The Making Work Pay Credit (MWPC) was enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA) which was signed into law on Feb. 17, 2009. The maximum credit is $400 for single taxpayers and $800 for married taxpayers filing jointly. The credit will be available for 2009 and 2010.

In many ways the MWPC is similar to the Economic Recovery Payment (ERP) which was enacted in the Economic Stimulus Act for the 2008 tax year. Both the MWPC and the ERP are calculated based on earned income and both are phased out above a modified adjusted gross income (MAGI) of $75,000 for singles and $150,000 for married filing jointly. Both the ARRA and the economic stimulus act were designed to put more money in the public’s pocket in order to turn around the depressed economy and to help consumers start spending.

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About the Author

Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, Maryland. He is also a registered representative with Multi-Financial Securities Corporation (Branch A9X), member FINRA/SIPC, also located in Silver Spring, Maryland.

© 2007-2009 My Federal Retirement. All Rights Reserved.

H.R. 2990, which would allow veterans receiving disability benefits from the Veterans Affairs Department to receive full retirement benefits from the Defense Department, included a provision that would let employees in the Federal Employee Retirement System count unused sick leave toward their pensions. The House, which approved the bill under a suspension of the rules, plans to roll H.R. 2990 into the fiscal 2010 Defense authorization bill.

Other measures included in H.R. 2990 would make it easier to rehire federal retirees part time; modify how the Civil Service Retirement System calculates annuity payments for employees who retire as part-time workers; and move federal employees in Alaska, Hawaii and U.S. territories from cost-of-living adjustments into the locality pay system. In addition, H.R. 2990 permits FERS workers to redeposit retirement funds, including interest, collected after leaving government upon returning for a second round of service. It would also allow District of Columbia Circuit Court employees, who are now considered federal workers, to count their time as district employees toward their retirement.

One federal retirement reform not included in H.R. 2990 was a provision that would allow federal retirees rehired by the government to keep their full annuity payments. Supporters of the measure had argued it would give agencies more flexibility to use experienced workers to meet agency needs, but some unions said it would put current workers at a disadvantage and circumvent fair hiring procedures.

The National Active and Retired Federal Employees Association issued a press release praising H.R. 2990, but criticized lawmakers for leaving the rehiring provisions out. That provision could be included in the Senate’s version of the Defense authorization bill.

By Alex M. Parker | Government Executive | June 24, 2009

A disciplined retirement preparation plan, diligently followed, will help you develop realistic objectives … assess progress toward your goals … and make periodic adjustments to keep you on track.

The legislation (S. 469), sponsored by Sen. George Voinovich, R-Ohio, would modify the way retirement annuities are calculated for employees covered under the Civil Service Retirement System. Currently, CSRS employees who retire with part-time service late in their careers could see reduced annuities.

According to the CBO report, the bill would provide an average of $2,000 more in retirement benefits per year for about 650 of the expected retirees from the CSRS system in 2010. Additional retirements by 2019 would boost the overall cost of the measure to $39 million, according to CBO.

At the same time, the budget office reported, a bill that would let agencies rehire retirees without cutting their annuities would not cost taxpayers extra.

The bill (S. 629), sponsored by Sen. Susan Collins, R-Maine, aims to give federal agencies greater flexibility to hire back retirees on a limited part-time basis. Supporters say it will give agencies a way to quickly hire experienced workers to help deal with issues such as administering economic stimulus funds, while critics — such as the American Federation of Government Employees — claim that it would circumvent fair hiring processes.

The CBO report on the bill said agencies would likely hire retirees whether or not the legislation passed. Already, more than 1,800 retirees are working for the government, and that doesn’t include employees at the Defense Department. Agencies currently must request waivers of the annuity cuts from the Office of Personnel Management.

“The bill would primarily reduce the administrative burden of issuing waivers, rather than significantly increase the number of retirees reentering the federal workforce,” the report stated. “Based on those assumptions …CBO estimates that S. 629 would not have a significant impact on the federal budget.”

Supporters of the measure said the report could help the legislation’s chances of passage.

“The current Congress is very budget-conscious,” said Jessica Klement, government affairs director for the Federal Managers Association.

Because the bill wouldn’t cost the government extra money, it could be passed without violating the House’s pay-go rules, which require new entitlement programs or tax cuts be offset by spending cuts or revenue increases.

The language for both of the provisions CBO evaluated was in an amendment offered to the tobacco regulation bill (H.R. 1256), but was stripped out by the Senate.

The amendment also contained several other provisions affecting government workers, including language allowing employees covered by the Federal Employees Retirement System to count unused sick time toward their retirement, and a measure allowing FERS employees who leave the government to redeposit their retirement money if they want to return to government service.

CBO previously scored these provisions in its report on H.R. 1256, which is awaiting President Obama’s signature. According to the budget office, the FERS sick leave change would cost $600 million over 10 years.

By Alex M. Parker, Government Executive – June 19, 2009

To determine your monthly expenses during retirement, you might start by dividing costs into two categories: those you believe will change and those you believe will remain largely the same.

Costs You Believe Might Change

Housing expenses – particularly if you plan to live in your paid-off home or plan to downsize to a smaller dwelling

Medical insurance – which may shift from a premium for HMO coverage to a Medigap policy

Costs for dependents – if you have children you believe will be self-sufficient by the time you retire

Entertainment and travel expenses – for some people, these might decline precipitously; for others, they might be far higher

Taxes – most retirees find their combined tax burden is less than during their working years

Automobile-related costs – retirees generally drive less than workers who commute to their jobs every day, thus spending less on maintenance, tolls, gasoline, etc.

Monthly contributions toward retirement savings accounts – not only can you stop making this contribution, you might even consider spending it!

