June 1, 2006

I had a number of retirement questions in May, several asking about the tax treatment of our annuities. The June issue of the National Active and Retired Federal Employees Association Newsletter had a very informative article on this subject. Visit their web site for a summary by state of the tax treatment of your federal annuity. You can read a summary of the article online. The NARFE article also discusses sales tax in each state and other state exemptions for retirees in general. You will also find information on this site concerning this subject at http://federaljobs.net/retire/annuity.htm. Follow the link on the main menu.

August 1, 2006

Retirement Can’t Get Much Better Than This!
By Dennis V. Damp, Retired FAA

I decided to simply reflect on what is going on in my life since retirement and defer part 10 of my Estate Planning series to a later date. It’s now been 19 months since I retired and thankfully, each month just keeps getting better and better. Can’t get much better than this!

I’m totally into my new routine — can’t hardly remember what is was like working 9 to 5 with the FAA anymore. Really, haven’t missed it either. I don’t’ mean this to sound unappreciative. I’m thankful for my good fortune and that I was employed by Uncle Sam all of those years including my DOD, FAA and military time.

During the past year or so I worked my way through various medical and physical fitness issues, expanded my business, took on new responsibilities, ventured forth on several short vacations, investigated things that needed attention, and most importantly.......... learned to look at things from a different perspective.

I recently achieved a major health goal with dramatic results and what I did to achieve these results may benefit others. I’ve been trying to lower my cholesterol for years and finally made it. My doctor has repeatedly recommended cholesterol lowering drugs until recently. Prior to retirement I didn’t evaluate health and other issues to the degree they truly required nor take the actions necessary to achieve the desired results. I often blamed this on my schedule when in reality it was more of a priority issue. Working or not, we all need to focus on what is best for us....... whatever that may be.

My cholesterol readings from my last two checks are noted in the following chart:

My LDL/HDL ratio reduced dramatically to 2.74 from the previous check of 3.62. It is believed that keeping this ratio under 3 and near to 2.5 can actually reverse plague build up. Ideally, the LDL level should be 100 or less. The lower the better and the HDL — the good type — should be as high as possible and levels of 45 and up are considered good, below 35 is bad.

I’ve tried just about everything possible to avoid medications and experimented with my diet and exercise for the last 5 years. I watch what I eat and just before retirement I started eating oatmeal every day for breakfast and did see some improvement in my levels. I eat less meat, minimal processed snack foods like chips, more fish and read the labels on the products we buy to insure they are low in cholesterol.

The only change I made between the two checks was to add 2 scoops of Shaklee Soy Protein to my oatmeal at breakfast. Fortunately I’ve known Chuck Jumpeter, our Health Awareness Forum’s Contributing writer, for many years. We worked on numerous projects together while we were both employed by the FAA. Chuck retired this past June. When I was having medical problems that started coincident with my exercise routines he suggested I try soy and several other supplements. Unfortunately, I used the soy that my wife was taking at the time from another company that I found too harsh and gritty so stopped taking it. Starting last November I started adding Shaklee Soy protein powder to my morning oatmeal.

When I went in for my last check I thought for sure my levels were going to go up because I eat a regular dinner, no restrictions, and last month I had steak three times and eat more red meat than I normally do. Much to my surprise the soy did the trick. My new goal is to get my LDL down to 100 and my ratio to an honest 2.5. They say that diet, soy, exercise and weight loss will help lower cholesterol and I’ve done all of that over the past 19 months. I think that everything I’m doing is helping and I do a lot. I exercise every day, walking a 1½ to 2 miles every other day, practice pilates and lift light weights the days I don’t walk, watch what I eat, take supplements and lost about 18 pounds since retiring. However, I was doing all of that long before my November check. The only significant change was adding soy and it lowered my cholesterol readings significantly.

For more information on health related issues read Chuck Jumpeter’s informative article titled Shape Up So You Don't Ship Out! I was able to calculate my Body Mass Index (BMI) using the chart he included in the article and my BMI measured 25.22. A BMI of 25 or less is considered excellent.

