Don’t Get Furloughed, Retire! A FERS Deferred Annuity Primer

Sequestration and the threat of Administrative Furloughs have many FERS employees retiring now and opting for a FERS Deferred Annuity.

OPM reported record retirements once again for the month of February – I’m eating a huge bucket of Kentucky Fried Crow with a side order of humble pie regarding my prediction that few (if any) FERS employees would retire in 2013.  February requests to retire outnumbered the requests in January, and furthermore, February retirement requests were up 218 percent versus requests from the same month last year.

This is especially odd when you factor in that most OPM retirement requests occur in batches at the beginning or end of each calendar year.

This matches up with some recent anecdotal evidence I received when I met a fellow FERS employee at an engineering standards training seminar (Don’t worry, Budget Whistleblowers- The training session was was local and no DTS/TDY funds were expended).

As the fellow FERS employee and myself compared notes on how our commands were dealing with the sequestration-driven Administrative Furloughs, he mentioned, “It’s OK- I’ve got my 20 years in and I’m ready to punch out”.  I prodded a bit further by politely mentioning he looked a lot younger than 57.  He replied, “Oh yeah, I’m not waiting anymore-  I’m doing the Deferred Annuity.”

 Which brings us to today’s Sequestration Survival Topic- the FERS Deferred Annuity.

You are eligible for a FERS Deferred Annuity if you meet the following:

• Completed at least 5 years of creditable civilian service – Eligible for FERS Deferred Annuity at age 62.
• Completed at least 10 years of “creditable service”, including 5 years of civilianservice- Eligible for FERS Deferred Annuity at any time after your Minimum Retirement Age (MRA).
  •  Your MRA ranges from age 55 (if you were born before 1948) to age 57 (if you were born after 1969).

** See “What’s your Service Computation Date” for more details on “Creditable Service” (includes Military Service Credit Deposit) versus “Creditable Civilian Service” (purely Federal Employment in most cases).

 More facts to know about the FERS Deferred Annuity:

• Your annuity calculation is “High-3 Salary” x Number of Creditable Years.
• Annuity is reduced by 5% per year for each year you retire prior to age 62.
• If you have 20 or more years of “creditable service”, the 5% yearly annuity reduction penalty starts prior to age 60 (not 62).
• You receive no FEHB (Health Care) benefit in retirement if you elect a FERS Deferred Annuity.
• You are still eligible for COLA and WILL receive a COLA starting at age 62.

So why are so many federal employees headed for the exits this year?  I postulate:

• TSP account balances have recovered along with the stock market (“My 401(k) is no longer a $201K”).
• 2+ years of pay freezes plus the threat of Administrative Furloughs have made career federal employees feel less valued on the job.
• Some Federal Employees are eligible for a Voluntary FERS retirement.
• Administrative Furloughs have no effect on the FERS “High-3 Average” Salary calculation, as the calculation is based on “Stated” base pay rather than “actual” pay received during furlough pay periods.
• Administrative Furloughs are having the effect originally desired by Congress– To make FERS employees miserable enough to retire early (opt for FERS Deferred Retirement) without Congress needing to offer them costly RIF/VERA/VSIP bonus incentives up front (although this postulate also makes a quantum leap assumption that there was Intelligent Design inherent in the original Sequestration Law).
• ObamaCare’s public exchange option has devalued the FEHB component of a FERS retirement for some retirees.

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