What Impact Does Returning to Federal Service Have on Your Annuity?

If you have already retired from federal service but choose to return, how would this impact your annuity?

What if you retire and miss your job? “Not likely,” you say. Believe it or not, some federal retirees return to work for the federal government after they have retired. If you don’t think that you will ever do such a thing, you don’t need to read any further. If you think that you might return to federal service, or are simply curious, read on.

This article is not about phased retirement; it is about returning to federal employment after you have already retired.

If you return to federal employment, your annuity may be affected. There are three ways to return to a federal position:

  1. By accepting a non-waivered position;
  2. By accepting a waivered position;
  3. By returning to work part-time under the provisions of a 2009 civil service law.

There is a legal prohibition against receiving “dual compensation” from the federal government (e.g., receiving both your pension and a full salary from a government job). The prohibition can be waived in certain situations, and has been repealed for certain approved part-time work.

If you are returning to a non-waivered position (i.e., a position that has not received a waiver of the prohibition on receiving dual compensation, or is not approved part-time work), you cannot receive both your pension and the full salary for the job. You will continue to receive your pension, but the salary of the job to which you return will be reduced dollar for dollar by the amount of your pension. If you make retirement contributions during this period of re-employment, you can become entitled to additional annuity payments.

  • If you remain as a re-employed annuitant for more than one year, but less than five years, you will, upon your “re-retirement”, become entitled to a supplemental annuity based on that period of re-employment.
  • If you remain as a re-employed annuitant for more than five years, your entire annuity will be recomputed when you “re-retire”.

There are special rules for those who retired on discontinued service retirement (not common). When they return to federal employment, their annuity will end.

If you are returning to a waivered position, you will receive the full salary for the job and your full annuity. Your period of re-employment will be limited to two years, and you will not earn any additional retirement credit for this period of re-employment. The prohibition against dual compensation is generally waived for special purposes. Currently you may find waivered positions in agencies that deal with national security and counter-terrorism. Earlier, you found many waivers being granted for Y2K issues.

Retired federal employees can return to federal employment part-time for a limited period without losing any of their annuity. The restrictions on part-time work are:

  • An agency cannot allow more than 3.5% of their positions to be filled by part-time workers who are re-employed annuitants.
  • An individual cannot work more than:
    • 1040 hours per year;
    • 520 hours in six months;
    • A grand total of 3,120 hours.

The rules above apply equally to CSRS and FERS retirees.

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.