Leaving Federal Service for Private Sector

The Private Sector Jump Doesn't Have to Mean Losing Your Pension

Federal employees leaving for private sector jobs routinely overestimate what they'll lose and underestimate what stays. If you have 5 or more years of creditable civilian service under FERS, your pension is vested — it belongs to you regardless of when you leave. The real questions are about timing, health insurance, and whether the lump-sum refund temptation is worth the trade-off.

What Travels With You

Your FERS pension survives as a deferred annuity if you have at least 5 years of creditable civilian service and leave your contributions in the fund. It can begin at age 62 with 5–9 years of service, at your MRA with 10–29 years (reduced if under 62), at your MRA with 30+ years (unreduced), or at age 60 with 20+ years (unreduced). The annuity formula uses your High-3 average salary frozen at the level when you separated — no inflation adjustment until payments start.

Your TSP account stays open as long as your vested balance is $200 or more. You can leave it invested in the same funds, reallocate, take partial withdrawals, or roll it into your new employer's 401(k) or an IRA. Many separating employees keep their TSP for the low expense ratios alone.

Annual leave pays out as a lump sum at your final hourly rate. Sick leave is not cashed out — it's either forfeited (deferred retirement) or credited toward service time (postponed retirement).

What You Lose — and the Gaps to Plan For

Health insurance is the sharpest break. If you are enrolled in FEHB or PSHB, coverage continues through the end of the pay period in which you separate, followed by a free 31-day extension. You can then elect TCC for up to 18 months at 102% of the total premium. After TCC expires, deferred retirees lose FEHB eligibility permanently. Postponed retirees — those who reached MRA with 10+ years, including at least 5 years of creditable civilian service — can re-enroll when the annuity starts.

If your new employer offers health coverage, this gap might not matter. If they don't, or if there's a waiting period, you need to plan for it: TCC, ACA marketplace, or spouse's coverage.

FEGLI life insurance terminates at separation, followed by a free 31-day extension of coverage. You can generally convert to an individual policy within 31 days after receiving SF 2819 or 60 days after coverage ends, whichever comes first; OPM allows belated conversion requests in limited circumstances. Private sector employers typically offer their own group term life, so evaluate whether conversion makes sense for your situation.

Agency matching contributions to TSP stop on your last day. The Agency Automatic 1% contribution vests after 3 years of creditable civilian service, or after 2 years for certain specialized appointments; any unvested amount is forfeited when you leave.

The SF 3106 Refund Question

Your former agency's HR exit briefing will present the option to cash out your FERS contributions via SF 3106. For someone leaving after 8 years at a GS-12 salary, the refund depends heavily on contribution tier: employee rates are 0.8% for original FERS, 3.1% for FERS-RAE, or 4.4% for FERS-FRAE, plus applicable interest. It feels like real money.

The trade-off: taking the refund removes that service from your annuity calculation unless you later qualify for and complete a redeposit. If you left with 10 years of service and a High-3 of $85,000, your deferred annuity at 62 would be roughly $8,500 per year for life — about $708 per month. That pension would pay back the refund amount in under three years. For most mid-career leavers, the break-even math strongly favors leaving the contributions in the fund.

If you take the refund and later return to federal service, you can restore the annuity credit by making a full redeposit — but you'll owe compound interest on the original refund amount for every year between the refund and the redeposit.

Before You Submit Your Resignation

Download your complete eOPF — you lose access to the agency intranet after separation. Save every SF-50, your most recent earnings and leave statement, and your retirement estimate.

Verify your retirement service computation date — it can differ from the leave SCD shown in Block 31 of your SF-50. Errors in credited retirement service can cost you months or years of service.

Finish any military service deposit — payments cannot be made after separation, and unpaid military service is permanently excluded from your annuity calculation.

Check your FEGLI and FEHB enrollment duration — the 5-year continuous enrollment rule determines whether you can re-enroll in health and life insurance if you pursue postponed retirement.

The Leaving Federal Service Early guide covers the full separation checklist, break-even calculator, and form walkthroughs for each path.

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