Reemployed Annuitants--What's this all about?

Here is one of those questions I get every single week these days. Seems everyone wants to both retire from the government and then continue to work for the government (well, obviously not everyone). And this can prove to be very, very lucrative. As the word gets around, more and more people are interested in it. Some people are getting a raise of $50k or more just by retiring and coming back to work, doing what they were doing before. Additional interest leads to additional questions. Understandably so, as it’s confusing. Let’s try to see if we can clarify some of it.

More than any other topic I’ve researched, I’ve found that for every rule, there’s an exception…or three. So the following is the best I can determine at this point. After reading through pages of documents and interviewing multiple rehired annuitants. Please post your comments and experiences below and that will help others.

TERMS

First of all, let’s define what the heck we’re talking about. I find confusion arises often just because a person is saying “A” but means “B”. And the person listening understands “B” to be something completely different. So let’s get this out of the way:

Annuitant: You retired from the government and are getting an annuity. If so, you are an annuitant. You might consider yourself a “retiree” but what you really are is an annuitant in the eyes of OPM.

Reemployed (or Rehired) Annuitant: You retired from the government, you are getting an annuity, and then you go back to work for the government AS A GOVERNMENT EMPLOYEE.

Be careful with that last statement. You can literally retire, and go back to work in your same exact office and not be a rehired annuitant. Why? Because you have to be a government employee. An actual FERS employee. Most agencies have contractors that work in the government offices that may even be retired FERS employees. But because they are employees of the contractor, they are not employees of the federal government.

Make sense? We need to be clear on that. If you retire from DEA and go work for an asset forfeiture contractor (say, FSA, for example), and then work in DEA office space in asset forfeiture, you aren’t technically an employee of the federal government, but rather an employee of the contractor.

So first things first—are you an employee of a company that has a contract with the federal government? Or are you going back to be an actual employee of the federal government?

Hopefully everyone understands that.

A typical retiree has a lot of different benefits coming into play. The annuity/pension, the supplement, sick leave, annual leave, health insurance (FEHB), life insurance (FEGLI), and more. We’ll go through each one of these and see how they are impacted if you retire from the government and then come back and work for the government.

Annuity

As a general rule, your annuity will continue. This will be the VAST MAJORITY of you. The exceptions? The annuity is a disability annuity, the annuitant is appointed as a federal judge, and a few more odd circumstances. (FERS Handbook Section 100B1.1-3). If you have those types of annuities, your annuity won’t continue.

Sometimes people get some of these rules confused and think that their annuity is reduced when they go back to work. That’s generally not true. The new government salary will be the one reduced (we’ll get to that in a minute), but the annuity itself will not be reduced.

Retiree Annuity Supplement (RAS)

Like the annuity, the RAS will continue to be paid to you….depending. Remember, there is an earnings test for the RAS after your MRA. So while you are allowed to continue to get the RAS theoretically, if you are past your MRA and are earning over the limit for that year, you may lose some or all of your RAS.

For you SCE’s that retire early, you will continue to receive the full RAS until at least your MRA, no matter how much you are making in your new government job.

If you don’t fully understand what I’m talking about, I would strongly encourage you to learn the supplement rules in and out. They often factor directly into whether or not you want to work after MRA. Read the article about it HERE.

There is an exception reported to me. Those annuitants from the Department of State will sometimes lose their supplement when they go back to work for Uncle Sam. Even if they are not at their MRA. This is because they are not under FERS. They retired under FSPS. FSPS does not always play nice with FERS rehired annuitants. It goes the other way, too. If you are FERS and get rehired under FSPS, you might be surprised how much money you lose. So if you find yourself in that situation, this should be something to research for sure!

1/9/24 UPDATE. IT HAS COME TO MY ATTENTION THAT OPM WILL NOT NECESSARILY REDUCE THE SUPPLEMENT FOR ALL REEMPLOYED ANNUITANTS. IT IS A BIT CONFUSING, BUT SOME REHIRED ANNUITANTS ARE EXEMPT FROM THE EARNINGS TEST. SEE ARTICLE HERE.

Annual Leave

When a person separates from the government, they receive their annual leave paid out to them in the form of a direct deposit. Basically their hourly rate multiplied by the number of hours of annual leave on the books. That’s the normal process.

However, when you retire and then go to work for Uncle Sam again, you run into a funny little rule here. The way your A/L works is the government takes all of your leave and projects it into the future as if you had continued to work for those number of hours (meaning you get any raises that you would have received if you had stayed and worked that amount of time). What that COULD mean is that according to the government, you’ll be getting paid for A/L while you’re also still working for the government. And that’s a no-no.

I realize that’s confusing. Here’s an example:

Patrick retires December 31, 2023. He has 400 hours of annual leave on the books. That’s the equivalent of 5 pay periods (80 hours a pay period x 5 pay periods = 400 hours). In essence it is like Patrick is getting paid for the first 5 pay periods after 12/31/23. Although it comes all in one check about 3 weeks after retirement. It gets deposited in one check but it is for the next 5 pay periods. (You didn’t know that’s how OPM does it, did you?)

