Question
“I retired from Federal Service under a VERA / VISP in 2017 with over 32 years of Federal Service and my MRA is 56 and approaching very soon. I returned to the workforce in March of 2018 as a contractor and am still working. Do I need to stop working before my birthday or the month following at all for my FERS Supplement to beign in April? How much can I earn without it effecting my FERS Supplement? Thank you.” – Scott
FERS Early Retirement Options
There are three main components of a Federal Employee’s Retirement: your pension, Social Security and your Thrift Savings Plan (TSP).
For an immediate retirement, you have to have reached your Minimum Age of Retirement (MRA) and have 30 years of creditable service. If you have less than 30 years of creditable service, you may still retire with an immediate but reduced benefit.
Federal Employees can retire from service before they are eligible for Social Security benefits. The earliest age you can draw Social Security benefits under normal circumstances is age 62. Since FERS Employees can retire before age 62, they receive the FERS Supplement.
The FERS Supplement allows someone who retired with an immediate annuity to receive supplemental income from OPM. Only until that person is eligible to receive Social Security benefits at the age of 62.
Scott retired under a VERA/VSIP before he was age 62. He is eligible to receive the FERS Supplemental income until he reaches age 62.
VERA & VISP
From time to time though, agencies undergo restructuring. This can make them eligible to offer employees and temporarily initiate the help of the Voluntary Early Retirement Authority (VERA).
The Voluntary Early Retirement Authority (VERA), granted by the Office of Personnel Management (OPM), is allowed to offer employees of that agency the opportunity to separate from service without having met the necessary eligibility requirements of an immediate retirement. The VERA works with the agency to help reduce their workforce without causing disruption while the agency reorganizes.
The Voluntary Separation Incentive Payment (VSIP) allows for agencies that downsize or restructure their departments to financially incentivize employees to separate from service voluntarily. This financial incentive does not disqualify an employee from Voluntary Early Retirement if they are eligible.
Often times, this is triggered by what is called a Reduction In Force or, “RIF”. Offering a VSIP while undergoing a RIF allows the government to reshape an organization without having to terminate employees.
A Federal Employee must have a good conduct report and have served more than 3 years in Federal Service for eligibility to participate in a VSIP.
VERA Requirements
A full-time employee still has to meet some rules of eligibility for the VERA to offer early retirement:
- Minimum Age: 50, Years of Service 20+ or,
- Any Age with 25 Years of Service.
Even if a federal employee is under age 55 at the time of the VERA, there is no reduction to an employees pension under voluntary retirement.
To maintain Federal Employee Health Benefits (FEHB) in retirement, the Federal Employee must have been covered under FEHB for 5 years or as long as coverage was eligible for them to participate in.
FERS Supplement Reduction
Your FERS Supplement will initiate automatically when you retire from Federal Service. Likewise, when you reach age 62 your FERS Supplement will stop. There is no additional paperwork that has to be filed for either occasion.
Trust us, OPM is pretty good at stopping payments when the period runs out. 🙂
Social Security income is subject to earnings limitations. If you receive social security income and earn W2 income from active employment, then the benefits you receive from Social Security are subject to penalty reduction. This includes your FERS Supplement.
Each year the Social Security Administration publishes their earnings limits.
For example, In the year 2019, the limit is $17,640.00.
If you are under your Full Retirement Age for Social Security Benefits, then for every $2 you earn above the annual limit, $1 will be deducted from your benefit payments.
If you are a Federal Employee, like Scott, who receives a FERS Supplement and earns an income greater than the annual declared earnings limit you want to be proactive.
There is no way for the Social Security Administration offices or OPM to know that you are working. You have to notify them.
You will want to go to OPM’s website and complete the form to declare your income to reduce or stop your FERS Supplement.
If you continue to work after your VERA/VSIP and earn above the limitations, it can take around two years before the respective agencies are aware you were overpaid.
When they discover that you’ve been overpaid they will stop the payments that you receive. This is to recapture the excess earnings that you were not supposed to have received.
Since you cannot control the timing in which this may occur, you want to be really proactive.