A previous column (Advantages and Disadvantages of FERS MRA+10 and MRA+20 Immediate Retirement) discusses an immediate retirement option available to federal employees covered by the Federal Employees Retirement System (FERS) called the “MRA+10” or “MRA +20” retirement option.
These retirement options are available to a FERS employee who has reached his or her minimum retirement age (MRA) and:
(1) With 10 to 19 years of creditable service (called the MRA +10 retirement) or
(2) With 20 to 29 years of creditable service (called the MRA+20 retirement option).
FERS employees who meet these requirements are eligible to retire as early as their MRA with less than 30 years of service. They are also eligible to keep all of their federal employee insurance benefits (health, life, dental and vision, long term care) throughout retirement.
A disadvantage of the MRA+10 and the MRA+20 immediate retirement is that there is a permanent reduction applied to the retired employee’s FERS annuity due to the fact that the FERS employee who retires immediately under the MRA+10 retirement option starts receiving his or her FERS annuity before the employee’s 62nd birthday. A FERS employee who retires immediately under the MRA+20 retirement option is subject to a permanent reduction applied to his or her FERS annuity due to the fact the employee is retiring before age 60.
This column discusses another retirement option available to a FERS employee who is eligible for the MRA+10 or the MRA +20 immediate retirement. This retirement option will allow a FERS employee to avoid any reduction in his or her FERS annuity by opting for what is called a “postponed” retirement. The advantages and the disadvantages of an MRA + 10 and an MRA +20 postponed retirement are presented in this column together with the procedures eligible employees must perform in order to retire under the postponed FERS retirement option.
Postponing Retirement Benefits
A FERS employee who is eligible to retire immediately under the MRA+10 or an MRA+20 retirement option is able to reduce or eliminate the age reduction penalty by electing to postpone the commencing date of their MRA+10 or MRA+20 FERS annuity.
The following two examples illustrate:
Example 1. Jamie entered federal service in March 2009. Jamie was born Jan. 4, 1966. As of May 2022, Jamie has 13 years of federal service and reached his MRA of 56 years and 4 months on May 4,2022. Jamie is eligible to immediately retire under the “MRA+10” retirement option as of May 4, 2022. If Jamie elects to retire on May 4,2022, his FERS annuity will be subject to a permanent reduction. The reduction is equal to 68 months (the number of months between the month and year that Jamie retires and the month and year of Jamie’s 62nd birthday) times 5/12 of 1 percent, or a 28.33 percent permanent reduction to his annuity. Because of this large FERS annuity reduction, Jamie decides to postpone the start of his FERS annuity.
Example 2. Betty entered federal service in May 1999. Betty was born Mar. 15,1964. As of May 2022, Betty has 23 years of federal service under FERS. Her MRA is age 56 years which she reached in March 2020. Betty is eligible to retire under the “MRA+20” retirement option. If she retires in May 2022, her FERS annuity will be subject to a permanent reduction, The reduction is equal to 22 months (the number of months between the month and year that Betty retires and the month and year of Betty’s 60th birthday) times 5/12 of 1 percent, or a 9.17 percent reduction to her annuity. Betty decides to postpone the start of her annuity.
Commencing Date of Postponed Annuity
A FERS employee who elects to separate from federal service rather than immediately retire under the MRA+10 or MRA+20 immediate option may elect a postponed FERS annuity to begin on any date later than the first day of any month following separation from federal service, subject to the following conditions:
• An election of a commencing date should be filed approximately 60 days before the designated commencing date of the annuity. The election must be made on OPM Form RI 92-19 (Application for Deferred or Postponed Annuity) downloadable here . It is important for a FERS employee who leaves federal service at his or her MRA and who elects a postponed retirement to understand that it is his or her responsibility to file Form RI 92-19 notifying OPM’s Retirement Office as to the commencing date of their FERS annuity. If a completed Form RI 92-19 is not completed and submitted to OPM’s Retirement Office, then the departed employee will not receive his or her FERS annuity. Also, as explained below, the employee’s federal insurance benefits (health, life, dental and vision) will not be restored.
• The former employee may not elect a postponed retirement commencing date that is earlier than the 31st day after the date the election is filed.
• A postponed annuity cannot begin later than the second day before the employee’s 62nd birthday (under an MRA+10 postponed retirement) and no later than the second day before the employee’s 60th birthday (under an MRA+20 postponed retirement), and
• An election of a commencing date becomes irrevocable on the day OPM authorizes the first regular annuity payment.