What that basically means is that Patrick is getting paid for 5 pay periods, or until somewhere around Mid-March. All fine and good. No problem.

However, if Patrick becomes a rehired annuitant before those 5 pay periods are up, he will have to pay back part of the annual leave he has received. Why? Because he can’t be paid by the government twice for the same period of time. Let’s say Patrick retires on 12/31/23 and comes back to work for the government on 2/1/24. In reality, Patrick can only keep the A/L he was paid that represents the month of January. Everything else he has to pay back……OR……

Patrick can wait until his annual leave period expires and then come back to the government. For example, if he waited until 4/1/24 to come back to the government, the A/L period would have passed and he would owe nothing back to the government.

Wait a second, Chris. This sucks—he just loses his A/L? No. Not at all. Once he pays back his A/L, it’s now back on his books in his new job, and when he leaves that next government job, he can cash out any balance left. He will also continue to accrue annual leave in the new job. And, of course, he can use that annual leave when he wants to.

In summary, annual leave gets paid out. If you come back to the government right away, you don’t get to keep all that paid out annual leave. It has to go back on your books. And you have to pay for it. Come back soon enough and you won’t even have to pay it back because you got rehired before you could even receive the pay.

6/26/23 EDIT/UPDATE:

I have heard back from many of you that you retired, went to work immediately for the government again, and were able to keep your annual leave payout. You weren’t required to pay it back even though you became a federal employee again right away. Enough of you have responded to me that I now believe there is some sort of exception that I just frankly don’t know about. And can’t seem to find any statute or rule on it. If this applied to you, and you have documentation why it applies, and may who it will apply to, and who it won’t, please share it with me. Thank you!

Sick Leave

Your sick leave was added to your service computation time and used to calculate your annuity. You do not have to pay any of your sick leave back.

Salary

Here’s the big one. This is where things really start to diverge.

General Rule

Let’s take things in order. The standard rule is this: A rehired annuitant will have their new government salary reduced by the amount of their pension (5 CFR 837.303). This is officially called “Annuity Offset”. It is unofficially called “you can’t double dip”. Let’s do a simple example. Pension is $50k a year. New government salary is $150k a year. You will not get $150k, you will get $100k. The $150k reduced by $50k of the pension. So you are getting $50k from your pension still, and $100k from your new government job.

If you want to do the exact formula, here we go: “divide the amount of the annuity for the calendar days included in the pay period by the number of hours that would constitute a full-time tour of duty for that pay period, then multiply the result by the number of hours actually paid for the pay period, not to exceed the number of hours that constitutes a full-time tour of duty.”

Is that supposed to help, Chris?

Let’s try it another way.

• Annuity is $4,000 a month. If we take that x 12, that’s $48,000 a year.

• Divide that by 2,087 hours in a year. To get your “annuity hourly rate”. That’s $23.00 an hour

• Multiply that by number of hours worked in a pay period (let’s say 80). Then that equals $1,840 a pay period that is reduced from the salary.

• Let’s say the salary is $4,000 a pay period. Then the rehired annuitant would earn $4,000 reduced by $1,840 a pay period, or $2,160 a pay period.

Dual Compensation Waiver

While the general rule states that your new salary will be reduced by the amount of your pension, there is something called a dual compensation waiver. And it’s super important to research this option before you take that new government job. Because if your new job comes with this waiver, then your new salary will NOT be reduced by the amount of your pension. You will get both your full pension and your full salary. No reduction. Sounds good doesn’t it? The thing is they are typically limited to specific skillsets. For those of you in law enforcement, you’re in luck. You’re one of the skillsets where this waiver is common. For example, talk to a LEO instructor at FLETC to find out some of the details. Many of them are on this waiver.

Want to research more? Try 5 CFR 553, 5 USC 8344 and 5 USC 8468.

Are you an agency and wanting to see how to request a waiver for a particular position? OPM has sample letters and guidance for you HERE.

This does not mean that you are exempt from the earnings test of the Supplement if this applies to you. If you are at your MRA and earning over the limit, the dual compensation waiver will allow you to get your full new salary, but it will not make you immune from the effects of the earnings test. You will lose your Supplement if you are earning too much in your new job.

Limitations on Hours in the New Job? Maybe

For some of you there will be a limit to the number of hours you are allowed to work as a rehired annuitant. For others of you, there is no such limitation. How will you know if this applies to you? It will be in the job details/announcement.

Here’s the deal. For those rehired under the National Defense Authorization Act (NDAA), there is a limit to the number of hours you can work. You will essentially be a part-time employee. The first six months, you are limited to no more than 520 hours. The first year you are limited to 1,040 hours. No more than 1,040 hours in any 12 month period. And no more than 3,120 hours total for the new job. If you do that math, that basically means you can’t work more than 3 years and it’s part-time for those 3 years. Some of you will be hired under this, depending on the job and the agency.

Many of you will not have that restriction. Again, there’s a very popular rehired annuitant opportunity: An instructor with the Federal Law Enforcement Training Center (FLETC). For the most part, these jobs do not have this 1,040 hour restriction. Rehired annuitants will work full-time. Here’s the authority on this particular job: 6 USC 464(d)(11).

