Understanding discontinued service retirement


With all the recent talk about downsizing parts of the Defense Department and trimming the sails of agencies such as the financially beleaguered U.S. Postal Service, employees are wondering what their options are if the finger of fate is pointed at them. In this column, I’ll talk about discontinued service retirement; in my next one, about deferred retirement.

First, a definition: The term “discontinued service retirement” applies to someone who is involuntarily separated from service and has the right combination of age and years of service to retire. To qualify as a discontinued service retirement, the separation must be against the employee’s will and without his consent. However, it does not apply if the separation is for misconduct or delinquency.

Among the most common situations that qualify you for a discontinued service retirement are a reduction in force, a job abolishment, a lack of agency funds that causes you to lose your job, a transfer of function out of your commuting area or poor performance. You would also qualify for a discontinued service retirement if you were in the National Guard and lost the military membership or the rank required to keep your National Guard technician position.

If your position is downgraded more than two grade levels, you might also be eligible for a discontinued service retirement. However, you wouldn’t be eligible if the reclassification of your position was because of an earlier misclassification or the application of a new standard.

It’s important to understand that if you are otherwise eligible for a discontinued service retirement and your agency makes a reasonable offer of another position in your agency, you won’t qualify for a DSR.

It is the Office of Personnel Management — not your agency — that determines if your separation is involuntary. Its job is twofold: first, to determine if your separation was, in fact, involuntary; and, second, to find out if you meet the age and service requirements to retire.

In the first case, OPM will review the specific written notice your agency gave you. It has to include a statement of the agency’s intent to separate you from service, the specific reason for its planned action, and the proposed effective date on which you’ll be separated.

In the second, it will find out if you are eligible to retire. Regardless of the retirement system you are in, the minimum requirements for a DSR are the same as those for early retirement: age 50 with 20 years of service or any age with 25 years of service. If you are facing involuntary separation and are just short of having enough service or being the right age to retire, you can stay on your agency’s roll and use your accumulated annual leave until you are eligible.

Note: If you are covered by the Civil Service Retirement System, your annuity will be reduced by 2 percent for every year (1/6 percent per month) that you are under age 55 when you retire. There isn’t any reduction if you are a Federal Employees Retirement System employee.

Voluntary or involuntary retirement? My focus has been on involuntary retirement, but you actually have a choice. If you prefer, you can retire voluntarily. So what’s the difference?

If you retire voluntarily and come back to work for the government:

• In most cases, the salary of your new position will be offset by the amount of your annuity.

• If you are enrolled in the Federal Employees Health Benefits Program or Federal Employees’ Group Life Insurance, the premiums will be deducted from your annuity.

• If you stay on the job for at least one year, and meet the age and service requirements for immediate retirement, you’ll be entitled to a supplemental annuity.

• If you stay for five years or more and are eligible to retire again, your annuity will be recomputed based on your total years of service and new high-three average salary.

On the other hand, if your retirement is involuntary and you come back to work for the government:

• Your annuity will stop and you’ll receive the full salary of your new position.

• If you are covered by FEHBP or FEGLI, your enrollment will end; however, in most cases, you’ll be able to re-enroll as an employee with no break in coverage.

• If you were covered by either CSRS or CSRS Offset and were off the rolls for more than three days, you’ll be given the option of transferring to FERS.


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  1. Federal employees subject to the BRAC with DSR’s were supposed to be eligible for the Homeowner’s Assistance Program (HAP). Their eligibility is currently under review by the Under Secretary of the Army (Installations, Energy, and Environment). Those people with applications current are stalled mid-stride with no answers.

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