When it comes to questions about retirement benefits under the Federal Employee Retirement System (FERS), the answers are usually complex.
But the answer to the question, “How long do I need to work to be vested in FERS” is quite simple: five years.
But these five years must be creditable service in the federal civilian service.
Active duty or reserve duty in the armed forces does not count. Neither does any kind of private-sector employment.
Once your contributions vest in FERS, your options for retirement change.
The vesting requirement also affects your options if you leave the federal government before retirement age.
Because understanding vesting requirements is essential for receiving retirement benefits, we’ll discuss the basics of FERS vesting requirements in this article.
For answers to specific situations or unique problems, contact one of our knowledgeable federal retirement attorneys.
Understanding the FERS System
Congress created FERS in 1986 to replace the aging Civil Service Retirement System (CSRS). Anyone who has joined the federal service after 1987 automatically falls under FERS.
Under FERS, employees receive three main retirement benefits: a Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP).
With this three-tiered scheme, every employee has to give a portion of their pay to the Basic Benefit and Social Security parts of FERS.
Each employee’s agency contributes as well. Then, after retirement, those accumulated funds return to the employee as monthly retirement annuity payments.
Employees can also choose to contribute to the TSP, which essentially functions like a 401k.
Why Is Vesting Important?
Vesting plays a critical role in determining your options for receiving your FERS contributions. How it affects your options changes based on your situation.
If you are already eligible for retirement but leave before you attain five years of service, you will not receive any retirement payments.
For those who leave the government before becoming eligible for retirement, vesting allows you to opt for a deferred retirement annuity.
This means that the government will send you your monthly retirement annuity pay after you reach your retirement age.
If you did not meet the vesting time requirement, your only option would be to request that the government return your retirement contributions to you in a lump sum.
This means you would never receive the government’s contributed money. However, some people may prefer to have a little money today rather than more money down the road.
At What Age Can I Retire?
The answer to this question depends on your length of service. If you have at least five years of government service, you can retire at age 62.
With at least 10 years of government service, you can retire at your minimum retirement age (MRA). The MRA varies on your birth year, but it is between 55 and 57.
However, if you have fewer than 30 years of service, your annuity will suffer a significant penalty if you retire before 62.
Understanding Vesting Requirements for FERS Disability Retirement
FERS also includes a disability retirement scheme for employees who need to stop working because of a debilitating and long-term illness or injury.
The vesting requirement for receiving disability retirement is only 18 months.
Is There a Vesting Requirement for the Thrift Savings Plan?
Unlike the Basic Benefit and Social Security portions of FERS, employees can choose whether to contribute to the TSP.
Any contributions by the employee vest immediately. However, the government’s contributions do not vest until you have achieved three years of civilian federal service.
Once you hit 59 1/2 years of age, you can begin withdrawing money from your TSP. If you try to withdraw TSP funds before that time, you will incur a 10% early withdrawal tax.
Have More Questions About Vesting Requirements or FERS?
Although you now know the answer to “How long does it take to be vested in FERS?” you probably have other questions about retiring.
As we mentioned before, the FERS retirement system is complicated. Even seemingly straightforward topics can become confusing quickly.
And the stakes are high since you are making decisions that significantly affect your life as a retiree. Don’t lose sleep thinking about how to navigate the tangled world of retirement benefits.
Our passion is to help federal employees with every aspect of their careers, including retirement options. Let us help you build a secure and worry-free financial future.