Limitations on Years in the New Job

How long can you work in the new job? Totally depends on the position and agency. As we saw, if you’re hired under the part-time NDAA rules, it’s 3 years. If you’re hired under the FLETC rehired annuitant, then it’s a maximum of 4 years in most cases. (13 month initial appointment and then possible extensions up to 4 years). Here are some FAQ’s on the FLETC Rehired Annuitant Program.

Others may have a one-year term, maximum of two years. Or a two-year contract to start. Or something completely different. It all depends.

(If you haven’t noticed the trend yet, the bottom line to all of this is you better do your homework and research the particular job you’re looking at to see all the ins and outs to it. The rules of one job won’t necessarily mimic the rules of another.)

BENEFITS IN THE NEW JOB

Now let’s look at how the various FERS benefits apply under the new job.

FERS Retirement Deductions

If you are a rehired annuitant and do not have a Dual Compensation Waiver, you are going to be contributing to FERS again. Building up additional credit toward your retirement. (However, if you are rehired under the NDAA rules, you will not contribute to FERS again.)

Everyone will be paying into FICA (Social Security and Medicare).

Being a rehired annuitant then, means that your retirement benefit may increase if you are paying into FERS again. There are two ways this happens:

1. Work full-time for a year and you can get a "supplemental annuity”. Do NOT confuse this with the FERS Retiree Annuity Supplement (RAS). This supplemental annuity is just an annuity that is added to your current annuity when you leave your job. Look up the details at 5 CFR 837.503

2. Work full-time for 5 years and you can get a “redetermined annuity”. This is not added to your current annuity. Your annuity is completely recalculated when you leave your second job and you get a higher percentage of your High-3 with a new service computation percentage. Look up the details at 5 CFR 837.504

If you are NOT paying into FERS because you have a Dual Compensation Waiver or you have a position that doesn’t pay into FERS, then you will not get these annuities.

When you leave the government again, you will be required to file the SF 3107 for any additional annuity. This is the same form you filled out the first time you retired.

Annual Leave/Sick Leave

You’ll continue to accrue them in your new FERS job. I think this is true across the board based on everything I’ve seen. Someone out there may be able to correct me?

TSP

Can you contribute?

As a general rule, yes, unless you are in the Dual Compensation program or hired under the NDAA provisions.

Can you withdraw from TSP? If you cannot currently contribute (like the Dual Compensation program), then you can withdraw from TSP. If you are still able to contribute, then no, you can’t withdraw. Here’s what TSP says:

Distributions

If your break in service was less than 31 full calendar days, you’re not eligible to take distributions from your TSP account.

If your break in service was 31 or more full calendar days, you were eligible, but not required to take distributions from your TSP account. Any distribution must have been paid and received while you were still separated from service.

If you began receiving TSP installments after you separated, those payments will stop when you’re rehired. If you are receiving annuity payments, they will continue.

Just to clarify that last point. TSP annuity payments are not the same as installment payments. A TSP annuity is when you take your TSP money and give it (irrevocably) to the TSP annuity vendor (currently MetLife). Then the insurance company pays you a monthly amount out of your own money for the rest of your life.

That is an annuity that you purchased with your TSP. Your money is already withdrawn from the TSP if you are getting these payments because that money is at the insurance company where it stays forever. Your money is OUT of the TSP. Those types of payments will continue. Because, well, your money isn’t in the TSP anymore. If you don’t know what I’m talking about, good. Very, very few people buy an annuity with their TSP money. And that’s probably a very good thing.

FEHB

Can you sign up for premium conversion? i.e. Paying your FEHB out of your check instead of your annuity? Yes, if your new job allows this. Same with Dental. See OPM FAQ’s here.

FEGLI

Do you continue it? Yes, if the position is FEGLI eligible, but it’s complicated. Your retirement FEGLI is suspended and you get FEGLI as an employee. Why is that? Basically suspended just means that OPM is no longer administering it, and your new agency is. Like before you retired the first time. Here are the details, per OPM.

Other Items?

Are there other questions? Of course! There are so many agencies, so many positions, and so many programs, it would be absolutely impossible for me to accurately summarize them all. And they are constantly changing based on the particular needs and budgets of any given agency. This article is just meant to be an overview of some of the bigger items mostly to help you decide what to inquire about when you are considering taking a rehired annuitant job.

Summary

Well, I’ll be honest with all of you.

I’m not sure if this article helped or made things worse. If you only get one thing out of it, I want it to be this:

KNOW EVERYTHING ABOUT THE REHIRED POSITION YOU ARE APPLYING FOR BEFORE YOU TAKE IT!

You can at least use this article to come up with the things you’ll ask about. The most important one by far would be the question of the Dual Compensation Waiver. That is the critical question in my opinion because of the drastic impact it has on your overall income from the annuity and the new job. And it also has secondary impacts on the benefits, as we’ve seen.

Or, just go work in the private sector and avoid everything on this page!

Or, better yet—-start your own business and never work for anyone else ever again!