Visitor Questions

I received several questions last month concerning annuity and Social Security tax liabilities. I advised the correspondents to review Publication 721 - Tax Guide to U.S. Civil Service Retirement Benefits. You will find a link to this publication on http://federaljobs.net/retire on the "Forms" page. Social Security benefits may be taxable. It depends on your total "combined" income from all sources including adjusted gross income, nontaxable interest income, plus a half of your SS benefit. About anything you need to know about Social Security is in the book titled "Social Security Medicare & Government Pensions" that we offer at discount online at http://federaljobs.net/retire/resources.htm.

Thrift Plan update

I transferred 50% of my TSP account from the G Fund to the L 2020 fund on 1/1/2006. The L 2020 fund recovered from the previous month as noted in the following chart. The market has been erratic for the past several months and the L-2020 Fund shows the volatility that is associated with equity investments. The L-2020 fund mix is 34% C Fund, 19% I Fund, 12% S Fund, 8 % F Fund, and 27% G Fund. The G Fund never goes down even with major market corrections.  My total TSP account has increased 2.9% since January 2006. 

by Dennis V. Damp (retired FAA)

The "Federal Employment Health Benefits Open Season" starts November 13^th and ends December 11^th this year. We all have a lot more choices to consider now that we have the new "Federal Employees Dental & Vision Insurance Plan" (FEDVIP) options available. On top of that, retirees can look forward to a Cost of Living Adjustment this January. The CSRS COLA is set at 3.3% and FERS retirees will receive a 2.3% increase.

I spent a day or so reviewing the FEHB and the new FEDVIP plans this week and found some surprises along the way. The new FEDVIP program seems to offer fair priced packages with a good mix of benefits and you have a number of companies to choose from. Generally speaking, costs for our FEHB plans have increased overall, however a few plans did actually have reductions for 2007. My FEHB premiums will increase over 11% from $360.86 to $410.19 per month.

You will find all of the information you need about these plans on OPM’s web site. I also added this information and links on http://federaljobs.net/fed.htm incase the OPM site gets bogged down with visitors due to the new programs offered this year.

Federal Employees Dental & Vision Insurance Plan (FEDVIP)

The new "Federal Employees Dental & Vision Insurance Plan" (FEDVIP) is divided into two sections, Dental and Vision, and both have their own premium charts. You can purchase coverage for either or both plans. Thankfully Uncle Sam negotiated a three tiered premium system for "Self, Self + 1, and Family" which is a real savings for empty nesters that only have themselves and a spouse to insure. It would be nice if they also had a three tiered system for the FEHB program.

The employee or retiree must pay the full cost of the FEDVIP insurance. Uncle Sam negotiated prices and they don’t pay a part of the premiums like they do for the FEHB program. The monthly costs seem reasonable, maybe because I live in rating area #1 which offers the lowest premiums. Look over your options closely and compare plans. Also, I checked with my dentist to see which companies they accepted and I discovered they only accept three of the listed company’s plans.

Dental & Vision Care Providers

Dental plans provide a comprehensive range of services, including but not limited to the following:

Class A (Basic) services, which include oral examinations, prophylaxis, diagnostic evaluations, sealants and x-rays.

Class B (Intermediate) services, which include restorative procedures such as fillings, prefabricated stainless steel crowns, periodontal scaling, tooth extractions, and denture adjustments.

Class C (Major) services, which include endodontic services such as root canals, periodontal services such as gingivectomy, major restorative services such as crowns, oral surgery, bridges and prosthodontic services such as complete dentures.

Class D (Orthodontic) services.

The program allows employees to use pre-tax dollars to pay for their vision and dental premiums. However, retirees can’t pay the premiums with pre-tax dollars. NARFE and other organizations are working to get retirees this same benefit.

The rates are based on where you live by zip code and you have to determine your rate (1 to 5) and premium from the following OPM charts:

Rate Chart Link:

Dental Premium Chart Link:

I am currently considering Met Life’s Standard Option. In rating area #1 the premium for my wife and I (Self +1) is only $31.59 per month. The highest Met Life Standard Option cost for rating area 5 for (Self +1) is $45.80. The coverage includes 100% Standard (A), 55% Intermediate (B), 35% Major ( C) and 50% Orthodontic with a $1,200 annual maximum benefit per person. Several plans offer no maximum benefit limits.

