FERS Employees Retiring Under the MRA+10 and MRA+20 Options Can Postpone FERS Annuity Commencing Date

A recent column, Federal Employees Who Leave Federal Service May Be Eligible for a Deferred Retirement, discussed the option of deferred retirement for FERS employees who leave federal service before they are eligible for an immediate retirement.

This column discusses the option of postponed retirement available to FERS employees who, when they reach their minimum retirement age (MRA) with at least 10 years and less than 30 years of Federal Employees Retirement System (FERS)  service, leave federal service and postpone the start of their FERS annuity.

SEE ALSO:

• Understanding the FERS Retirement Options
• FERS Employees May be Eligible for a Deferred Retirement

FERS MRA+10 and MRA+20 Retirement Option

Under the FERS retirement rules, a FERS employee can retire immediately when the employee reaches his or her MRA and with a minimum of 30 years of creditable service. An employee’s MRA depends on his or her year of birth. Table 1 summarizes MRA by birth year. Under FERS immediate retirement rules, a retiring FERS-covered employee receives his or her first of lifetime monthly FERS annuity checks one to two months after the employee retires. In addition, the employee keeps his or her Federal Employee Health Benefits (FEHB) program health insurance and Federal Employee Group Life Insurance (FEGLI) program life insurance benefits in retirement. This assumes that the retiring employee was a continuous participant in the FEHB and FEGLI programs during the five-year period ending on the employee’s retirement date.

Table 1. FERS MRA According to Birth Year

There are FERS employees who when they reach their MRA do not have 30 years of creditable FERS service. They are therefore not eligible for an immediate FERS retirement under the FERS regular retirement rules. But there is a provision that allows a FERS employee who reaches his or her MRA with at least 10 years but fewer than 30 years of creditable FERS service to retire immediately. For employees who have between 10 years and less than 20 years of service, this retirement option is called the MRA+10 immediate retirement. For employees who have between 20 years and less than 30 years of service, this retirement option is called the MRA+20 immediate retirement.

FERS Annuity Reduction Under MRA+10 and MRA+20 Immediate Retirement

There is, however, one disadvantage with respect to the MRA + 10 and the MRA +20 immediate retirement option. When a FERS employee retires under the MRA +10 or MRA +20 immediate retirement option, the retiring employee’s FERS annuity will be permanently reduced. Table 2 below summarizes the reduction for both MRA +10 and MRA +20 immediate retirements.

Table 2. MRA + 10 and MRA + 20 Immediate Retirement FERS Annuity Reductions

The following examples illustrate:

Example 1. Jan was born October 15,1967 and has an MRA of 56 years and 6 months. She entered federal service on July 8, 2009. Jan reached her MRA on April 15,2024 with 14 years and 9 months of federal service. Jan intends to retire under the MRA + 10 retirement rules on August 31, 2024. Her FERS annuity will be reduced as follows:

Number of months between September 2024 and October 2029 = 61 (five years and one month)

Reduction to Jan’s FERS annuity = 61 months x (5/12 of 1 percent per month) = 25.4 percent

Example 2. Peter was born September 20,1967 and has an MRA of 56 years and 6 months. He entered federal service on May 8,2002 and reached his MRA on March 20,2024 with 21 years and 10 months of federal service. Peter intends to retire under the MRA + 20 retirement rules on August 31, 2024. His FERS annuity will be reduced as follows:

Number of months between September 2024 and November 2027 = 38 (three years and two months)

Reduction to Peter’s FERS annuity = 38 x (5/12 of 1 percent per month) = 15.8 percent

Note the following with respect to Jan’s and Peter’s MRA + 10 and MRA + 20 retirements, respectively:

1. Jan’s 25.4 reduction to her FERS annuity is permanent. The reduction will not be restored when Jan reaches age 62.

2. Peter’s 15.8 reduction to his FERS annuity is permanent. The reduction will not be restored when Peter becomes age 60.

