Federal Break in Service: Retirement, TSP, and FEHB Impact

A federal break in service is any gap of four or more calendar days between separating from one federal position and starting another. Moving between agencies without missing a single full workday is a transfer, and a gap of one to three calendar days is treated as continuous service for most purposes. Once you hit the four-day mark, the break is formal, it shows up on your SF-50, and it changes how your agency handles nearly every benefit you have earned.¹²³

How much a break actually costs you depends on its length, what you elect during it, and what benefits you carry back in. The rest of this article walks through each benefit in turn.

How OPM Counts the Days

Every calendar day in the gap counts, weekends and federal holidays included. Resign on a Friday and start again the following Wednesday, and you have a four-day break on the record. A gap of three days or fewer is a continuation of service for benefits like leave accrual and reduction-in-force retention, and those separation days themselves are not subtracted from your creditable service total.¹

Annual and Sick Leave

On separation, you get a lump-sum payment for unused annual leave at your final rate of pay.⁴ Sick leave is not paid out, but your full balance is preserved on the books and re-credited whenever you return to federal employment, no matter how long you were away. The one exception: if you retired and your sick leave was already used to compute your annuity, that balance is gone and cannot be re-credited if you come back to work.⁵

Your annual leave accrual rate depends on total creditable service, tracked through the Service Computation Date for Leave. Three tiers apply:

Less than 3 years of service: 4 hours per biweekly pay period (13 days per year)
3 to 14 years of service: 6 hours per pay period, plus an extra 4 hours during the last pay period of the year (20 days per year)
15 or more years of service: 8 hours per pay period (26 days per year)

These tiers are set by statute.⁶ When you return, your agency recalculates your SCD-Leave by adding the non-creditable days to your original date, pushing it forward. Separations of three days or fewer are ignored in that math.⁷ So if you had ten years in and were away for two, you come back at roughly ten years of creditable time and stay in the six-hour tier rather than starting over.

Retirement Credit Under FERS

You need at least five years of creditable civilian service to qualify for any FERS retirement benefit.⁸ A break pauses the clock; it does not erase what you have already earned. Your prior years combine with new service toward eligibility, and your annuity is based on your “high-3” average — the highest annual rate you can produce by averaging basic pay over any three consecutive years of service.⁹ A break can change which three-year window produces the highest average, especially if you return at a lower grade or step.

Refunds and Redeposits

If you leave before reaching retirement eligibility, you can request a refund of your FERS retirement deductions, but only after you have been separated at least 31 days and are not reemployed in a FERS-covered position. Accepting the refund voids all annuity rights tied to that period of service. If you later return, you can make a redeposit equal to the original refund plus interest, which restores full credit for the earlier service. Skip the redeposit and those refunded years still count toward whether you are eligible to retire, but they are excluded from the annuity computation, producing a smaller monthly check for you and any surviving spouse.¹⁰

TSP Vesting and Outstanding Loans

Your own TSP contributions and the agency matching contributions are always yours. The 1% agency automatic contribution requires three years of civilian service to vest.¹¹ Leave before three years and those automatic contributions plus earnings are forfeited. Prior creditable service counts toward the three-year requirement when you return: the TSP Service Computation Date includes all prior federal civilian service creditable under FERS or CSRS, regardless of refunds, time limits, or breaks.¹² Two years in before you left means one more year after returning to vest.

An outstanding TSP loan does not disappear when you separate. You have three options: keep making monthly payments by check, money order, or direct debit under the original repayment deadline; pay off the full balance by the original term deadline; or let it foreclose, at which point the remaining balance plus accrued interest is declared a taxable distribution by the IRS. You cannot take a new TSP loan after separating, and a delinquent post-separation loan forecloses automatically with no chance to catch up.¹³ If foreclosure happens, you can avoid the tax bill, and the 10% early withdrawal penalty if you are under 59½, by rolling over the taxable amount into your TSP account, another eligible employer plan, or an IRA by the due date of your federal tax return, extensions included, for the year the foreclosure occurred.¹⁴

Health Insurance (FEHB)

FEHB coverage does not end the day you leave. You receive a 31-day extension at no cost, in the same enrollment type you held at separation.¹⁵ After that, coverage ends unless you elect Temporary Continuation of Coverage, which lets you keep the plan for up to 18 months. TCC costs the full premium (both the employee and government shares) plus a 2% administrative charge, so it runs substantially higher than what you paid while working.¹⁶

Return within three days and your enrollment continues as though nothing happened.¹⁷ Return after a longer break and you have 60 days to enroll, change plans, or adjust your coverage level. Your old enrollment does not roll over automatically, so treat it as a fresh enrollment opportunity and act inside the window.¹⁵

Life Insurance (FEGLI)

Basic and Optional FEGLI coverage also carries a 31-day extension after separation. What happens when you come back depends on how long you were gone. Return after a break of at least 180 days and any previous waiver of Basic is automatically cancelled; unless you file a new waiver, Basic starts on your first day in pay status. For Optional coverage, you have 60 calendar days after reinstatement to elect any form of it. Miss that window and you keep whatever Optional coverage you had immediately before separating, with any additional options considered waived.¹⁸ A long absence effectively gives you a clean slate on life insurance, which matters if you previously waived coverage and now want it.

