In two previous articles we have looked at issues surrounding the White House’s proposed 2018 budget. One article was on being prepared in the event the changes to our retirement and benefits actually take place. The other was on weighing the pros and cons of staying in federal service versus leaving and finding work elsewhere.
This article will address what federal retirement benefits we will have if we decide to leave federal service, and yet another article will look at what happens to our other employee benefits.
We all need to keep in mind that the proposed budget is just that – a proposal. It is likely viewed as the starting point for negotiations during the budget process. It’s not out of the realm of possibility that very little, or even none, of the proposals will come to pass. Having said that, it’s better to be prepared for an event that doesn’t happen that to be unprepared for one that does.
Becoming Retirement Eligible
A substantial number of federal employees are already eligible to retire, especially if we consider the fact that much use will be made of Voluntary Early Retirement Authorities (VERA) when agencies reorganize. The tables that follow outline the eligibility criteria for both voluntary and early retirement.
CSRS
Most remaining CSRS employees are already able to retire voluntarily. The few who aren’t are certainly all eligible for early retirement.
| CSRS | Type of Retirement | Minimum Age | Minimum Service |
|---|---|---|---|
| Voluntary |
55 60 62 |
30 20 5 |
|
| Early |
50 Any |
20 25 |
Under CSRS, an individual who takes early retirement will suffer a 2% per year reduction in their pension for each full year they are under the age of 55 (1/6 of 1% per month).
FERS
The criteria for retirement under FERS are similar to those for CSRS, though FERS has an additional option for reduced (often called MRA+10) retirement.
| FERS | Type of Retirement | Minimum Age | Minimum Service |
|---|---|---|---|
| Voluntary |
MRA (between 55 and 57) 60 62 |
30 20 5 |
|
| Early |
50 Any |
20 25 |
|
| Reduced | MRA | 10 |
Under FERS, an individual who takes early retirement will not face an age-based reduction, but one who takes reduced retirement will be subject to a 5% per year reduction for each full year they are under the age of 62 (5/12 of 1% per month).
So, if you meet any of the criteria in the above charts you are in a position where you can pull the plug at any time you want. Some people say they’ve “joined the club” when they reach retirement eligibility. You may not want to retire when you are first eligible, but you do have that option.
Federal Employees Who Are Not Retirement Eligible
What of the federal employees who do not meet the above criteria?
All a person needs to become eligible for a pension at a later date (called “deferred retirement”) is five years of creditable civilian service. Another requirement is that the person must have left their retirement contributions on deposit with OPM.
Almost all folks who choose to leave before retirement eligibility will be covered under FERS, and the criteria for deferred retirement under FERS are the same as the criteria for voluntary retirement.
So, for example, if a FERS employee who is age 42 with 19 years of federal service chooses to leave federal employment and leaves their FERS contributions on deposit, they will first become eligible for a deferred pension when they reach their Minimum Retirement Age (under the MRA+10 criteria) – but that deferred pension will be reduced 5% per year for each year they are under age 62. If they do not want to have their pension reduced, they will be eligible for an unreduced pension at age 62 (under the 62 + 5 criteria). Deferred pensions do not entitle the retiree to continue enrollment in FEHB or FEGLI.
