Maybe it’s the fact that far fewer early retirement and buyouts are being offered than were expected, but I’ve run into a surprising number of unhappy employees who are thinking about resigning now and applying later for a deferred annuity. However, before they jump ship, they want to know when they could get one and how it’s computed. So, let me explain.

The rules are basically the same for CSRS and FERS. You must have at least five years of creditable service, you can’t be eligible for an immediate retirement when you leave government, and your deferred annuity won’t begin until the first day of the month after you reach age 62.

There’s a variation on this theme for a departing FERS employee. You can receive a deferred annuity as early as the first day of the month after you reach your Minimum Retirement Age (MRA). However, your annuity will be reduced by 5 percent for every year you are under age 62. (That’s 5/12 percent per month.) There are only two ways to avoid that age penalty: have at least 20 years of service under your belt and postpone receiving your annuity until you reach age 60 or if you have fewer than 20 years, delay the receipt of your annuity until age 62.

The rules for computing a deferred annuity are also the same for the two retirement systems. CSRS annuities will be computed under the CSRS formula and FERS annuities under the FERS formula. Each will be based on your creditable years of service and your highest three consecutive years of average salary when you left government. Your high-3 will not be increased by any intervening pay increases for your former position or any cost-of-living adjustments (COLAs) paid to retirees. Further, no additional service credit will be given for any unused sick leave that was on the books when you left. This provision only hurts CSRS employees and FERS employees with a CSRS component in their annuity. FERS employees have never been able to increase their service credit with unused sick leave hours.

Leaving government and later applying for a deferred annuity carries some additional penalties. Your coverage under the Federal Employees’ Group Life Insurance and Federal Employees Health Benefits Program programs will cease after a 31 day cost-free extension of coverage. You may, of course, convert to individual policies or, in the case of FEHB, continue for 18 months under the Temporary Continuation Provision of law. Both will be at your own expense. As a deferred annuitant, you may not reenroll in either program.

If you decide to bail out and apply for a deferred annuity, you’ll need to do so no sooner than two months before the date you plan to retire. As noted above, for CSRS employees that’s always age 62. For FERS employees, it’s age 62, their MRA+10, or age 60 with 20 or more years of service. To start the ball rolling, you’ll need to get in touch with OPM. You can do that by phone at (202) 606-0500 ((202) 606-0551 TDD) or write them at P.O. Box 45, Boyers, PA 10617-0045. In either case, they will send you the appropriate form to fill out.