Federal Retirement Benefits and DRP 2.0: What You Need To Know

The United States government's Deferred Resignation Program 2.0 (DRP 2.0), is a voluntary program that lets federal employees resign in advance but still get paid and keep benefits until September 30, 2025. Announced via a mass email titled "Fork in the Road" on January 28, 2025, the program offers federal employees the option to resign effective September 30, 2025, while remaining on paid administrative leave with full benefits until that date.​

Understanding how the Deferred Resignation Program 2.0 may impact federal employees’ retirement benefits is crucial. However, before we dive into DRP 2.0, let’s start with an overview of federal employee retirement benefits. Below is an overview of the six key retirement benefits available to federal workers, along with considerations for each.

1. Pension Plans: CSRS and FERS

Federal employees fall under one of two pension systems:

• Civil Service Retirement System (CSRS): Applies to those who began federal service before January 1, 1984, provided federal employees with an annuity based on a percentage of the average of their three highest-earning years of employment. 
• Federal Employee Retirement System (FERS): Covers most current federal employees and offers a pension that, while lower than CSRS, includes Social Security benefits and the Thrift Savings Plan (TSP).

The FERS pension formula calculates benefits as 1% of the high-three average salary multiplied by years of service. For employees retiring at 62 or older with at least 20 years of service, the percentage increases to 1.1%.

For example, an employee aged 62 with 20 years of service and a high-three average salary of $70,000 would receive approximately $15,400 annually ($1,283 per month) in pension benefits.

2. Social Security

FERS employees contribute 6.2% of their earnings to Social Security, with the government matching this amount for a total of 12.4%. To qualify for benefits, employees must accumulate 40 quarters (10 years) of eligible work.

Social Security benefits are based on the highest 35 years of earnings. While payments can begin at age 62, this is considered early retirement, leading to reduced benefits. The longer an employee waits (up to age 70), the higher the monthly payment.

Calculating social security is more complicated with CSRS employees, who should consult a financial adviser who specializes in federal retirement to see if they qualify for Social Security.

3. Thrift Savings Plan (TSP)

The TSP, the government’s version of a 401(k) plan, includes five core investment funds: G, C, I, F, and S. Additionally, there are the Lifecycle funds which are a blend of the five core funds and are tailored to specific retirement timelines.

The TSP is one of the most important and beneficial of the federal retirement benefits but also tends to be confusing for many federal employees. 

Key TSP Benefits:

• Generous government matching: Up to 5% of salary
• High contribution limits: Employees should monitor these limits on the TSP website
• High liquidity: Unlike pensions and Social Security, retirees control their withdrawals

While the TSP is a great accumulation tool during working years, it presents limitations as you draw closer to retirement. TSP investment funds have limited diversification, which are essential to pay close attention to when nearing the pre-retirement and income phases. Employees should consult a financial expert who truly understands TSP, its options, and rules that apply to maximize their TSP strategy.

4. Federal Employee Health Benefits (FEHB)

The FEHB program provides health coverage, with the government covering 72% of the cost. Employees can maintain their FEHB coverage into retirement if they have been enrolled for at least five consecutive years before retirement. This also applies to covered family members who can be added during open enrollment or during major life events. 

A common misconception is that FEHB costs increase in retirement. In reality, the annual deduction is simply split over 12 monthly pension payments instead of 26 paychecks, making each deduction appear larger. However, post-retirement deductions are taken after taxes, unlike during employment.

5. Survivor Benefits

If a federal retiree passes away, their spouse may be eligible for survivor benefits, although these calculations vary between FERS and CSRS and can be difficult to calculate. Employees should consult a financial adviser to understand their specific benefits.

6. Federal Employee Group Life Insurance (FEGLI)

FEGLI offers various life insurance options:

• Basic Coverage: Low-cost while employed but becomes expensive in retirement
• Option A: Pays a fixed $10,000
• Option B: Covers up to five times salary, but costs rise every five years
• Option C: Provides optional coverage for family members

Now that we’ve covered the basics by reviewing the six federal retirement benefits, let’s touch on the latest updates issued by The White House.

