The interim period during the retirement process can be a frustrating somewhat murky stage to plan around. It is designed to bridge the gap between federal employees’ separation dates and the start of their full FERS (Federal Employee Retirement System) annuity payments. There are some inconsistencies as far as when this interim payment will start and the amount of the payment that can make it difficult to have an exact plan in place.
The following is a quick look at the interim period, the range of outcomes as it pertains to the payment amount, the timing, and the process of getting an application finalized.
Retirement Application Submission
To start the retirement process, FERS employees must submit their retirement application (SF 3107) to their agency at least sixty days (varies by agency) before their desired separation date. The application includes providing personal information, survivor benefit election, service time verification, and other relevant documentation.
Upon receipt of the retirement application, a benefits officer with your respective agency will contact you to go over your application, usually a couple of weeks before your separation date.
As part of the initial processing, your agency may provide you with a preliminary annuity estimate, providing retirees with an approximate idea of the annuity amount they can expect once the process is finalized.
Once you retire, your agency will then send the retirement packet to the Office of Personnel Management (OPM) for processing. This stage is where the potentially lengthy wait happens.
OPM Application Process
OPM starts the initial processing and review stage. This includes verifying the retiree’s eligibility for benefits, verifying time served, and calculating the annuity amount.
OPM reviews the retiree’s supporting documentation, which may encompass birth certificates, marriage certificates, divorce decrees, and military service records. This process validates the retiree’s eligibility for specific benefits.
Based upon the length of service and your “High 3” (highest average consecutive 36 months base plus locality pay at any point in a federal employee’s career), OPM calculates the retiree’s annuity. This calculation determines the monthly payment amount the retiree will receive once the annuity is finalized.
Upon completion of the review and processing stage, OPM issues an official notification to the retiree, confirming the approved retirement date and the calculated annuity amount. The notification also includes instructions for the retiree regarding any outstanding documentation or additional information required, if applicable.
The interim period spans from the approved retirement date until when your annuity payments start.
During this period, retirees may be eligible to receive interim retirement payments. The interim payments were set up to support retirees while OPM finalizes the annuity process.
The interim payments usually start around 60 days of your separation date and the key term here is “usually,” because some retirees wait three to four months for their payments to start, while others have their payments start within two months. There have also been cases of retirees not getting an interim payment at all and then their full annuities start four months after their separation date.
The interim payments are typically based on an estimated annuity amount, ranging from 50-80% of what your finalized annuity amount will be. Your FEHB premiums are not deducted from the interim payments, and when OPM finalizes your retirement application, they will credit you the difference of what you are owed minus what you received in the interim period and also subtract health insurance premiums that you would have been paying.
It is important to note that supplement payments for those who qualify are not included in your interim payments either, however, once your application is finalized, they will credit you back what they owe you (much like for your annuity payment) and then your supplement will be included in your annuity payments going forward until the supplement stops at age 62.
Dental and vision coverage through FEDVIP is also not deducted, but premiums still need to be paid during the interim period to keep them active.
Meanwhile, OPM concludes the annuity application process by conducting a final review, ensuring all necessary documentation is complete and accurate. Once this step is finalized, the retiree’s official annuity is calculated and confirmed.
Following the completion of the annuity process, OPM initiates regular annuity payments. These payments are disbursed monthly and continue throughout the retiree’s lifetime, with potential adjustments for cost-of-living increases.
Having a plan in place to be able to weather a potentially lengthy interim period is very important. It can be a frustrating stage of retirement if you have not fully prepared for it.
It would be wise to have additional funds set aside while waiting on the interim/full annuity payments to start. You could save up annual leave that gets paid out in a lump sum usually within 30 days of separation or start setting aside some money in savings well before your retirement date. Having additional funds set aside could make all the difference since the interim payment is only going to represent part of what your final annuity amount will be, and that interim payment amount is uncertain.
Note that the Thrift Savings Plan (TSP) usually gives access to your account (if under 59.5 years old) within 60 days of your separation date. If you are over 59.5 years old, you should have immediate access which could also help bridge the gap to get you to your full annuity payments.
Having a plan for a lengthy wait that can take several months for your interim payments to start and several months after that for your final pension to commence will make waiting less stressful and hopefully you will be pleasantly surprised if everything is finalized sooner.
Advisory services offered through CreativeOne Securities, LLC an investment advisor. FedSmart Retirement Planners and CreativeOne Securities, LLC are not affiliated. Address: 23131 N Lake Pleasant Pkwy Peoria, AZ 85383.