FERS Annuity

This article discusses how your retirement annuity is calculated if you are a federal employee under the Federal Employees Retirement System (FERS) or you are already retired under FERS.  It discusses both non-disability and disability annuity calculations.

Your basic FERS annuity is computed based on your length of service and your “high-3” average salary. To determine your length of service for computation of your annuity, add all your periods of creditable service, then eliminate any fractional part of a month from the total.

When you elect to receive your FERS Annuity, your decisions will impact how much income you will receive for the rest of your lifetime.  Each employee has selections that are more advantageous than others and depending on your individual circumstances the wrong FERS Annuity selection could amount to tens of thousands dollars of lost income over your lifetime.  Make sure you consult with a Financial Professional who understands Public Sector Retirement benefits before making your selection.

FERS Annuity High-3 Average Salary

Your “high-3” average pay is the highest average basic pay you earned during any three consecutive years of service. These three years are usually your final three years of service, but can be an earlier period if your basic pay was higher during that period. Your basic pay is the basic salary you earn for your position. It includes increases to your salary for which retirement deductions are withheld, such as shift rates. It does not include payments for overtime or bonuses. (If your total service was less than 3 years, your average salary was figured by averaging your basic pay during all of your periods of creditable Federal service).

FERS Annuity Computation for Non-Disability Retirements

For traditional, non-disabled retirees, here’s how your basic FERS annuity is calculated.

If you are under age 62 at the time of retirement, or age 62 or older with less than 20 years of service,
the basic annuity is 1% of your high-3 average salary for each year of service. If you are age 62 or older with 20 or more years of service, it is 1.1% of your high-3 average salary for each year of service.

If you retire under one of the following special provisions — Special Provision for Air Traffic Controllers, Firefighters, Law Enforcement Officers, Capitol Police, Supreme Court Police, or Nuclear Materials Couriers, the basic annuity is calculated as:

  • 1.7% of your high-3 average salary multiplied by your years of service which do not exceed 20, plus
  • 1% of your high-3 average salary multiplied by your service exceeding 20 years

For Members of Congress or Congressional employees (or any combination of the two), you must have at least 5 years of service as a Member of Congress and/or Congressional employee. The basic calculation is:

  • 1.7% of your high-3 average salary multiplied by your years of service as a Member of Congress or Congressional Employee which do not exceed 20, plus
  • 1% of your high-3 average salary multiplied by your years of other service

If you transferred to the FERS.  At the time of transfer, if you had had at least 5 years of creditable civilian service covered by either:

  • Civil Service Retirement System (CSRS) or
  • Social Security

but not both (i.e., this excludes service during which partial CSRS deductions were withheld)
your basic annuity will have 2 components:

  • FERS Component
  • CSRS Component

Calculation of FERS Component:

If you were under age 62 at retirement, or age 62 or older with less than 20 years of service, it is 1% of your high-3 average salary for each year of service. If you were age 62 or older at separation with 20 or more years of service, it is 1.1% of your high-3 average salary for each year of service.

TSP Annuity Worksheet

Calculations of CSRS Component

For the first 5 years of CSRS service Your annuity is 1.5% of your high-3 average salary for each year of service
For the second 5 years of CSRS service Your annuity is 1.75% of your high-3 average salary for each year of service;
For all years of CSRS service over 10 Your annuity is 2.0% of your high-3 average salary for each year of service.

If you retired under the special provision for firefighters, law enforcement officers, or nuclear material couriers, your basic annuity is calculated under the following formula.

  • 2.5% of the years and months of CSRS law enforcement officer, firefighter or nuclear material courier service up to 20 years multiplied times your high-3 average salary, plus
  • 2% of the remaining years of service times your high-3 average salary.

If you retired under the special provision for Members of Congress or Congressional employees, the calculation is:

  • 2.5% of your high-3 average salary multiplied by your years and months of service as a Member of Congress and/or Congressional Employee, your military service while on a leave of absence as a Member and up to 5 years of other military service, plus
  • 1.75% of your high-3 average salary multiplied by your years of other service, which when added to your years of 2.5% service, do not exceed 10 years, plus
  • 2% of your high-3 average salary multiplied by your years of other service in excess of 10

Reductions in Non-Disability FERS Annuity

If you retire under the MRA+10 provision

  • If you have 10 or more years of service and retire at the Minimum Retirement Age (MRA), your benefit will be reduced by 5/12 of 1% for each full month (5% per year) that you were under age 62 on the date your annuity began. However, your FERS annuity will not be reduced if you complete at least 30 years of service, or if you complete at least 20 years of service and your annuity begins when you reach age 60.
  • If you postpone the beginning date of your annuity, the age reduction will be reduced or eliminated.

