The "Fork in the Road" email went out when deferred resignation was announced, but that left a substantial slice of the late-career federal workforce wondering about their retirement options. Image: Hyejin Kang/Shutterstock.com
By: FEDweek StaffThe Trump Administration is pursuing a wide scale reduction in the size of the federal workforce not seen in scale since the Clinton Administration, and this time with a stated aim of reducing a “bloated and corrupt” federal bureaucracy it views as foremost, obstructive and costly.
Agencies have been instructed to pursue the use of reductions-in-force, along with other tools to thin the employment rolls, including early retirements, buyouts and even a new deferred resignation program that promises to allow employees to retain pay and benefits through September 30 with no expectation to continue working.
Many employees close to retirement age or already eligible are considering their options as well, while agencies have begun deploying and considering the use of early retirement and buyout offers, developing transition materials and drafting RIF notices – among other measures that have sent shockwaves through the federal workforce.
Following is a chart summarizing alternative retirement options under CSRS, FERS or both: Early retirement, discontinued service retirement, MRA, deferred and postponed annuities.
Lacie Harmon, Federal Employee Benefits Group
Early Retirement from Federal Job – VERA
Normally, an employee is eligible to retire from federal service when the employee has at least 30 years of service and is at least age 55 under the Civil Service Retirement System or under the Federal Employee Retirement System, 56 and ten months in 2025 (note: this age is rising by two months a year until it will reach 57) under FERS; has at least 20 years of service and is at least age 60; or has at least five years of service and is at least age 62.
However, the Office of Personnel Management may allow agencies to temporarily lower the age and service requirements in order to increase the number of employees who are eligible for retirement, thus encouraging more voluntary separations via early retirement.
Under an early retirement authority, the basic age and service requirements are reduced to 20 years of federal service at age 50 or 25 years of service, regardless of age. By offering these short term opportunities, employees can receive an immediate annuity years before they would otherwise be eligible.
Voluntary vs ‘Discontinued Service’ Retirement – DSR
A discontinued service retirement is one in which you are forced to retire, usually in the face of a specific notice of separation generated by a reduction-in-force. In effect, it interrupts your career.
While you may be eligible to retire on an immediate annuity, you might not want to do that for financial or other reasons. In that case, you have a choice to make: retire voluntarily, or involuntarily under discontinued service retirement.
If you retire voluntarily and later return to work for the federal government, the salary of your new position generally will be offset by the amount of your annuity. In other words, your annuity will continue but you will only receive the difference between your annuity and your salary. For example, if your annuity is $60,000 and the salary of the new position is $80,000, you’ll only be paid $20,000 a year by your new employer. Note: Under limited circumstances, you may be allowed to receive your full annuity and the full salary of your new position.
On the other hand, if you take a discontinued service retirement, 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.
Retirement Eligibility & FERS Minimum Retirement Age (MRA)
Retirement eligibility in the federal government adheres to certain age and years of service combinations. Federal retirees are eligible for an annuity under the following categories:
Regular (Immediate) Retirement
Under the CSRS, CSRS Offset and FERS systems, it is the employee’s option to retire after reaching minimum age and service requirements. However, there is a difference in eligibility requirements between the CSRS/CSRS Offset and FERS systems.
Under CSRS/CSRS Offset, and employee may retire at age 62 with five years of service, 60 with 20, or 55 with 30.
Under FERS, an employee who meets one of the following age and service requirements is entitled to an immediate retirement benefit: age 62 with five years of service, 60 with 20, minimum retirement age (MRA) with 30 or MRA with 10 (but with reduced benefits).
FERS Minimum Retirement Age*
Year of Birth FERS Minimum Retirement Age
Before 1948 55
1948 55 and 2 months
1949 55 and 4 months
1950 55 and 6 months
1951 55 and 8 months
1952 55 and 10 months
1953–1964 56
1965 56 and 2 months
1966 56 and 4 months
1967 56 and 6 months
1968 56 and 8 months
1969 56 and 10 months
1970 and after 57
* Does not apply to CSRS
Calculating a Deferred Annuity
Deferred annuities for CSRS/CSRS Offset employees are calculated the same as those who take immediate or early retirement. In other words, a deferred annuity is determined by the following formula:
1.5% x high-3 x first 5 years of creditable service,
+ 1.75% x high-3 x next 5 years of service,
+ 2.0% x high-3 x all years of service over 10.
Note: The high-3 used will be the one in effect when the employee left government. It is not adjusted upward for any inflation that may have occurred between the time the employee left government and the time he or she applied for an annuity.
Under FERS, just as with an immediate or early retirement annuity, a deferred annuity benefit will be based on the high-3 average salary. The benefit is calculated according to this formula: .01 x high-3 x years of creditable service.
Those who retire at age 62 or later with at least 20 years of service will have a factor of 1.1 percent used rather than 1 percent.
The FERS Postponed Annuity Option
The postponed annuity is a feature of the retirement system only open to FERS employees. If you are in FERS and have reached your minimum retirement age (MRA—between 55 and 57 depending on your year of birth) and have at least 10 years of creditable service, you could retire on an immediate annuity under the MRA+10 provision.
However, you’d face a potentially hefty price for doing that.
If you have at least 10 but fewer than 20 years, your annuity would be reduced by 5 percent for every year (5/12ths of 1 percent per month) that you are younger than age 62.
If you have at least 20 (but fewer than 30) years, that penalty would only apply if you claim pension prior to age 60. Note: If you have at least 30 years, you could retire on an immediate unreduced annuity at your minimum retirement age.
Thanks to Lacie Harmon, Federal Employee Benefits Group for putting together this chart. Lacie is a Federal Benefits and Retirement Specialist who helps federal employees understand and maximize their benefits, both during employment and retirement years. She teaches regularly at federal agencies and offers monthly federal retirement webinars. Past classes taught include for clients such as the FAA and GAO, as well as union locals of the APWU and NALC. She can be reached at: https://www.lacieharmon.com/
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See also
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
