Understanding the New FERS Rules for Deferred Retirement

Example 1.  Ted, currently age 58 years and 2 months, was a federal employee under FERS until 2023, at which time he left federal service with 15 years of service. Ted was born May 10.1968 and his MRA is 56 years and 8 months. If Ted applies for his deferred FERS annuity now in July 2026, his FERS annuity will be reduced by a total of 19.17 percent (46 months times 5/12 of one percent).

Example 2. Anne, age 64, was a federal employee under FERS until 2020 at which time she left federal service at age 58 with 13 years of federal service under the deferred retirement option. When Anne became 62, she did not apply for her FERS deferred retirement and therefore did not receive her deferred FERS annuity. Two years later at age 64, a friend of Anne reminded Anne that she had to apply for her deferred retirement. She did and starting two months after Anne submitted her retirement application to OPM,  she received her first monthly FERS annuity check. Because she applied for her deferred annuity after she became age 62, there was no reduction to Anne’s monthly FERS annuity. However, Anne was not eligible to receive retroactive FERS annuity payments back to the month after she became 62.

Note the following circumstances:

1. If a former FERS employee had between 20 and 30 years of creditable FERS service, left federal service and elects to have their FERS annuity starting the month after the former employee becomes age 60 , then there is no age reduction applied to the FERS annuity.
2. If a former FERS employee had 30 or more years of creditable FERS service and left federal service before the month before the month they reached their MRA, then the former employee can apply for deferred retirement a few months before the month they reach MRA. They will then receive a no reduction FERS annuity starting the month after they reach MRA.

Note that a FERS employee who leaves federal service before their MRA cannot later apply for deferred retirement and receive their FERS annuity while they are a reemployed annuitant.

Federal Health Benefits and Life Insurance Coverage

If a former employee with at least five years of federal service left federal service, applies for deferred retirement and is receiving a  deferral FERS annuity, then the deferred annuitant is eligible to re-enroll in the Federal Employee Health Benefits (FEHB) program health insurance and in the Federal Employees Group Life Insurance (FEGLI) life insurance program. This is the case even if the former employee was enrolled in the FEHB program and FEGLI program throughout the time they were in federal service.

FERS Annuity Supplement

Former FERS employees who receive a deferred annuity are not eligible for the FERS annuity supplement.

Spousal Survivor Annuity

If a former FERS employee who left federal service and who is eligible for FERS deferred retirement is married when their FERS deferred annuity begins, then the FERS annuity will be computed with a reduction to provide a maximum spousal survivor annuity (equal to 50 percent of the FERS gross annuity) for the spouse upon the former employee’s death.

The former FERS employee can elect to provide a partial survivor annuity (25 percent of the FERS gross annuity) or no survivor annuity; however, the former FERS employee must have their spouse’s notarized consent to elect either of these options. The former employee can also elect a survivor annuity for a former spouse or an insurable survivor annuity.

Commencing Date of FERS Deferred Retirement

The commencing date of deferred FERS retirement  for a departed employee with at least 10 years of service begins:

1. The first day of the month after the departed employee reaches their MRA; or
2. Any date after the departed employee’s MRA up to age 62. The purpose of delaying the stating date is done in order to decrease or avoid the age penalty reduction to the FERS annuity.

The following examples illustrate:

Example 3.  Margaret is a former FERS employee who left federal service in 2023 at age 54 with 18 years of federal service. Margaret’s birth date is February 15, 1969. Her MRA is 56 years and 10 months, which is December 15, 2025. The earliest date that Margaret’s deferred annuity can begin is January 1, 2026, which is the first day of the month after Margaret reached her MRA.

Example 4. Robert is a former FERS employee who left federal service in 2021 at age 55 with 12 years of federal service. Robert’s birth date is May 18, 1966. His MRA is 56 years and 4 months, which is September 18, 2022. The earliest date that Robert’s deferred annuity can begin is October 1, 2022, which is the first day of the month after Robert reached his MRA. If Robert were to start his deferred annuity on October 1, 2022, his FERS annuity would be reduced by approximately 27.92 percent (5/12 of 1 percent per month 67 months percent) . Robert therefore decides to apply for his deferred annuity to start on May 18,2028, his 62^nd birthday in order to avoid the FERS annuity reduction.

A deferred annuity for a departed employee who has at least five years of creditable FERS service but less than 10 years of service may begin on the first day of the month after the departed employee reaches age 62.

How to Apply for a Deferred Annuity

Former employees who left federal service and who are eligible for a deferred retirement will need to submit their application through OPM’s Online Retirement Application (ORA) platform - https://www.opm.gov/retirement-center/apply/online-retirement-application/.

Submitting the Application

A former employee who is applying for deferred retirement should submit their application directly to OPM through ORA at least 60 days before the former employee wants their deferred annuity to begin. The following example illustrates:

Example 5.  Howard was born October 20,1964 and  left federal service at age 58 in 2022. When he left federal service Howard had 12 years of federal service. Howard will be aged 62 on October 20, 2026. In order to avoid any reduction to his FERS annuity, Howard has chosen October 20,2026 for his deferred retirement to begin. Howard should submit his ORA no later than August 21, 2026, which is 60 days before his deferred retirement is to begin.

In order to start their deferred application, the former employee will need to click on the “Start deferred or postpone application” hyperlink. Then follow the instructions to create their OPA account and complete the Login.Gov identity verification process.

The ORA platform has a dedicated Help.page that contains useful information for navigating OPA and contacting the ORA Technical Support Team.

What a Former Employee Needs to Apply for a Deferred Annuity for a Deferred Annuity

When completing their deferred retirement application, a former employee will need to know:

1. The beginning and end dates of federal service for each agency the employee worked for throughout their federal career;
2. The beginning and ending dates of any honorable active-duty military service;
3. Details about the former employee’s military service deposit, if possible;
4. If the former employee previously applied for a refund, deposit, or retirement with OPM; and
5. If the former employee ever received workers’ compensation from the Department of Labor.

The former employee is advised to visit the Application Tips page for more information about documentation the former employee may need to complete the deferred retirement application through ORA.

Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.