Taking a FERS refund: cashing out your contributions
Leave federal service before you are eligible to retire and you reach a fork. You can take a FERS refund of your retirement contributions as one lump sum, or leave the money in the fund and claim a deferred annuity later. The refund is the harder choice to reverse.
9 min read · By RetireCiv Editorial · Updated August 7, 2026
What are your options if you leave before you are eligible?
OPM puts the choice in two sentences. Leave before you qualify for retirement and you can ask for your contributions back as a lump sum, called a refund. Or, with at least five years of creditable service, you can wait and claim a monthly benefit later as a deferred retirement.
The two roads are not symmetrical. One hands you money now and closes the pension door on that service. The other leaves a modest amount of your own cash sitting in a government fund for years, and pays you monthly for life once you reach the right age.
Nothing forces the decision on your last day. You can leave the contributions where they are, take a new job, and decide later. Waiting costs you nothing except the return you might have earned on the cash.
The rest of this lesson covers what the refund actually pays, what it takes away, how it is taxed, and how much it costs to change your mind. Deferred and postponed retirement covers the other road in detail.
The fork at separation
| Take the refund | Leave it in the fund | |
|---|---|---|
| Money now | Your contributions, in one payment | Nothing |
| Pension later | Ends for the refunded service | Deferred annuity at 5 years of service |
| To reverse it | Repay the refund plus interest | Nothing to reverse |
Can I cash out my FERS contributions if I leave the government?
Yes. If you separate before you are eligible to retire, you can apply for a refund of the retirement deductions taken from your pay. It comes as one lump-sum payment. The alternative is to leave the money in the retirement fund and claim a deferred annuity later, which needs at least five years of creditable civilian service.
Do I have to decide when I separate?
No. Your contributions stay in the fund until you ask for them back, so the choice stays open after you leave. Many people separate, start a new job, and only look at the question years later. The one cost of waiting is the return you might have earned on the cash in the meantime.
What is a FERS refund, and how do you apply?
A FERS refund returns the retirement deductions withheld from your pay, and nothing else. Your agency also paid into the fund on your behalf, at a much larger rate than you did, and none of that money comes back to you. The refund is your contributions only.
You apply on Standard Form 3106. The form comes packaged with SF 3106A, a notification for a current or former spouse, because a refund can affect a survivor benefit or a court-ordered share.
Where you send it depends on how long you have been gone. Separated 30 days or less, and it goes to your servicing personnel office; any longer and it goes to OPM in Boyers, Pennsylvania.
Interest is not automatic. You receive it only if you worked more than a year. The rate is the one paid on government securities, not something the retirement plan sets.
Does a FERS refund include what my agency contributed?
No. The refund covers the retirement deductions taken from your own pay. Your agency contributes to the same fund at a considerably higher rate, and that money stays there. This is why the refund check tends to look small next to the pension it replaces.
Does my spouse have to be notified?
A notification form for a current or former spouse, SF 3106A, is packaged with the refund application. A refund can wipe out the service a survivor annuity or a court-ordered share would have been built on, so the spouse gets notice of the request.
What if I have CSRS service too?
OPM refunds the deductions held under both systems when you apply. You can also elect to have only the CSRS deductions refunded. The repayment rules differ between the two, and CSRS deductions have always been repayable, so this is worth raising with your HR office before you file.
Do you lose your FERS pension if you take a refund?
Mostly yes, and the precise answer has three parts. Take a refund and leave it unpaid, and the refunded service still counts toward eligibility and toward your average salary, but not toward computing the annuity. The years stay on your record. They stop producing money.
That split matters more than it sounds. Your High-3 and your eligibility date survive, so the service can still get you through the door at 62. What it will not do is add its 1 percent per year to the benefit, which is the part that actually pays you.
The effect compounds with a long career. Someone who refunds eight years, returns later, and retires with 30 years of total service is paid as though they had 22. That gap is permanent for as long as the refund goes unpaid.
This is the real cost of the refund, and it is not the tax bill people brace for. The check is your own money coming back. The pension it deletes is the part worth thinking hard about.
Do I lose my FERS pension if I take a refund?
You lose the part of it built on the refunded service. OPM is precise here: unless you repay the refund, that service still counts toward eligibility and toward your average salary, but it is not used to compute the annuity. So the years still help you qualify, and they no longer add to the monthly amount.
Does a refund affect service I earn after I return?
No. Service performed after you come back is credited normally and is unaffected by the earlier refund. The gap applies only to the period the refund itself covered. Repaying the refund is what folds that earlier stretch back into the computation, and nothing else about your later service changes.
