Editor’s note: Ilene Slatko is a longtime columnist with Rethinking65. Read more of her articles here.
Ilene Slatko
Many federal civilian employees are at a crossroads. Although the Trump administration’s “Fork in the Road” early resignation offer deadline has passed, other federal employees continue to be fired. As of February 24, about 30,000 federal workers have been laid off since the Department of Government Efficiency (DOGE) launched in January, and many senior officials at affected agencies have resigned. This is in addition to the approximately 75,000 who accepted the Fork in the Road memo I wrote about previously.
I provide retirement advice to federal employees, and many tell me they are rolling the dice to see if they will survive the next round of cuts. Others are preparing to retire, should that become necessary. Most federal employees are vulnerable, and they should understand their best options and what the result of their choices will mean for their financial futures.
If you are an advisor with federal employees as clients, here is information to help you understand their options.
First Steps
As a start, suggest federal employees who face possible termination comply with all requests. That’s because the methods to appeal a separation only apply to those still employed by the federal government, says Debra D’Agostino, a founding partner of the Federal Practice Group, a D.C.-based law firm. She noted the options to appeal a separation include filing a grievance, an Equal Opportunity complaint, or a Merit Systems Protection Board appeal, depending on the situation.
I also recommend for federal employees who suspect their job might be terminated, that you remind them to wait and not give notice without a signed contract or offer for a subsequent job, where possible. As quickly as things are changing, including rescinded terminations, I believe there is no reason for clients to resign before they are forced to, especially when voluntary retirement is not an option.
If a client is terminated, 26 states and the District of Columbia offer the maximum unemployment benefits of 26 weeks. Some jurisdictions may offer extra weeks of benefits, as they did during the COVID pandemic. Unemployment benefits are generally calculated at 40% to 60% of pay, although there are caps on the benefits. All jurisdictions have portals where documentation to determine eligibility can be uploaded; benefits often start seven to 10 days after an eligibility determination. Remember that this is an ongoing process, where periodic income or part-time employment must be reported and will impact the payment of benefits.
Any client who is at least 65 and ineligible for federal health insurance benefits, or who cannot afford the costs of maintaining those benefits, may qualify for health-insurance subsidies while on unemployment.
Choices for Federal Employees
Federal civilian employees who did not accept the Trump administration’s early retirement offer by the February 10 deadline still have a lot to consider. Two options are Discontinued Employment Retirement (DSR) and deferred retirement.
DSR can be triggered for employees who lose their specific job (as opposed to whole agency reductions), are at least 50 years old with 20 years of service, or are any age with 25 years of service. Critical benefits, like healthcare (FEHB) and life insurance (FEGLI), are maintained, provided the employee has been enrolled for five years preceding the separation. Pension benefits, through the Federal Employee Retirement System (FERS) annuity, are based on years of service, with a slight increase in the calculation if you are 62 and have at least 20 years of service. Payments from the Supplemental Annuity start once the employee hits their minimum retirement age. COLAs begin at age 62, as with all forms of retirement under FERS.
For those who are not eligible to keep healthcare and life insurance benefits, employees may continue temporary healthcare coverage, which allows for 18 months of paid coverage, albeit 102% of the cost. Life insurance replacements are available on the open market; no replacement coverage exists through FERS benefits.
Deferred retirement might be an option for those employees ineligible for retirement under a DSR but with at least five years of creditable federal service. Under a deferred retirement, FERS contributions are left in the system, and retirement can be triggered later. Retirement age is dependent upon the number of years of creditable service. But under the deferred retirement option, health and life insurance benefits, as well as the supplemental annuity, are forfeited.
FERS annuity payments are calculated based on years of service and “hi-3” salary at the time of separation. According to the U.S. Office of Personnel Management (OPM), this is the highest average basic pay earned during any three consecutive years of service.
Internal resources are available for federal employees starting with their agency leadership, HR team and retirement specialists. For those who separate from federal civilian service, tell your clients to look for state-sponsored resources on resumes, job fairs, and local employment attorneys who are offering to assist on a pro bono basis.
Unions have informed federal workers regarding the different requests from OPM and DOGE. Now they are advocating for their members in court. The National Treasury Employees Union filed a lawsuit in mid-February in U.S. District Court for the District of Columbia, asking the judge to declare that the mass firing of probationary and other employees and the deferred resignation program, collectively, are unlawful. The National Federation of Federal Employees (NFFE-IAM) added its voice to the concerns over these firings of probationary employees, too.
What My Clients Have Faced
Regardless of agency, HR teams are currently overwhelmed with the volume of inquiries. Many federal employees who have either taken my classes or who have been referred to me are looking for reassurance in their preparation or readiness to separate. Not all will separate with retirement benefits, but understanding their options enough to make decisions is critical for them.
The fear and confusion are palpable when I speak with federal employees. It is not necessarily the loss of a job that has people panicked, but rather the speed of decision-making required, the number of options to be considered, and the amount of paperwork necessary.
One client is worried about filing incomplete paperwork and somehow being denied benefits or making the wrong decisions on a document. We are working together to ensure that doesn’t happen. Another civilian employee who reached out is rediscovering that for each answer, there is often another question. For example, how will earnings at a subsequent job impact taxation on benefits and how can that information be used to make decisions about when to retire?
Many who reach out to me want to hear confirmation that the financial estimates they’ve put together are right: that they’ll be able to continue to pay the mortgage, keep kids in after-school activities, and help provide for their families. Some have told me they feel they’ll be spared; I hope that’s true, but I encourage them all to put together the documentation I list below, to be prepared.
For the time being, with overworked HR departments, it’s difficult for employees to get answers. Regardless of whether you provide financial, employment, or tax advice, I believe it’s important to remember that for much of the federal workforce, uncertainty is forcing them to worry about the weeds; our job is to help them see the bigger picture.
On the Way Out
Because issues occasionally crop up with separation, termination, or retirement, I always suggest federal employees create a notebook with the following:
Printed history from their eOPM (online personnel folder), containing all federal service, military and civilian.
SF-50s documenting salary and total pay.
Any correspondence from their HR team regarding their performance reviews.
Correspondence from OPM, especially with their CSA (civil service active number) when retiring.
Any paid-in-full letters buying back military time or previous FERS-covered time requiring buyback.
Information documenting enrollment dates for FEHB and FEGLI.
Printouts with forecasted FERS annuity benefits and social security benefits.
For your clients struggling with a potential job loss or early retirement decision, help them think through all the moving parts of the FERS puzzle. Talking with them about insurance options, taxation, and retirement planning can help them face the future, regardless of what it holds.
llene Slatko, CEO and founder of DSS Consulting and the e-learning platform Metamorphosis, coaches clients on building strong financial decision-making skills. She spent over 25 years as a financial advisor and built her business through her seminar series, “Women and Their Money.” Ilene is also a subject-matter expert on the Federal Employees Retirement System (FERS) and speaks to civil-service employees across the federal agency spectrum.
