FERS: Replaced the older Civil Service Retirement System (CSRS) in the 1980s.
FERS Basics: What is FERS?
The Federal Employees Retirement System (FERS) is a defined benefit plan that provides a lifelong payment (annuity) to eligible federal employees when they retire. FERS became effective January 1, 1987, and retroactive to employees hired after January 1, 1984. FERS has three main components:
- Basic benefits (FERS Annuity) – administered by the Office of Personnel Management
- Thrift Savings Plan – administered by the Federal Retirement Thrift Savings Board
- Social Security Benefits – administered by the Social Security Administration
There are contributions that both the employee and the agency make. However, most of the contributions are made by the agency on the employee’s behalf. These contributions are mandatory, and the amount contributed is defined by law.
FERS employee contributions:
- 0.8% (FERS) of their salary for employees hired before 2013
- 3.1% (FERS-RAE) of their salary for employees hired on January 1, 2013
- 4.4% (FERS-FRAE) of their salary for employees hired on January 1, 2014
Eligibility for an immediate FERS annuity requires that age and service timelines are met. The requirements to be eligible for a full, unreduced pension are:
- Age 62 with 5 years of service
- Age 60 with 20 years of service
- Minimum Retirement Age (MRA) with 30 years of service
The Minimum Retirement Age varies according to the employee’s year of birth, as indicated on the following schedule:
|Minimum Retirement Age (MRA)|
|If you were born||Your MRA is|
|1948||55 and 2 months|
|1949||55 and 4 months|
|1950||55 and 6 months|
|1951||55 and 8 months|
|1952||55 and 10 months|
|1965||56 and 2 months|
|1966||56 and 4 months|
|1967||56 and 6 months|
|1968||56 and 8 months|
|1969||56 and 10 months|
|1970 and after||57|
High-Three Average Pay
The high-three average pay is determined by using any period of three consecutive years of service when the employee received the greatest amount of compensation during their career. Most employees equate their last 36 months of working as their “high-three.” However, this is not always the case.
Computation for FERS Annuity
Use the following calculations to determine annuity:
Take the “High-three salary” x years of service x 1%
Service: 30 years
$82,000 x 30 x 1% = $24,600 annually before taxes
Take the “High-three salary” x years of service x 1.1%*
*For those with 20 years of service or more and retiring at the age of 62 or later
Service: 35 years
$82,000 x 35 x 1.1% = $31,570 annually before taxes
A 10% increase for the enhanced formula may seem like little, but it can dramatically change the trajectory of retirement over many years.
Other types of FERS Retirement?
There are other ways to retire in the Federal Employees Retirement System (FERS) Basic Benefit Plan. Each has its own particular set of rules and calculations.
- Special Provisions (Special Category Employees)
Understanding the features and benefits, as well as limitations of each of the plans, is critical for a federal employee’s long-term financial security.
FERS can be complicated – we understand the totality of your benefits in detail. Connect with us today to see how we can help.