The Special Retirement Supplement

There is a financial difference between the calculation of annuity under the threatened high-5 formula and the current high-3 formula. Also, there is a new legislative proposal that calls for the elimination of the special retirement supplement (SRS) and it is not clear what would happen after the proposal has been introduced.

According to the current policy, a FERS employee is entitled to a Social security benefit and an immediate, unreduced annuity when they retire before 62 years. The system is meant to replace your retirement income value before one can officially begin to receive their benefits when they reach age 62. In order to qualify for the immediate, unreduced annuity, one must;

• Serve for 20 years and retire at age 60
• Serve for 30 years and retire at the Minimum Retirement Age of 57
• Retire voluntarily at the Minimum Retirement Age
• Voluntarily retire early at the Minimum Retirement Age

You cannot be eligible for the SRS if you retire under the minimum retirement. Also, disability retirees and deferred retirees do not qualify for the special retirement supplement (SRS).  However, a complicated formula is normally used to determine the amount of the SRS. The data that is used in this type of computation isn’t available for beneficiaries. Therefore, one can get a rough estimate of the amount by using another simple formula provided by OPM.

In this case, you only need to multiply your years of FERS service by the SSA Social Security benefit estimate and divide the result by 40 after rounding off the product to the nearest whole number. It is during the day of one’s retirement that the SRS is established. It is also important to point out that SRS is a fixed amount and the cost of the living adjustments does not in any way affect the fixed SRS amount. Also, the amount only becomes a social security when you reach the age of 62.

The Civil Service Retirement and Disability Fund provides the money used to fund the SRS program. This type of arrangement only applies to the FERS service. The SRS has a limit when it comes to annual earnings just like a normal Social Security Benefit. For every $2 above the annual earnings limit, your SRS is always reduced by $1. The rule is applied on earnings from self-employment as well as earnings from wages.

However, the limit rule does not apply to individuals that retire before the Minimum Retirement Age, but they must be traffic controllers, firefighters, or law enforcement officers. For such cases, the SRS is not in any way reduced even if they exceed the earning limit.

The special provision only ceases to apply when the mentioned individuals reach their Minimum Retirement Age. In other words, traffic controllers, firefighters, and law enforcement offices are not exempted from all earnings limit when they reach the Minimum Retirement Age.

The abolition of SRS will come with its implications for workers and some of them may not be attractive. To begin with, individuals that retire before age 62 will only be entitled to the FERS civil service annuity before they can be eligible for social security benefit at age 62. Second, one will be left to decide on how they will survive as the government will not be able to fill the income gap.

Failure to retire as early as expected means that one might fail the eligibility test for social security benefit.  Some of the coping tactics that one might adopt include living frugally or taking another job. Also, one might end up using up their investment or TSP faster than expected. However, it is too early to tell whether the SRS will be abolished or not.