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What happens when you retire, but then are enticed to return to the civil service?

For some federal employees, the idea of retiring from a government job but continuing to work is appealing. But what if that work takes you right back to a civil service position? It does happen. Some feds even retire on a Friday and return to the same office on Monday.

If you retire and then return to government, you immediately become what's known as a "re-employed annuitant." This classification can bring salary offsets and a loss of retirement benefits, and there are requirements that you must work a specific amount of time to qualify for future retirement benefits.

Let's take a closer look at the rules for re-employed annuitants.

When Retirement Stops

Under certain conditions, your federal retirement simply stops if you become re-employed in the civil service:

  • If you retired under the disability retirement program and the Office of Personnel Management determines you have recovered or restored your earnings capacity.
  • If you retired involuntarily under the Civil Service Retirement System's discontinued service retirement provisions. This does not apply to Federal Employees Retirement System retirees or to those who left due to mandatory retirement regulations, such as law enforcement officers and firefighters.

Under these circumstances, your new retirement status will be determined based on your eligibility for retirement, like any other current federal employee with a similar service history. Your retirement will be reinstated if you retired under CSRS discontinued service retirement when you leave the next time if you are not entitled to an immediate or deferred retirement based on your new separation.

Let's look at an example. Suppose Kathy is 54 years old with 22 years of service, and takes discontinued service retirement under CSRS because her agency is moving to a different state. (Under the rules, an employee is eligible for discontinued service retirement at any age with 25 years of service or at age 50 with at least 20 years of service.)

Two years later, at 56, Kathy takes a job with another federal agency. Her retirement stops, and she won't become eligible for regular retirement benefits until after she reaches age 60. (She would need to have 30 years of service to retire younger than age 60 under normal voluntary retirement regulations.) Kathy would receive credit for the additional years of service and a new high-three salary computation. When she retired the first time, she may have had an age reduction applied to her benefit; this would not apply the second time if she retires at age 60 or older with more than 20 years of service. If she doesn't work until age 60, her previous retirement benefit would be reinstated.

When Retirement Continues

If you retire under voluntary early retirement authority or under regular optional retirement rules, your retirement benefits will continue if you are re-employed in federal service.

Be aware, however, that your new salary is likely to be reduced by the amount of your retirement benefit. Suppose, for example, that Gerald is receiving a retirement benefit of $40,000 per year when he takes a new federal position. His salary would be offset based on an "hourly" rate ($40,000 / 2,087 hours) of $19.17 per hour. If his new salary is $65,000 per year ($31.15 per hour), his actual pay would be $31.15 - $19.17 or $11.98 per hour.

Under certain circumstances, agencies can use provisions of the 1990 Federal Employees Pay Comparability Act to hire federal retirees without offsetting their salaries.

While the FEPCA authority was originally used sparingly, its use has increased in recent years. In 1998, agencies were allowed to waive the salary offset to hire computer specialists for year 2000 conversion efforts. Sixteen agencies submitted requests, which OPM quickly approved. Agencies also have used the authority to deal with the terrorist attacks of Sept. 11, 2001, to respond to Hurricane Katrina and to deal with other emergencies.

When You Retire Again

When the time comes to retire again after you are re-employed, several factors could come into play. If your salary was being offset by your retirement, you may qualify for a supplemental or a recomputed annuity depending on how long you were re-employed.

A supplemental benefit would be payable if your re-employment lasted at least one year. You must pay retirement contributions in order to receive this additional payment. The benefit would be based on the average salary during the period of re-employment and the amount of service you performed.

You would be eligible for a completely new retirement computation if your re-employment lasts at least five years. You would be required to make retirement contributions to cover this period of service. The new service would be added to your original service to determine your new retirement benefit. A new high-three average salary also would be computed.

If you were hired under the exceptional circumstances provisions of FEPCA, then you would not be entitled to any future retirement benefits other than Social Security for your additional service.

Finally, remember that there are many ways to work for the government without becoming a federal employee. If you choose this course, you will be able to receive your CSRS and FERS retirement benefits and continue working. For more information on exploring post-retirement opportunities, see part three of Karen Rutzick's 2005 GovExec.com series about retirement considerations.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

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