Annuity Reduction for Age
As a rule, a postponed FERS annuity is reduced by 5/12 of 1 percent for each full month (5 percent per year) by which the former employee’s chosen FERS annuity commencing date precedes the month of employee’s 62nd birthday. This is the case if the departed employee had between 10 and 19 years of service at the time of leaving federal service. The same reduction of 5/12 of 1 percent for each full month (5 percent per year) by which the former employee’s chosen FERS annuity commencing date precedes month of the employee’s 60th birthday if the departed employee had between 20 and 29 years of service at the time of leaving federal service.
An employee who elects postponed retirement can therefore avoid the reduction to the FERS annuity entirely by choosing the commencing date of the annuity:
• A date that is less than 1 full month before the month the employee becomes age 62 if the former employee had between 10 and 19 years of service when he or she left the government. The following example illustrates:
Example 3 (from Example 1 above). Jamie had 13 years of federal service when he left federal service on May 4, 2022 (his MRA). In order to avoid a reduction to his FERS annuity, Jamie decides to postpone the start of his FERS annuity until Dec. 15, 2027, about three weeks before he becomes age 62 on Jan. 4, 2028.
• A date that is less than one full month before the month the employee becomes age 60 if the former employee had between 20 and 29 years of service when he or she left federal service. The following example illustrates:
Example 4. (From Example 2 above). Betty had 23 years of federal service when she leaves federal service in May 2022. Betty will become age 60 on Mar. 15, 2024. If Betty elects to postpone the start of her FERS annuity until Feb. 20, 2024, then her FERS annuity will not be subject to any reduction when her first FERS annuity check is issued April 1, 2024.
Federal Health, Life, Dental and Vision Insurance Coverage Under a “Postponed” Retirement
If a FERS employee elects MRA+10 or MRA+20 postponed retirement thereby separating from federal service rather than immediately retiring and postponing the commencing date of his or her FERS annuity, then:
• The employee’s Federal Employee Health Benefits (FEHB) program health insurance is suspended
• The employee’s Federal Employees Group Life Insurance (FEGLI) program life insurance is suspended, and
• The employee’s Federal Employees Dental and Vision Insurance Program (FEDVIP) dental and vision insurance is suspended.
When the postponed annuity begins:
• The employee’s FEGLI life insurance may be restated based on the amount of FEGLI life insurance the separated employee had at the time of the separation from federal service. Also, the separated employee is eligible to continue the FEGLI life insurance into retirement and had been enrolled in that amount of FEGLI life insurance for at least the five years preceding the employee’s separation from federal service. The employee may elect reduced FEGLI coverage during OPM’s adjudication of the employee’s retirement application, and
• The employee may reenroll in the FEHB and FEDVIP programs. For the FEHB program, the employee must meet the usual requirements for continuing coverage into retirement (that is, the employee must have been a participant in the FEHB program for all of the last 5 years preceding the date on which the employee separated from federal service) when the annuitant separated. The employee may enroll in any FEHB plan or option, covering eligible family members if he or she want to.
Survivor Benefits
If an employee separates from federal service after having met the age and service requirements for an immediate “MRA+10” or an “MRA+20” retirement but dies before electing an FERS annuity start date (filling out and submitting Form RI 92-19), then he or she is deemed to have filed that application. The former employee is considered to have died as an annuitant, thereby ensuring the rights of survivors including the following benefits: (1) A survivor annuity benefit to a surviving spouse; (2) Children survivor benefits for eligible children; (3) Insurance benefits for eligible family members (spouses and children) (FEHB and FEDVIP) if the deceased was eligible to continue coverage into retirement; and (4) Lump sum payment to the person or persons entitled under the order of precedence of the deceased’s contributions to the FERS Retirement and Disability Fund.
Retirement Annuity Supplement
An employee who retires under the immediate or postponed MRA+10 or MRA+20 retirement is not eligible for the FERS Retiree Annuity Supplement.
Employee Procedures and Responsibilities for a Postponed Retirement
An employee who chooses not to file for an immediate MRA+10 or MRA+20 immediate retirement but chooses a postponed retirement and selects a starting date for his or her first FERS annuity check must:
(1) download from www.opm.gov/forms RI 92-19 (Application for Deferred or Postponed Retirement);
(2) Fill out Form RI 92-19 and mail the completed application to OPM’s Retirement Processing Office in Boyars, PA. The complete address is in on the form.
The separated employee must specify on Form RI 92-19 the starting date of his or her FERS annuity. Also, there is a section on Form RI 92-19 to request restatement of FEHB, FEGLI and FEDVIP insurance. A portion of Form RI 92-19 is presented below.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER®, Chartered Life Underwriter, Chartered Financial Consultant, Registered Health Underwriter and Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, located at 833 Bromley Street Suite A, Silver Spring, MD 20902-3019