Separation from Federal Service: A Complete Guide to FERS, FEHB, FEGLI, and TSP Benefits
What Happens to Your Benefits When You Leave Federal Service?
If you are a federal employee considering resignation, retirement, or separation from service, it is essential to understand how your departure impacts your retirement benefits, health insurance, life insurance, leave balances, and Thrift Savings Plan (TSP).
Your eligibility for benefits after separation depends largely on your years of creditable service and whether you are covered under the Federal Employees Retirement System (FERS).
Below is a comprehensive breakdown of what you need to know.
FERS Deferred Retirement: Are You Eligible?
Under FERS, employees who separate with at least five years of creditable civilian service may qualify for a deferred retirement annuity.
If you do not qualify for — or choose not to receive — a deferred annuity, you may request a refund of your FERS retirement contributions. However, withdrawing your contributions cancels future retirement eligibility unless you are later re-employed and redeposit those funds.
FERS Deferred Retirement Eligibility Requirements
Your eligibility to begin receiving annuity payments depends on your total years of service:
5 to 9 years of service
Eligible for an annuity at age 62.10 to 29 years of service
Eligible at your Minimum Retirement Age (MRA) with a permanently reduced annuity.20 years of service
Eligible for an unreduced annuity at age 60.30 years of service
Eligible for an unreduced annuity at your MRA.
Your MRA ranges from age 55 to 57, depending on your year of birth.
Understanding these thresholds is critical when deciding whether to separate before reaching retirement eligibility.
Federal Employees Health Benefits (FEHB) After Separation
Your FEHB coverage ends 31 days after separation from federal service.
You may elect to continue coverage under the Temporary Continuation of Coverage (TCC) program, which allows you to extend FEHB for up to 18 months.
However, under TCC:
You pay 100% of the premium (both employee and government share)
You pay an additional 2% administrative fee
Because TCC premiums are significantly higher than active employee rates, many separating employees compare this option to private marketplace plans.
Federal Employees’ Group Life Insurance (FEGLI) After Separation
Like FEHB, your FEGLI coverage terminates 31 days after separation.
You may choose to convert your FEGLI coverage to an individual policy with MetLife without undergoing a medical exam. This option can be especially valuable for individuals who may otherwise be uninsurable.
Important considerations:
Premiums for converted policies are typically higher
Rates are based on age and coverage level
Conversion must occur within the required timeframe
Employees in good health may wish to compare private life insurance alternatives before converting.
Unused Leave Payout at Separation
Upon separation:
You will receive a lump-sum payment for all unused annual leave.
Unused sick leave is forfeited.
However, if you return to federal service in the future, previously forfeited sick leave will be restored to your leave balance.
Strategic leave planning before separation can help maximize your final payout.
Thrift Savings Plan (TSP) After Leaving Federal Service
Your TSP account remains yours after separation.
Vesting Rules
Your own contributions: Immediately vested
Government matching contributions: Immediately vested
Automatic 1% agency contributions: Fully vested after 3 years of service (2 years for certain congressional and military employees)
After separating, you may:
Leave funds in the TSP
Roll funds into another qualified retirement plan or IRA
Begin withdrawals (subject to IRS rules and potential penalties)
Careful planning can help avoid unnecessary taxes or early withdrawal penalties.
Key Considerations Before Leaving Federal Service
Before separating, federal employees should evaluate:
Eligibility for deferred retirement
Health insurance continuation costs
Life insurance conversion deadlines
Impact on long-term retirement income
TSP withdrawal strategies
Leave payout timing
In many cases, timing your separation strategically — even by a few months — can significantly impact your retirement benefits.
Final Thoughts
Separation from federal service is a major financial decision. Understanding how your FERS retirement, FEHB coverage, FEGLI insurance, leave balances, and TSP are affected ensures you make an informed choice.
Before making a final decision, consider consulting your agency’s HR office or a federal retirement specialist to evaluate your personal situation.