What Is the Cumulative Retirement for FERS?

The Federal Employees Retirement System (FERS) serves as the primary retirement plan for most federal civilian employees hired after 1983. This three-tiered program provides a framework for retirement income. It integrates a Basic Benefit Plan, Social Security benefits, and the Thrift Savings Plan (TSP), offering multiple sources of financial support.

The FERS Basic Annuity

The FERS Basic Benefit Plan is a defined benefit component, offering a guaranteed monthly annuity in retirement. Its calculation considers an employee’s years of creditable service and their “High-3” average salary. The “High-3” average salary represents the highest average basic pay earned during any 36 consecutive months of federal service. This calculation includes basic pay and locality pay, but it excludes overtime, bonuses, or other forms of additional compensation.

The standard formula for calculating the FERS basic annuity is the “High-3” average salary multiplied by the years of creditable service and an applicable multiplier. For most employees, the multiplier is 1% if they retire before age 62 or have fewer than 20 years of service. If an employee retires at age 62 or later with at least 20 years of creditable service, the multiplier increases to 1.1%. Creditable service includes time worked for the federal government, such as service where FERS deductions were withheld, and potentially “bought-back” military service. Unused sick leave can also be added to an employee’s years of service for annuity computation purposes, though it does not count towards retirement eligibility.

Social Security Integration with FERS

Social Security benefits are part of the FERS retirement system. Federal employees covered by FERS contribute to Social Security through payroll taxes. These contributions ensure that FERS employees earn Social Security benefits based on their entire earnings history, not solely their federal service. This structure provides a portable retirement benefit that can be carried over if an employee transitions between federal and private sector employment throughout their career.

Certain provisions can affect Social Security benefits for FERS retirees. The Windfall Elimination Provision (WEP) may reduce Social Security benefits for individuals who receive a pension from non-covered employment (where Social Security taxes were not paid) in addition to Social Security earnings. Similarly, the Government Pension Offset (GPO) can reduce Social Security spousal or survivor benefits for individuals who also receive a government pension based on their own earnings from employment not covered by Social Security. These provisions aim to prevent individuals from receiving disproportionately high benefits from both Social Security and non-covered pensions.

The Thrift Savings Plan (TSP)

The Thrift Savings Plan (TSP) is the defined contribution component of the FERS retirement system, akin to a 401(k) plan offered in the private sector. This plan allows federal employees to contribute a portion of their salary towards retirement savings, which then grows through investment earnings. The TSP features automatic agency contributions, agency matching contributions, and employee contributions, which can be made on a pre-tax traditional or after-tax Roth basis.

Agencies automatically contribute an amount equal to 1% of an employee’s basic pay to their TSP account each pay period, regardless of whether the employee contributes their own money. Agencies also provide matching contributions when employees contribute their own funds. The first 3% of an employee’s pay contributed is matched dollar-for-dollar, and the next 2% is matched at 50 cents on the dollar. By contributing at least 5% of their basic pay, employees can receive a total agency contribution equivalent to 5% of their pay (1% automatic plus 4% matching). Employee contributions can be directed to a Traditional TSP, which offers pre-tax contributions and tax-deferred growth, or a Roth TSP, where contributions are made with after-tax dollars and qualified withdrawals in retirement are tax-free. All agency contributions, however, are made to the Traditional TSP. Participants can choose from various investment options:

• G Fund (Government Securities)
• F Fund (Fixed Income Index)
• C Fund (Common Stock Index)
• S Fund (Small Capitalization Stock Index)
• I Fund (International Stock Index)
• Lifecycle (L) Funds, designed to simplify investment choices based on a target retirement date

FERS Retirement Eligibility

For immediate, optional retirement, a federal employee must reach their Minimum Retirement Age (MRA) with 30 years of creditable service, or be age 60 with 20 years of service, or be age 62 with at least 5 years of service. The MRA varies depending on an individual’s birth year, ranging from 55 to 57. For example, those born before 1948 have an MRA of 55, while those born in 1970 or later have an MRA of 57.

Employees who leave federal service before meeting the age and service requirements for an immediate annuity may still qualify for a “deferred retirement.” To be eligible for a deferred annuity, an employee must have completed at least 5 years of creditable civilian service and not have received a refund of their retirement contributions. The benefits then become payable when the individual reaches a specified age, such as age 62 with 5 years of service, or their MRA with 10 or 30 years of service. “Early optional retirement” may also be available under specific circumstances, such as during a reduction in force (RIF) or reorganization, requiring age 50 with 20 years of service or any age with 25 years of service.