If you’re thinking of leaving government without having reached retirement eligibility, you’ll need to decide if you should ask for a refund of your retirement contributions when you leave.
Note: This is almost exclusively a consideration for employees under the FERS system because the large majority of those under CSRS already are eligible to retire under regular voluntary retirement rules.
As a federal employee, every pay period you’ve contributed a portion of your salary to the Civil Service Retirement and Disability Fund. Some FERS employees contribute more than others depending on their date of hire. And if you are a special category employee, such as a law enforcement officers or firefighter, you contribute more than others who are otherwise equally situated.
As a result, the amount of your refund will vary according to your employment category and retirement system. It will also vary, of course, by your salary level and how long you’ve been contributing to the fund.
If you have been employed under FERS for a year or more, you’ll receive market rate interest on your contributions. And that interest will be compounded annually up to the month before OPM makes the payment.
Is it a better idea to take the money and run or leave it in the fund? It may be tempting to take it and use for living expenses or to invest.
If you have at least five years of service, think hard first: you later will be eligible for a deferred retirement benefit so long as you don’t take a refund. This would be payable (under FERS) at age 62 with at least five but fewer than 20 years of service, age 60 with at least 20 but fewer than 30, and at your “minimum retirement age” (between 55 and 57, depending on your year of birth) with at least 30.
While the annuity you’ll later be entitled to have been locked in time—that is, not growing along with your salary and years of service as it would if you continued working for the government—it will be paid for life and will be inflation-protected. And due to the government paying a share toward that benefit, it would be hard to achieve the same amount through taking the money and investing it.
One situation in which taking a refund may make the most sense: If you have less than five years of service and expect you’ll never return to the government to reach that number, leaving the money in the system essentially means forfeiting it. If you take a refund on those grounds and do later return to work for the government despite your earlier expectation, you’d need to redeposit that amount plus interest to get credit for that prior time in your annuity computation.
If you’ve made up your mind to take a refund, you’ll have to get a copy of the appropriate form, either from your servicing personnel office (SF 2802 for CSRS, SF3106 for FERS) or download it at www.opm.gov/forms.
You’ll need to send the completed form to OPM, Retirement Operations Division, P.O. Box 45, Boyers, PA 16017-0045. Before you can receive a refund, you’ll have to notify your spouse and any former spouse that you have applied for a refund. If the refund would end any court-ordered right they have based on future benefits, you may be barred from receiving that refund.