If you are leaving your federal job before retirement eligibility you can ask that your retirement contributions be returned to you in a lump-sum payment, or wait until you are retirement age to apply for monthly retirement benefit payments.
If you get a refund of your retirement contributions after separation when not eligible for an immediate annuity, you will no longer be eligible to receive monthly payments when you reach retirement age. However, if you choose to receive a deferred annuity, it will be frozen in time; that is, it will be based on your years of service and your earnings record at the time you left the government. It will not be adjusted for inflation occurring between the time you left and when you begin receiving the annuity, nor will you get credit for years of work or earnings rates achieved after leaving the government.
General—If you are leaving your federal job and want a refund of your retirement contributions, you can get an application from www.opm.gov/forms or your personnel office, complete it, and return it to them. The form for CSRS employees is Application for Refund of Retirement Deductions (CSRS), Standard Form 2802, and the form for FERS employees is SF 3106, Application for Refund of Retirement Deductions (FERS).
If you are no longer in the federal service, go to that same site or contact the Office of Office of Personnel Management, P.O. Box 45, Boyers PA 16017-0045. Specify your retirement plan.
If you were under FERS, you will get interest on the refund of those contributions if you worked more than one year, plus interest at a rate linked to certain government securities. If you were under CSRS, interest will be included in the refund of those contributions if you have more than one but less than five years of service.
Interest is paid at 3 percent. Interest does not accrue after your separation. No additional interest would be due you, for example, if you waited two years before applying for a refund.
Your retirement contributions are not taxable, but interest included in the payment is taxable.
The Internal Revenue Service considers FERS and CSRS to be defined benefit plans. You can rollover the taxable portion, which is the interest amount. If your interest is more than $200 you can request a direct rollover to an Individual Retirement Account (IRA) or other employer retirement plan that accepts these payments. If you choose not to rollover an interest payment of $200 or more, OPM will withhold federal income tax at the rate of 20 percent.
CSRS—You may receive a refund of your Civil Service Retirement System contributions if:
- you separate from federal service for at least 31 consecutive days; or you transfer to a position in which you are not subject to CSRS deductions or deductions under the Federal Employees Retirement System, and you remain in such a position for at least 31 consecutive days;
- you file an application for a refund of your retirement contributions with OPM;
- you are not reemployed in a position subject to CSRS deductions at the time you file an application for a refund;
- you will not become eligible to receive an annuity within 31 days after filing the application;
- you notify your spouse and any former spouse that you have filed an application for a refund (you do not have to notify a former spouse if you were divorced before May 7, 1985, or if your marriage to that person lasted less than nine months, or if you had less than 18 months of CSRS-covered service); and
- your receipt of the refund would not end the court-ordered right of any spouse or former spouse to future benefits based on your service.
Regardless of your length of service, if you leave government service for any reason or transfer to another federal job under another retirement system, you may withdraw your CSRS contributions under the above conditions. (Note: You may be barred from receiving a refund if the refund would end the court-ordered right of any spouse or former spouse to future benefits based on your service.)
Remember that only the amount you have paid in can be refunded to you—the agency contribution remains in the retirement fund.
The application form, Standard Form 2802, should be filed through your agency; if you have been separated for more than 30 days, the form should be submitted to the Office of Personnel Management, Civil Service Retirement System, Boyers, PA 16017.
Generally, your receipt of a refund of retirement contributions voids any future annuity rights for the time covered, unless you are later reemployed under the CSRS or FERS and repay the withdrawal with interest or accept an annuity reduction. Anyone who received a refund covering a period of service that ended before March 1, 1991 can choose to have their annuity actuarially reduced based on their age and the amount of redeposit, including interest, owed at the time of retirement. The reduction is calculated according to life expectancy tables, with the design of spreading out the amount over an average lifetime from that point.
FERS—You may apply for a refund of your retirement contributions if you have been separated from federal service for at least 31 days (or have occupied a position not covered by FERS for at least 31 days). If you have more than one year of service, interest on the contributions will be part of the refund.
Before you can receive a refund, you generally must notify your spouse and any former spouse that you have filed the application. Also, you may be barred from receiving a refund if the refund would end the court-ordered right of any spouse or former spouse to future benefits based on your service.
