ProFeds Founder, Chris Kowalik, walks through the effect that a RIF will have on an employee’s pension based on their length of federal service.
Key takeaways:
- Effect on pension if an employee has less than 5 years of federal service
- Effect on pension if an employee has at least 5 years of federal service
- Effect on pension if an employee is already fully-eligible to retire
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Prefer to read instead? A Transcript of this Podcast is Below:
Originally released on 3/7/2025
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We recently held a webinar in February about a topic that had nothing to do with the downsizing of the government, but the number one question that was put into the Q&A area was, “If I’m already eligible to retire and I get RIF’ed, am I going to lose my pension?”
I was shocked when I saw the Q&A following the workshop of how many people were coming to this session just trying to figure out if they were going to lose something that they felt that they had already earned. I was sad to see the fear and panic for so many people, and so I knew that this particular video was going to be important.
Whether you get a pension or not, all depends on the number of years of service that you have and there is a magic number to hit, and that’s what we’re going to talk about today.
Hi, I’m Chris Kowalik, the Founder of ProFeds, and welcome to the FedImpact Podcast where we offer candid insights on your federal retirement.
Reduction in Force – Will I lose my pension if I’m RIF’ed?
Like I mentioned, there are some times that questions come out of the woodwork even in unlikely places on topics that have nothing to do with the topic of the actual question, but I think it’s important to walk through some of the details so that we can rest assure many federal employees from the worry and panic that they’re feeling right now.
Let’s talk about what it takes to be eligible for a pension. To know if we get to keep it, we first have to determine are we eligible for it.
Full Eligibility
If you are looking for a full eligibility, meaning you could walk out on your own accord without anyone’s permission, without an early out off, or anything like that, just normal full eligibility, if you’re under the first program, you would need to be at least age 62 with five years of service, age 60 with 20 years of service, or have met your minimum retirement age, which is somewhere between 55 and 57 depending on the year that you were born, and have at least 30 years of service under your belt at that time.
Again, full eligibility. But with respect to RIF, there are two other more relaxed versions of eligibility called the VERA, or the early out, and the discontinued service retirement option, which is just the involuntary version of the early out.
Early outs are voluntary, DSRs are involuntary. In order to qualify for either one of those two programs, you would need to be either at least age 50 with at least 20 years of service or any age with at least 25 years of service.
That puts you in the running to be able to be offered an early out by your agency or be subject to a discontinued service retirement, which simply allows your pension to start right away. Both DSR and VERA allow your pension to start right away, but much earlier than would normally be allowed under full eligibility rules.
At Least 5 Years of Service
If, in fact, you have five years of service but you don’t have enough and you’re not the right age, so you’re under the age of 62, you’ve got at least five years of service, but you don’t have the 20 to be eligible for the VERA or the DSR, and again, you’re under 62 so you don’t meet the 62 with five eligibility for full eligibility purposes, you are in kind of a unique group of people.
In this situation, you would be eligible for a pension but not a normal pension. It will be what we refer to as a deferred pension. Instead of your pension starting right away when you leave federal service, that pension would start at some point in the future.
It just depends how old you are and how many years of service that you have. For instance, if you had five years of service but you are 60 years old, once you hit 62, you would be able to draw your pension. I won’t go into all the details there, but there is a pension waiting for you, it’s just a deferred one.
With a deferred pension, there are plenty of benefits that get stripped away from you. For instance, you don’t get to keep health insurance or life insurance, you don’t get the special retirement supplement, those types of things.
It’s important to realize, your pension isn’t being taken from you. Those years of service are preserved for you but you’re not going to get that pension until later.
Lees Than 5 Years of Service
Now, if you have less than five years of service, you are not vested for a pension, so there’s not one waiting for you, now or ever, if, in fact, you do get laid off through the RIF process.
We have a special video for you. It’s video number 10. Please go watch that because it’ll tell you all the details of what happens in that scenario when you haven’t been vested for an actual pension.
But rest assured, for those of you who have at least five years of service, there is absolutely a pension waiting for you. It may not be huge and it might not be right away, but it’s there for you and no one can take that away.
Now, there are reasons why a person might lose their pension, but these are considered high crimes against the United States. Think of treason, espionage, that type of thing. That is a pretty high crime and one that you are hopefully not facing right now.
You’ll have a great opportunity to be able to have a pension. It will start right away as long as you meet either the full eligibility, or take early out, or a discontinued service retirement. Again, the involuntary version of the early out.
Again, that deferred pension, the one that you have to wait a little for, is if you don’t quite meet the eligibility rules, either fully or the early out or discontinued service, you’re going to wait a little while to get that pension. Again, if you have less than five years of service, please go watch video number 10, and we’ll go through all the details of what happens.
Get Connected & Next Steps
We’re big fans of knowing your numbers, and knowing whether you should hold out for full eligibility, go ahead and take the early out, or perhaps not a choice, but to go out under the discontinued service option, there are a lot of variables in all of this.
Keep, in mind it’s not just your pension, it’s all of the other choices that you’re going to have with your benefits as well, so I really encourage you, if you haven’t already, get to one of our retirement workshops.
These are in-person sessions where we’re covering not just the pension, but all of the details of the benefits that you are going to be electing and making modifications to as you approach that retirement window.
Just as important for those people taking an early out or going out on a discontinued service retirement, that you get into these sessions so that you know all the things that you need to pick.
If you want to be connected to us, say you’re new to our podcast and you want additional information on an ongoing basis, I encourage you to pull out your phone, text the word podcast to 224-444-6144. We will get connected.
You’ll have access, obviously, to the podcast and the show notes that go into that, but also all of the other resources that we have here at ProFeds. FedImpact retirement workshops, webinars, podcasts, that’s the place to go for feds, and so we hope to see you on future episodes. If you haven’t already, subscribe today, so you’re sure not to miss an episode.
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