One of the more innovative features of the Federal Employees Retirement System is a FERS employee’s right to retire on an immediate annuity when he or she reaches minimum retirement age and has at least 10 years of creditable service. This early retirement option is called the MRA+10 provision.
Minimum retirement age ranges from 55 for those born before 1948 to 57 for those born in 1970 or later.
The 10 years of creditable service must include at least five years of civilian service. While that service may have been under either FERS or the Civil Service Retirement System, you must be covered by FERS when you retire. Creditable service also includes:
• Service before Jan. 1, 1989, for which no deductions were taken from your pay for the retirement fund, but it is creditable only if you make a deposit for that time. Nondeduction service performed after that date isn’t creditable.
• Active-duty service in the armed forces, but only if a deposit is made for that time.
You knew there had to be a catch to this early retirement option, didn’t you? As it turns out, there are several:
The age penalty. As a rule, if you retire under the MRA+10 provision, your annuity is reduced by 5/12 percent for every month you are under age 62, which adds up to 5 percent per year. You have the option of retiring and postponing receipt of your annuity to a later date to reduce or eliminate the age reduction.
However, for those who have at least 20 years of service, there are two specific exceptions to the age 62 penalty rule. One, there is no age penalty if you retire at age 60 or later. Two, there is no age penalty if you retire and postpone receipt of your annuity to age 60.
The special retirement supplement. If you retire under the MRA+10 provision, you won’t be eligible for the special retirement supplement, which approximates the Social Security benefit an employee earns while employed under FERS. It’s designed to bridge the gap between the age at which an employee retires and age 62, when he first becomes eligible for a Social Security benefit. For most retirees the supplement begins at minimum retirement age — or the date on which they retire if that’s after they reach their minimum retirement age. Without the supplement, MRA+10 retirees will be more dependent on their annuities to get by.
Cost-of-living adjustments. Your annuity won’t be increased by any cost-of-living adjustments until you reach age 62. That’s true of other FERS retirees, except for firefighters, law enforcement officers or air traffic controllers.
Now some good news for MRA+10 retirees:
Health benefits. If you have at least five years of consecutive coverage under the Federal Employees Health Benefits Program on the day you retire, or have been covered since your first opportunity to enroll, you’ll be able to carry that coverage into retirement, with the premiums being deducted from your annuity payments.
If, however, you postpone receipt of your annuity, your FEHBP coverage will stop. When you begin receiving your annuity, you’ll be eligible to re-enroll in the program.
To bridge the gap between the time you retire and the day on which you begin receiving your annuity, you’ll receive 31 days of free coverage and be eligible to continue coverage for up to 18 months under the Temporary Continuation of Coverage provision. Under TCC, you would pay the entire premium plus 2 percent. When that coverage stops, you’ll be able to convert to a nongroup policy, which usually will offer fewer benefits at a higher premium cost.
Life insurance. If you have at least five years of consecutive coverage under the Federal Employees’ Group Life Insurance program on the day you retire, or have been covered since your first opportunity to enroll, your basic coverage will continue and the premiums will be deducted from your annuity. The same is true if you are carrying optional insurance, as long as you retain your basic insurance.
If you postpone the receipt of your annuity, you’ll receive 31 days of free coverage for your basic insurance and be offered an opportunity to convert it, or any of your optional insurance, to a nongroup policy at your own expense. When you begin receiving your annuity, you’ll be able to reinstate your coverage.