It’s that time of year again: pumpkin spice lattes are back and so are those pesky notices about open enrollment season and all the potential changes coming to your employee benefits. Even though you’d probably prefer to sip the lattes and forgo the notices, it’s important to make sure you are up to date on all the details of your plan, especially if you’re planning to retire in the near future. It can be daunting to sort through all the particulars on your own, though, so here are the top 3 things you need to know for 2022.
In October, the Social Security Administration announced the largest cost-of-living increase for retirement benefits ever received. Coming in at a whopping 5.9%, this means that federal retirees enrolled under the Federal Employees Retirement System (FERS) will see a 4.9% increase in their benefits in 2022. (1)
Cost-of-living adjustments are based on the third quarter change in the Consumer Price Index for workers (CPI-W), which is a measurement of inflation. Federal employees who are enrolled in the older Civil Service Retirement System (CSRS) will receive the full 5.9% increase, while FERS employees will receive a 4.9% increase. This difference is caused by a rule that states if inflation is greater than 3.0%, then the cost-of-living adjustment for FERS benefits is equal to the CPI-W minus one percentage point. (2)
This seemingly arbitrary difference between the CSRS benefits and the FERS benefits has many federal employees calling for changes to the law, but in the meantime, it is important that you keep track of which retirement program you are enrolled in and how much your benefit stands to increase.
According to information released by the Office of Personnel Management (OPM), Federal Employees Health Benefits (FEHB) premiums will increase by an average 3.8% in 2022. Though this is a smaller increase than in previous years (2020 saw a 5.6% increase and 2021 saw a 4.9% increase), (3) it is not an insignificant amount either. FEHB is the main health insurance benefit provided by the government, so if you are a federal employee enrolled in an employer health plan, this change probably applies to you.
Keep in mind that the premium changes are tied to specific plans, so you may see a larger or smaller increase depending on the benefits you choose. This is why it’s so important to review your plan during open enrollment. If the increase in premium makes your current plan financially unsustainable, make sure you don’t let your benefits renew, keeping you locked in a plan that doesn’t work for you. Conversely, if you can afford to upgrade to a plan that better accommodates your health needs, then that option should be thoroughly explored as well.
Another important update to keep in mind is the continued backlog of retirement applications at the OPM. Due to staffing shortages and increases in the number of people retiring, the backlog has remained persistent throughout 2021. As of October, the backlog stands at 26,105, which is double the OPM’s steady state goal of 13,000. (4)
Be sure to keep an eye on this backlog as you plan for retirement, as it typically takes 95 days for an application to be processed. Those who are hoping to retire by December 31st should have already submitted applications, and if you want to retire in the beginning of 2022, you should submit your application soon. Here are three things to do to help you deal with the backlog:
- Planning ahead is crucial! If you expect delays, you won’t be caught off guard when they happen.
- Keep an adequate emergency fund in case your application is delayed beyond the typical 95-day window. OPM does provide partial retirement payments during the waiting period, but an emergency fund will act as a buffer, so you won’t have to dip into other retirement plans before receiving full benefits.
- Use the online application forms to speed up the process. Online forms will make your application more legible and easier to process, decreasing the chance that it will get sent back to you with questions or revisions.
Review Your FERS Benefits Today
At Bridgerland Financial, we understand the ins and outs of the unique set of benefits offered to federal employees. We are here to help you review the upcoming changes and answer any questions you may have. Schedule an appointment online or reach out to us at email@example.com or (435) 535-1630 to get started today.
David Packer is founder and financial advisor at Bridgerland Financial, an independently managed financial firm in Utah. With 20 years of industry experience, David serves his clients by helping them bridge the gap between their working years and their retirement. He provides tailored, comprehensive financial plans to his business owner and individual clients so they can retire with confidence. David has a bachelor’s degree in finance and holds the Chartered Retirement Planning Counselor℠, CRPC® credential. Outside of the office, David loves to spend time with his wife and five kids and stay involved in his community. He currently serves on the board of directors of the Cache Valley Chamber of Commerce. He and his wife, Melonie, spent years as foster parents and eventually adopted their foster children. David loves playing and watching all kinds of sports, including officiating high school sports, and won’t turn down a good board or card game. Learn more about David by connecting with him on LinkedIn.