Is a FERS refund taxable?
Mostly not, which surprises people who expect a tax bill. Your retirement contributions are not taxable when refunded, because they were withheld from pay you had already been taxed on. Only the interest included in the payment is taxable income.
Withholding still applies to that taxable slice. OPM withholds 20 percent in federal income tax from taxable payments over $200, unless you send the money straight into another account instead.
A direct rollover avoids the withholding entirely. The taxable portion can go to an individual retirement account, to an employer plan, or back into the TSP. Choose a direct transfer and OPM does not withhold anything.
Take the cash and you have 60 days to change your mind, with one trap. If OPM withheld 20 percent and you roll over only the 80 percent that reached you, the withheld portion counts as a taxable distribution. Replacing it from your own pocket within the window is what keeps the whole amount sheltered.
Is a FERS refund taxable?
The contributions are not. They were taken from pay you had already paid tax on, so they come back tax free. The interest included with them is taxable in the year you receive it. That is a much smaller number than people expect, and it is the only part subject to withholding.
Can I roll a FERS refund into my TSP?
Yes. The taxable portion of the payment can be rolled into the Thrift Savings Plan, an individual retirement account, or another employer plan that accepts rollovers. A direct rollover also avoids the 20 percent withholding, since nothing is paid to you along the way.
What happens if I miss the 60-day rollover window?
The taxable portion becomes taxable income for that year. The window runs 60 days from the day you receive the payment. Rolling over part of it shelters only that part, so a partial rollover leaves the remainder taxable. A direct rollover avoids the deadline problem entirely.
Can you pay a FERS refund back later?
Usually yes, and this changed relatively recently. Under Public Law 111-84, anyone covered by FERS on or after October 28, 2009 may redeposit refunded FERS service. Before that law, a FERS refund was permanent and the service was gone for good.
The price is the refund you received plus interest. Interest runs from the refund, so the cost of changing your mind grows every year you leave it. There is no interest-free window on the front end.
Paying it restores the service to the annuity computation, which is the piece the refund removed. Deposits and redeposits for civilian service covers what you would owe, how to find out, and how the payment is made.
One warning for anyone reading older material. Guidance written before 2009 says flatly that a FERS refund can never be repaid, and some of it is still in circulation. That was true once and is not true now.
Can I pay back a FERS refund later?
If you were covered by FERS on or after October 28, 2009, yes. Public Law 111-84 created the authority to redeposit refunded FERS service. You repay the refund plus interest, and the service goes back into the annuity computation. Older guidance saying a FERS refund is permanent predates that law.
Does the redeposit get more expensive over time?
Yes. Interest accrues on the amount you were refunded, so the longer the balance sits unpaid, the more the redeposit costs. There is no interest-free grace period at the start, unlike a military deposit. That makes this a decision that is cheaper to revisit early than to leave sitting.
How to weigh a refund against a deferred annuity
There is no answer that fits everyone, and the tradeoff is not really about the size of the check. It is about whether a lifetime monthly benefit starting decades from now is worth more to you than the same money in hand today. We lay out the factors rather than pick for you.
A few things shift the weight more than the rest:
Two facts are worth carrying out of this lesson whichever way you lean. The refund returns only your own contributions, never your agency's. And the years you refund keep counting toward eligibility and your High-3 while contributing nothing to the payment.
If you want to see what a preserved deferred annuity would actually add to your retirement picture alongside your TSP and Social Security, run your free readiness score.
- Your years of service. Five years of creditable civilian service is what creates the deferred annuity right in the first place; below that, there is no pension to preserve.
- How likely you are to return. Federal careers are often interrupted rather than ended, and a refund taken during a gap is one you may want to repay later at interest.
- What the cash is for. Money that clears high-interest debt does different work than money that sits in a savings account.
- Your age. A deferred annuity that starts at 62 is a long wait at 35 and a short one at 55.
What is the difference between taking a refund and leaving my money in?
A refund pays you your own contributions now and stops the refunded service from computing an annuity. Leaving the money in preserves a deferred annuity you can claim later, provided you have at least five years of creditable civilian service. Neither one carries FEHB into retirement under a deferred retirement.
Is a refund ever the sensible choice?
It can be, and the situation matters more than the rule. Someone with under five years of service has no deferred annuity to protect, so the money is simply theirs. Someone with twenty years is giving up a great deal more. We describe the tradeoff rather than recommend a path, because the right call depends on your situation.