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Understanding the Rules Associated with “Postponed” Retirement

Employees covered by FERS may be eligible for “postponed” retirement. This week’s column discusses how “postponed” retirement works and which employees are eligible. Also included in the discussion are any possible reductions to the FERS annuity and the effect of “postponed” retirement on Federal health, life, dental and vision, and long care insurance benefits associated with “postponed” retirement.

As a result of budget cuts, some agencies are offering early retirement in the form of a Voluntary Early Retirement Authority (VERA) to eligible employees. But other agencies have not been given the authority to offer VERAs and there are employees who are forced to leave Federal service. The previous “Informed Investor” column discussed deferred retirement for FERS employees who leave Federal service before they are eligible to retire. This week’s column presents another option for FERS employees who must leave Federal service, called “postponed” or “MRA + 10” retirement.

Age and Service Requirement

A FERS-covered employee who: (1) Is currently contributing a portion of his or her gross salary to the FERS Retirement and Disability Fund; (2) has reached at least his minimum retirement age (MRA); and (3) has at least 10 years of creditable service is eligible for  “postponed” retirement.  

Creditable civilian service for FERS purposes includes: (1) Service time in which full FERS contributions were deducted from an employee’s wages; (2) a deposit was made for “non-deduction” service – that is, temporary or intermittent service performed prior to Jan. 1, 1989 and/or a deposit for military service; and (3) service time for which Social Security (FICA) taxes and reduced CSRS contributions were made via payroll deducting and not refunded.

Commencing Date of Annuity

Assuming a FERS employee is between MRA and age 62 and has at least 10 years of creditable FERS service, the employee can leave Federal service. The FERS annuity can then begin at least one month later upon the departed employee’s completion and submission of the application form for “postponed” retirement, Form RI 92-19 (Application for Deferred or Postponed Retirement). The completed application should be mailed to: OPM – Federal Employees Retirement System, PO Box 45, Boyars, PA. 16017-0045.

Age Factor Reduction on FERS Annuity

If a departing FERS employee has completed at least 10 but fewer than 30 years of creditable service before leaving Federal service, the employee’s FERS annuity will be reduced if the departed employee elects to start receiving the annuity before age 62. The only exception to this reduction is when the employee has at least 20 years of service and the annuity begins when the employee is between age 60 and 62. In that case, there is no annuity reduction.

The annuity reduction is equal to 5/12 of one percent for each month (five percent per year) in which the annuity starting date precedes the employee’s 62nd birthday. Departing employees can postpone the commencing date of their FERS annuity in order to reduce or eliminate the age reduction factor. If the departing employee dies before the postponed annuity starting date, then any survivor benefits which the departed employee elected would still be payable upon the employee’s death.

Health, Life, Dental and Vision Insurance Coverage

Employees who separate from Federal service after reaching their MRA with at least 10 years of service and postpone the commencing date of their FERS annuity in order to reduce or avoid the age reduction are eligible to reenroll in the Federal Employees Health Benefits (FEHB) program and the Federal Employees Group Life Insurance (FEGLI) program once their FERS annuity begins. This assumes that the departed employee participated in the FEHB program and the FEGLI program for the five years immediately before their separation from Federal service. The departed employee is eligible to reenroll in the Federal Dental and Vision Program (FEDVIP) if the departed employee was enrolled in that program when he or she separated from Federal service.

Federal Long Term Care Insurance Coverage

Those employees who enrolled in the Federal Long Term Care Insurance Program (FLTCIP) will have their coverage continue when they depart Federal service and postpone the start of their annuity. Employees who are not currently enrolled in the FLTCIP can apply to enroll in the FLTCIP provided the employee is eligible for a postponed annuity. An application may be downloaded from www.ltcfeds.com. Applicants must pass underwriting in order to be approved for coverage.

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