Do you know the differences between the many types of FERS retirements? We’ll break down the requirements for immediate, reduced, early, deferred, postponed, mandatory, and disability retirements
The Federal Employee Retirement System (FERS) offers many options for workers to collect their pension, even if it is before they reach age of 62, or even before their “minimum retirement age” (MRA). Like the “full retirement age” for Social Security benefits, the MRA is dependent on what year you were born. If you were born in 1964, for example, your MRA is 56 and you would have reached it in 2020. There’ll be more information about the MRA at the end of this article, but first, here is an overview of the numerous types of FERS retirements:
Immediate and Unreduced
FERS employees are eligible for a full (unreduced) immediate annuity at age 62 with 5 years of service. With 5 years or more service, at age 62 or older, workers can leave federal service and claim a full pension. Those who choose this retirement are the only ones who get a .1% boost to their retirement calculation. If you are MRA with at least 30 years of service, or age 60 with 20 years of service, you are also eligible for a full, immediate FERS pension but if younger than 62, no matter your years of service, your retirement calculation will use a 1% multiplier instead of 1.1%. However, if you are able to claim an immediate, unreduced annuity before 62, you also meet the requirements to receive the special retirement supplement (SRS, which is a federal program designed to supplement social security benefits before social security can be claimed at 62.)
Immediate and Reduced
At age 60 with at least 10, but less than 20, years of service, one can claim an immediate pension. This can also be done at the MRA with at least 10, but less than 30, years of service (known as MRA+10). However, in both of these circumstances, there is a reduction. At whatever age the immediate retirement benefits are claimed, the FERS annuity amount will be reduced 5% for every 1 year under the age of 62.
With 5 years of service or more, a federal employee covered by FERS can leave federal service whenever they choose, and still claim unreduced retirement benefits… they just have to wait until they are 62 to receive the retirement income. With at least 30 years of service, an employee can leave service before reaching their MRA, and then choose to defer receiving the full FERS pension until their MRA.
Note that the same reduction rules apply for deferred retirements as for immediate ones. If you had at least 10, but less than 30, service years, you can claim your deferred benefits at your MRA with a 5% reduction for every year under the age of 62. If you had at least 10, but less than 20 service years, and claim the deferred retirement income while at least 60 years old, but less than 62, you’ll also see the same 5% reduction (so either reduced by 5% at age 61 or by 10% at age 60.)
It is important to remember that you can’t re-enroll in FEHB when you start receiving your FERS annuity.
With a postponed retirement, you have to be at least your MRA and have a minimum of 10 years of service when you leave your position with the federal government. You are then entitled to receive your full pension benefit upon reaching the age of 62. The biggest difference between this and deferring FERS benefits is the ability to re-enroll in FEHB when you start collecting the annuity at age 62. Note the word re-enroll, though. If you weren’t already enrolled, or at least eligible for enrollment, in FEHB when you left federal service, you’ll still be ineligible when collecting a postponed retirement annuity.
And just to reiterate, postponed and deferred retirements do not get the .1% boost, even if they’re not collecting their retirement income until 62. The 1.1% multiplier is only used in retirement calculations if the federal employee is claiming an immediate annuity at 62 or older. Retirees who choose postponed, deferred, or immediate but reduced retirement benefits are also ineligible for SRS payments.
Early Retirement: VERA and VSIP
It is possible to collect an immediate, unreduced annuity before reaching MRA, but it is because the employing agency is restructuring or trying to reduce positions. Early retirements are only offered to specific federal employees for a defined timeframe under special circumstances. OPM allows agencies to offer these “early out” retirements through the Voluntary Early Retirement Authority (VERA). Sometimes, agencies will include an added bonus known as a VSIP (voluntary separation incentive payment) which is a lump sum that, by law, can’t exceed $25,000 gross.
To be eligible for a retirement through VERA, you either need to be at least age 50 with 20 years of service, or you can be any age with 25 years of service. (So, if you’re hired under FERS at age 18 and offered a VERA after working 25 years, at 43 years old, you are the youngest possible age that someone can collect a full, immediate, non-disability FERS pension.)
While the retirement calculation utilizes the 1% multiplier, those who take an “early out” are eligible to receive SRS income.
At any age with 18 months of service, you might be eligible for a FERS disability retirement. An employee does need to be disabled, however, and in such a manner that, for at least one year, they are unable to perform their job’s duties or relocate to an accommodating workspace within their region. Claiming disability retirement benefits entails providing the employing agency with complete documentation about the disabling medical condition. After the agency has “exhausted all reasonable attempts” to keep the employee in a “productive capacity,” then that employee may claim disability retirement benefits.
It is important to remember that a disability pension amount will be offset by any social security disability benefits that might also be claimed at the same time, and you are not eligible for SRS payments. When someone 62 or over retires with a disability pension, they do get to use the 1.1% multiplier in their retirement calculation.
Mandatory and Special Retirements
There are some federal occupations where there are mandatory retirement ages. Law enforcement officers (LEOs), firefighters, and nuclear weapon couriers (NWCs) are required to retire at age 57. Air Traffic Controllers (ATCs) must retire at age 56. Because of this, they have different eligibility requirements. They can take a full, unreduced FERS annuity at age 50 with 25 years of service, or at 55 with 20 years. FERS employees who retire under these special provisions get to use a different multiplier in their retirement calculation: 1.7% for the first 20 years of service and 1% for any subsequent service. However, they do have to contribute .5% more to FERS each paycheck than regular FERS employees. The SRS was also created for these individuals, so naturally they are eligible for the social security supplement. In fact, if a federal LEO, firefighter, or ATC retires before reaching their MRA (as in minimum, not mandatory - see next section), their SRS payments are not subject to any earnings test reductions until reaching that age.
The Minimum Retirement Age
If you were born in 1947 or earlier, your MRA is 55. The oldest members of this group turned 62 in 2009. If born between 1948 and 1952, see the chart below:
|Birth Year||MRA||Years They Turned 62|
|1948||55 years, 2 months||2010/2011|
|1949||55 years, 4 months||2011/2012|
|1950||55 years, 6 months||2012/2013|
|1951||55 years, 8 months||2013/2014|
|1952||55 years, 10 months||2014/2015|
If you were born between 1953 and 1964, your MRA is 56. The oldest members of this group reached their MRA in 2020. If born between 1965 and 1969, see the chart below:
|Birth Year||MRA||Years They Reach MRA|
|1965||56 years, 2 months||2021/2022|
|1966||56 years, 4 months||2022/2023|
|1967||56 years, 6 months||2023/2024|
|1968||56 years, 8 months||2024/2025|
|1969||56 years, 10 months||2025/2026|
Anyone born in 1970 or later has an MRA of 57.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.