Deferred Annuities

Last week I wrote about employees who are eligible to retire under the Voluntary Early Retirement Authority (VERA). This time I want to explain what happens if you leave government before you meet the age and service requirements to retire.

If you have fewer than five years of creditable service when you leave, you won’t be vested in the retirement system. Therefore, you’ll only have two options:

• you can ask for a refund of your retirement contributions, or

• if you’re thinking about returning to work for the government, you can leave that money in the retirement fund.

If you have five or more years of creditable civilian service, and don’t take a refund of your retirement contributions when you leave government, you’ll be eligible for a deferred annuity. Here’s how that works:

Eligibility requirements

If you are a former CSRS employee, you can apply for a deferred annuity at age 62. If you are a former FERS employee, when you can apply for a deferred annuity depends on your years of service and age. If you have at least five years of service, you’ll be eligible for an unreduced annuity at age 62. With at least 20, age 60. If you have 30, you can retire when you reach your MRA (minimum retirement age).

On the other hand, if you have at least 10 years of service but fewer than 30, you can retire when you reach your minimum retirement age (MRA); however, your annuity will be reduced by 5 percent for every year (5/12 percent per month) you are under age 62. If you want to reduce or eliminate the age penalty, you can delay the receipt of your annuity to a later date.

Once your annuity begins, you’ll receive it for the rest of your life. However, because your annuity will be frozen at the amount it would have been on the day you left, the longer the gap between when you leave and when you are eligible to receive an annuity, the more it will have been eroded by inflation.

Cost-of-Living adjustments

At age 62 any cost-of-living adjustments (COLAs) will be added to your annuity.

The special retirement supplement

The special retirement supplement (SRS) approximates the amount of Social Security benefit earned by a FERS employee. While it’s payable to those who meet the age and service requirements to retire on an immediate annuity, it isn’t payable to deferred annuitants.