Deferring a Deferred Annuity

In my last two articles, I wrote about the age and service combinations governing CSRS and FERS retirement. In both cases, I pointed out that if you leave the government but don’t meet the requirements to retire on an immediate annuity, you may apply for a deferred annuity when you become old enough to meet one of those combinations, given your years of service.

What I didn’t address is something that was just brought to my attention by an alert reader: “What happens if someone doesn’t apply for a deferred annuity when they become eligible? Do they lose out?”

Just to be clear about when you’d be eligible for a deferred annuity, here’s a summary of the rules. You need to have at least 5 years of service, not ask for a refund of your retirement contributions, and meet one of the following age and service combinations:

Under CSRS:

• 62 with 5

• 60 with 20

• 55 with 30


Under FERS:

• 62 with 5

• 60 with 20

• your minimum retirement age (55-57, depending on your year of birth) with 30

• your MRA with 10, but your annuity will be reduced by 5 percent for every year (5/12 of 1 percent per month) you are under age 62 (60, if you have 20 years of service)

What if you don’t apply for a deferred annuity at the pertinent age for your retirement system and years of service? This could happen for example to those who thought they had lost eligibility by withdrawing their retirement contributions on separation, and never returned to government to repay them and recapture that service time. But later on they find themselves not so sure they did withdraw their contributions—maybe that money they received on separation was actually for unused annual leave?—and think they may be eligible after all.

Or, someone could have left, maybe many years ago, and didn’t withdraw the money but they may never have known—or knew at one time but forgot—about the concept of a deferred benefit, and it was brought to their attention only later.

So, what happens if you defer your deferred annuity? Good question. And one with a good news answer.

If you don’t apply for a deferred annuity as soon as you are eligible you can later apply for one and you’ll be entitled to 1) all the money you would have received if you’d applied for it when you first became eligible and 2) monthly payments from that point forward until you die. And while the benefit will be calculated on the high-3 salary (and years of service) at the time of separation, it would be increased by COLAs paid on annuities in that system in the meantime.

If you died and your survivors became aware of your oversight, a one-time payment would be made to your estate that covers the entire period during which you were entitled to a deferred annuity but had not received it.

Thus, it can be too early to apply for deferred retirement, but it’s never too late.