What Happens to My FERS if I Leave Federal Service

Your FERS Pension Doesn't Disappear When You Resign

The biggest misconception among federal employees leaving before retirement age is that resignation means losing everything. It doesn't — but what you keep depends entirely on your years of creditable civilian service and which path you choose at separation.

If you have at least 5 years of creditable civilian service under FERS, you are fully vested. That pension entitlement stays yours even if you walk out next week. The question isn't whether you get a pension — it's when, how much, and what else you lose along the way.

Three paths exist for vested FERS employees who separate before immediate retirement eligibility: a deferred annuity, a postponed retirement under MRA+10 rules, or a lump-sum refund of your contributions via SF 3106.

The Three Paths After Separation

Deferred annuity preserves your pension for collection later if you 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). Your High-3 average salary freezes at the dollar amount you earned when you left, so inflation eats into the real value every year you wait. You permanently lose FEHB health insurance and FEGLI life insurance eligibility. The FERS Supplement is not available to deferred retirees.

Postponed retirement is available only if you've already reached your Minimum Retirement Age (typically 56–57, depending on birth year) with at least 10 years of service, including at least 5 years of creditable civilian service. Delaying payments reduces the age penalty; with 20+ years of service and an annuity starting at age 60, the age reduction is eliminated. The key advantage: you can re-enroll in FEHB and FEGLI when your annuity starts, provided you met the 5-year continuous enrollment rule at separation. Unused sick leave credits also survive.

SF 3106 refund gives you your employee contributions back as a lump sum — principal plus interest if you had more than one year of service. The refund removes the service from the amount calculation for your annuity and any survivor annuity. If you were covered by FERS on or after October 28, 2009, refunded service still counts toward retirement and survivor-benefit eligibility, but not toward those benefit amounts unless a full redeposit with interest is paid. For refunds of $200 or more, you can roll eligible taxable interest into a traditional IRA, eligible employer plan, or TSP to avoid the 20% withholding on a direct payment and potential 10% early distribution penalty.

What You Keep No Matter Which Path You Choose

Your TSP account stays yours as long as your vested balance is $200 or more. You can leave it invested, reallocate among funds, take partial withdrawals, or roll it to an IRA. Employee contributions and agency matching (up to 4%) vest immediately. The Agency Automatic 1% contribution vests after 3 years of creditable civilian service, or after 2 years for certain specialized appointments; any unvested amount goes back to TSP when you leave.

Your annual leave balance gets paid out automatically in a lump sum at your final hourly rate.

Any military service deposit you haven't finished paying must be completed before your last day on the rolls. Once you separate, you can no longer make payments, and unpaid military service won't count toward your annuity calculation.

What You Lose

FEHB/PSHB health coverage continues through the end of the pay period in which you separate, followed by a free 31-day extension. You can then elect Temporary Continuation of Coverage (TCC) for up to 18 months at 102% of the full premium. After that, it's gone — permanently for deferred retirees, temporarily for postponed retirees who met the 5-year rule.

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.

Sick leave cannot be cashed out. Deferred retirees forfeit it entirely. Postponed retirees get credit for unused sick leave when their annuity starts.

The Social Security Fairness Act Changed the Math

Before January 2025, the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) reduced Social Security benefits for people with non-covered pensions, including many CSRS retirees. The Social Security Fairness Act (H.R. 82) repealed both provisions for benefits payable January 2024 onward. If you left federal service years ago and never applied for Social Security because of WEP or GPO, you need to file a new claim — SSA won't do it automatically. The repeal did not change other statutory offsets, including FERS disability offsets.

Making the Decision

The choice comes down to a few concrete questions: How long until you reach age 62 (or 60 with 20+ years)? Can you afford to bridge health insurance during the gap? Is the present value of a lump-sum refund invested privately worth more than a guaranteed lifetime annuity?

A separation decision toolkit walks through the exact math for each path — the break-even analysis on refund vs. deferred annuity, the MRA+10 penalty calculator, and the FEHB coverage bridge worksheet.

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