Be Aware of the FERS Earnings Test

FERS pensioners who retire at their minimum retirement age (MRA) will have to take an earnings test based on their retirement income for possibly up to 11 years.

For most FERS employees, the minimum retirement age is 56 or 57 years. After 30 years of completed federal service and reaching in the MRA, they are eligible to retire. Anyone who earns an income beyond the earnings limit will lose money from their Retiree Annuity Supplement (RAS) from their MRA to age 62 and from their Social Security from age 62 to the full retirement age (FRA) of their SS, which is around 66 to 67 years of age.

For the 2019 Earnings Test, Social Security, and—if you are receiving supplement— OPM, both request submission of an earnings report during the period you are required to take the test. The 2019 earnings tests are from your FERS MRA to the year your Social Security reaches full retirement age. For every $2, your income is over $1,470 per month or $17,640 annually; your Social Security should be lowered by $1.

The decrease is $1 for every $3 that your revenue exceeds $3,910 per month or $46,920 from the year you reach Social Security FRA. There is no earnings test starting the month you attain your FRA.

The test is modified annually for any inflation changes, and it is prorated.

If you make an income that has you lose benefits due to the earnings test, the loss is only for a short period of time. Once you reach FRA, Social Security will reanalyze your interests and adjust your monthly payment so that the benefits that were lost due to the earnings test will be paid back throughout your lifetime.

The earnings test is only applicable to earned revenue. It does not apply to gifts, annuities, and other items that might not fall under general categories. Earned income is cash you earn from working. Social security states that only gross wages or net self-employment income is defined as earned income. Earnings from investments, FERS, TSP distributions, and even annual leave payments do not fall under the category of an earned income.

Those who retire before their Social Security FRA must be conscious of the earnings test and prepare appropriately.