How to Calculate Your FERS High-3 Average Salary
Understand how your federal salary history shapes your FERS retirement annuity. Learn to calculate a key component of your future benefits.
The Federal Employees Retirement System (FERS) provides a defined benefit plan to many federal civilian employees. It offers a secure retirement income, known as an annuity, to eligible individuals. Understanding its calculation is important for federal employees planning their future. A central element in this calculation is the “High-3” average salary.
Key Factors in Your FERS Annuity
The FERS annuity calculation relies on three main components that determine the retirement income an individual will receive: the High-3 average salary, years of creditable service, and a specific multiplier.
The High-3 average salary represents the average of an employee’s highest basic pay earned during any 36 consecutive months of service. This period does not necessarily have to be the last three years of employment. Basic pay includes an employee’s regular salary and any applicable locality pay. Certain earnings are excluded from basic pay for this calculation, including overtime pay, bonuses, awards, differential pay for night work, and hazardous duty pay.
Years of creditable service measure the total time an employee has worked under FERS. This includes full years and months of federal civilian service, such as 25 years and 6 months. Service credit deposits, like those for prior military service, can increase total creditable service.
The multiplier is a percentage factor in the annuity formula. For most FERS retirees, the multiplier is 1%. However, for individuals who retire at age 62 or older with at least 20 years of creditable service, an enhanced multiplier of 1.1% is applied.
Pinpointing Your High-3 Average Salary
Determining your High-3 average salary involves identifying the specific 36-month period when your basic pay was at its highest. Reviewing your pay history is necessary to pinpoint this period.
Employees can consult official documents and resources for pay information. These include Standard Form 50 (SF-50) Notifications of Personnel Action, detailing changes in pay and position. Pay stubs, available through agency payroll systems or portals such as MyPay, provide records of basic pay. Agency human resources or payroll departments can assist with historical pay data.
Once the highest 36 consecutive months of basic pay are identified, the average is calculated by summing the basic pay for those 36 months and dividing the total by 36. For example, if an employee’s total basic pay over their highest 36 consecutive months was $216,000, dividing this by 36 would result in a High-3 average salary of $6,000 per month, or $72,000 annually.
Certain employment scenarios can influence the High-3 calculation. Periods of leave without pay (LWOP) exceeding six months within a calendar year may shift the 36-month period, as they may not count towards consecutive service. Similarly, part-time employment or changes in pay grade and locality pay directly affect monthly basic pay amounts. These variations mean the High-3 period might not be the most recent 36 months before retirement.
Estimating Your FERS Annuity Payout
Once the High-3 average salary and years of creditable service are determined, these values estimate a FERS annuity payout. This estimation uses the components discussed previously.
The core FERS annuity formula is: (High-3 Average Salary) multiplied by (Years and Months of Creditable Service) multiplied by (Multiplier). For example, consider an employee with a High-3 average salary of $72,000. If this employee has 30 years and 6 months (30.5 years) of creditable service and is eligible for the 1% multiplier, the calculation would be $72,000 x 30.5 x 0.01. This calculation yields an estimated annual annuity of $21,960.
To determine the estimated monthly payout, the annual annuity estimate is simply divided by 12. Using the previous example, an annual annuity of $21,960 would translate to a monthly payout of $1,830.
This calculation provides an estimate of the FERS annuity. The Office of Personnel Management (OPM) is responsible for performing the official and final annuity calculations upon an employee’s retirement. The estimated figures serve as a valuable planning tool.