Leaving Government Before Retirement? What Happens To Your Benefits?
By John Grobe
Wednesday, October 8, 2008
What happens to Your Benefits if you leave before you retire?
As many of us periodically think of leaving federal service for various reasons (the grass is greener or the boss from Hell are common reasons) this information is important and can help us make the right decision when or if the time comes.
You will get an automatic 31-day extension on your health insurance. At the end of the 31-days you can convert to an individual policy or continue your current coverage for 18 months under temporary continuation of coverage (TCC). Costs and coverage on an individual policy will vary. The cost for TCC are your share + Uncle's share + a 2% administrative fee. In both situations, no physical is required and there is no ban on pre-existing conditions.
You can convert your life insurance to an individual policy.
If you leave your retirement funds on deposit, you will be entitled to a CSRS or FERS pension at a later date as long as you have at least five years of federal service. FERS employees should not withdraw their contributions to the retirement fund because, if they return to federal service, they will not be allowed to re-deposit the money and the time covered by the withdrawn contributions will not count towards retirement upon return. CSRS employees have the opportunity to re-deposit any withdrawn contributions.
Your annual leave, credit hour and comp time balance will be paid to you in a lump sum shortly after you leave.
Your sick leave will do you no good, unless you return to federal service. If you return, you can have it re-credited.
You have many choices with your TSP. You are not required to withdraw your TSP contributions and have the option of leaving them in the TSP. You will still have the same ability you currently do to make interfund transfers. You could also transfer the TSP to an IRA or a subsequent employer's tax-deferred retirement plan. If you choose the transfer option, make sure it is a direct transfer (directly from the TSP to the new plan) in order to avoid any withholding.
If you withdraw any money from the TSP before reaching the age of 59 ½, you will be subject to a 10% early withdrawal penalty in addition to taxes.
© 2009 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.
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