Key Milestones in the Career of a Federal Employee
I’ve seen it many times. Federal employees who thought they would only spend a few years as a Fed and move on, only to find themselves still a Fed 20+ years down the road.
This unintentional floating along in a Federal job can be transformed into an intentional career path if you put your Fed status into a context and measure your progress with clear milestones.
Below I have outlined some key milestones that are built into your Federal career. Keep them in mind as you intentionally grab what are arguably the best employee benefits in the country.
Day 1 – Getting the TSP Match:
The TSP match is, for most, the most important of all Federal benefits. You must get this match from Day 1 and allow the miracle of compounding to take place in your TSP. Compounding interest is what Einstein calls “the 8th wonder of the world.” It accelerates the growth of your TSP by leveraging your greatest asset – time.
Getting the full agency match from Day 1 may very well allow you to:
- retire at the earliest eligible date
- self-insure in retirement, allowing you to drop some other expensive insurances such as:
- Survivor Benefits
- Medicare Part B
- leave more assets to your heirs
- just simply have more spending money in the future.
I know people who don’t get the match and they seem to have the best excuses in the world, such as they can’t afford it, or they have debts they need to pay off, etc. I don’t buy it! I’ve written about this mistaken thinking as the #1 mistake in my Top TSP Mistakes. Those who don’t get this match from Day 1 are committing a crime against themselves and their family.
Day 1 – Have other private or public sector service experience credited towards your annual leave accrual.
If you have creditable private or public sector service experience, you should request to have this service added to your leave service comp date from day 1. This way you can earn more annual leave per pay period. See below for more about annual leave accrual.
First Pay Period – Sick Leave Accrual
Federal employees accrual both sick leave and annual leave at the end of each pay period. The amount of annual leave increases at various milestones (see below), however sick leave stays pretty much constant – 4 hours for each bi-weekly pay period.
Sick leave doesn’t just benefit you should you get sick. Any unused sick leave will be added to your future retirement pension (so long as you are eligible for an immediate retirement). I have seen Feds retire with thousands of sick leave hours, representing years of service added to their pension.
Days 1 through 60 – Simplified underwriting for LTC – for Feds or their family members
Any federal employee (and their eligible family members) can access OPM’s Long Term Care Insurance program (LTCFEDS) at any time, however only new federal employees (and their eligible family members) within their first 60 days of employment can access LTCFEDS with simplified underwriting. Simplified underwriting essentially means that some higher-risk medical conditions are ignored when considering the someone’s insurability. This, in turn, can transform someone who ordinarily would be uninsurable into someone who now is insurable.
Think about your parents or in-laws or other relatives that may not have the best health. If they would apply to LTCFEDS (or any other LTC insurer) any other day, they would need to clear full underwriting, making it less likely they would be granted coverage. Not so in your first 60 days! That relative can be approved even though they carry a relatively high-risk status. See LTCFEDS.com for details.
18 months – FERS Disability coverage
Once you reach 18 months of service, you are covered by the FERS disability benefits.
This benefit will replace 60% of your salary (or hi-3, whichever is higher) during the first year of disability, and then 40% of your salary (or hi-3, whichever is higher) in subsequent years, for the duration of disability until the age of 62. (This is not for short term disability, but rather disabilities with an expected duration of at least 1 year.
18 months – in-service death lump sum survivor death benefit
Once you have at least 18 months of service, should you pass away while you are an active FERS employee, your survivor (that you named beneficiary on SF form 3102) will be eligible to receive a Basic Employee Death Benefit. The Basic Employee Death Benefit is equal to 50% of your salary (or hi-3, whichever is higher), plus an additional benefit of over $30k. (The amount adjusts every year).
This benefit will convert into a lifetime annuity benefit at 10 years of service. See below.
3 Years – Vested in the Agency Automatic 1% TSP contribution
Your agency automatically contributes 1% into your TSP account, even if you aren’t contributing anything. This is known as the Agency Automatic 1%.
However, this 1% contribution has a 3 year vesting period. Should you leave federal service prior to 3 years, you forfeit this 1%.
This automatic agency 1% is the only agency contribution that requires a 3 year vesting period. Every other agency contribution (i.e. the match) is vested immediately.
Once you reach 3 years of Federal Service you are 100% vested in the agency automatic 1%. If you leave then you can walk away with your entire TSP, including your contributions, all of your agency matching and the automatic 1%.
If you transfer to another federal agency before 3 years of service, your clock does not restart. You continue on as if you were at the same agency.