The age reduction applies to both the CSRS and FERS components of your annuity, if you transferred to FERS and part of your annuity is computed under the CSRS provision.
If you retire under the discontinued service or early optional retirement provision with a CSRS Component:

  • If you retire on a discontinued service retirement or early optional retirement because your agency was undergoing a major reorganization, reduction-in-force or transfer of function, and part of your benefit was computed under CSRS rules, the CSRS portion will be reduced if you are under age 55. The reduction is 1/6 of 1% (2% per year) for every month that you are under age 55 at the time of retirement.

FERS Annuity Survivor Benefits

If you are married, your FERS Annuity benefit will be reduced as a survivor benefit, unless your spouse consented to your election of less than a full survivor annuity. If the total of the survivor benefit(s) you elect equals 50% or more of your benefit, your annuity is reduced by 10%. If the total equals 25%, the reduction is 5%.

Unpaid or Refunded Service

If you have a CSRS component in your FERS annuity:

  • The CSRS portion of your benefit will be reduced by 10% of any deposit owed for CSRS non-deduction service performed before October 1, 1982, unless the deposit was paid before retirement.
  • The CSRS portion of your non-disability benefit will be reduced by an actuarial factor for any CSRS refunded service performed before October 1, 1990, if you do not repay the refund before retirement and your annuity commences after December 2, 1990.

Alternative Annuity

Your benefit may be reduced if you elected a lump sum payment equal to your retirement contributions and a reduced monthly annuity, commonly called an “alternative annuity.” Only non-disability annuitants who have a life-threatening affliction or other critical medical condition can elect this option.

FERS Annuity Disability Retirement Computation

FERS disability benefits are computed in different ways depending on the annuitant’s age and amount of service at retirement. In addition, FERS disability retirement benefits are recomputed after the first twelve months and again at age 62, if the annuitant is under age 62 at the time of disability retirement.

If you are age 62 or older with less than 20 years of service, or are under 62 and meet the age and service requirements for immediate voluntary retirement, you receive your “earned” annuity based on the general FERS annuity computation, as follows: 1% of your high-3 average salary for each year of service.
If you are 62 or older at retirement with 20 or more years of service, you are entitled to 1.1% of your high-3 average salary for each year of service.

FERS Disability Computation

  • Under age 62 at retirement, and
  • Not eligible for voluntary immediate retirement

For the first 12 months:
60% of your high-3 average salary less 100% of your Social Security benefit for any month in which you were entitled to such benefits. However, you are entitled to your “earned” annuity if it is larger than this amount.

 

After the first 12 months
40% of your high-3 average salary minus 60% of your Social Security benefit for any month in which you are entitled to Social Security disability benefits. However, you are entitled to your “earned” annuity if it is larger than this amount.

When you reach age 62, your annuity will be recomputed using an amount that essentially represents the annuity you would have received if you had continued working until the day before your 62nd birthday and then retired under FERS.

Reductions in FERS Disability Annuity

Survivor Benefits
If you are married, your benefit will be reduced for a survivor benefit, unless your spouse consented to your election of less than a full survivor annuity.

  • If the total of the survivor benefit(s) you elect equals 50% of your benefit, your annuity is reduced by 10%.
  • If the total equals 25%, the reduction is 5%.

 

FERS Annuity Cost of Living Adjustments

Your annuity will be increased for cost-of-living adjustments (COLAs), if:

  • You are over age 62; or
  • You retired under the special provision for air traffic controllers, law enforcement personnel,
  • or firefighters; or
  • You retired on disability, except when you are receiving a disability annuity based on 60% of your high-3 average salary. This is generally during the first year of receiving disability benefits; or
  • Your retirement includes a portion computed under Civil Service Retirement System (CSRS) rules.

FERS retirees under age 62 who do not fall into one of the categories mentioned above, are not eligible for COLA increases until they reach age 62.

If you have been receiving retirement benefits for less than 1 year and are eligible for a COLA adjustment, you’ll get a percentage of the cost-of-living increase. The percentage depends on how long you were receiving your annuity before the effective date of the increase.