For whatever reason, you may eventually decide to leave your job in civil service before becoming eligible for retirement. If you are thinking about doing so, or have already done so, it is important to know and consider what will happen to your government benefits as the door closes behind you.

Health Insurance: Health coverage receives an automatic extension of 31 days upon separation. After the 31 days is up, you do have the option of purchasing up to 18 months of Temporary Continuing Coverage if you’d like to continue on your government plan. You could also either purchase an individual policy on the open market, or assume coverage under a new employer’s policy at any time. If you opt for the Temporary Continuing Coverage, you will need to pay the premium you were paying while employed + the premium the government was paying + a 2% administrative fee.

Accrued Leave: On the first or second federal payday after you separate, you will receive a lump sum payment of all accrued annual leave, comp time and credit hours. Your sick leave balance will remain on the books with the government and will be re-instated if you return to federal employment.

Life Insurance: Life insurance coverage will be granted a 31 day extension after separation, as well as the option to convert to an individual policy.

FEDVIP/Disability/FSA: Dental and/or Vision coverage, disability coverage, and your flexible spending account all terminate upon separation.

TSP: There are a few different ways to handle your TSP:

1) Leave the balance: This requires no action as you simply leave your TSP balance alone upon separation. You will still have access to the account and can move investments around, but no new funds can be contributed. This is likely the best option for those who still have awhile until they plan to eligibly withdraw the funds, since it is unlikely that your next 401k or IRA will best the combination of fees and diversification that the TSP has to offer.

2) Rollover the balance: You can request that your TSP balance be transferred into a new 401k plan or IRA. If you wish to do so, make sure that the transfer is made within 60 days and as a direct transfer. A direct transfer simply means that your previous employer (the government) directly sends the balance to the new plan without sending it through you first. Since the money never touches your hands, this method avoids any tax or penalty implications.

3) Withdraw the balance: This should be considered a non-option for most, but is a choice nonetheless. If you decide to cash out your TSP balance when you leave, you will effectively be withdrawing the funds from a retirement account. Doing so under the age of 59 1/2 subjects the entire withdrawn balance to income taxes, as well as a 10% penalty. A side point here is that if you wait to separate until age 55 or later, TSP funds can be immediately accessed penalty free. This option should always be carefully thought over due to its financial repercussions.

Accrued Retirement Benefit: Each year that you work in civil service, essentially 1% of your salary (the average of the highest 3 years in the end) is accrued towards a lifelong pension. The monthly payments of this pension begin penalty free (depending on your years of creditable service) as early as age 55 for some, and age 60-62 for most. Although you aren’t fully eligible to begin receiving that annuity until a later date, the benefit is still accruing in the background during your working years. When you leave employment, there are two ways to handle the benefit that has been accrued.

1) Leave the benefit: By simply doing nothing and leaving the benefit in the system, you can come back later and apply for the pension when you become eligible. You will need to have at least 5 years of creditable civil service to be eligible for an annuity, but by leaving the accrued benefit on deposit you can also restart your accrual clock where you left off if you decide to return to federal employment later on. Pensions are a valuable form of guaranteed income that have gone extinct, so this option can provide a lot of long term benefit if you’re willing to put in at least 5 years and wait patiently until becoming eligible at the appropriate age.

2) Withdraw the benefit: The second option is to apply for a refund of your benefit. This can be accomplished by submitting a standard form (SF) 3106 to your personnel office if still employed, and to OPM if you’ve already separated. The form lays out various combinations of how each portion of the payment will be taxed and how it can be paid out, so you will have to determine which treatment is best.

It’s important not to forget that some value can still be extracted from the benefits of your government job even after you separate. By leaving your TSP contributions in place and perhaps your annuity accrual as well, you can still capitalize on the unique financial vehicles that the government offers. If nothing else, taking the time to consider how your government benefits can be used after leaving employment ensures an informed and seamless transition to whatever your next stage may be.