TSP

John Grobe

I suspect that most current federal employees are, or soon will be, “fully vaccinated” for COVID-19. By the CDC’s definition, you’re considered fully vaccinated two weeks after your final dose of the vaccine (i.e., two weeks after your second Pfizer and Moderna shot, or after your one Johnson & Johnson shot). Yet, I’m sure that there are some federal employees who have not and will not get vaccinated for COVID-19.

There are procedures for individuals to receive a vaccine exemption, but not all of those who refuse vaccination will be eligible for an exemption. In the US, unlike in the EU, having recovered from COVID and having enough antibodies to be considered as having natural immunity, is not considered a reason for not having to receive the vaccination.

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If you are faced with the choice of getting the COVID vaccine or losing your job, what would you do. This is a moot point for most readers of this article, as they are fully vaccinated. But it’s a serious question for those who are unvaccinated and do not plan to receive the vaccine. This article will not discuss or opine on the reasons for getting vaccinated (or not). Rather it will take a look at what will happen to your federal benefits if you choose not to receive the COVID vaccine.

Don’t stop reading if you’re already fully vaccinated! What we discuss here will be applicable to anyone who leaves federal service for whatever reason (e.g., winning Lotto, having the boss from hell, etc.).

If you’re already eligible for retirement, you can simply retire. You will begin receiving your FERS annuity, be able to withdraw from the TSP and, if you’re old enough, be able to start collecting Social Security. Whether the amount you receive will be enough is another question. If your plan had you working another five years in order to retire at the level of income you desired, you will have to live on less if you leave now.

If you’re not currently eligible for retirement, your choices are starker. If you have at least five years of civilian service, and you leave your FERS contributions on deposit with the Office of Personnel Management (OPM), you will be entitled to a “deferred annuity” at a future date. The time of your entitlement will be based on the number of years of service you had at the time you left and your age at the time of application for deferred retirement. The criteria for an unreduced deferred retirement are listed below.

• Age 62 and five or more years of service.
• Age 60 and twenty or more years of service.
• Your minimum retirement age (MRA) and at least thirty years of service. For most current FERS employees you MRA will be 56, 57, or some age in between.

You are entitled to a reduced deferred retirement at your MRA with ten or more years of service, but the annuity will be reduced 5% per year for each year you are under the age of 62. If your MRA was 57, your reduction would be 25%.

No one who takes deferred retirement is entitled to the Retiree Annuity Supplement (RAS).

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No discussion of federal retirement would be complete if there weren’t some confusing factors to add. If you are your MRA and have 10 or more years of retirement, you are allowed to retire on an immediate, reduced annuity. The reduction is 5% per year for each year you are under 62 and you are not entitled to receive the RAS.

What will you get from Social Security if you leave before retirement eligibility? In all but a small number of situations, the answer is nothing. You have to wait until the age of 62 for Social Security eligibility.

Because this is a newsletter about the Thrift Savings Plan, I better say something about it. You will have many choices with your TSP. You are not required to withdraw your contributions and have the option of leaving them in the TSP. You will still have the same ability you do as an employee to make interfund transfers. If you find work elsewhere, you could transfer the TSP to a subsequent employer’s tax-deferred retirement plan. And you can always roll it over to an Individual Retirement Arrangement (IRA). If you choose the transfer/rollover option, make sure it is a direct transfer (directly from the TSP to the new plan/IRA) in order to avoid any withholding.
If you separate from federal service before the year in which you reach the age of 55 (50 for special category employees), any money you withdraw from the TSP before reaching the age of 59 ½, will be subject to a 10% early withdrawal penalty in addition to taxes. There’s an exception to the penalty if you take life-expectancy based payments for whichever is longer, five years or until you reach the age of 59 ½. With an IRA, regardless of your age at separation, you’ll be subject to the penalty for anything you take out before 59 ½ (the same life expectancy based exception will apply to the IRA).

There are a lot of things to think about if you are considering leaving federal service for any reason, let alone because of a vaccine mandate. Be sure to look before you leap.

Federal Benefits and Retirement Dates

TSP: Don’t Burn Through it, but Don’t be Afraid to Spend It

Don’t Fumble Your Retirement at the Goal Line

OPF: Tweak Your Personnel Folder for Maximum Benefits

FERS and Social Security Take Some Stress Out of Planning to Spend Your TSP, IRAs

Lessons Learned Growing a TSP Balance Beyond $1M

FERS Retirement Bundle: 2021 FERS Guide & TSP Handbook

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