If you leave your government job before reaching retirement eligibility, you have two main options regarding your FERS contributions:
Refund of Contributions: You can request a lump sum payment for your retirement contributions.
Deferred Retirement: If you have at least five years of creditable service, you can choose to defer your retirement benefits and apply for monthly payments once you reach retirement age.
Refund Application Process
If you are leaving your federal job and want a refund of your retirement contributions, you can get an application from your personnel office, complete it, and return it to them. If you are no longer in the federal service, you can download the Application for Refund of Retirement Deductions (FERS), Standard Form (SF) 3106(PDF file). If you have been separated for more than 30 days, submit the application via mail to the Office of Personnel Management (OPM).
Interest on Refunds
- FERS: If you worked more than one year, your refund will include interest, paid at the same rate as government securities.
- CSRS: If you worked more than one but less than five years, your refund will include interest at a rate of 3%.
Taxability and Rollovers
- Taxability: The principal amount of your FERS contributions is not taxable, but the interest is.
- Rollovers: You can roll over your refund (including interest) to an IRA or employer-sponsored plan, which could help avoid immediate tax withholding. If you choose to receive the refund directly, the taxable portion is subject to a 20% federal tax withholding, but you can avoid this by rolling over the funds to another qualified plan within 60 days.
Further details on tax implications can be found in IRS publications related to pensions, annuities, and retirement accounts.
FERS Redeposits
If you request a refund of FERS (Federal Employees Retirement System) deductions and are subsequently reemployed, you can redeposit refunded service to count it toward your annuity. If the redeposit is not paid, your service still counts toward title and average salary computation, but not to compute your annuity benefit.
To get personalized advice, reach out to a specially trained Federal Retirement Consultant®. They can help you navigate the complex world of federal benefits, minimize your tax burden, and ensure you are prepared for whatever lies ahead.
