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. 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 you felt like it. 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 meet the age and service requirements.
As a rule, if you are a voluntary retiree and go back 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 redetermined annuity. When you again retire, a supplemental annuity is simply added to your existing annuity. A redetermined 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.
Note: If you are one of those reemployed annuitants who is able to receive both your full annuity and the full salary of your new job, you won’t be eligible for either a supplemental or a redetermined annuity. That period of service isn’t creditable for any retirement purposes.
More on retirement eligibility under FERS and CSRS and DSR at ask.FEDweek.com