Lump sum annual leave and my FERS supplement. If you've ever had questions about your lump sum annual leave and your FERS supplement, stay tuned for the next episode of All About FERS. Hi, my name is John Raleigh, certified financial planner, and today on All About FERS, we're going to answer a question that's been sent to us. The question is from Dave. Dave states, Hi, my name is Dave, and I will be retiring at the end of
the year at age 58 I am eligible for a FERS supplement. My question is, is my lump sum annual leave payment consider earned income that would affect my FERS supplement amount, could you please help answer this for me? Thanks! Dave, what a great question, and you're not alone wondering this. Believe it or not, there's a lot of confusion about lump sum annual leave payments and earned income and how they're tied together, so let's start by defining some of the pieces here in this
question. First of all, we'll start with the FERS supplement, because we're trying to figure out how that's affected. The FERS supplement, also known as the FERS annuity supplement, or the SRS the Special Retirement Supplement, is a monthly benefit paid to some federal employees that retire before age 62. It is designed to supplement an employee's income till it eligible for Social Security benefits. Now let's take a look
at what OPM defines as earned income. OPM defines earned income as any income that's subject to federal employment taxes or self employment net earnings. This includes your salary, pay for your employment, overtime, bonuses, vacation pay, severance pay, all those pieces fit in. It also includes self employment net earnings as well as deferred income, or income earned but not received during the current calendar year. So is my lump sum annual leave payment considered earned income.
According to OPM, lump sum payment for unused annual leave income is considered earned income and will be subject to certain taxes. These taxes include both federal and state taxes with that stated, will it affect my FERS supplement? And the answer here is no, it does not. You do not need to report your unused annual leave when you're calculating your FERS supplement, a lump sum payment for unused annual leave does not
affect your FERS supplement earnings. Just as a reminder, OPM will not consider it as part of your reportable income for the earnings test on your FERS supplement it is considered a one time payout. I hope this answers your question, a great resource for you is that the OPM website, search fact sheet, lump sum payments for annual leave, Dave, I hope this answers your question and gives you a better insight on the lump sum annual payment earned income and how the effects affect your FERS
supplement. If you have additional questions, send them to us, and maybe we'll use them at one of our next episodes of All About FERS. Thanks for stopping by All About FERS and until next time, Happy Planning!