I’ve written about “Catch 62” several times here already, most notably:
- When The 62nd Birthday Blows Up In Your Face
- Federal Employee Divorces — Top 10 Mistakes, and most recently,
- Catch 62 — Bad News — Good News
Judging by the search engine traffic it seems to still be a very popular subject. I originally wrote this article some time back, but decided to clarify a few points, correct some typos and generally modernize it.
Just a day or so ago I received the following comment which shows me I am not reaching folks, so the time has come to talk about Catch 62 yet again:
To my valued reader, here’s your comment and my answer:
Can I still buyback my military time? I retired in 1998 and will turn 62 in Mar. 2013. If not,will my retirement annuity be reduce by 8% for 4 years in the military.
And the answe is, Yes, No or Maybe:
First if all, did you retire under CSRS or FERS? If you were under FERS the IS NO Catch 62, so sit back and enjoy your birthday.
If you retired under CSRS you have a potential problem here, my friend.
First, under the law, if you did not buy bck your military time before you actually retired, it is lost forever.
Second, your idea about the reduction at age 62 shows me that you probably did not get the proper information at retirement to make a proper decision at thta time.
At age 62 your reduction will indeed be 8%, probaly a little more, and it will not be for 4 years, it will last for life … actually the life of any survivors you may have on a survicor’s benefit plan as well.
In addition to this basic “hurt” you lose that money on the month of your 62nd birthday regardless of whether or not you chose to apply for Social Security benefits at that age (a great many experts advise waiting until at least your full retirement age). So between your 62nd birthday and whatever day you do apply for your Social Security benefits, you have no Social Security income at all to offset this reduction.
It’s not good, my friend. Please read the article below and some of the related ones to look at some of the options.
In your case you might be very well advised to file an appeal to allow you to make the payment after retirement, because the amount you are likely to owe is small in comparison to the lifetime income you may be able to avoid losing. Best of luck on this.
Catch 62 — So Hard To Understand?
Based on some recent conversations with military/civil service retirees the subject still seems to be widely misunderstood, so perhaps it’s time for a short primer. There are a few other legal issues floating around out there that also have “62” in their names so let me be specific. This primer is referring to the “Catch-62” provisions of Public Law 97-253.(9-82).
Catch 62 — To Whom Does It Apply
In essence these provisions may apply to any person who has served in the active components of the US military and who has also been employed in the US civil service, so the number of folks possibly impacted is a lot larger then the knowledge base on this subject seems to be.
Important Update: Recent legislation has included some specific service in the Reserve Components as well, so the issue 9is now applicable to a much broader audience. Stand by for more on this as it happens.
In particular, personal conversations and perusal of lawyer’s web sites gives me the feeling that a lot of lawyers out there who may otherwise be very expert in divorce procedures also don’t have a comprehensive understanding of this legal speed bump.
I’ll write more at a later date on some of the finer points of valuation and division of marital assets and Catch 62, in this article I’ll just cover the basics of how it affects most potential retirees … even though you almost certainly need competent legal assistance for a divorce, you need a basic understanding of the points that your attorney has to consider, at the least.
In simplest terms the Catch 62
(I’m sure this term was adapted from Heller’s “Catch 22” novel, especially since the novel, in some cases, makes more sense than the law)
attempts to give employees with combined military and federal civil service time a way to get credit for all their years of government service, while at the same time insuring that their time in the military (which counts toward any potential military retirement benefit) is ‘paid for’ in the applicable retirement system (CSRS or FERS) that the civil servant retires under.
There are major differences in how Catch 62 applies to CSRS and FERS employees. I’ll cover the FERS system first, since the rules seem to be the simplest there and the potential pitfalls for the employee don’t seem as fearsome.
Catch 62 — Important Differences Between CSRS and FERS Employees
Catch 62 and FERS:
For those employees hired under the FERS (Federal Employees Retirement System) the required contribution is 3% of the base pay received during their active military service. The employee must pay the contribution in order to receive any credit for their military time.
