Under current law, an employee who leaves government before being eligible to retire can leave his retirement contributions in the retirement fund and apply for a deferred annuity at a later date. Former CSRS employees who have at least five years of creditable service can apply for one at age 62. Former FERS employees have more options. They can apply at age 62 with five years of service, 60 with 20, and at their minimum retirement age (MRA) with 30.
When they do apply for a deferred annuity, it will be calculated using their high-3 and years of service on the day they left government. As a result, the longer the time between leaving and becoming eligible for a deferred annuity, the greater is the erosion of the dollar value of that benefit.
However, that could change. On March 25, Rep. James Moran (D-Va.), along with Frank Wolf (R-Va.), Gerald Connolly (D-Va.), and Eleanor Holmes Norton (D-D.C.), introduced HR-4979. It’s a bill that would increase the amount of a deferred annuity by all the general schedule increases that have taken place between the time an employee left government and the date on which the deferred annuity begins, as long as that rate of pay doesn’t exceed the highest rate that would be paid for the position last held by the former employee.
In addition, it includes a provision now only available to former FERS employees who die before establishing a valid claim for a deferred annuity. It assures that the widow or widower of a former CSRS employee will be eligible for a survivor annuity, just as he or she would be if the former employee had lived to apply for the deferred annuity and elected a survivor annuity. It also allows the widow or widower to decide, instead, to receive a lump-sum payment of the retirement contributions in lieu of a survivor annuity. Note: As is true of all survivor annuities, the annuity ends if the recipient dies or remarries before age 55.
Whether this bill will eventually becomes law remains to be seen. To date all that has happened is that it was introduced and referred to both the Committee on Oversight and Government Reform and the Committee on House Administration.