Options if you leave your Federal job before becoming eligible for retirement.
- You can ask that your retirement contributions be returned to you in a lump sum payment, or
- If you have five or more years of civilian service, you can wait until you are retirement age to apply for monthly retirement benefit payments. This is called a deferred retirement.
If you get a refund of your retirement contributions now, you will no longer be eligible to receive monthly payments when you reach retirement age, unless you are later reemployed subject to the Civil Service Retirement System or the Federal Employees Retirement System. Refer to information about retirement eligibility.
Procedures for having your retirement contributions refunded to you
If you are leaving your Federal job and want a refund of your retirement contributions, you can get an application(PDF file) [757.46 KB] from your personnel office, complete it, and return it to them. If you are no longer in the Federal service, you can acquire the appropriate application from our website.
Interest payable on the lump sum payment of your retirement contributions
For service under the Civil Service Retirement System, interest will be included in the refund of those contributions if you have more than one but less than five years of service. Interest is paid at three percent.
Taxability of refund payment
Your retirement contributions are not taxable, but interest included in the payment is taxable. You should contact the Internal Revenue Service (external link) for additional tax information.
Rollover of refund payment to IRA or Employer Sponsored Plan
You can roll over lump sum payments representing your retirement contributions, including voluntary contributions, and applicable interest. An eligible payment can be paid either to you or directly to an individual retirement account or other employer sponsored plan. Your choice will affect the amount of taxes you owe. We are required to withhold Federal income tax from taxable payments over $200 at the rate of 20 percent. However, you may choose to take all or part of these payments in a direct rollover to an individual retirement account or an employer-sponsored retirement plan that accepts rollovers. The taxable portion can be rolled over into the Thrift Savings Plan. If you make this election, we will not withhold the Federal income tax from the taxable payments.
You can open an individual retirement account to receive a direct rollover. You must contact the individual retirement account sponsor to find out how to have your payment made to your account. If you are unsure of how to invest your money, you may wish to temporarily establish an account to receive the payment. However, you may wish to consider whether or not you may move any or all of the monies to another account at a later date without penalties or limitations.
If you choose to have the payment made to you and it is over $200, the taxable portion is subject to the 20 percent Federal income tax withholding. The payment is taxed in the year in which it is received unless within 60 days after receiving it, you roll it over to an individual retirement account or retirement plan that accepts rollovers. You can roll over up to 100 percent of the eligible distribution, including the 20 percent withholding. To do so, you must replace the 20 percent withholding within the 60 day period. You will be taxed on any amount that you do not roll over. For example, if you roll over only the 80 percent of the distribution, you will be taxed on the remaining 20 percent.
You can find more information about the taxation of payments from qualified retirement plans from the following Internal Revenue Service (external link) publications:
IRS Publication 575 (external link), “Pension and Annuity Income”,
IRS Publication 590 (external link), “Individual Retirement Arrangements”,
IRS Publication 721 (external link), “Tax Guide to U.S. Civil Service Retirement System Payments”, and
Form 4972 (external link) (PDF file), “Tax on Lump Sum Distributions”.
We will not withhold any amount for Federal income tax if your total taxable lump sum is less than $200. We will request a rollover election when you are eligible for a payment of $200 or more.