Voluntary Retirement Law and Legal Definition

Some public and private employers offer voluntary retirement plans for employees. Such plans generally allow an employee to retire at an age younger than that required to earn mandatory retirement benefits, usually with a reduced level of benefits. Voluntary retirement is often used for the employer's goal of reshaping and repositioning of the workforce. Voluntary retirement is often offered when an employer anticipates layoffs and wants to reduce the number of affected employees by offering additional incentives to those willing to retire sooner than planned. Complex rules govern vesting and payment of benefits, so careful investigation of applicable requirements should be made before opting for early retirement.

The policies for opting for early retirement vary by employer. Such policies govern who is eligible for voluntary retirement and often provide a period of time within which the option must be exercised. The policy may define who is eligible for early retirement by setting a minimum age and/or length of service. They may require retirement when a voluntary retirement application is submitted and not withdrawn within a certain time period. Public employee voluntary retirement programs are subject to state, federal, union, and/or agency laws and regulations.

For example, eligible federal postal workers must be an employee in a competitive area where it is apparent that they occupy a position that is either excess to the mission of the Postal Service or is a potential placement opportunity for those employees whose positions are being excessed.

For eligible postal employees covered by the Civil Service Retirement System (CSRS) and for employees covered by the Federal Employees Retirement System (FERS), the minimum age and service requirements are:

  • age 50 with 20 years of creditable service, or
  • any age with 25 years of creditable service.
  • For both eligible CSRS and FERS employees, at least five years of service must be creditable civilian service.
  • Eligible CSRS employees must have been employed under CSRS for at least one year out of the last two years.