Some retiring employees elect to defer the starting date of their annuities to avoid a benefit reduction. Image: Hyejin Kang/Shutterstock.com
A deferred annuity is one where you have the age and service needed to retire but want to defer the receipt of your annuity to a later date.
That’s now an extremely rare situation under the CSRS retirement system, so I’m going to set that aside. Instead, I’ll focus on those covered by FERS.
FERS employees can retire under the MRA+10 provision (minimum retirement age—55 to 57, depending on year of birth—with at least 10 years of service) and defer the receipt of their annuity to a later date. They often do that because their annuity will be reduced for every year they are under age 62. If you are one of those former FERS employees and you didn’t make a deposit for any post-1956 military service before you left, you won’t be able to do that when you apply for your deferred annuity.
With that behind me, let me spell out the rules: If you are less than 62 years old when you apply for your deferred annuity, it will be reduced by 5/12 of 1 percent for each month (5 percent per year) you are under age 62 unless you have:
1) at least 30 years of service,
2) 20 years of service and postpone your retirement until you are age 60, or
3) at least 20 years of service as a law enforcement officer, firefighter or air traffic controller.
The same penalty applies to a postponed annuity. That’s the reason why some retiring employees who would be affected by it elect to defer the starting date until the benefit reduction is reduced or eliminated.
If you didn’t make a deposit for any military service before you left, you won’t be able to do that when you apply for your deferred annuity. If you elect to retire and postpone your annuity commencing date, you’ll have to make that deposit before separating.
In case you’re wondering the consequence if you don’t make a deposit to get credit for your active duty service, here it is. When you become eligible for a Social Security benefit at age 62, those years of military service will not be included in your annuity computation. Any dollar benefit due for that time will come in your Social Security check.
And the value of those years under Social Security will usually be much less than if they were included in your annuity.
Let me close with another head’s up. With the exception of law enforcement officers, firefighters and air traffic controllers, former FERS employees applying for a deferred annuity won’t be eligible to receive annual cost-of-living adjustments (COLAs) on their annuities until age 62.
In addition, they won’t be eligible to acquire Federal Employees’ Life Insurance (FEGLI) coverage or participate in the Federal Employees Health Benefits Program (FEHB).
Former head of retirement and insurance policy at the Office of Personnel Management, and longtime FEDweek contributor, Reg Jones is known throughout the federal workforce community as an authority on pay and benefits.
5 Steps to Protect Your Federal Job During the Shutdown
Over 30K TSP Accounts Have Crossed the Million Mark in 2025
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
Primer: Early out, buyout, reduction in force (RIF)
See also,
OPM Guidance Addresses Pay Issues arising During, After Shutdown