How Much Will My FERS Refund Be?

A FERS refund allows former federal employees to receive a lump-sum payment of their retirement contributions. This option is available to individuals who separate from federal service before qualifying for an immediate retirement annuity. Understanding this refund and its implications helps federal employees consider their post-service financial options.

Eligibility and Consequences of a FERS Refund

Receiving a FERS refund depends on meeting specific criteria after separating from federal employment. Individuals must be separated from federal service for at least 31 consecutive days and not be reemployed in a position subject to Federal Employees Retirement System (FERS) or Civil Service Retirement System (CSRS) deductions when applying. The applicant cannot be eligible for an immediate or deferred annuity within 31 days after filing the application. Spousal notification requirements also apply, necessitating consent from current and, in some cases, former spouses.

The decision to take a FERS refund impacts future retirement benefits. Accepting a refund voids all rights to a future FERS annuity based on the refunded period of service. The service time covered by the refund will not count towards eligibility for a FERS annuity or in the calculation of future FERS benefits. Historically, refunded FERS service could not be redeposited to reestablish credit; however, for employees covered by FERS on or after October 28, 2009, a redeposit option became available.

If a former employee returns to federal service and wishes to regain credit for the refunded time, they may be able to make a redeposit. This redeposit amount equals the original refund plus accrued interest. Choosing not to redeposit means the refunded service will not be used in computing an annuity benefit, though it might still count for retirement eligibility in certain scenarios. Consider the immediate financial benefit of a refund against the long-term loss of retirement service credit when leaving federal employment.

Calculating Your FERS Refund Amount

The refund consists of the employee’s direct contributions to the FERS retirement system. These contributions are a percentage of an employee’s basic pay, with specific rates depending on their hiring date. For example, employees hired before 2013 contributed 0.8% of their pay, those hired in 2013 (FERS-RAE) contributed 3.1%, and those hired in 2014 or later (FERS-FRAE) contributed 4.4%. The refund may also include any Civil Service Retirement System (CSRS) interim plan or CSRS Offset contributions, as well as any civilian or military service deposits.

Interest accrues on FERS contributions included in a refund if the period of service totals more than one year. This interest is paid at the same rate earned by government securities. Interest is compounded annually, and the official rates are set by the U.S. Treasury. While employee contributions are after-tax money, any interest earned is taxable income unless properly rolled over into a qualified retirement plan.

Any gross refund amount is subject to mandatory deductions before payment. Federal income tax withholding is applied to the taxable portion of the refund (the interest) if the payment exceeds $200 and is not directly rolled over. This withholding rate is 20%. State income tax withholding may also apply based on the recipient’s residency, further reducing the net refund amount.

Beyond tax withholding, any outstanding debts owed to the U.S. government can be deducted from the refund. These debts might include overpayments, unpaid loans from the Thrift Savings Plan (TSP), or other financial obligations. OPM will withhold such amounts at the government’s request, provided all legal requirements for debt collection are met. The final net refund amount is determined by subtracting these mandatory tax withholdings and debt offsets from the total of contributions and accrued interest.

The FERS Refund Application Process

Initiating a FERS refund requires completing the application form designated by the Office of Personnel Management (OPM). The FERS refund application form is Standard Form (SF) 3106, “Application for Refund of Retirement Deductions (FERS).” This form is accompanied by SF 3106A, “Current/Former Spouse’s Notification of Application for Refund of Retirement Deductions,” required for spousal consent. Both forms can be obtained from the OPM website.

Before completing the application, gather all necessary information and documentation. This includes personal identifying details such as your Social Security Number, current mailing address, and contact information. You will also need dates of your federal employment, including start and end dates for each agency where you worked, along with the names of those agencies. For direct deposit of the refund, bank account details, including routing and account numbers, are needed.

Once SF 3106 and SF 3106A forms are completed and signed, with spousal signatures witnessed if applicable, the application is ready for submission. If you have been separated from federal service for 30 days or less, submit the application to your former servicing personnel office. If your separation from federal service exceeds 30 days, mail the completed forms to the Office of Personnel Management at: U.S. Office of Personnel Management, Retirement Operations Center, PO Box 45, Boyers, PA 16017.

After submission, the processing timeline for FERS refund applications can vary. While some refunds may be processed within 30 to 45 days of OPM receiving all forms, the entire process often takes several weeks to a few months. OPM communicates with applicants regarding the receipt of their application and may request additional information if needed. If there are delays or concerns about the application status, contacting OPM’s retirement services can provide updates.