culprit in this mess. Calculation of the supplement is quite complex and lengthy. Consider:

  • Chapter 51 of the CSRS and FERS
    Handbook ( here)
    explains how to calculate the supplement. This chapter is 44 pages in length.
  •  Even with help from their “FACES”
    computer program, it still takes OPM claims processors three hours – average – to
    do one FERS computation! Compare to less
    than one hour for a CSRS case.

Is there a solution to avert this worsening crisis? Yes, there is. Have somebody develop a computer program for quickly and easily determining the supplement. Congress already thought of this. About five years ago, they appropriated $330+ million for OPM to bring itself into the computer era, via “Retirement Systems Modernization (RSM).” What happened?

OPM signed a contract for calculator development, although not for the supplement per se. There were months of ringing announcements about the wonderful new system, but then they canceled the contract, after paying the contractor $21 million. Taxpayers got nothing for their money. RSM has been abandoned.

The need is still there and the task can be accomplished. OPM can issue a competitive announcement, declaring their need for a world-class computer program dedicated to calculation of the FERS annuity supplement. There already exist commercial programs for this. Are they world class? I do not know. But for enough money, they can be. You can bet on it.

Development and use of a world-class computer program will do the job. Are you listening, OPM?

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.