What Happens to Your Federal Employee Benefits Due to Downsizing or Outsourcing?

Have you ever wondered what would happen to your government benefits and seniority if you found yourself out of federal employment due to a downsizing or an outsourcing decision? Well, as with so many other items dealing with our federal employment, the answer is “it depends.”

Have you ever wondered what would happen to your government benefits and seniority if you found yourself out of federal employment due to a downsizing or an outsourcing decision? Well, as with so many other items dealing with our federal employment, the answer is “it depends”.

Health Insurance

If you are eligible for retirement (including early retirement) you may retire and you can continue your health benefits under the same conditions as if you were an employee as long as you had been enrolled in the FEHBP for the last five years.   As a retiree, you continue to participate in the annual open seasons.

If you hadn’t been enrolled for the last five years, or you were not eligible for retirement, you could carry over your health insurance for 18 months under the provisions of COBRA. COBRA, the Consolidated Omnibus Budget Reconciliation Act, requires that you pay 100% of your cost and the employer’s cost, plus a 2% administrative charge. This sounds like a lot, but often it is less expensive than purchasing an individual health insurance policy. Often employees who can’t carry their health insurance over when they leave look for group insurance through a spouse’s employment or through a professional or fraternal organization to which they belong.

Life Insurance

If you are eligible for retirement (including early retirement) you may retire and you can continue your life insurance under the same conditions as if you were an employee as long as you had been enrolled in the same options in the life insurance program for the last five years.   If you are not eligible for retirement, you will have the opportunity to convert your life insurance to an individual policy.

Early Retirement

Both CSRS and FERS early retirement have the same criteria. You must be age 50 with 20 years of service, or be any age with 25 years service. Under CSRS you are subject to a 1/6 of 1% per month (2% per year) reduction for each full month you are under age 55. There is no age-based reduction for early retirement under FERS.

FERS MRA+10 Retirement

Under FERS, employees who have reached their minimum retirement age may retire if they have at least 10 years of service. There is a 5/12 of 1% (5% per year) reduction for each full month you are under age 62.

Deferred Retirement

If you are not eligible for immediate retirement you can leave your contributions in the retirement fund and later become eligible for an annuity when you meet the criteria for immediate retirement (FERS) or reach age 62 (CSRS). You are not eligible to carry your insurance over under deferred retirement.

Leave

You will be paid in a lump sum for any annual leave you have left.

If you are eligible for retirement, your unused sick leave will be added to your length of service for the purpose of computing your annuity. The rules for crediting sick leave for CSRS and FERS retirement differ.

If you have three years of federal service and left federal service after 1994, your sick leave can be re-credited to your account if you ever return to federal service.

Seniority

What happens to seniority would depend to a large extent on your agency and any applicable collective bargaining agreement.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at johnfgrobe@comcast.net to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.