Reemployment in Federal Service (FERS)

This is the third of a series of columns discussing how certain life events can affect a federal retiree’s benefits.

This column presents how reemployment in federal service can affect a FERS annuitant’s current and future benefits.  When a FERS annuitant (a federal retiree who retired from federal service under the Federal Employees Retirement System (FERS) and receiving a FERS annuity) becomes reemployed in federal service, the annuitant’s FERS annuity will stop if:

‧ The annuitant is a disability annuitant whom the Office of Personnel Management (OPM) has found recovered or restored to earning capacity prior to reemployment; or
‧ The annuitant is a disability annuitant who was medically disqualified from continued membership in the National Guard.

Federal Employee Health Benefits (FEHB) Program Coverage

If a FERS annuitant’s annuity stops upon reemployment into federal service, then the annuitant’s FEHB program health insurance coverage ceases. Coverage ceases both for the annuitant and for the annuitant’s eligible family members.

If the annuitant’s appointment in federal service gives the newly appointed employee eligibility for FEHB program coverage, then the newly appointed employee can re-enroll in the FEHB program, both for the employee and for eligible family members.

Federal Employees Group Life Insurance (FEGLI) Coverage

If a FERS annuitant’s annuity stops upon reemployment in federal service, then the annuitant’s FEGLI life insurance coverage, both the “basic” Coverage and Additional Coverages: A, B and C, ceases without a right to convert to an individual whole life insurance policy. The reemployed annuitant can reenroll in the FEGLI program as a newly hired federal employee under the same conditions as any other permanent employee.

Federal Employees Dental and Vision Program (FEDVIP) Coverage

If a FERS annuitant’s annuity stops upon reemployment in federal service, then the annuitant’s eligibility for FEDVIP participation ceases. If the reemployed annuitant’s appointment in federal service gives the reemployed individual eligibility for FEHB program coverage, then the reemployed individual may enroll in the FEDVIP.

If the FERS annuitant returns to federal service and still receiving their FERS annuity (see below, “FERS Annuity Continues”), then the reemployed annuitant must contact BENEFIEDS (1-877-888-3337) if the reemployed annuitant wants their FEDVIP premiums to be deducted from their paychecks. Most reemployed annuitants want to make that change because annuitants pay FEDVIP premiums with after-taxed dollars (premiums are deducted from their after-taxed annuity) while employees pay FEDVIP premiums with before-taxed dollars (premiums are deducted from their gross salary before all payroll taxes are withheld). If the reemployed annuitant’s job position does not convey FEDVIP eligibility, then the reemployed annuitant may retain FEDVIP coverage as an annuitant.

Future Benefits Upon Cessation of the FERS Annuity

When a federal annuitant’s FERS annuity stops, the annuitant has the same status as any other federal employee employed in an equivalent position with a similar service history. When the reemployed annuitant leaves federal service, the reemployed annuitant will be entitled to either an immediate or a deferred annuity based on this new separation. In general, the FERS annuity will be computed on the basis of reemployed annuitant’s service and salary history at the time of future separation from federal service.

If the reemployed annuitant is reemployed with a Department of Defense agency, then the federal annuitant may be subject to a dual compensation waiver that allows the reemployed annuitant receipt of both the FERS annuity and salary with no offset. The reemployed annuitant will not be entitled to further retirement benefits under this waiver. If the reemployed annuitant retired under a discontinued service provision, then the reemployed annuitant may not be eligible for this waiver and becomes subject to the FERS reemployment provision. This will apply as an offset to the reemployed annuitant’s salary based on the monthly amount of their monthly FERS annuity.

FERS Annuity Continues

If the reemployed annuitant’s FERS annuity does not cease under the rules explained above, the reemployed annuitant will continue to receive their full FERS annuity while the reemployed annuitant’s salary will be reduced by the amount of the FERS annuity paid for the period worked. If the reemployed annuitant does not work full-time, the reduction in pay will be adjusted proportionally.

FERS Annuity Continuation and FEHB Program Coverage

If a reemployed annuitant’s FERS annuity continues, then the reemployed annuitant’s FEHB program coverage will generally be withheld by the reemployed annuitant’s agency in order to take advantage of the premium conversion (FEHB program premiums are withheld bi-weekly from the reemployed annuitant’s gross salary). If the reemployed annuitant’s appointment does not make the reemployed annuitant eligible for FEHB program benefits with the agency or if the reemployed annuitant elects to not participate in FEHB program premium conversion with the agency, then OPM will continue to withhold premiums from the reemployed annuitant’s after-taxed monthly FERS annuity.

FERS Annuity Continuation and FEGLI Program Coverage

If a reemployed annuitant’s FERS annuity continues after being reemployed in federal service, then the reemployed annuitant retains the life insurance they have as an annuitant. If the type of annuity the rehired annuitant has makes the rehired annuitant eligible for FEGLI coverage as an employee, then any “Basic Life” insurance, Standard (Option A) and Family (Option C) insurance coverages that the reemployed annuitant has as an annuitant are suspended and will continue as an employee. The reemployed annuitant will have the option of keeping Additional (Option B) as an annuitant or having it as an employee.

Future Benefits of a Reemployed Annuitant

Reemployment may increase a reemployed annuitant’s retirement and death benefits. A reemployed annuitant can earn either a: (1) Supplemental annuity; or (2) Redetermined annuity, as explained below:

‧ A supplemental annuity is a FERS annuity that is added to the reemployed annuitant’s present FERS annuity. Those reemployed annuitants who work on a full-time, continuous basis for at least a year may be entitled to a supplemental FERS annuity. Those reemployed annuitants who work part-time must work a proportional longer period to earn a supplemental annuity.
‧ A redetermined annuity is a recomputed annuity that takes the place of the reemployed annuitant’s present FERS annuity. If the reemployed annuitants’ reemployment continues for at least five years (or the part-time equivalent) and if the reemployed annuitant qualifies for a retirement at separation from the reemployment service, then the reemployed annuitant may elect a redetermined FERS annuity.

If the reemployed annuitant dies while reemployed after establishing eligibility for either a supplemental or redetermined annuity, then the reemployed annuitant’s surviving spouse may have their FERS survivor annuity benefit either increased or recomputed.

Employment in the Private Sector and the Effect on the FERS Basic Annuity and Annuity Supplement

A FERS annuitant’s employment outside in private industry will not affect their FERS annuity unless the annuitant is under age 60 and receiving a FERS disability annuity. A FERS employee who retires before age 60 under a FERS disability retirement and works is subject to the 80 percent earnings limit. A FERS disability annuitant will reach the 80 percent earnings limit during any calendar year in which the annuitant’s income from wages and self-employment is at least 80 percent of the current rate of basic pay for the federal service position from which the disability annuitant retired.

With respect to the FERS Annuity Supplement, a FERS annuitant who retired from federal service before age 62 and receiving the FERS Annuity Supplement will have their annuity supplement reduced if their earned income (salary/wages and net-self-employment income) is over the Social Security annual earnings limit (the same “earnings” test for Social Security recipients who are younger than their full retirement and working).