Costs You Think Will Remain the Same

Food

Clothing – unless you previously spent large amounts of money on uniforms or other job-specific wardrobe items

Household expenses – such as telephone, utilities, cable, etc.

Determine Your Individual Needs

Once you analyze all this information, you can determine your estimated monthly income needs as well as how large of an emergency fund to establish. This fund should be held in a liquid form such as a money market account, which provides stability for your funds as well as ready access to them.

Consider reviewing your estimated needs at least annually, because circumstances can and do change in today’s fast-moving world.

Source: Financial Visions, Inc.

Five thousand participants in the 401(k)-type plan will be offered the opportunity to test the revamped site before it is expanded. It will feature updated interfaces for tracking transactions online and interfund transfers, as well as a hub for managing personal information.

Pamela-Jeanne Moran, deputy director of external affairs for the board, said TSP officials selected the number of testers based on surveys. The trial run will help determine how much bandwidth and server space will be required to support the site’s enhanced functions, she said.

“A part of the beta is not just the user experience, but the provider experience for us,” TSP Executive Director Greg Long said.

Moran said one of the goals of the redesign was to make the Web site more comprehensive, as investors look for more information on the Internet. “You don’t just want to leave it in a booklet form,” she said.

She said she was developing online training for benefits and payroll officers so they will be prepared to support participants as the new site rolls out. TSP officials will mount an aggressive campaign to educate employees about the changes.

“We’re going to have lots of communications out there that say, ‘The new site’s coming, the new site’s coming, the new site’s coming,’ ” Moran said.

Board member Alejandro Sanchez praised the fresh design and displays of investment data.

“[From] everything I’ve seen, [the designers did an] excellent job,” he said. “What a transformation from 1997 to 2009.”

Other changes to the TSP still are awaiting congressional action, Director of External Affairs Tom Trabucco said. Lawmakers still are considering legislation (H.R. 1256) that would create a Roth retirement account option in the plan, and give the board the authority to allow participants to invest in mutual funds. Trabucco said congressional staffers had expressed a willingness to modify the language governing the mutual fund option, which the board has not yet agreed to support. A bill incorporating those changes probably will come to the Senate floor after Memorial Day, he said.

Those modifications come as the TSP is recovering from the market collapse last fall. Overall investments in the plan rose from $198 billion in March to $207 billion in April. Renee Wilder, director of the TSP’s Office of Research and Strategic Planning, said that boost was driven by a combination of growth in the market and increased contributions.

Participation as a percentage of the workforce held steady. In April, 84.6 percent of Federal Employees Retirement System members had TSP investments, a 0.1 percentage point increase over March. Involvement by members of the armed services also rose slightly, from 28.1 percent in March to 28.2 percent in April.

“Slowly but surely, our participation rate is inching back up to the level we had last year before the market declined,” Wilder said. “[Participants] did move over significantly to the [stable government securities fund], but they really have not bailed out on us in big numbers.”

By Alyssa Rosenberg, Government Executive May 18, 2009

Finally the legislation, sponsored by House Oversight and Government Reform Committee Chairman Rep. Edolphus Towns, D-N.Y., would remove rules that effectively penalize CSRS employees for working part-time at the end of their careers and would allow FERS employees returning to government after a stint in the private sector to reinvest their retirement savings and claim credit for previous service.

The House passed the 2009 Federal Retirement Reform Act by a voice vote.

Federal employee and managers’ groups praised passage of the bill, especially the provision equalizing sick leave policies under FERS and CSRS.

“Both groups of employees are dedicated public servants and both groups deserve to have their sick leave counted,” said Colleen Kelley, president of the National Treasury Employees Union.

The Federal Managers Association noted that the measure would give FERS employees incentives to avoid taking unnecessary sick days, reducing the cost of sick leave to the government. FMA also applauded the TSP provisions and incentives for FERS employees to return to government service.

Darryl Perkinson, the group’s national president, urged the Senate to take up the measure and pass it quickly.

Government Executive

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Our goal is to help our clients create, accelerate, and preserve their wealth. We help them improve their financial position by providing sound strategies, products and services.

SUCCESS REQUIRES A PLAN

Adopt a holistic approach to your planning!
The financial plan for the average person looks like a junk drawer – not coordinated or integrated. Everything was acquired at different times, without consideration of how it impacts their overall program. The first step is to organize your finances and get them working together for you. The right hand needs to know what the left hand is doing.

Visit the Wealth Accerleration Institute website for more information.

No matter what type of investor you are, it’s crucial to keep your plan on track. Revisit your asset allocation periodically (every year or so, depending on market conditions) to determine whether it needs adjustment. You should also periodically re-examine your risk tolerance and investment profile, especially as you get closer to your goal. You may discover you need to tweak your portfolio’s risk exposure over time.

Sitting down regularly to reassess your goals, time frame, and asset allocation allows you to fine-tune your strategy, keep your risk within acceptable levels, and make sure you’re on track. A skilled professional can help you identify investments that not only achieve the greatest absolute return over the years, but also subject you to the lowest overall taxes along the way. Your advisor will also show you how to properly allocate investments among your various accounts and work with you to integrate your investment and financial goals. A truly knowledgeable advisor will also help you stay abreast of developments in the financial marketplace as innovative new products and services become available.

Just as you see your doctor for checkups, your lawyer for legal advice, and your mechanic for tune-ups, consult a qualified financial advisor for financial planning.

Call ABS for your tune-up now… 301-702-9223.

Assisting someone in immediate financial need

Providing financial security for the recipient

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Seeing the recipient enjoy the gift

Taking advantage of the annual exclusion

Paying a gift tax now to reduce overall taxes

Giving tax-advantaged gifts to minors

Source: Financial Visions, Inc.