FERS Retirement vs. Resignation

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stan1
Posts: 8363
Joined: Mon Oct 08, 2007 4:35 pm

FERS Retirement vs. Resignation

Post by stan1 » Fri May 22, 2020 6:53 pm

Earlier this week a co-worker announced that he had resigned 2 years before he reached MRA to take an outside job. It got me thinking about what would lost in making the decision on whether to resign and then take a deferred pension in a few years or hold out until MRA to take an immediate pension.

Let's assume 30 years of service and MRA is within 5 years and a VERA is not available. Employee is FERS not CSRS. Not law enforcement or other special duty. No prior military service. Also assume there is either offsetting income or no need to work so the loss of income itself is not a factor.

With a resignation before MRA and a deferred pension a FERS employee:
  • Is not eligible to carry FEHB medical insurance into retirement
  • Loses accumulated sick leave that is not credited towards years of service
  • Is not eligible for FERS supplement
  • Pension is no longer adjusted upward due to additional years of service
  • Pension is no longer adjusted upward due to impact of COLAs on High 3 salary
  • Is not eligible to carry FEGLI or federal dental/vision insurance into retirement
Anything else major in the way of lost benefits with a deferred annuity or benefits that are kept with retirement at MRA/30 with an immediate annuity? I do realize it can be situational, very complicated and there are many special cases. My co-worker seemed to think he would be eligible to opt back in to FEHB once he reached 60. He'd already punched out so I didn't argue the point with him.

SteadyOne
Posts: 174
Joined: Fri Mar 22, 2019 5:26 pm

Re: FERS Retirement vs. Resignation

Post by SteadyOne » Fri May 22, 2020 7:33 pm

stan1 wrote:
Fri May 22, 2020 6:53 pm
Earlier this week a co-worker announced that he had resigned 2 years before he reached MRA to take an outside job. It got me thinking about what would lost in making the decision on whether to resign and then take a deferred pension in a few years or hold out until MRA to take an immediate pension.

Let's assume 30 years of service and MRA is within 5 years and a VERA is not available. Employee is FERS not CSRS. Not law enforcement or other special duty. No prior military service. Also assume there is either offsetting income or no need to work so the loss of income itself is not a factor.

With a resignation before MRA and a deferred pension a FERS employee:
  • Is not eligible to carry FEHB medical insurance into retirement
  • Loses accumulated sick leave that is not credited towards years of service
  • Is not eligible for FERS supplement
  • Pension is no longer adjusted upward due to additional years of service
  • Pension is no longer adjusted upward due to impact of COLAs on High 3 salary
  • Is not eligible to carry FEGLI or federal dental/vision insurance into retirement
Anything else major in the way of lost benefits with a deferred annuity or benefits that are kept with retirement at MRA/30 with an immediate annuity? I do realize it can be situational, very complicated and there are many special cases. My co-worker seemed to think he would be eligible to opt back in to FEHB once he reached 60. He'd already punched out so I didn't argue the point with him.
You will lose federal health coverage in retirement. The cost of replacing it will be huge.
“Every de­duc­tion is al­lowed as a mat­ter of leg­isla­tive grace.” US Federal Court

Topic Author
stan1
Posts: 8363
Joined: Mon Oct 08, 2007 4:35 pm

Re: FERS Retirement vs. Resignation

Post by stan1 » Fri May 22, 2020 8:20 pm

SteadyOne wrote:
Fri May 22, 2020 7:33 pm
You will lose federal health coverage in retirement. The cost of replacing it will be huge.
Correct, that one is already on the list. Has to be figured out for both pre-Medicare and post-Medicare.

motorcyclesarecool
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Joined: Sun Dec 14, 2014 7:39 am

Re: FERS Retirement vs. Resignation

Post by motorcyclesarecool » Fri May 22, 2020 8:35 pm

I’ve got to wonder if perhaps your friend wasn’t frustrated or sick or forced out and is putting a positive spin on it? I just don’t see the rationale.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

rkhusky
Posts: 9256
Joined: Thu Aug 18, 2011 8:09 pm

Re: FERS Retirement vs. Resignation

Post by rkhusky » Fri May 22, 2020 9:50 pm

This thread might be of interest:
viewtopic.php?t=135087

rich126
Posts: 1449
Joined: Thu Mar 01, 2018 4:56 pm

Re: FERS Retirement vs. Resignation

Post by rich126 » Fri May 22, 2020 10:18 pm

I believe you are wrong with sick leave. It is added to years of service for fers retirement. I left before immediate retirement but qualify for a postponed retirement so I do get health insurance at 60. There are a lot of government jobs that have horrible management. And places I worked would be a huge hazard during the virus due to a lack of cleaning, lack of personal space, many offices are open space, etc.

I actually left twice.

delamer
Posts: 9949
Joined: Tue Feb 08, 2011 6:13 pm

Re: FERS Retirement vs. Resignation

Post by delamer » Fri May 22, 2020 10:24 pm

I think you’ve hit the highlights. You also lose the TSP match, but you might get the equivalent at another job.

You former co-worker is in for an unpleasant surprise regarding FEHB.

trueblueky
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Joined: Tue May 27, 2014 3:50 pm

Re: FERS Retirement vs. Resignation

Post by trueblueky » Fri May 22, 2020 10:35 pm

The pension calculation is frozen in time with no adjustment for inflation between leaving government service and starting the pension.

Topic Author
stan1
Posts: 8363
Joined: Mon Oct 08, 2007 4:35 pm

Re: FERS Retirement vs. Resignation

Post by stan1 » Sat May 23, 2020 7:52 am

rich126 wrote:
Fri May 22, 2020 10:18 pm
I believe you are wrong with sick leave. It is added to years of service for fers retirement. I left before immediate retirement but qualify for a postponed retirement so I do get health insurance at 60. There are a lot of government jobs that have horrible management. And places I worked would be a huge hazard during the virus due to a lack of cleaning, lack of personal space, many offices are open space, etc.

I actually left twice.
Thanks, I think you are describing an MRA +10 postponement (one of the many special cases). In that case there is a path to FEHB.

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