3 years – Accrue 6 hours of annual leave per pay period
Unless you were credited for private or public sector service experience prior to your start date as a federal employee, most federal employees begin in the 4 hour leave category. (If you do have creditable private or public sector service experience, you should request to have this service added to your leave service comp date from day 1!) This means you accrue 4 hours of annual leave each pay period. Once you reach 3 years of federal service you will be bumped up to the 6 hour leave category therefore you will earn 6 hours of annual leave each pay period. The next milestone for leave purposes comes at 15 years of service. Please see note below.
5 years – “Vested” for Federal Pension
5 years is what I call the “critical mass.” With just 5 years of federal service where you are entitled to receive a federal pension. Therefore, if you are thinking about leaving federal service and you are just shy of 5 years, you may want to consider staying until you reach the 5 years. If you leave Federal service after being covered under a federal retirement system for 5 years you can receive a monthly annuity payment once you reach age 62 for the rest of your life (assuming you did not withdraw your contributions into the retirement system). Of course, the longer you stay with the federal government the greater that monthly payment will be as it is determined by your salary as well as years of service. However, 5 years is enough critical mass to provide you with a pension.
5 years – Ability to convert active duty military service into civilian service
Active duty military can be converted into civilian time and counted toward retirement eligibility (and computation) only once you’ve reached 5 years of civilian service. If you don’t have an active duty pension, you should strongly consider converting that active duty time into civilian. However, if you do have an active duty pension (as opposed to reservist pension) you may not want to convert this time into civilian time. I discuss this in my article on Converting Military time.
10 years – Minimum Retirement Age (MRA) + 10
Your Minimum Retirement Age (MRA) is somewhere between age 55-57, depending on the year you were born. (See this OPM chart). You can retire at MRA once you reach 10 years of federal service. This is known as MRA+10 retirement. If you leave Federal service after being covered under a federal retirement system for 10 years you can receive a monthly annuity payment once you reach age MRA for the rest of your life (assuming you did not withdraw your contributions into the retirement system). Any MRA+10 pension will be reduced by 5 percent a year for each year you are under age 62.
10 years – In-service death leaves behind a survivor pension
If you are covered under FERS once you have served in the federal service for 10 years, if you were to pass away while still employed and you have been married for at least 9 months your spouse will receive a monthly annuity check that equals 50% of your accrued FERS pension. They can receive this check for the rest of their lives, so long as they don’t get remarried before their age of 55.
10 years – Public Loan Forgiveness
As the law is written today there is a program called the Public Service Loan Forgiveness Program that essentially forgives the remaining balance of employees federally funded loans once they have completed serving 10 years in a public position. 10 years serving as a federal employee counts towards participating in this program. This program is managed by the Department of Education and has recently been in the news as a program that may go away. However, if you will owe money on your public loans after serving 10 years in the government keep an eye on this program.
15 years – Accrue 8 hours of annual leave per pay period
Once you reach 15 years of service you will begin accruing 8 hours of annual leave each pay period. If you are not on an alternative work schedule that is 1 day off each pay period.
20 years – Age 50 + 20 years to retire with “early out.”
This opportunity doesn’t always present itself, but if your agency ever announces an “early out” or VERA (voluntary early retirement authority) you can be eligible for an immediate retirement (without taking any penalties) once you are 50 years of age and have worked in the federal government for 20 years.
20 years – Age 60 + 20 years to be eligible for full retirement
You become eligible for an immediate retirement (without taking any penalties) once you are 60 years of age and have worked in the federal government for 20 years. This retirement option is always available, meaning you don’t need VERA or “early outs” for this.
20 years – Age 62 + 20 years to get 1.1% on FERS pension
If you are covered by FERS your annuity is calculated by 1 OR 1.1 percent of your high 3 average salary for each year of service. It is 1% when you retire under age 62, however goes to 1.1% when you wait until age 62 with 20 years of service to retire.
25 years – Eligible to retire with “early out” at any age.
This opportunity doesn’t always present itself, but if your agency ever announces an “early out” or VERA (voluntary early retirement authority) you can be eligible for an immediate retirement (without taking any penalties) at any age, once you have worked in the federal government for 25 years.
30 years – MRA + 30 years to be eligible for full retirement
If you covered by CSRS and are 55 years old with 30 years of service you are eligible to retire. If you are covered by FERS and are at your MRA with 30 years of service you are eligible to retire.
41 years 11 months – Max out CSRS pension
If you are covered by CSRS once you work as a federal employee for 41 years 11 months you will max out your pension. This is due to OPMs “Maximum Payable” rule which states the maximum benefit you can receive from CSRS is 80 percent of your high -3 average salary, plus credit for your sick leave. If you work beyond 41 years 11 months, you will still contribute 7% into the CSRS system, but that additional service will not be credited into your CSRS pension. (That 7% will be returned to you upon retirement.)
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