Latest Federal Workforce Changes

The Original Deferred Resignation Program vs DRP 2.0

Federal employees may be wondering what the differences are between the original Deferred Resignation Program and DRP 2.0. Here’s a clear and simple explanation on the three main differences:

Scope and Participation

Original Program (early 2025):

• Offered only in selected federal agencies.
• Focused on a smaller number of employees.

DRP 2.0 (April 2025):

• Expanded government-wide to almost all federal employees (with a few exceptions like military and national security roles).
• Much broader participation encouraged.

Terms of Leave

Original:

• Rules for administrative leave varied by agency. Some employees still had small duties or "on-call" expectations.

DRP 2.0:

• Guaranteed full paid administrative leave — employees are officially off duty, with no work expected, until September 30, 2025.

Retirement Options

Original:

• No special early retirement options were provided.

DRP 2.0:

• Introduced Voluntary Early Retirement Authority (VERA) for some employees.
• Employees near retirement age could now retire earlier with full benefits instead of just resigning.

Reductions in Force (RIFs)

RIFs are involuntary job cuts. As government agencies continue issuing layoff notices to employees, federal employees at risk of a RIF should prepare (just in case). Consulting with a federal retirement consultant will help government employees understand various pension social security, and TSP scenarios. They should:

• Review their pension, Social Security, and TSP balances. Government employees would need their most current information on their TSP, pension, years of service, and average high-three salary
• Check severance pay eligibility on the Office of Personnel Management (OPM) website: 
• Prepare for FEHB changes: Health benefits continue for 31 days post-separation. After that, they can request in writing within the first 60 days of their separation a temporary extension of up to 18 months. However, continuing the plan in this manner would require them to pay their own portion of the coverage, the government’s portion, and a 2% administrative fee, totaling 102% of the cost of the plan.

Understanding Your Options

Federal Employees should carefully assess their age, financial readiness, and planned lifestyle during retirement before opting for a Deferred Resignation package. Factors to consider include:

• Their TSP savings and Social Security eligibility: Someone in their 50’s may have 10+ years before collecting Social Security benefits. This means they’d be relying heavily on their TSP earlier in retirement which may not be ideal.
• Potential reliance on TSP withdrawals before Social Security kicks in: Early-retirement TSP withdrawals mean less capital gaining compounded interest. Over time, this could have a large impact on your overall retirement funds and lifestyle options during retirement
• Whether they plan to transition into private-sector employment: Federal employees considering taking VERA and transitioning into the private sector should not take social security, even if eligible. They should also consider rolling their TSP into an IRA when they leave federal service as IRA’s have far less limitations unlike TSP or 401k plans. 

Next Steps for Federal Employees

As government restructuring unfolds rapidly, employees should stay informed and proactive. Federal Employee Benefit Advisors (FEBA) is available to answer questions and is offering a free educational webinar on May 8th, hosted by Justin T. Pierce and James M. Campbell, to address federal retirement benefits and government downsizing updates.

Employees can take advantage of this expert-led session to gain insights into their retirement options and financial security.

Free Federal Retirement Benefits Training

Unlocking The Secrets of Your TSP

Thursday, May 22, 2025 |  1-2pm EST + 30 Min Live Q&A

• Latest Government Downsizing Updates
• Retirement Benefit Eligibility Requirements
• Understanding the TSP basics.
• C, S, I, F, & G funds explained.
• Learning about contribution limits and strategies. Roth vs. Traditional. When/how to withdraw. Plus more!
• How to maximize TSP utilizing the Age-Based In-Service withdrawal.
• Forms needed for retirement: The forms you need for retirement vary depending on your specific situation and the retirement system you’re a part of within the federal government.
• Interactive 30-Min Q&A Session

Register Now For Free Webinar