Expert's View

Reg Jones

Several readers have asked me explain the difference between voluntary and discontinued service retirement. I’m not sure if they were at a crossroad with their agencies or just preparing for what might happen in the future. Anyhow, here’s what I told them.

Voluntary
Voluntary retirement is when you meet one of the combinations of age and service to retire on an immediate annuity and you decide to do that. As a rule, you can pick the date you want to leave, fill out the paperwork, and move on to the next phase of your life. However, you might be encouraged to retire if your agency announces a reorganization, realignment or reduction-in-force (RIF). If it does, it’s up to you to decide if it’s a good time to retire.

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Discontinued service
Discontinued service retirement is when you receive a specific written notice of separation for no fault of your own, usually triggered by a reduction-in-force (RIF). While you may be eligible to retire on an immediate annuity, you might not want to do that for financial or other reasons. In that case, you have a choice to make. Do you want to retire voluntarily or involuntarily?

What’s the difference?
If you retire voluntarily and later return to work for the federal government, the salary of your new position will be offset by the amount of your annuity. In other words, your annuity will continue but you will only receive the difference between that amount and your salary. For example, if your annuity is $70,000 and the salary of the new position is $90,000, you’ll only be paid $20,000 a year by your new employer. Note: In rare instances, you might be allowed to receive both your full annuity and the full salary of your new position.

If your separation is involuntary, you leave on a discontinued service retirement and later return to work for the government, your annuity will stop and you’ll receive the full salary of your new position. If you already had the necessary age and service to retire on an immediate annuity when you left, you could retire again at any time you want.

However, if you retired before being eligible for an immediate retirement, e.g., by accepting an “early out”, you wouldn’t be eligible to retire again until you meet the age and service requirements to do so.

Supplemental and redetermined annuities
As a rule, if you are a voluntary retiree, go back to work for the federal government, and stay at least one full year (or its part-time equivalent), you’d be eligible for a supplemental annuity. On the other hand, if you work for at least five years (or its part-time equivalent), you’d be eligible for a redetermined annuity. A supplemental annuity would be added to your existing annuity. A redetermined annuity would be created by recomputing your annuity as if you were retiring for the first time, using your new total years of service and your new high-3, if it’s greater than your previous high-3.

Note: If you are one of those reemployed annuitants who is able to receive both your full annuity and the full salary of your new job, you won’t be eligible for either a supplemental or a redetermined annuity. That period of service won’t be creditable for any retirement purposes.

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Rollovers: Moving Your Money Out of the TSP

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FERS Retirement Guide 2021

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