Expert's View

Reg Jones

The postponed annuity is a feature of the retirement system only open to FERS employees. If you are in FERS and have reached your minimum retirement age (MRA—between 55 and 57 depending on your year of birth) and have at least 10 years of creditable service, you could retire on an immediate annuity under the MRA+10 provision.

However, you’d face a potentially hefty price for doing that. Let me explain.

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If you have at least 10 but fewer than 20 years, your annuity would be reduced by 5 percent for every year (5/12ths of 1 percent per month) that you are younger than age 62. If you have at least 20 (but fewer than 30) years, that penalty would only apply until you reach age 60. Note: If you have at least 30 years, you could retire on an immediate unreduced annuity at your minimum retirement age.

The good news is that you can reduce that penalty by postponing the receipt of your annuity to a later date. You can totally eliminate it by waiting until either age 62 or 60, depending on which of those two groups you’re in.

Just know that whenever you do apply for your annuity, the computation will be based on your years and full months of service and your high-3 on the day you retired, with no increases for employee pay raises or retiree COLAs since. However, unlike in the deferred annuity option I wrote about last week, whenever you do take your annuity, any unused sick leave you had to your credit when you left government will be used in the computation.

If you retire on an immediate annuity and were covered under the Federal Employees Health Benefits (FEHB) program for the 5 consecutive years before you retired, your coverage will be suspended until your annuity begins. However, all is not lost during that interim period. Under the Temporary Continuation of Coverage provision of law, you can keep your health benefits coverage for up to two years by paying the entire premium plus 2 percent.

On the other hand, if you were covered under the Federal Employees’ Group Life Insurance (FEGLI) program, there isn’t a comparable provision in law that would allow you to continue that coverage. Instead, you’d have the option of buying an individual policy for which you’d pay the entire cost.

Assuming that you were eligible to continue your coverage under the FEGLI and/or FEHB program before you retired and postponed the receipt of your annuity, you can reenroll in either or both of them when you annuity begins. If you reenroll in the FEHB program, you can choose any plan, not just the one in which you were enrolled when you retired or the one you enrolled in under TCC. On the other hand, your FEGLI coverage will be limited to the amount you had when you retired.

The Deferred Annuity Option

Immediate Retirement Under FERS

Immediate Retirement – CSRS & CSRS Offset

Health Care Costs Set to Rise in New Year for Most

FERS Retirement Bundle: 2021 FERS Guide & TSP Handbook