With many federal employees now facing the prospect of applying for retirement earlier than planned due to ongoing federal sector reductions in force (RIFs) and deferred resignation programs, a discussion of how FERS postponed retirement works is potentially timely.
Many federal employees covered by the FERS retirement system are familiar with the basic eligibility requirements for applying for retirement. Employees who have 5 years of creditable civilian service and are over age 62 may apply for “immediate retirement.” Employees who are over age 60 with 20 years of service, or who are over their “minimum retirement age” (MRA) (which varies from 55 to 57, depending on the employee’s birth year) and who have 30 years of service may also apply for immediate retirement benefit without any reduction on their FERS pension amount due to retiring before age 62. Employees may apply for “early retirement” either through accepting their agency’s offer of Voluntary Early Retirement Authority (VERA) if they are over age 50 with 20 years of service, or with 25 years of service at any age. Employees may also apply for FERS early retirement (in the form often referred to as “discontinued service retirement” or “DSR”) if they are involuntarily separated for a non-disciplinary reason (such as a RIF) and the meet the same age and service criteria. Employees with more than 18 months of service who become disabled during their federal civilian service may apply for FERS disability retirement. Certain occupations (for example, law enforcement, firefighters, and air traffic controllers) have special early retirement eligibility.
Most crucial for the present discussion are “MRA+10” and “deferred retirement.” For MRA+10 retirement, an employee who has reached MRA and has 10 years of service but has not reached age 62 may retire on immediate retirement, with a pro-rated 5%/year reduction on the annuity for each year they retired before age 62. If an employee separates from service with sufficient service to later qualify for an annuity but isn’t old enough to claim immediate retirement, they may apply later for “deferred retirement,” if they are (a) age 62 with 5 years of prior service, (b) MRA with 30 years of service, or (c) MRA with 10 years of service (with the 5%/year annuity reduction applied). However, an applicant who only retires on deferred retirement loses their ability to retain their FEHB federal health benefits, FEGLI life insurance and FEDVIP dental and vision insurance into retirement, as previously discussed in this blog. Is there then a way for an employee with MRA+10 eligibility at separation to keep their benefits into retirement without a 5%/year reduction on their annuity? The answer is yes, through applying for FERS “postponed retirement.”
To apply for postponed retirement, the employee files a retirement application using the retirement form for deferred and postponed retirement (Form RI 92-19), not the FERS immediate retirement application form (SF-3017). The applicant specifies in the application form the month and year that they want the annuity to start being paid, set sometime at least a month after the date of the separation, and no later than the first day of the month that the employee turns age 62 (and preferably, more than 2 days prior to their birthdate). While the pension is postponed, the employee will receive no FERS annuity and will not be able to retain FEHB, FEGLI or FEDVIP in the manner of a retiree (although they may sign up for FEHB Temporary Continuation of Coverage (TCC) or convert their FEGLI to an individual policy to cover some of the interim period). Once the postponed annuity starts, the annuitant may then reenroll in FEHB, FELGI and FEDVIP. The amount that the postponed pension is reduced for retiring before age 62 is pro-rated based not on when the retirement is applied for, but instead the requested postponed annuity payment started. As OPM notes in the instructions for Form RI 92-19, “You can avoid the age reduction entirely if you choose the first day of the month that you reach age 62 as your annuity commencing date. The age reduction does not apply if your annuity commences the first day of the month after your 60th birthday and you have at least 20 years of service.”
However, it is very important that the applicant not set the annuity start date after their 62nd birthday—as press accounts warn, doing so is a mistake, and would convert the postponed retirement application into a deferred retirement application, costing the applicant their ability to reenroll in FEHB, FEGLI and FEDVIP.
If you are a federal employee considering your FERS retirement options, and wish to discuss your rights, consider contacting Gilbert Employment Law to request an initial consultation.