CSRS versus FERS retirement

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Q. I was allowed to go back into CSRS after an 18-year break in service even though I cashed out of it in 1991, with eight years of service. I can pay the redeposit back and have 12 years of service, if that is the wise thing, but I am waiting to see if I get a permanent job when this temporary job expires in 2014. Since I am only 54, I am beginning to wonder if I should have gone back into CSRS, because if I can’t find another federal job, and it is looking difficult with the budget questions, I still have to wait till age 62 to retire in CSRS, whereas if I were in FERS, I could retire at 55. Am I missing something?

A. Unless you leave government, return, elect to be covered under FERS and redeposit the refund you took, you’re stuck. Even then, if you wanted to retire under FERS at age 55, the FERS component of your annuity would be reduced by 5 percent for every year you were under age 62.

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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.

5 Comments

  1. I just returned to government employment after a long break in service and am in CSRS Offset. Can I use my IRA (traditional) to rollover my owed redeposit money into CSRS. My IRA is with Vanguard and they advised me that they believed there would be no penalty but was not sure if IRS would penalize me. I called IRS and no one knows this answer. I appreciate your help.

      • Rick Blackburn on

        Nancy, Reg,

        I’m following this answer as well because I am in the same situation as Nancy is. I did pull IRS Pub 721 tax guide for CSRS. There is a paragraph describing roll over rules. It states that you can roll over between “qualified” retirement plans. It defines qualified plans as: ” a qualified employee plan, a qualified employee annuity, a tax-sheltered annuity plan (403(b) plan), or an eligible state or local government section 457 deferred compensation plan. The CSRS, FERS, and TSP are considered qualified retirement plans. ” It appears to me this is ok. However I haven’t received an answer from the FED (IRS and CSRS retirement help line) yet either.

  2. The reply I read in the other column and have seen elsewhere is that you cannot roll over an IRA to pay the Redeposit. I am also CSRS-Offset and paying a Redeposit. I read somewhere that the Redeposit has to be paid with after-tax money, which would explain why you cannot roll over an IRA to pay it.

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