News for Annuitants

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(This article appeared in the May/June 2007 issue of The American Postal Worker magazine.)

Doug Holbrook, Director

The Retirees Department often is asked about deferred retirement for workers who are covered by the Federal Employees Retirement System, the counterpart to the older Civil Service Retirement System.

A FERS employee can receive a deferred retirement annuity provided that he or she:

  • Is not eligible for an immediate annuity within one month of separation; 
  • Meets the minimum civilian service requirement (at least five years); and 
  • Does not take a refund of retirement deductions after separation from service (or after a transfer to a non-covered position).

This benefit is commonly referred to as the Minimum Retirement Age-plus-10 (MRA+10) annuity. The provision allows an eligible employee to receive an annuity as early as age 55 with as little as 10 years of service, but with a reduction. The deferred annuity will be determined by a formula based on a combination of age and years of service at the time of separation, and it will be reduced by 5 percent for each year the employee is under 62 years old.

An example would be a 47-year-old male FERS employee who decides to leave the Postal Service this year. Let’s say that he has 15 years of creditable service, which would give him a “high-three” average salary at separation of around $45,000.

The separated employee may first apply for a deferred annuity at age 56, his MRA. Eligible for 1 percent of the high-three salary for each year of FERS service, his unreduced annual annuity at age 56 would be $6,750 (15 percent of $45,000).

But because at age 56 the former employee will be six years away from full eligibility, his annuity is reduced by 30 percent (5 percent per year, for six years), a reduction of $2,025.

So the annuity payable to this employee at age 56 will be $6,750 minus $2,025, or $4,725 annually (approximately $400 a month, in this example, beginning in 2016).

When It’s Not Reduced

The annuity is not reduced if the employee:

  • Completed at least 30 years of service — the unreduced annuity can begin as early as the first of the month following the employee’s reaching the MRA; or 
  • Completed at least 20 years of service and postponed the commencement of the annuity until having reached age 60; or 
  • Completed at least 10 years of service and postponed the annuity commencement to age 62.

As an annuitant, you can carry coverage for health insurance and life insurance into retirement. But if you choose to postpone the commencing date of annuity to avoid the reduction, your coverage for both kinds of insurance will terminate. Only when the postponed annuity begins can coverage for health and life insurance be reinstated.

If you do not meet the MRA requirement and apply for deferred annuity when you reach your MRA or age 62, coverage for health and life insurance terminates at time of separation and will not be reinstated.

Finally, it should be noted that former employees who received a deferred annuity are not eligible for the retiree annuity supplement.

Alert Your Representatives...

The following bills are now before the 110th Congress, and we are asking all active and retired APWU members to contact their representatives and request that they cosponsor and support these bills:

  • S.206, to amend Title II of the Social Security Act to repeal the Government Pension Offset and Windfall Elimination Provisions. (The House version of this Senate bill is H.R. 82.) 
  • H.R. 1110, to amend the Internal Revenue Code of 1986 to allow federal, civilian and military retirees to pay health insurance premiums on a pretax basis, and to allow a tax deduction for payments for TRICARE supplemental premiums.

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