Those who later return to federal service may make redeposits with interest to count that time in their FERS benefit calculations. If you have a CSRS component and you received a refund covering a period of service that ended before March 1, 1991, to recapture that service time you have the choice of either making the redeposit for that service or having the CSRS component of your annuity actuarially reduced, as described above.
CSRS—Employees with five years or more under the CSRS and who do not take a refund on separation before retirement eligibility have title to a deferred annuity at age 62. Leaving the contributions in does not prevent you from requesting a future refund, provided you file an application for refund with OPM at least 31 days before the commencing date of your deferred annuity.
See also, Calculating a Deferred Annuity
If you have not withdrawn your contributions and should die before attaining age 62, a lump-sum of the total of your contributions would be paid to your survivors as a death benefit.
To apply for a deferred retirement, use OPM form 1496A, Application for Deferred Retirement. Call (888) 767-6738, go to www.opm.gov/forms, or write OPM, P.O. Box 45, Boyers PA 16017-0045. Complete the form and mail it to OPM no sooner than two months before you are 62. The deferred annuity begins on your 62nd birthday.
The annuity is computed according to the standard formula expressed as a percentage of your “high-3” average salary (the highest salary you earned in any consecutive three-year period, usually your last 36 months):
- 1.50 percent per year for the first five years plus
- 1.75 percent per year for the next five years plus
- 2.00 percent per year for service over 10 years.
FERS—If you have at least five years of creditable civilian service for which withholdings or deposits remain in the retirement fund, and you are not eligible for an immediate retirement benefit, you will be eligible for a deferred annuity beginning on the first day of the month after you attain age 62. Alternatively, if you have at least 10 years of creditable service, you may elect to receive a deferred annuity as early as the first day of the month after you attain your “minimum retirement age”—for the pertinent age depending on your year of birth, see What If I Hit a ‘Magic Number’?
If you are eligible for a deferred annuity beginning after you attain your MRA, your deferred annuity will be reduced by 5/12 percent for each month (5 percent per year) by which the commencing date of annuity precedes your 62nd birthday, unless you have at least 30 years of service; have 20 years of service and postpone the commencing date until you are age 60; or have at least 20 years of service as an air traffic controller, firefighter, law enforcement officer, or member of Congress.
Go to www.opm.gov/forms, call (888) 767-6738 or write: OPM, P.O. Box 45, Boyers, PA 10617-0045 for form RI 92-19, Application for Deferred or Postponed Retirement.
The deferred annuity is based on the length of your service and your high-3 average salary. The basic annuity computation formula is 1 percent of your high-3 average pay times years of creditable service. If you retire at age 62 or later with at least 20 years of service, a factor of 1.1 percent is used rather than 1 percent.
Military service—If you want to make a deposit for post-1956 military service so that you can receive credit for this service in the computation of a deferred annuity, you must pay the deposit to your employing agency before you separate from federal employment. OPM cannot accept your payment.
Insurance—You generally are not eligible for FEHB coverage when you are receiving a deferred annuity, and your surviving spouse is not eligible for FEHB coverage as a survivor annuitant. However, a former spouse may be eligible for FEHB coverage under the spouse equity provisions.
Employees who retire on a deferred annuity are not eligible to continue Federal Dental and Vision Insurance Program coverage after separation. Nor are they generally eligible to enroll in it; the exception is that FERS employees who separate with eligibility for a FERS “minimum retirement age plus 10 years of service” annuity may reenroll in FEDVIP within 60 days of beginning that annuity.
You cannot reinstate your FEGLI life insurance benefits coverage if you receive a deferred annuity.
Those who separate with eligibility for a deferred annuity remain eligible to apply for Federal Long Term Care Insurance Program coverage if they aren’t already enrolled; if they are already enrolled, they can continue it by continuing to pay the premiums.
Survivor Benefits—If you die before applying for a deferred annuity and you have less than 10 years of creditable service or no eligible survivor, any contributions remaining in the retirement fund are paid in a lump-sum (with interest) to your designated beneficiary or person in the order of precedence set by law.
If you die before applying for a deferred annuity, your surviving spouse is entitled to a survivor annuity if:
- you have at least 10 years of creditable service for which withholdings or deposits remain in the fund (five years of which is creditable civilian service); and
- your spouse was married to you at the time of your separation from federal service.
Your surviving spouse may elect to receive a lump-sum payment of your retirement contributions in lieu of the survivor annuity.
*Excerpted from FEDweek’s Book of Answers