What Happens to Your Benefits if You Leave Federal Service?

Apr 24, 2023

man smiling at phone learning what happens to his benefits if he leaves federal service

People leave jobs all the time, for various reasons. Those who work in the federal government are no different. As with any job move, you must think about what will happen to your benefits, and if you’ll get to keep them. Federal employees have access to several insurance options, a thrift savings plan, sick and annual leave, and a retirement pension. If you leave federal service before you reach your retirement age and service requirements, you should know what happens to your benefits!

Health Insurance

You will get an automatic 31-day extension of your health insurance if you separate from federal service. After those 31 days, you can convert to an individual policy or continue coverage for 18 months under a temporary continuation of coverage (TCC). If you choose a TCC, you must pay the full premium for the plan (both the employee and Government shares) plus a 2 percent administrative charge.

Life Insurance

Your life insurance will be automatically terminated at your separation from federal employment. Your HR department will provide you with SF 2819 which represents notice of your loss of group life insurance coverage and the right to convert.

Like health insurance, you will get a 31-day extension in order to apply for a conversion to an individual policy. You must request a conversion within 31 days after the date of your separation or within 31 days of receipt of the SF-2819, whichever is later.

FERS Pension

If you have at least five years of creditable civilian service, you have two options for your FERS pension:

Deferred Annuity– You can apply for a deferred annuity once you meet your minimum age and service requirements. This will allow you to receive your full annuity later in life, when you might need it most.

Refund of retirement deductions– You can receive a refund of your retirement deductions if you submit form SF 3106. You can apply for a refund any time after separation which will give you the freedom to receive your deductions whenever you need them.

If you have less than five years of creditable civilian service, you can leave your money in your retirement account if you think you might return to federal service, or you can request a refund.

Annual and Sick Leave

Any annual leave, credit hour and comp time balance will be paid to you in a lump-sum after you leave. Generally, the lump-sum payment will equal the pay you would have received if you had remained employed through the leave.

You will not receive any compensation for sick leave unless you return to federal service, in which case it may be credited back to you.

Thrift Savings Plan

Upon separation, you have several options for handling your Thrift Savings Plan (TSP) account.

  • You can leave your TSP alone for it to continue growing interest
  • You can transfer all or part of your TSP balance into an Individual Retirement Account (IRA) or other eligible retirement plan
  • You can cash out your TSP in a lump sum, partial payments, or monthly installments
  • You can purchase a life annuity through TSP, if you have at least $3500 in your account
  • You can transfer your civilian TSP account into a uniformed services account, if eligible

Keep in mind that if you separate before the year in which you reach age 55, and choose to withdraw your TSP, you will be subject to a 10% penalty as well as income tax on all amounts you receive before age 59 1/2.

Is there a way to maintain your benefits?

One great option for federal employees who are struggling with a disability and are worried about maintaining their benefits is Federal Disability Retirement.

Federal Disability Retirement allows you to retire now while maintaining your federal benefits like health and life insurance, the ability to gain creditable years of service, and your retirement pension.

Additionally, you will have the option to work in the private sector and make money on top of a secure monthly annuity provided by the OPM to Federal Disability Retirement annuitants.

Schedule a FREE consultation to learn more and see if you qualify for this life-changing benefit.

Message us & find out if you qualify today!

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