The Implications of Federal Reemployment on Annuities

Those who retire from the government and then return to work may enjoy a significant increase in their annuity.

Unless you’re one of the few who will be allowed to maintain both the annuity and the entire income of your new job, what happens will depend on whether your retirement was voluntary or involuntary and the retirement system you were in. Generally, a retiree’s annuity terminates if he was involuntarily removed from his employment and the new post is permanent in nature, such as a career, career-conditional, or excepted service appointment. However, if the involuntary separation was mandated by law due to age and length of service (or for cause), the annuity continues, and the retiree is treated as if the retirement had been voluntary.

If the separation was involuntary and your annuity was terminated, when you return to work, you’ll have the same status as every other federal employee in an equivalent job and with a similar service history. To put it another way, you’ll take up where you left off. If you leave the government again, your annuity will get reinstated unless you’re entitled to an immediate or deferred annuity based on the new separation.

If, on the other hand, you retired voluntarily, you’ll continue to get your annuity; unless you’re one of the few authorized to draw both entirely, the amount of your annuity will be deducted from your income for the new employment. The decrease will be proportional if you work part-time.

If you received a $26,000 annuity and your new position pays $75,000, your take-home income for the year would be $49,000 ($76,000 – $26,000).

You’ll be eligible for a supplementary annuity if you’re reemployed full-time for at least one year. However, if you work for at least five years, you’ll be entitled to choose a redetermined annuity. That means that you can have your annuity recalculated based on your total number of years of service and your greatest pay base, regardless of when it was earned.

Retirement contributions are needed to get such benefits. They’re mandatory for FERS employees and optional for CSRS employees (CSRS reemployed annuitants have the option of paying the deposit after separation if they want so.) The amount to be paid is the standard portion of your basic wage before the annuity is deducted.

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Bio:
My name is Kevin Wirth and I have worked in the financial services industry for many years and I specialize in life insurance and retirement planning for individuals and small business owners, with a specialty in working with Federal Employees. I am also AHIP certified to work with individuals on their Medicare planning. You can contact me by e-mail or phone. I look forward to the opportunity of working with you on these most relevant areas of financial planning.

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Disclosure:
These articles are intended for educational purposes only. Please contact your advisors for legal, accounting or investment advice.