In my last column I described the options available to employees who leave government before being eligible to retire. In short, they have two choices: take their retirement contributions and run or leave them in the retirement fund and apply for a deferred annuity at a later date.

This time I want to talk about FERS employees who are in the unique position of being able to retire on an immediate annuity but, because they don’t have the right combination of years and service to retire on an unreduced annuity, will have their annuities cut by five percent for every year they are under a specific age. Fortunately, there is a way to reduce or eliminate that penalty.

The FERS law contains a special provision that allows you to retire at your minimum retirement age with 10 years of service. It’s called the MRA+10 provision. If you were born before 1948, your MRA is 55. It increases by two months each year for those born between 1948 and 1952, plateaus at 56 years for those born from 1953 through 1964, then increases by 2 months each year for those born until 1970, when it reaches a maximum of 57.

By the way, those 10 years of service don’t have to be exclusively under FERS. They can include time spent under CSRS or any other kind of service for which the payment of a deposit is allowed and has been made–for example, active duty service in the military.

As mentioned above, the downside of retiring under the MRA+10 provision is that there is an age penalty. If you have between 10 and 19 years of service, your annuity will be reduced by 5 percent for every year you are under age 62 (5/12ths percent per month). If you have between 20 and 29 years of service, the reduction will be the same for every year you are under age 60.

Fortunately, you can reduce or eliminate that reduction in your annuity by postponing its receipt to a later date. When you do elect to receive it, the amount will be calculated in the same way it would have been on the day you retired. Your years of service will be multiplied by your high-3 and the result multiplied by 0.01 percent. Unfortunately, your high-3 won’t be increased by any pay increases or cost-of-living adjustments that occurred after you retired. The age penalty will only be applied to any remaining years or months you fall short of an unreduced benefit.

The bad news is that no matter when you begin receiving your annuity, you won’t be eligible for the special retirement supplement. The SRS approximates the amount of Social Security benefit you earned while employed under FERS. Further, like most other FERS retirees, you won’t be eligible for a cost-of-living increase (COLA) until you reach age 62.

The good news is this. If you were eligible to carry your Federal Employees Health Benefits (FEHB) and/or Federal Employees’ Group Life Insurance FEGLI coverage into retirement, that coverage will only be suspended, not cancelled. You’ll be eligible to reenroll in them when you begin receiving your annuity.