Thus, the vast majority of FERS employees will have already paid the contribution. In spite of some (in my opinion) nonsensical claptrap advice an employee will always be ahead of the game by paying this contribution.
It seems smart to pay it during the first three years of employment when there is no interest penalty, but even when an employee has delayed payment and interest has begun accruing I can’t see any circumstance where the decision to pay would be wrong … unless the employee plans to die early.
If a FERS employee still decides not to pay there is no pitfall awaiting him or her. The employee will simply retire with a smaller annuity than s/he would have been entitled to had the contribution been made, and life goes on.
To amplify this, since it still seems unclear to people .. my fault I suppose, for unclear writing .. in the “real world” there IS no Catch 62 for FERS employees. You either buy back your military time prior to your FERS retirement (that is, make a deposit to cover the retirement contributions you didn’t make during that time in service), or you don’t. Nothing happens at age 62.
Catch 62 and CSRS:
Now, as Shakespeare is alleged to have written, here’s the rub. A lot of things are different under CSRS.
First: For military time served before 1956 the employee is ‘home free”. The time is added to the employee’s total service time, his or her annuity is calculated and … life goes on.
Second: For military time accrued after 1982, the same rule as the FERS program applies. The employee must make a contribution (7% in this case) and if s/he chooses not to, the military time disappears for purposes of annuity calculation.
Third, and most important: Those CSRS employees with military time between 1956 and 1982 (which includes a great many CSRS employees coming up for retirement) are the ones that the “goofiness” of the law puts most at risk. The employee gets credit for the military time as if it were “good” civil service time. If he or she retires before age 62 the annuity will be calculated using the “real” civil service years and the military years. If the employee failed to consider Catch 62, however, a time bomb is ticking … the employee’s 62nd birthday.
Since a person eligible for Social Security retirement may choose to begin collecting their retirement benefit at age 62 the law assumes that they will … regardless of the amount of money involved and regardless of the advisability of taking “early” Social Security retirement. An ignorant or careless employee will find their Civil Service annuity pay reduced … recalculated to exclude the unpaid years of military service.
This can be a significant cut in pay … reductions of $1,000 a month or more are common. At the same time, employees eligible for Social Security not only find that their reduced age 62 benefit doesn’t match the amount they have lost from their civil service annuity, but that the Social Security benefit they are entitled to may be further reduced by the Windfall Elimination Provision (WEP) which many of us subject to the provision are convinced should be referred to as the WEPT.
Basically, for a federal retiree who had service for which Social Security Tax was not deducted is determined to have received a ‘windfall” by being eligible for both CSRS annuity and a Social Security annuity and the Social Security benefit is reduced … by hundreds of dollars per month in many cases to eliminate this so-called “windfall”.
To amplify this: If you have qualified military years and you retire under CSRS before age 62, you must buy back the military time, BEFORE CSRS retirement, or at age 62, you will lose those military years and it is already too late to do anything about it. A very, very few people have beat the system and convinced OPM to make an exception for them, but the chance of winning a “re-do” on this decision is virtually nil. Decide BEFORE you retire.
Catch 62 Bottom line?
Every federal civil service employee had better learn about the Catch 62 rules before retirement and CSRS employees in particular must make some very important decisions as early as possible. Unless you think a surprise reduction of a thou or so per month won’t affect you.
And if you’re a potential divorce candidate looking for an attorney and the prospective attorney gives you a blank look when you mention Catch 62 … run, don’t walk to find a different lawyer. You’re playing around with huge sums of money over a lifetime and decisions that once made can be irrevocable … don’t take a chance, know before you light the fuse.
As always remember that this site, although written by a retiree with substantial experience in the school of hard knocks, it is for personal, lay opinions and informational purposes only.
If you have a legal question you should seek help from a legal professional.
If you have questions involving current or future values of pensions you need an actuary or competent pension valuation expert.
If your questions are tax-related, seek a competent tax advisor.
In other cases, I recommend the base chaplain.
That’s about 1900 words on Catch 62 which I hope will help.
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