For federal retirees under the Federal Employees Retirement System (FERS), the terms “deferred annuity” and “postponed annuity” refer to distinct options for receiving retirement benefits after leaving federal service. Here’s a clear breakdown of the differences:
Deferred Annuity
A deferred annuity applies to FERS employees who leave federal service before being eligible for an immediate retirement but have at least 5 years of creditable civilian service. They must leave their retirement contributions in the FERS system rather than withdrawing them. The annuity is “deferred” because it doesn’t start until a later age, typically age 62, though it can begin at the Minimum Retirement Age (between 55 and 57 depending on birth year) with at least 10 years of service. The amount is calculated using the standard FERS formula, based on service and salary at separation. Unused sick leave isn’t used in the calculation.
Key features:
- Eligibility: At least 5 years of service with separation before immediate retirement eligibility.
- Benefits Impact: No Federal Employees Health Benefits (FEHB) or Federal Employees Group Life Insurance (FEGLI) coverage in retirement, even when the annuity begins. No Cost-of-Living Adjustments (COLAs) until age 62.
- Survivor Benefits: No survivor annuity is payable if the retiree dies before the annuity starts.
Postponed Annuity
A postponed annuity is an option for FERS employees who are eligible for an immediate retirement but choose to delay the start of their annuity. For instance, if you qualify for an MRA+10 annuity, you might choose to postpone your annuity to avoid or reduce the 5% per year under age 62 penalty that applies if you take the annuity immediately upon separation. The annuity calculation includes unused sick leave, unlike deferred annuities.
Key features:
- Eligibility: MRA reached, at least 10 years of service, and eligible for immediate retirement at separation.
- Benefits Impact: Retirees can reinstate FEHB and FEGLI coverage when the annuity begins, provided they were enrolled for the five years before separation. COLAs apply once the annuity starts.
- Survivor Benefits: A survivor annuity may be payable if the retiree dies after postponing but before starting the annuity, depending on timing and elections.
Main Differences
- Timing and Eligibility: Deferred applies to those leaving before immediate eligibility; postponed requires immediate eligibility at separation.
- Penalty: Deferred has no penalty but delays benefits; postponed avoids the MRA+10 penalty by delaying the start.
- Health/Life Insurance: Deferred retirees lose FEHB/FEGLI permanently; postponed retirees can resume them.
- Sick Leave: Included in annuity calculation for postponed, not for deferred.
In short, a deferred annuity is for early leavers securing a future pension without extras, while a postponed annuity lets eligible retirees delay benefits strategically to preserve health coverage and optimize their payout. Your choice depends on age, service, and benefit priorities. For more information, reach out to a Federal Retirement Consultant® who can help tailor a plan that fits your needs.
