As you get closer to concluding your federal career, you’ll encounter several retirement horror stories. Many are true and tragically avoidable, often resulting from a lack of planning, misinformation, or misguided advice. However, there lies one particular bogeyman who preys on federal employees of all agencies, regardless of their level of preparation or organization. His name is the Interim Period and he is unfortunately more than just an urban legend. Halloween may have passed, yet the Interim Period is in every federal employee’s future.
The Interim Period creates financial uncertainty as you transition to your next chapter, leading to unfavorable implications that can linger for several months to upwards of a year. Let’s conquer these fears and put this bogeyman to rest, starting by getting to know the beast lurking behind your last day with the Federal Government.
What is the Interim Period?
The Interim Period is the time between your retirement date and the first day you receive your full, unreduced pension check. This period typically lasts 4-6 months, but in extreme cases, can go over a year.
Throughout the Interim Period, you will receive a partial pension check each month for roughly 50-80% of your true pension amount. No eligible FERS Supplement payments will be made either. You will know once your Interim Period has ended because one day you’ll receive a large check with all the necessary backpay. Every check thereafter will be your regular, full pension. OPM claims the Interim Period is necessary to successfully process your retirement paperwork and verify what you’re actually owed. The most frustrating part is that they don’t provide any estimate on how long your Interim Period will last, making it nearly impossible to calculate the months of savings you’ll need on hand to bridge the gap.
Let’s walk through an example of how the Interim Period works. Take Frank, a 63 year old federal employee with an estimated gross monthly pension of $2,000. After all taxes and deductions, Frank’s pension should be $1,200 each month. Frank retires on 12/31/2022. His retirement posts with OPM on 01/01/2023. OPM then takes a month to begin processing his retirement, so Frank receives his first partial pension check during the first week of February. Instead of getting the $1,200 he expects, Frank only receives $500. This partial pension payment signifies that he’s in the Interim Period. Several months go by where Frank only collects $500 every 4 weeks. By the beginning of May, Frank has received three pension checks (February, March, April) totalling $1,500, even though he should have received $3,600, resulting in a difference of over $2000! In May he receives a direct deposit for $1,200 and the next day another deposit for $2,100. This signifies that his interim period is over, as he’s now been paid his expected pension amount along with the backpay he’s owed.
How Can I Prepare for the Interim Period?
Unused vacation time is actually the key to mastering a smooth Interim Period. By selling your annual leave back to the government when you retire, you’ll receive cash for every hour up to your agency’s annual sell back limit. The government will multiply your hourly rate by the number of hours sold, withhold taxes, and give you this balance as a lump sum included on your last paycheck. That’s why you’ll hear many federal retirees say “your last paycheck is your best paycheck.” This lump sum can help smooth your cash flow until things get sorted at OPM and you start receiving your regular, unreduced pension checks.
What Happens to my Health Insurance and Dental/Vision Plans?
One of the most valuable benefits available to federal employees and retirees is your FEHB (Federal Employee Health Benefits). As long as you were enrolled in any FEHB plan for at least 5 continuous years prior to your retirement, you’ll retain access to subsidized health insurance offerings for life, at rates that most other Americans can only dream of. Thankfully, the Interim Period will not impact your health care coverage. According to OPM directly, “If an annuitant meets all the requirements, he/she does not need to do anything to have the same health benefits enrollment continue after retirement.”¹ During the Interim Period, your life & insurance premiums will not be deducted from your partial pension check. Once you receive that sizable check signifying the end of your Interim Period, you will notice all these premiums retroactively withheld from this check all at once².
Your Dental and Vision Insurance (FEDVIP) follow a different set of rules. FEDVIP premiums are not included on pension checks. If you’re enrolled in FEDVIP, you will be responsible for paying those premiums until OPM finalizes your retirement. Once your pension is finalized you can login to https://www.servicesonline.opm.gov/ using your CSA number (retiree identifier assigned by OPM after retirement), and elect those premiums to be withheld directly from your monthly annuity. You will need to contact FEDVIP directly to discuss payments during the Interim Period. Contact FEDVIP at 877-888-3337.
¹“Annuitants and Compensationers.” U.S. Office of Personnel Management, United States OPM , https://www.opm.gov/healthcare-insurance/healthcare/reference-materials/reference/annuitants-and-compensationers/.
²“What Happens after Retirement from Ice.” What Happens After Retirement From ICE, Ice.gov, https://www.ice.gov/doclib/careers/retirees/retirement.pdf.