Dental and Vision Insurance (FEDVIP)

FEDVIP uses a 30-day threshold rather than the three-day line that governs FEHB. Return in under 30 days and, if you were previously enrolled, you can pick up the same plan, option, and enrollment type. If you weren’t enrolled before, you wait for the next open season or a qualifying life event. Return after 30 days or more and you are treated as a new hire: you can enroll in any plan, change plans, or change enrollment type without waiting for open season.¹⁹

Within-Grade Increases

General Schedule employees earn within-grade increases after completing a waiting period at each step. If your combined time off the rolls and in nonpay status exceeds 52 calendar weeks, the waiting period for your next WGI starts over.²⁰

Shorter breaks can still cost you. Time in nonpay status is creditable only up to a set number of workweeks, and the allowance rises with your step: two workweeks below step 4, four workweeks between steps 4 and 6, and six workweeks at step 7 and above. Nonpay time beyond those limits extends the waiting period day for day.²¹ Military service is treated more favorably and is fully creditable if you are reemployed within 52 weeks of leaving military duty.

Probationary Period

Most competitive service employees serve a one-year probationary period that cannot be extended. Whether a break resets it depends on three conditions: you must return to the same agency, in the same line of work, and your break cannot exceed 30 calendar days. Meet all three and your prior probationary service counts toward completing probation. Miss any one of them and the clock restarts.²²

Time in pay status counts automatically. Nonpay time on the rolls is creditable up to 22 workdays; anything beyond that extends probation by the excess. Absences for military duty or compensable injury are fully creditable upon restoration.²²

Career Tenure and Reinstatement

Competitive service employees are hired as career-conditional and must complete three years of creditable service to earn full career tenure.²³ Only the first 30 calendar days of each period in nonpay status count toward that requirement, though breaks for military service or workers’ compensation are credited in full.²⁴

Once you have career tenure, reinstatement eligibility is for life. You can apply for competitive service positions open to status candidates, which is a real advantage over competing through public announcements. If you separated while still career-conditional, non-veterans have a three-year window from the separation date to be reinstated; after that, the competitive advantage disappears. Veterans with preference eligibility face no time limit, whether or not they reached career tenure.²⁵

Military Service Under USERRA

Leaving federal service for military duty is a special case. Under the Uniformed Services Employment and Reemployment Rights Act, on reemployment you get the seniority and seniority-based benefits you had when you left, plus whatever additional seniority you would have earned had you stayed.²⁶

For retirement, your military period is treated as though you never left. USERRA provides that a reemployed service member has not incurred a break in service for pension plan purposes, and each period of military duty counts as service with the employer for both benefit accrual and vesting.²⁶ Your military time counts toward the three-year TSP vesting requirement, leave accrual tiers, and FERS eligibility as if you had been continuously employed.

If You Are Coming Back as a Retiree

Returning after retirement is a different situation from a mid-career break. If your annuity continues during reemployment, your agency must offset your pay by the annuity amount allocable to the reemployment period, and the agency pays the offset to the retirement fund regardless of whether the deduction from your paycheck is processed correctly. Two narrow exceptions apply: no offset during periods when you have elected Federal Employees’ Compensation benefits in lieu of your annuity, and no offset from a lump-sum annual leave payment at the end of your reemployment.²⁷ Retirees who expected to draw full pay and full annuity at the same time are often surprised by this reduction.

1
U.S. Office of Personnel Management. Guide to Processing Personnel Actions – Chapter 35, Glossary of Terms
2
U.S. Office of Personnel Management. Details and Transfers
3
U.S. Office of Personnel Management. Guide to Processing Personnel Actions – Chapter 4
4
eCFR. 5 CFR Part 630 – Absence and Leave
5
U.S. Office of Personnel Management. Fact Sheet: Sick Leave General Information
6
Office of the Law Revision Counsel. 5 USC 6303 – Annual Leave; Accrual
7
U.S. Office of Personnel Management. Chapter 6 – Creditable Service for Leave Accrual
8
eCFR. 5 CFR Part 842 – Federal Employees Retirement System, Basic Annuity
9
Office of the Law Revision Counsel. 5 USC 8401 – Definitions
10
U.S. Office of Personnel Management. FERS Refund Fact Sheet
11
eCFR. 5 CFR Part 1603 – Vesting
12
Thrift Savings Plan. TSP Vesting Requirements and the TSP Service Computation Date
13
Thrift Savings Plan. TSP Loans
14
Thrift Savings Plan. Tax Rules About TSP Payments
15
eCFR. 5 CFR Part 890 – Federal Employees Health Benefits Program
16
U.S. Office of Personnel Management. Temporary Continuation of Coverage
17
eCFR. 5 CFR 890.303 – Continuation of Enrollment
18
eCFR. 5 CFR Part 870 – Federal Employees Group Life Insurance Program
19
GovInfo. 5 CFR 894.512 – What Happens if I Leave Federal Government and Then Return
20
eCFR. 5 CFR 531.405 – Waiting Periods for Within-Grade Increase
21
eCFR. 5 CFR 531.406 – Creditable Service
22
eCFR. 5 CFR 315.802 – Length of Probationary Period; Crediting Service
23
eCFR. 5 CFR Part 315 – Career and Career-Conditional Employment
24
eCFR. 5 CFR 315.201 – Service Requirement for Career Tenure
25
eCFR. 5 CFR 315.401 – Reinstatement
26
Office of the Law Revision Counsel. 38 USC Chapter 43 – Employment and Reemployment Rights of Members of the Uniformed Services
27
eCFR. 5 CFR 837.303 – Annuity Offset