Thursday, May 15, 2014
Can Retiring ATRs Get Both The Lump Sum Retroactivity And Severance? - No!
I was asked a question from an ATR who plans to retire at the end of the school year could he get both the lump sum retroactive raises along with the immediate pension boost by retiring before June 30th, 2014 and the severance package? The answer is no! He can either take the ATR severance package and retire in July or take the lump sum retroactivity by retiring by June 30th, but he can't have both.
The reason he can't take both options is that the MOA states that for ATRs a severance package (20% of a person's salary) is only available between 30 and 60 days after the contract is ratified by the members. The earliest the contract can be ratified is June 3, 2014. Therefore, the first day the severance can be offered is July 3rd, 2014. Consequently, if the ATR waited to take the severance package, he would then get the retroactive raises and the pension enhancements at the same time as active in-service members.
The question then becomes which option should he take? The severance package and retire in July or the lump sum retroactive raises and pension boost and retire by June 30th? The answer depended on that individual's situation and the tax considerations. However, it does seem to me that taking the severance and retiring in July is the preferred approach since the ATR retiree will eventually get his retroactive raises and pension enhancements, while getting an up to an extra $20,000 severance as well. Moreover, by retiring in July, he is covered for August by his health insurance and wouldn't have to pay $110 a month for retiree health insurance. Finally, his tax situation for this year would eat up some of his retroactive pay because of the large lump sum payment.
Another point to consider, by taking the severance package, the ATR retiree can look forward to having annual raises in his pension and additional paychecks in the first five years of retirement when his pension is not eligible for a cost of living adjustment. That's a nice little present going forward. While this may not be the proper choice for everybody, it would appear to be the choice I would make given my present circumstances.