Vision Plan Comparison

For questions regarding the Federal Employees Dental and Vision Insurance Program, contact the customer service representatives at 1(866) 639-3917.

Federal Employees Health Benefits (FEHB) Open Season 2007

Yes, retiree’s did get a COLA this year and most active feds will get that or more, however our health care premiums increased substantially. In my case over 11% from last year. Retirees with annuities of $20,000 a year or less may see their COLA increase completely consumed by increased health care costs. Still, we are fortunate to have comprehensive health care coverage and now dental and vision care. Many in the private sector have little to NO health insurance coverage or like several people that I know can’t buy coverage because of preexisting condition clauses mandated by many insurance providers.

Thankfully there are many options for us to consider and you can shop around in most locations for price and coverage options that you can live with and afford.

The FEHB program brochures and premium lists are posted on the OPM web site. Use the links that follow to select the coverage available in your local area. If you received this message via my email newsletter you may have to cut and paste the web addresses into your browser. Some network administrator disable email links.

Dennis V. Damp

I received OPM’s Open Season letter for retired federal employees last week. The letter provides several ways to obtain the information that you will need to make an informed decision. You will also find a summary of plans available in your area that provide additional contact information, costs, enrollment, codes and a wealth of information. It is easier getting information on plans and options now that I’m retired. Prior to retirement I often found it difficult to obtain brochures and general information. OPM developed a comprehensive and easy to use process for retirees. I used several of the methods below to check them out for this article. I also included sources for currently employed feds.

Retirees can initiate an open season health benefits enrollment change using these two systems. You will need to log in using your retirement claim number.

Open Season Express - Call their toll free number 1-800-332-9798. I used this system to order several provider pamphlets. You have to use the touch tone on your phone to answer a number of questions including providing your retirement claim number, plan enrollment code, and other information.

Many federal facilities sponsor FEHB fairs that local providers attend from the area to distribute information and answer questions about specific plans. Your personnel office should also provide information. The following two web sites offer rate schedules and plan brochures and are easy to view online or download. You can make changes to your plan by contacting your personnel office or through Employee Express online.

Enroll by phone 1-877-888-3337 (TTY number, 1-877-889-5680)

Request information by phone - 1-800-322-9798 (touch tone phone prompts)

Retirement Take Home Pay Comparison

I received the following question from a reader that you may find informative.

Question: Rob asked me for clarification on how I calculated the percentage of my pre-retirement take home pay that I received when I first retired.

Reply: You asked if it is accurate to characterize FEGLI and FEHB as "non-elective." I may have used the incorrect term. What I was looking for was a figure that represented actual take home after all deductions except elective allotments such as savings bonds and allotments to credit unions etc. Either side of retirement Uncle Sam takes out for FEGLI and FEHB deductions. I deducted Retirement, Medicare, Federal Tax, FEHB, State Tax, FEGLI, and TSP Deductions from gross pre retirement pay.

Basically you don't see this in your take home because it is paid out or in the case of the TSP invested for you. To get a fair comparison of what you will have to spend after retirement I did it this way. Others may have not included TSP and considered it like bonds because you could cancel the TSP or reduce your allotment.

I also had to do a conversion from bi-weekly pre-retirement pays to post-retirement monthly pay checks. I took the biweekly net and divided by 14 then multiplied that by 30 for an average month to come up with my pre retirement net.

I received 69% of my pre-retirement take home pay in retirement when all was said and done. I simply took my retirement take home pay and compared it to my pre-retirement take home pay and I actually received 69% of my pre-retirement take home. Not bad at all. Remember, I had one COLA increase of 3.78% last January so my retirement take home has increased since I retired in 2004.

Dennis V. Damp
Retired FAA

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November 27, 2006

Well, after weeks of reviewing plan brochures, talking with program representatives and fellow retirees, and discussions with my wife we finally decided to change plans. Historically, I opted for HMOs because of the 100% coverage for most costs. This year I decided to compare the Blue Cross & Blue Shield Fee for Service plan to my HMO coverage and analyze the benefits and risks associated with the change. Our decision to change plans was driven by several factors including high HMO premiums. The Blue Cross Basic plan is less than half the cost of our local HMO!

