Certain FERS employees who want to retire on an immediate annuity are faced with the prospect of having their annuities reduced by 5 percent for every year they are under a specific age. The solution to their problem may be a postponed annuity.

Unlike CSRS, FERS contains a special provision that allows an employee to retire at his minimum retirement age with 10 years of service. If you were born before 1948, your MRA is 55. It increases by two months per year from 1948 through 1952. It stays at 56 years from 1953 through 1964, then increases by 2 months per year until 1970 when it reaches a maximum of age of 57.

The required 10 years of service can be any combination of creditable service, from years employed under CSRS and FERS to any other kind of service for which the payment of a deposit is allowed, for example, active duty service in the military.

The downside of retiring under the MRA+10 provision is that there is an age penalty. If you have between 10 and 19 years of service, your annuity will be reduced by 5 percent for every year you are under age 62. If you have between 20 and 29 years of service, the reduction will be the same for every year you are under age 60. In either case, that 5 percent translates onto 5/12ths of a percent per month.

To reduce or eliminate the reduction in you annuity, you can retire but postpone the receipt of your annuity to a later date. When you finally begin receiving it, the amount will be calculated in the same way it would have been on the day you retired. Specifically, your years of service will be multiplied by your high-3 and the product multiplied by 0.01. Unfortunately, your high-3 won’t be increased by any pay increases or cost-of-living adjustments that occurred since you left. The age penalty will only be applied to any remaining years or months you are short of an unreduced benefit.

No matter when you begin receiving your annuity, you won’t be eligible for the special retirement supplement. That’s the extra benefit that approximates the amount of Social Security benefit you earned while employed under by FERS. And like most other FERS retirees, you won’t be eligible for a cost-of-living increase until you reach age 62.

If you postpone the receipt of your annuity and were eligible to carry your Federal Employees Health Benefits (FEHB) and Federal Employees’ Group Life Insurance FEGLI coverage into retirement, that coverage will only be suspended. Therefore, when you begin receiving your annuity, you’ll be eligible to reenroll in them.