If you have as few as 5 years of service you can retire on an immediate annuity at age 62. Image: 3rdtimeluckystudio/Shutterstock.com
By: Reg JonesLast week I wrote about employees who spend a full career in federal service and retire when they meet the age and service requirements to do so. That’s most of you. However, there are a substantial number of employees who will retire with fewer years of service. This time around I’ll focus of them.
Age and service requirements
The age and service retirement requirements to retire for those with fewer than 30 years of service are the same for CSRS and FERS. Under both systems, if you have as few as 5 years of service you can retire on an immediate annuity at age 62. Or if you have at least 20 years of service, you can retire at age 60.
However, there’s one exception to that rule. If you are a FERS employee, you can retire at your minimum retirement age with as few as 10 years of service. MRAs range between 55 for those born before 1948 to 57 for those born in 1970 or later. However, before you start packing your bags, I need to alert you to the fact that there’s a downside to doing that. If you retire at your MRA with at least 10 years of service but fewer than 30, your annuity will be reduced by 5 percent for every year – 5/12 percent per month – that you are under age 62. The good news is that you can reduce or eliminate that age-reduction penalty by holding off applying for your annuity until a later date.
Early retirement rules
Under both retirement systems, the age and service requirements are reduced if you are offered early retirement under either the Voluntary Early Retirement Authorities (VERA) or a buyout under the Voluntary Separation Incentives Program (VSIP). If one of those comes your way, you can retire at age 50 with 20 years of service or at any age if you have at least 25.
Cost-of living adjustments (COLAs)
If you are a CSRS retiree, regardless of how old you are when you retire on an immediate annuity you’ll be entitled to receive annual COLAs. However, with one exception, if you are a FERS retiree you won’t be entitled to receive a COLA until you reach age 62. The exception applies to law enforcement officers, fire fighters and air traffic controllers.
The FERS special retirement supplement
As a FERS retiree who retires at age 60 with 20 years of service or if you retire early, you’ll be entitled to receive a special retirement supplement. The SRS approximates the Social Security benefit you earned while covered by FERS. It doesn’t matter if that retirement was voluntary or involuntary. However, if you retire early, your SRS won’t begin until you reach your MRA. No matter which way you retired, you won’t receive any COLAs on your SRS.
FYI. The SRS continues until age 62, when you first become eligible for Social Security. It can be reduced or eliminated earlier than age 62 if you have earnings from wage or self-employment that exceed the Social Security annual exempt amount.
Health and life insurance
The rule for carrying your Federal Employees Health Benefits (FEHB) or Federal Employees’ Group Life Insurance (FEGLI) into retirement is the same. You need to have been covered for the five full years before you retire or, if you are covered by Tricare or CHAMPVA, be enrolled in the FEHB program when you retire.
If you meet the requirements to carry your FEHB coverage into retirement, retire under the MRA+10 provision, and delay receipt of your annuity to a later date, you may re-enroll in the FEHB when you begin receiving that annuity. On the other hand, if you don’t meet the requirements to carry your FEHB coverage into retirement, you may qualify for an automatic waiver if you are retiring under one of the early retirement authorities.
Reader alert! You need to be aware of one stark difference between the rules covering FEHB and those covering FEGLI. Under the FEGLI program, regardless of how you leave government, if you haven’t meet the five years of coverage rule there is no waiver provision. The only way to once again be covered by FEGLI is to be reemployed in a position in the federal government that provides for such coverage.
Deferred annuities
Many employees leave the government to pursue other opportunities. That doesn’t mean that their retirement benefits are lost. For example, if you leave and don’t ask for a refund of your retirement contributions, you’ll be eligible for a deferred annuity when you meet the age and service requirements to do so: age 62 with 5 years of service, age 60 with 20, at your MRA with 30, and at your MRA with 10 (but with the same reduced benefits mentioned above).
Note: Deferred retirees aren’t eligible to receive the SRS. Nor may they reenroll in either the FEHB or FEGLI programs when their annuities begin. However, just like other retirees, they will be eligible to receive COLAs beginning at age 62.
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See also
Alternative Federal Retirement Options; With Chart
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