With all the uncertainty in the federal government today, it’s more important than ever for federal employees to understand their options regarding job security and federal employee benefits. While most resources focus on traditional retirement qualifications, there is far less discussion about a lesser-known path—Discontinued Service Retirement (DSR).DSR applies specifically to federal employees who are involuntarily separated from service, such as a Reduction In Force (RIF), provided certain conditions are met. We will cover the fundamentals of DSR, including eligibility requirements and the benefits available under this type of retirement. Like all federal employee benefits, the details can quickly become complex. If you need further clarification, our experts are available to provide personalized guidance.
What Is Discontinued Service Retirement (DSR)?
The following text is taken from Chapter 44 of the OPM handbook:“A Discontinued Service Retirement (DSR) allows federal employees who are separated against their will, but not due to misconduct or delinquency, to receive an immediate annuity. These non-disciplinary separations occur without the employee’s consent and are typically documented on the SF-50, Notification of Personnel Action, as ‘terminations.’”
Eligibility Requirements for DSR
To qualify for DSR under the Federal Employees Retirement System (FERS), employees must meet the following criteria:
Age & Service Requirements
- Age 50 or older with at least 20 years of service
- Any age with 25 or more years of service
Minimum Civilian Service Requirement
- Employees must have at least 5 years of creditable civilian service.
Separation from a Covered Position
- The employee must be separated from a position covered under FERS.
The “Reasonable Offer” Requirement
An agency may attempt to reassign an employee instead of terminating their position. If a reasonable offer is made and declined, the employee will not qualify for DSR. A reasonable offer must meet these conditions:
- It is provided in writing.
- The employee meets the qualification requirements for the position.
- The position is within the same agency (including successor agencies in cases of function transfers).
- The job is located within the same commuting area, unless the employee is under a geographic mobility agreement.
- It offers the same tenure as the previous position.
- It is no more than two grades or pay levels below the employee’s current level.
Severance Pay
The following text is taken directly from Chapter 44 of the OPM handbook:
“A separation that meets discontinued service criteria also meets severance pay criteria. The severance benefit payable is based on the employee’s age and length of service. Note, however, that severance pay is not payable in situations in which the employee is eligible for Discontinued Service Retirement (DSR).”
In other words, federal employees who are involuntarily separated may receive severance pay, unless they qualify for DSR. If an employee meets the eligibility requirements for a DSR, they are not entitled to severance benefits.
Am I Eligible to Carry FEHB Into Retirement?
If you have already met the 5-year enrollment requirement leading up to involuntary separation, then you will be able to carry FEHB into retirement automatically. If you have not met the 5-year enrollment requirement, you may still be able to be granted a waiver by OPM. See below for OPM’s current waiver policy.
Current Waiver Policy
“OPM’s current waiver policy provides pre-approved waivers for any employee who has been covered under the FEHB Program continuously since October 1, 1996, or the beginning date of an agency’s latest statutory buyout authority, whichever is later.
To be eligible for a pre-approved waiver, the employee must:
- Retire during an agency’s statutory buyout period; and
- Receive a buyout under the agency’s statutory buyout authority; or
- Took an early optional retirement as a result of early-out authority in the agency; or
- Took a Discontinued Service Retirement (DSR) based on an involuntary separation due to Reduction in Force (RIF), directed reassignment, reclassification to a lower grade, or abolishment of position.”
Do I Still Receive the FERS Supplement?
If you are involuntarily separated and qualify for DSR, you can begin receiving the FERS Supplement immediately if you have reached your Minimum Retirement Age (MRA). However, if you separate before reaching your MRA, the supplement will not begin until you attain that age.
Will I be Able to Withdraw From my TSP?
If you separate in the calendar year you turn 55 or later, you can withdraw from your Thrift Savings Plan (TSP) penalty-free. However, if you separate before that year, penalty-free withdrawals are generally unavailable until age 59 ½, except in limited cases.
Final Thoughts
Understanding DSR can be complex, but it’s essential for securing your financial future. If you’re facing an involuntary separation due to a Reduction in Force (RIF), don’t navigate it alone—our team is here to help you make the most informed decision possible.