3. Under the FERS postponed retirement rules, Jan and Peter are eligible to keep their FEHB, FEDVIP and FEGLI insurance benefits assuming they have been enrolled in the FEHB and FEGLI programs for the five-year consecutive period ending on the day they retire and elect to start receiving their FERS annuities. Note that keeping FEHB, FEDVIP and FEGLI program insurance benefits is not allowed under the FERS deferred retirement rules.

4. Jan and Peter are not eligible to receive the FERS Retirement Annuity Supplement

5. Jan and Peter are not eligible for their first cost-of-living adjustment (COLA) on their FERS annuity until the year they become age 62.

Avoiding the FERS Annuity Reduction

If a FERS employee wants to avoid a FERS annuity reduction resulting from their retiring the MRA + 10 and MRA + 20 immediate retirement, the employee can “postpone” the receipt of their annuity until the retiring employee will not be subject to an annuity reduction. For a FERS employee retiring under the MRA + 10 retirement rules, this means postponing the receipt of the FERS annuity until the month and year the FERS employee becomes age 62. For an employee retiring under the MRA + 20 retirement, this means postponing the receipt of the FERS annuity until the month and year the FERS employee becomes age 60.

Note the following with respect to postponing the start of the FERS annuity under MRA + 10 and MRA + 20 postponed retirement:

1. A FERS employee who elects to postpone the receipt of the FERS annuity under the MRA + 10 and MRA + 20 retirement must notify their agency that they are leaving federal service and not immediately retiring. They are choosing therefore to postpone the start of their FERS annuity in order to avoid the age reduction.

2. FEHB program enrollment is suspended once the employee leaves federal service. Health benefits can be temporarily continued under the Temporary Continuation of Coverage (TCC) for 18 months. The employee must pay the full cost of FEHB program insurance. That full cost includes both the employee and federal government share of the cost, plus a two percent administrative charge. Once the departed employee applies for their FERS annuity to start and for their FEHB program benefit to be reinstated, FEHB program enrollment will be reinstated.

FERS Employees Retiring Under the MRA + 10 and MRA + 20 Options Can Postpone FERS Annuity Commencing Date

3. Once the FERS employee leaves federal service, his or her FEGLI life insurance enrollment is suspended until the FERS annuity starts. Once the FERS annuity starts, the FEGLI life insurance coverage that the employee had when he or she left federal service will resume.

4. In order to start the FERS annuity, the employee must download Form RI 92-19 (Application for Deferred or Postponed Retirement). Form RI 92-19 should be filled out and submitted to OPM’s Retirement Office two months before the month the FERS annuity starts. A portion of Form RI 92-19 is shown here:

FERS Employees Retiring Under the MRA + 10 and MRA + 20 Options Can Postpone Their FERS Annuity Commencing Date

The following examples illustrate:

Example 3. Same facts as in Example 1 except that Jan leaves federal service on August 31,2024 and chooses a postponed retirement. Jan becomes age 62 on October 15, 2029 (born October 15, 1967). She should submit her RI 92-19 in August 2029.

Example 4. Same facts as in Example 2 except that Peter leaves federal service on August 31,2024 and chooses a postponed retirement. Peter becomes age 60 on September 20, 2027 (born on September 20, 1967). Peter therefore should submit his RI 92-19 in July 2027.

Note the following:

1. With the MRA + 20 postponed retirement, an employee who starts receiving his or her FERS annuity at age 60 will not receive the FERS Retirement Annuity Supplement until he or she becomes age 62. In Example 4, when Peter starts receiving his FERS annuity the month after he comes age 60, he will not receive the FERS Retirement Annuitant.

2. If a FERS employee leaves federal service opting for the “postponed retirement” dies before filing Form RI 92-19, then the rights of the deceased former employee’s surviving family members would be protected. Eligible family members would be eligible to receive FERS survivor benefits and Social Security survivor benefits. This is because the deceased employee would be considered a federal retiree even though he or she was not receiving a FERS annuity at the time of death.