2010 Defense Appropriation benefits changes and raising financially responsible children

The Defense Authorization Bill has been the subject of conversations in all federal agencies over the last few weeks because of the changes to benefits for federal workers. Jessica Klement is the legislative director for the Federal Managers Association and she joined Federal News Radio's Senior Correspondent Mike Causey on his Your Turn program (Wednesdays at 10 a.m.) to outline the provisions that affect federal workers.

• Credit for unused sick leave for FERS employees
• Extends locality pay to federal employees in Alaska, Hawaii, and US territories
• Fixes the glitch for CSRS employees who go part time toward the end of their careers
• Allows for annuitants to return to service without offsets to their annuities
• Allows FERS employees who come back into service, to redeposit their previously cashed out annuity

She said the FERS flu cure is essential because it is a productivity issue not a benefits issue if managers can't keep FERS employees at work the year before they retire.

In terms of the timeline, she said it is important to note that nothing in the bill is retroactive, but the bill takes effect as soon as President signs it or when the phase-in begins.

If you retire between when the President signs the bill and Jan 1, 2014, you receive 50% of your unused sick leave. The reason that this bill contains a phase-in is because this is not a cheap provision. It took a lot of convincing to get some members of Congress to wrap their head around the problem. So this was a compromise to get people on board.

There is also a three year phase-in for locality pay.

Klement explained that right now if you are a federal retiree and you come back to service, your salary is offset by the amount of annuity that you are collecting. Under the changes in the bill, if you return to government service for specific reasons (mentoring, training) there will be no offset of the salary. The bill lays out very strict guidelines on who can do this, the hours they can work and what kind of reporting needs to be done for these employees.

Mike also spoke with Rebecca Schreiber, a financial planner who specializes in Gen X and Gen Y feds. Schreiber said that it is important to start early in financial planning.

No one is rational about money. Some people are rational about money management. That's a little different. No one is rational about money no matter what you know. It is important to recognize where motivations are coming from and to use them to help you, instead of holding you back. And by teaching these lessons to children you can help them create an emotional and positive construct that will play out in a positive financial way. And that's developing a sense of gratitude."

She says this gratitude is beneficial because,

Everyone gets along better when you appreciate what the other person is doing. But also you learn to appreciate the physical things that you have and you learn to compare what you have now versus what it will cost to get something else more closely. So people comparison shop better and more closely when they recognize that they can only have one or two of something, instead of buying whenever they get bored.

According to Schreiber, another important issue for young and old federal employees is the issue of health insurance. An especially difficult decision is when to start looking for longterm care insurance. In terms of an age to begin looking, Schreiber said,

That age is when longterm care becomes a probability instead of a possiblity. And that's really where financial planning comes in. It helps you make the distinction. We might need longterm care when we are old, but when you are in your 20s or 30s not only do you have all these other financial goals but it is hard to tell if you are going to need this type of care.

Young professionals are still trying to get emergency funds saved and contribute to their retirement funds which do take precedence over getting longterm care policy when they are that young because they know something is going to happen and they are going to need the emergency funds and they know that they are going to retire. But they don't know if they are going to need long term care. However, when you are at that age it is a great opportunity to have the conversation with your parents about their longterm care policy, because not only are you supporting yourself but possibly children and there isn't going to be a lot of money to support parents if they are going to need help from you in the future.

To listen to the entire show, click on the audio link at the top of the page.

Read Mike's Wednesday column: Your Kids and Their Money

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