Federal Employee Annuities

Federal Employee Annuities

The FERS or Federal Employees Retirement System was created by the US Congress in 1986 and came into effect from 1st Jan 1987. Since then, retirement coverage of all new civilian workers of the Federal government falls under FERS.

FERS can be defined as a retirement program which offers benefits via 3 varied sources, i.e., Social Security, a Basic Benefit Plan, and TSP or Thrift Savings Plan. TSP and Social Security follows you to your next workplace in case you resign as a federal employee before retirement. The Social Security and Basic Benefit sections of FERS make it mandatory for employees to pay their share every month from their paychecks. Your agency keeps the cost of Social Security and Basic Benefit from the paycheck as deduction from payroll. Some money is paid/contributed into these funds by your agency as well. Later you should get federal employee annuity payments every month after retirement for the remainder of your life.

The Thrift Savings Plan which forms a section of FERS, can be described as an account automatically created by the agency for each federal worker. Every payroll day, the agency will deposit a sum of 1 percent of your basic pay earned during a specific period into your TSP account.  Employees can also willingly contribute a percentage of their earnings into their TSP account which can be matched by the agency up to a certain limit. Such contributions to TSP are deferred from taxation. The Federal Retirement Thrift Investment Board administers TSP.

Listed below are some important points that federal employees need to note with regards to federal employee annuities:

  • Eligibility for federal employee annuities is determined by the number of years that you were in credible service and your age. In certain instances, employees must be of MRA (Minimum Retirement Age) to get the federal employee retirement benefits.
  • Different types of retirement include ‘immediate retirement’, ‘early retirement’, ‘deferred retirement’, and ‘disability retirement.’
    • Federal employee annuities in case of immediate retirement begin within thirty days from the day you stopped working. Employees, who take retirement at MRA with a minimum of 10 years, but not more than 30 years of credible service, get benefits that will decrease by 5% per annum for each year that the employee does not reach 62 years of age. However, for employees with 20 years of service, the annuities begin when you turn 60 or older.
    • Federal employee annuities in case of early retirement can be availed in some cases of involuntary separation as well in instances of voluntary separations due to decrease in force or a major restructuring.
    • In case of deferred retirement, payment of federal employee annuities is delayed till certain criteria are met. Employees, who retire from federal service before meeting the service and age requirements for access to benefits of immediate retirement, may become eligible for benefits of deferred retirement.
    • In case of disability retirement, employees must have at least 18 months of service. Also, the disability must have occurred while being employed in a post that was subject to Federal Employees Retirement System, due to some injury or disease, for efficient and useful service in the current post. It should be recognized that the disability will continue for a minimum of 1 year. A certificate must be provided by the agency stating that the employee’s disability cannot be accommodated by them in the current post and that the agency has considered the employee for some vacant post in the same agency at a similar pay/grade level, inside the same area of commute, for which the employee has the qualifications for getting reassigned to.
  • The OPM will consult with the personnel of your agency as well as the payroll office to verify and process your federal employee annuity claim. Irrespective of the type of retirement, the personnel office must take certain actions to be able to process the claim. Employees can decrease any possible delays in processing of the retirement annuity claim by ensuring that your application is submitted well in advance and that your OPF/Official personal folder is properly and completely filled. Early submission of your paperwork will assist the payroll and personnel offices to finish all the required action before your date of retirement.
  • The basic federal employee annuity is calculated according to the length of creditable service and average of ‘high-3’ salary.
    • You need to add all the months of service and remove any fractional periods from the total to calculate your total federal service period.
    • The average of ‘high-3’ pay refers to the highest basic pay average earned by an employee during any three successive years of creditable service. These 3 years of highest pay typically occur during the last 3 years of service before retirement. It can however also occur during an earlier time of your service if the basic pay was more during that earlier time.


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