What Happens to Your Federal Benefits If You Leave Before You Are Eligible to Retire?

What happens to your benefits as a federal employee if you leave before you are eligible to retire from federal service?

Are you afraid that your job or your agency will be abolished under the new administration? Are you not yet eligible to retire? Or are you just tired of working for the federal government and want to try something else?

Before you make any decisions about leaving federal service (or before decisions are made that affect you), you should get a handle on what happens to your benefits if you leave before you are eligible to retire.

What Happens to Your Benefits When Leaving Before Retirement?


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 from your current insurer 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. There will be no accidental death and dismemberment coverage in the individual policy. The policy cannot be term insurance and must have level premiums.


If you leave your retirement funds on deposit with the Office of Personnel Management (OPM), you will be entitled to a CSRS or FERS pension at a later date as long as you have at least five years of creditable federal civilian service.


Your annual leave, credit hour and compensation 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 you 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 separate from federal service before the year in which you reach the age of 55, and 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. If you are a special category employee (Law Enforcement Officer, Firefighter, Air Traffic Controller, etc.) the age is 50, not 55.

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.