Over the last two weeks, I’ve written about how to speed up the retirement application process if you are ready to retire and how to retire to maximize your benefits. This time I want to clarify something that seems to confuse most employees. That’s the difference between voluntary and discontinued service retirement.
You can retire on an immediate annuity when you feel like it if you have the right combination of age and service to retire. Usually you can pick the date you want to leave, fill out the paperwork, and leave when that date comes up. However, your agency may give you a push in that direction by announcing a reorganization, realignment or reduction-in-force. It may also offer a buyout as an incentive for you to leave.
You will be eligible for a discontinued service retirement if you meet the age and service requirements (age 50 with 20 years of service or at any age with 25) and have received a specific notice of separation (aka a RIF notice).It’s called a discontinued service retirement because it interrupts your career. If you are getting the bum’s rush, you have a choice to make. Do you want to retire voluntarily or involuntarily?
Voluntary versus Involuntary
If you retire voluntarily and later return to work for the federal government, the salary of your new position will be offset by the amount of your annuity. In other words, in most cases your annuity will continue but you will only receive the difference between your annuity and your new salary. For example, if your annuity is $50,000 and the salary of the new position is $85,000, you’ll only be paid $35,000 a year by your new employer. However, under certain limited circumstances, you may be able to receive your full annuity and the full salary of your new position.
On the other hand, if you accept an involuntary retirement and later return to work for the federal government, your annuity will stop and you’ll receive the full salary of your new position. Your career will restart and you’ll acquire a new retirement right. If you already had the necessary age and service to retire on an immediate annuity when you left, you could retire again at any time. However, if you retired before being eligible for immediate retirement (for example, by accepting an “early out”), you wouldn’t be eligible to retire again until you met the age and service requirements.
Supplemental and Re-determined Annuities
As a rule, if you are a voluntary retiree and return to work for the federal government for at least one full year, or its part-time equivalent, you’d be eligible for a supplemental annuity; if you work for at least five years, or its part-time equivalent, you’d be eligible for a re-determined annuity.
A supplemental annuity is simply added to your existing annuity. A re-determined annuity is created by recomputing your annuity as if you were retiring for the first time, using your new total years of service and your new high-3, if it’s greater than your previous high-3.
Alert: If you are reemployed in a position that allows you to receive both your full annuity and your full salary, you won’t be eligible for either a supplemental or a re-determined annuity. That period of service isn’t creditable for any retirement purposes.