Impact of Early Retirement on Benefits and Annuities
When government agencies need to downsize or restructure, they may offer eligible employees early retirement through the Voluntary Early Retirement Authority (VERA).
How Early Retirement Affects Your FERS Annuity
Your FERS annuity begins on the first day of the month after retirement. It is calculated based on your highest three consecutive years of salary (high-3 average) and your total years and months of creditable service. Any unused sick leave can be added to your service time.
FERS employees who retire early (before age 55) do not face an annuity reduction. Additionally, employees with at least one year of FERS service qualify for the FERS Annuity Supplement upon reaching their Minimum Retirement Age (MRA) — which falls between 55 and 57, depending on birth year. This supplement continues until age 62, when Social Security benefits become available, though it is subject to an earnings cap.
Effects on Federal Employee Benefits
Employees retiring under VERA or receiving a Voluntary Separation Incentive Payment (VSIP) must meet certain criteria to maintain their Federal Employees Health Benefits (FEHB) coverage in retirement. Specifically, they must have been enrolled in FEHB for at least five years before retirement or continuously since first becoming eligible, unless an exception applies.
Similarly, to keep Federal Employees Group Life Insurance (FEGLI) in retirement, employees must have had coverage for at least five years before retiring. The cost and coverage level depend on the employee’s elections at retirement.
Post-Retirement Employment Considerations
Early retirees are free to work outside the federal government without restriction. However, FERS retirees receiving the annuity supplement should be mindful that earnings beyond a certain threshold may result in a reduction or termination of the supplement.
If a retired federal employee returns to federal service, they become a reemployed annuitant. In this case, their annuity continues, but their salary is typically reduced by the annuity amount unless the Office of Personnel Management (OPM) grants a waiver. After at least one year of full-time reemployment, they may qualify for a supplemental annuity. After five years, they can choose between a supplemental annuity or a recomputed annuity based on their new federal service.
For personalized guidance on your federal retirement benefits and early retirement options, consult a Federal Retirement Consultant® to ensure you’re fully prepared for the future.
