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.
John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. Order your copy at shoplrp.com. Ask your human resources office to contact Federal Career Experts about pre-retirement training.