FEDweek

Deferred vs. Postponed Annuities

Deferred annuity? Postponed annuity? Those are terms that have confused a lot of federal employees. Do they mean the same thing or are they different? Read on because I’m about to tell you.

Deferred Annuities

Former CSRS and FERS employees are eligible for a deferred annuity if they left government before being eligible to retire, didn’t take a refund of their retirement contributions when they departed, and meet the age and service requirements.

Under both CSRS and FERS, you would need to have at least five years of creditable service to be eligible for a deferred annuity. Under CSRS rules, you would also have to be age 62. Under FERS, there are a range of points at which you can apply for a deferred annuity: 62 with 5 years of creditable service, 60 with 20, at your minimum retirement age (MRA) with 30 or at your MRA with 10, with a 5 percent reduction for every year you are under age 62 (5/15 percent per month), unless you have at least 20 years of service and your annuity begins at age 60 or later. MRAs range between 55 and 57, depending on your year of birth.

Deferred annuities are calculated using the standard CSRS and FERS formulas, with your years of service and high-3 being the ones you had on the day you separated from the government:

CSRS

0.015 x your highest three years of average salary x 5 years of creditable service, plus

0.0175 x your high-3 x 5 years of service, plus

0.02 x your high-3 x all remaining year of service

FERS

0.01 x your high-3 x years of service.

Note: The first multiplier is changed to 0.011 if your annuity begins at age 62 with at least 20 years of FERS service.

Under both CSRS and FERS, deferred retirees are eligible to receive annual cost-of-living adjustments beginning at age 62.

FERS deferred retirees are ineligible to receive the special retirement supplement, which approximates the Social Security benefit earned while covered by FERS.

Postponed Annuities

Postponing the receipt of an annuity is a special feature available to FERS employees who retire under the MRA+10 provision of law. If you are one of them, you can postpone the receipt of your annuity to a later date to reduce or eliminate the age penalty mentioned above.

Your annuity will be calculated using the standard FERS formula and based on your years of service and high-3 on the day you retire. And that’s the amount you’ll receive when your annuity finally begins, minus any portion of the age penalty that remains.