Last week I went over the relatively simple rules that govern retirement eligibility for CSRS employees. This time I’ll focus on the rules governing FERS employees, which not only include more options but also have features that are unique to FERS.
Immediate unreduced annuity
If you are a FERS employee, you can retire on an immediate unreduced annuity with the following combinations of age and service:
• 62 with 5
• 60 with 20
• at your minimum retirement age (MRA) with 30
• at your MRA with at least 10
Note 1: MRAs range between 55 and 57, depending on your year of birth.
Note 2: If you retire under the MRA+10 provision, your annuity will be reduced by 5 percent for every year (5/12 of 1 percent per month) that you are under age 62. You can reduce or eliminate that penalty by postponing the receipt of your annuity to a later date.
Just as is true of CSRS, if your agency is offering early retirement opportunities under the Voluntary Early Retirement Authority (VERA), you can retire with the following combinations of age and service:
• 50 with 20
• at any age with 25
Note: There isn’t any age penalty for retiring before you reach your MRA.
Special retirement supplement
Unlike CSRS, FERS is a retirement system with three parts to it: an annuity, Social Security, and government contributions toward the Thrift Savings Plan. If you retire at age 60 with 20 years of service or at your MRA with 30, you’ll be entitled to a special retirement supplement, which approximates the amount of Social Security benefit you earned while a FERS employee. The same is true if you retire under a VERA, but only when you reach your MRA.
The SRS will continue to age 62, when you first become eligible for a Social Security benefit. However, if you have earnings from wages or self employment that exceed the annual Social Security earnings limit, the SRS will be reduced or eliminated before that.
Unlike CSRS, a FERS annuity generally won’t be increased by COLAs until you reach age 62. And your SRS, which ends at age 62, won’t be increased at all.
Postponed and deferred annuities
As mentioned above, if you retire under the MRA+10 provision, you can postpone the receipt of your annuity to a later date to reduce or eliminate the age penalty. If your annuity begins before age 62, you’ll be entitled to the SRS.
If you don’t meet the age and service requirements to retire when you leave but have at least 5 years of service and don’t ask for a refund of your retirement contributions, you can apply for a deferred annuity when you meet one of the following age and service contributions:
• 62 with 5
• 60 with 20
• at your MRA with 30
• at your MRA with 10, but with the same age penalty described above
Note: Deferred retirees are never entitled to the SRS.
Health benefits and life insurance
If you retire on an immediate unreduced annuity, you can carry your FEHB and FEGLI coverage into retirement, so long as you were in the program for the prior five years (or from the first opportunity to enroll, a rare situation applying mostly to those who returned from a break in service within five years of retiring).
If you either postpone the receipt of your annuity or are only eligible for a deferred annuity, your FEHB and FEGLI coverage will end after a 31-day free extension of coverage. At that point you can continue your health benefits coverage at you own expense, plus 2 percent for up to 18 months. And you’ll have the option of purchasing individual life insurance at your own expense.
If you retire on a postponed annuity, you can reenroll in the FEHB and FEGLI programs when your annuity begins. On the other hand, if you apply for a deferred annuity, you won’t be able to reenroll in either program.