What is Discontinued Service Retirement?

Discontinued Service Retirement (DSR) is the only type of federal retirement that is not considered voluntary. These are some examples.

Discontinued Service Retirement (DSR) is the only type of federal retirement that is not considered voluntary. An individual can become eligible for DSR if they are separated against their will for reasons other than “misconduct or delinquency” and meet the age and length of service requirements. Those requirements are either:

  • Age 50 with 20 years of service; or
  • Any age with 25 years of service.

In both of the above cases, at least 5 of the years of service must be creditable civilian service.

Although the Office of Personnel Management makes the final determination as to whether the separation is involuntary, the following actions are generally considered to be involuntary:

  • Reduction-in-force (RIF):
  • Abolishment of position;
  • Lack of funds;
  • Expiration of incumbent’s term of office;
  • Unacceptable performance (unless due to employee’s misconduct);
  • Transfer of function outside commuting area;
  • Reassignment outside commuting area when no mobility agreement exists;
  • Failure to continue to meet qualification requirements of the position (provided the separation is non-disciplinary and the action is initiated by the agency);
  • Separation during probation because of failure to qualify due to performance (not misconduct);
  • Separation of a National Guard technician because of loss of military membership or the rank required to hold the National Guard position; and
  • Removal from the Senior Executive Service for less than fully successful performance (under title 5, U.S.C., Ch. 43, Subchapter II)

Note the differentiation between separation due to unacceptable performance and separation due to misconduct. An employee who “can’t do” is likely to be eligible for DSR, while one who “won’t do” isn’t.

Even if an employee’s separation meets the above criteria, the employee will not be eligible for DSR if they decline a reasonable offer of a position. Generally an offer is considered reasonable if it is in the same agency, the same commuting area, the same tenure group and within two grades of the employee’s previous position.

Discontinued Service Retirement, like early retirement, provides for a 2% per year (1/6 of 1% per month) reduction in a CSRS retiree’s pension for each year (month) they are under the age of 55.  A FERS DSR retiree (who is not a special category employee) will face no age based reduction in their pension, but will not be eligible to earn a cost-of-living increase until they have reached the age of 62.

Barbara Haga, with Federal HR Services, Inc., cautions that HR practitioners dealing with unacceptable performance or inability to perform cases should be aware of some special provisions related to those actions.

For an employee to be eligible to retire under discontinued service provisions for either unacceptable performance or disability or illness, the employee must have received a decision to remove by the agency. For example, if a performance action was taken under 5 CFR 432, it would entail having provided an opportunity to demonstrate acceptable performance during which the employee was not able to improve, a proposal to remove and then a decision notice. The removal action is the basis for the employee’s retirement, so an agency may not settle the case and remove the notice of decision to provide a clean record.

This article is an overview of the rules on Discontinued Service Retirement. Much more detailed information (which will likely put you to sleep) can be found in Chapter 44 of the CSRS and FERS Handbook.

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.