Author: Bob Braunstein, Federal Benefits Specialist

If you leave Federal service before you are eligible to retire, you still retain some important Federal benefits.   These can include temporarily continuing your health insurance, converting your life insurance to individual coverage without an examination, keeping your long term care coverage, maintaining your Thrift Savings Account, and possibly receiving severance payments if your separation is involuntary.  Let’s take a closer look:

Federal Employees Health Benefits

You can continue your Federal Employees Health Benefits (FEHB) coverage free for 31 days after you resign.  After that you can continue it for up to 18 months (36 months for dependent children through Temporary Continuation of Coverage (TCC).  The downside is that it will be expensive, requiring you to pay both the employee and government share of the plan’s premium, plus a 2% administrative fee.

Federal Employees’ Group Life Insurance

You will have the opportunity to convert your Federal Employees’ Group Life Insurance (FEGLI) coverage to an individual policy without a required medical exam.  Unlike FEGLI term coverage which has no cash value for the policy holder, the converted coverage will be “whole life” coverage which you can borrow against. You will have the option to convert your FEGLI coverage within 31 days of the date it terminates or within 31 days of receiving a Notice of Conversion Privilege (SF 2819) from your agency, whichever is later.

Unpaid Vacation Time (Annual Leave)

Regardless of how you separate, you will be paid for unused Annual Leave.  The payment can include leave up to your annual ceiling – 240 hours for most employees – plus any unused use or lose leave in the year you separate.  A payment could also include “banked” leave that you couldn’t use because of a prior public exigency.   Annual Leave is paid “as if it could have been used.”  In other words, the payment includes any pay raises you would have received during the service period that would have been covered by the leave, if it had been used.  

Unused Sick Leave

While you are not paid for unused Sick Leave, it will remain in your account for later use if you return to Federal service.  So, keep your last Leave and Earnings Statement to make it easier to reestablish your balance if you are ever reappointed to Federal service.

Thrift Savings

Your TSP account goes with you including all the contributions you made, matching, and interest.  If separated, having served 3 or more years, you also keep the government’s automatic 1% of salary contributions to your account and its interest and earnings.  Though you can no longer make direct TSP contributions, you may roll money into your account from qualified retirement plans like 401k, 403b and Traditional IRAs.  This can help you save money on annual administrative fees as the TSP’s fees are considerably lower than those of traditional mutual funds or 401(k) plans. 

Deferred Retirement

If you have completed at least 5 years of creditable civilian service, you could apply for a deferred retirement at age 62; with 10 or more years, you could apply for it as early as your FERS MRA (typically age 57).  Deferred retirements will give you monthly payments for life just like immediate retirements, but when you claim them, you will not be entitled to reenroll in any of your current insurance entitlements.  If you apply for a refund of your retirement contributions after you leave – the amount of your gross salary payments that goes into the pension fund – you lose title to a deferred retirement.

Severance Pay

When you are separated involuntarily through no fault of your own, such as during a RIF or transfer of function, you would be eligible for severance pay if you meet all of the following criteria:

• You did not refuse to accept reassignment to another position in your agency that is in your commuting area and no more than two grades below your current grade level.
• You have been employed for at least 12 continuous months.
• You are not eligible for an immediate retirement (including an age-reduced MRA + 10 retirement).   
• You are not receiving Workers’ Compensation benefits for wage loss due to an on-the-job injury.

Severance pay provides one week’s pay at your current salary rate (usually base + locality pay) for each of your first 10 years of civilian service, and 2 weeks for each year of service beyond 10 years.  For every 3-month period beyond a full year, 2.5 percent is added to the payment.  And if you are over 40, the payment is increased by 10 percent for each year that you are over that age.  Severance payments:

• Are paid biweekly by the terminating agency at the same salary rate you were receiving when you were separated.
• Cannot exceed 52 weeks in your lifetime.
• Are withheld for Federal, state, and payroll taxes (FICA).

Unemployment Compensation

If you are involuntarily separated, you can apply for unemployment compensation in the state in which you work to receive weekly income for a limited period.  Claims must be filed in the state in which you work at a local Employment Service or Unemployment insurance claims office.  You will usually need your Social Security card, an official notice of separation (usually a Standard Form 50), a RIF notice letter, and unemployment insurance notice (Standard Form 8) in support of your claim.  More information is available on the Department of Labor’s website at Unemployment Insurance | U.S. Department of Labor  

Finally, if you have career status when you leave – typically earned after three years of career-conditional employment – you will be able to compete for future Federal vacancies much like current Federal employees, allowing you to bypass open competition for many positions.  If you are rehired, your retirement coverage will resume, your Annual Leave category will be the same as it was when you separated, the Sick Leave balance you had at separation will be restored, and your TSP account will again be eligible for direct contributions and matching.  And, if the new job is similar in qualifications to your former position, you will likely not have to serve another probationary period. 

Bob Braunstein is a retired Federal employee who was last employed as a Senior Human Resources Consultant with the Office of the Comptroller of the Currency (OCC) at the Department of the Treasury. During his Federal career, he served in a full range of HR positions spanning recruitment, staffing, employee relations, retirement and benefits, and position classification/management disciplines.  He is a retirement and benefits instructor for NITP.

This newsletter is designed to provide information on the subjects covered. NITP, Inc. takes great care to insure the accuracy and quality of these materials which are provided without any expressed or implied warranty, including, but not limited to, their fitness for a particular purpose. They are also provided with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, financial planning or other professional service. If additional assistance is required, the services of a competent professional should be sought.