This change wasn’t easy. I read the brochures front to back and still had questions after going through them several times. They are confusing to say the least unless you fully understand the terminology used and terminology can change between plans to a degree. My initial aversion to Blue Cross & Blue Shied coverage was all of the exceptions that are included for non-participating/non-member practitioners and the various Preferred Provider Allowance (PPA) co-pays under the Standard Option and the Catastrophic Benefits limits for both plans.

I was drawn to the Basic Plan because of its simplicity and it feels more like a traditional HMO with some major differences. Instead of PPA fees for many procedures you have co-pays and you are restricted to Preferred Providers within the network just like an HMO. However, the Blue Cross & Blue Shield network providers are available nationwide — an advantage for retirees who like to travel or go south during the winter for extended periods.

After much reading and analysis I came to the conclusion that to make this change you have to be willing to take certain risks. The cost of the plan at $192.82 is considerably less than my 2007 HMO premium of $410.19, a $2608.44 annual health insurance reduction. However, if your family suffers major illnesses and/or ends up in the hospital numerous times throughout the year you may have considerable out-of-pocket expenses. Blue Cross and Blue Should limits your family’s catastrophic losses for out-of-pocket expenses, coinsurance and co-payments, to $5,000 per year. Also, if you use a non-preferred provider none of the costs are covered and in this situation your out-of-pocket expenses could exceed $5,000.

Where do these copayments and fees come from?

The Basic Plan requires a $100 copay per day up to $500 for 5 days for in hospital stays. After five days all costs are covered. If you and another family member have multiple stays your out-of-pocket expenses will be high. If you don’t pre-certify a hospital visit you will be fined $500. Most physicians will pre-certify visits however the patient is responsible to make sure the visit was certified except for emergency visits. You still have to notify Blue Cross after the emergency visit. You have various copayments that can add up as well, $50 for accidental injury physician services, $100 surgical care copays, and so on. The "Service Benefit Plan Summary" booklet outlines copays in section two. Review the 2007 Plan Brochure for complete details. All-in-all, if you and your family have major medial problems you may end up paying significant out-of-pocket expenses.

Looking back over the last 30 years my family had 3 hospital stays with maybe 4 emergency room visits. Historically this may be true but we are getting older and you never know what lies ahead. Overall, my wife and I are in good health with several medical conditions that require treatment. The risk is tolerable for us and I’ll start a personal medical fund depositing the $2608.44 premium savings for the next three years to cover out-of-pocket expenses. If you or a family member have a major medical issue diagnosed you are never more than 12 months away from an open season and can change back to an HMO or higher coverage plan if you foresee problems down the road.

Steve, a good friend and federal retiree, enrolled in Blue Cross Blue Shield Standard in the early 1990s. I asked him if his out-of-pocket expenses were ever excessive. He stated that he hasn’t had any unusual expenses other than normal copays since he first enrolled. He and his wife also turned 65 last year and since then Medicare has covered all Blue Cross & Blue Shield out-of-pocket expenses and copays except for prescriptions.

FEDVIP Elections

Finally we have comprehensive dental and vision care available. I decided on MetLife High Option Dental and Blue Vision. Both plans provide comprehensive coverage and are low cost. My monthly premium for MetLife Self +1 High Option is$51.87 per month and Blue Vision High Option Self costs $10.86 per month. My total monthly health insurance premium will decrease from $410.19 (what my HMO premiums would have been in 2007) to only $255.55 including Blue Cross Blue Shield Basic. A savings of $154.64 per month or $1855.68 per year. I’ll report back next fall on just how cost effective the year turned out to be taking in to consideration any out-of-pocket expenses that I incurred that would have been covered by my HMO. The previous articles on Open Season have more information and links that you can use to evaluate your options.

FEHB & FEDVIP Sign Up (Online)

OK, I’m done how about you? I received several questions about plan comparisons in other parts of the country. I only evaluated plans in my area and the national Fee For Service Blue Cross and Blue Shied programs. To fully understand the programs in your area you are going to have to read through the plan brochures to make comparisons. You can do some of this online at the web sites mentioned in this article.

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Dennis V. Damp
Retired FAA

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