FERS Rehired Annuitants: Rules for Reemployed Annuitants & Retirees
The allure of returning to work after retirement is strong for many. Whether it’s the desire to continue contributing expertise, the need for additional income, or simply enjoying work, many in the Federal Employees Retirement System (FERS) may decide to return to work. However, can a retired federal employee be rehired into federal service? The short answer is Yes! Employing agencies are allowed to rehire retired annuitants. However, understanding reemployment rules is crucial for retirees to make informed decisions and maximize their benefits before returning to work.
FERS Rehire Basics
The FERS system offers flexibility in reemployment options, catering to varying preferences and needs. Retirees can choose from full-time, part-time, temporary, or term appointments. This typically does not interrupt any rehired annuitant programs. However, there are some exceptions where the existing FERS pension may stop.
- Annuity Stops: The annuity payments stop if the annuitant is a disability annuitant whom OPM (Office of Personnel Management) has found recovered or restored to earning capacity before reemployment. The payments also stop if the disability annuitant who was not disabled for their National Guard Technician position but received disability annuity due to medical disqualification from continued National Guard membership.
- Annuity Continues: The annuity continues uninterrupted if the reemployment is not subject to the exceptions listed above. In these situations, the annuitant’s salary is reduced by the amount of the annuity allocated to the reemployment period.
Knowledge is Confidence!
Understanding Supplemental and Redetermined Benefits
Reemployment generally does not impact your existing annuity. You will continue to receive the same amount of your annuity. However, depending on the nature and duration of your reemployment, you may be able to earn additional service credit towards a future, higher annuity calculation. If you continue working for a significant period, you might be eligible for a supplemental annuity or even a redetermined annuity that replaces your original one.
- Supplemental Annuity: A supplemental annuity is an additional pension added to the existing annuity. Annuitants may qualify for a supplement if they work full-time continuously for at least one year. Proportionately longer service periods are required for part-time employees to earn the same supplement annuity.
- Redetermined Annuity: This is a recalculated annuity that replaces the existing FERS pension. A FERS annuitant may qualify for a redetermined annuity after completing at least five years of continuous full-time service or the part-time equivalent.
It’s important to note that intermittent service does not count towards establishing eligibility or computation for either supplemental or redetermined annuities.
Salary and Annuity Considerations
For most retirees rehired, their salary is not reduced by their annuity payments (salary offset). However, for those rehired before November 2003, salary will be reduced, where annuity payments are reduced by the salary earned.
If you are under age 62 and receiving the FERS special retirement supplement, the earnings limit (similar to Social Security) may affect your supplement payments. Waivers and exceptions to salary reduction may exist under certain circumstances, so it’s important to understand how these rules apply to your situation.
Annual Leave Considerations for Federal Retirees
A common strategy for retirees is accumulating annual leave before retirement and looking forward to a large payout. However, it will cause issues if you are reemployed in federal service within the leave time frame. If you received a payout from your leave and returned to work soon after retirement, your time will be compensated by leave and income. Here is an example:
An employee retired from their federal agency on 12/31 with 400 hours of sick leave, about 5 pay periods or 10 weeks (400 / 80 hours per pay period). If they return to work for the government after 10 weeks, everything is fine. However, retirees who return beforehand would be considered double paid and need to pay back a portion of their leave. They will not lose it since the hours will be calculated and added to accrued leave.
Health Insurance and Other Benefits
Rehired annuitants can continue their Federal Employees Health Benefits (FEHB) coverage as an annuitant without disruption. However, FEHB premiums will be deducted from the annuity. If you are in a position that conveys FEHB eligibility and your annuity stops, you can enroll in FEHB and take advantage of premium conversion (paying FEHB premium using salary, allowing pretax deductions). After you end reemployment and resume the annuity, your FEHB will be paid from retirement deductions.
There may be changes in your Federal Employees’ Group Life Insurance (FEGLI) coverage upon rehire. If your annuity stops and the position is FEGLI eligible, your retiree FEGLI coverage will stop, and you acquire life insurance coverage as an employee, and the cost will be deducted from your pay. If your annuity continues, you retain it as a retiree.
Voluntary Separation Incentive Program (VSIP)
If you received a VSIP from a federal agency, you must repay the entire VSIP if you are a rehired annuitant federal government jobs within 5 years. This includes any employment with any entity of the federal government in civil service or personal service contract for any length of time.
Recommendations for Retirees Considering Rehire
If you’re contemplating a return to federal service, careful planning is essential:
- Financial Planning: Analyze how rehire income affects your retirement income, taxes, and potential benefits.
- Career Goals: Ensure the rehire position aligns with your interests and offers opportunities for growth or contribution.
- Consult with Experts: Seek guidance from financial planners specializing in FERS and your agency’s human resources office.
Additional Tips
- Negotiate the terms of your rehire before accepting a position.
- Stay informed about the latest FERS rehire regulations through resources like the rehired annuitant OPM handbook and agency-specific guides. https://www.opm.gov/retirement-center/publications-forms/csrsfers-handbook/c100.pdf
Rehiring as a federal annuitant can be a rewarding experience, offering financial and personal benefits. However, it’s crucial to approach it with a clear understanding of the rules and potential impact on your retirement. By carefully weighing the pros and cons and seeking expert advice, you can make an informed decision that best suits your retirement goals and aspirations.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
