Understanding Variant Forms of Retirement

While the majority of those who retire from the government do so voluntarily and with eligibility for an immediate annuity at the standard combinations of age and years of service (most commonly, age 62 with five years of service, 60 with 20, or 55 with 30 for CSRS or minimum retirement age–currently 56–with 30 for FERS) several special types of retirement are available to those who don’t meet one of those two conditions.

Discontinued service retirement applies to those who are involuntarily separated, other than for misconduct or delinquency, and have at least 25 years of service or are at least age 50 with 20 years of service, will be entitled to an immediate annuity. (Under CSRS/CSRS Offset, that annuity will be reduced by 2 percent for each year the employee is under age 55, which would apply to few anymore. There is no reduction under FERS.) At least five years of that service must be civilian service. CSRS/CSRS Offset employees further must have been employed under CSRS for at least one year out of the last two years preceding retirement. There is no such requirement under FERS.

Employees separated from federal employment by reduction-in-force (RIF) may be very close to retirement eligibility on the effective date of the RIF. Normally employees are entitled to a lump-sum payment for their annual leave balance upon separation. However, instead of taking a lump-sum payment, employees may remain on the agency’s rolls past the effective date of the RIF, if they will become eligible for an immediate annuity (or to carry health benefits coverage into retirement) during the period represented by the amount of their accrued annual leave. This right also extends to a separation because an employee does not transfer with the function to another location.

Another special category is deferred retirement. Employees under CSRS/CSRS Offset who leave federal service before meeting the age and service requirements for an immediate retirement benefit may receive a deferred annuity at age 62, if they have at least five years of creditable civilian service, do not receive a refund of all retirement contributions and are not eligible for an immediate retirement benefit. Under FERS, employees are eligible at age 62 with five years of service, 60 with 20, MRA with 30 or MRA with 10 (but with a reduced benefit).

Employees who receive a deferred retirement benefit have their benefit calculated as of their high-three salary years upon separation–not according to the salary rates applying at that grade and step at the time the annuity begins. Thus, depending on how long it is between separation and the start of the annuity, much of the benefit’s value can be lost to inflation.