Federal Employees Retirement System
The Federal Employees Retirement System (FERS) is the retirement system for employees within the United States civil service. FERS became effective January 1, 1987 to replace the Civil Service Retirement System (CSRS) and to conform federal retirement plans in line with those in the private sector.
FERS consists of three major components:
- The FERS annuity, a defined benefit plan,
- Mandatory participation in Social Security (most CSRS employees are not part of Social Security and do not pay taxes into the system, nor are they eligible for benefits unless they qualify under private sector employment or by being rehired and covered as CSRS (with a Social Security) Offset), and
- The Thrift Savings Plan (TSP), a defined contribution plan which operates like a 401(k)
Transition from CSRS to FERS
Since January 1, 1984, employees with fewer than 5 years of nonmilitary experience on December 31, 1986 were covered under interim retirement rules under which they were covered by both CSRS and the Social Security system. They made reduced payments to the CSRS (1.3 percent of earnings instead of the usual 7 percent) and contributed their full employee share to Social Security. Employees with more than 5 years of nonmilitary service on December 31, 1986 continued under the dual benefit coverage unless they opted to switch to FERS between July 1, 1986 and December 31, 1987. Employees covered only by CSRS remained covered by it unless they opted to switch to FERS.
The FERS annuity is based on (a) the length of an employee's Federal service eligible for FERS retirement (referred to as "creditable Federal service", which may not be the actual duration of Federal employment) and (b) the average annual rate of basic pay of the employee's highest-paid consecutive three years of service (commonly referred to as the "high-3" period).
The annuity does not begin until one full calendar month has passed since the employee's retirement. Thus, an employee retiring on the last day of a month (June 30, for example) will have his/her annuity begin on August 1 (as the entire month of July will have passed), but an employee retiring during a month (July 1, for example) will not have his/her annuity begin until September 1 (as July will not be a full month passed, but August will be).
Eligibility for Social Security benefits and TSP withdrawals are covered by the regulations for those plans.
Eligibility for FERS
Most new federal employees hired on or after January 1, 1984 are automatically covered under FERS. Those newly hired and certain employees rehired between January 1, 1984 and December 31, 1986 were automatically converted to coverage under FERS on January 1, 1987. Rehired federal employees who worked prior to December 31, 1983 and had 5 years of civilian service by December 31, 1986 can choose between remaining in CSRS or electing FERS within 6 months of rehire. Once an employee is covered by FERS or elects to switch from CSRS to FERS coverage, the employee remains covered by FERS. Employees of Nonappropriated Fund Instrumentalities of the Departments of Defense and Homeland Security participate in a separate retirement system, except when retaining previous coverage under a different retirement system following a transfer.
Eligibility for annuity
In order to qualify for the standard FERS annuity an employee must have reached a minimum retirement age (MRA) and have a specified number of years of "creditable Federal service". Certain levels of military service may be purchased for a specified amount, but such repurchase is optional.
The MRA is based on the employee's birth year as shown on the table below:
|Birth Year||MRA||Birth Year||MRA|
|1947 or earlier||55 years||1965||56 years, 2 months|
|1948||55 years, 2 months||1966||56 years, 4 months|
|1949||55 years, 4 months||1967||56 years, 6 months|
|1950||55 years, 6 months||1968||56 years, 8 months|
|1951||55 years, 8 months||1969||56 years, 10 months|
|1952||55 years, 10 months||1970 or after||57 years|
For an immediate retirement (which starts 30 days after the employee stops working) or a deferred retirement the employee must meet one of the following combinations of age and years of creditable service:
|Age||Years of Service|
|MRA||10 years |
Employees in certain cases of either involuntary separation, or voluntary separation during a "reduction in force" can qualify for early retirement. The employee must either have 25 years of service at any age, or 20 years of service and be age 50. Disability retirement is also a potential option for eligible federal employees with at least 18 months of service who no longer can perform their duties due to a medical disability.
FERS Annuity Calculation
The FERS annuity is calculated on a base of the "high-3" average pay. It uses your highest 78 consecutive pay periods of Basic Pay with locality only. Years with 27 pay periods have no impact on the calculation. The average pay includes all items for which retirement deductions are withheld (e.g., locality pay adjustments and shift differentials, but not overtime, bonuses, or hazard pay [additional pay for certain "hazardous" duty assignments, such as working in a combat zone].).
For the majority of FERS employees the annuity is structured to provide employees an incentive to continue working until age 62 (which is also the earliest age at which a FERS employee can collect Social Security benefits) and is calculated as follows:
- For employees retiring at or after age 62 with at least 20 years of service, the annuity is 1.1 percent of the high-3 average times the number of years worked.
- For employees retiring before age 62, or at or after age 62 with less than 20 years of service, the annuity is 1.0 percent of the high-3 average times the number of years worked.
Separate calculations exist for certain workers (mainly Members of Congress or congressional staff, law enforcement officers, firefighters and air traffic control specialists) and for employees who transferred from CSRS to FERS.
Married employees will have their annuity reduced by a survivor benefit unless the spouse consents to receiving less than a full ipock benefit; the reduction is based on the survivor benefit chosen.
Employees are eligible for a cost of living adjustment (Cost Of Living Allowance) if they meet certain criteria. The most notable is retirement after age 62; most employees who retire before age 62 will not receive a COLA until age 62.
The Federal Erroneous Retirement Coverage Corrections Act (FERCCA) legislation was signed in September 2000. It was designed to provide relief to federal civilian employees who were placed in the wrong retirement system for at least three years of service after December 31, 1986.
FERCCA gave affected employees and annuitants placed in the wrong retirement system an opportunity to choose between the Federal Employees Retirement System (FERS) and the offset provisions of CSRS. FERCCA may also provide one or more of the following:
- Reimbursement for certain out-of-pocket expenses paid as a result of a coverage error,
- Ability to benefit from certain changes in the rules about how some government service counts toward retirement, and
- Make-up contributions to the Thrift Savings Plan and receipt of lost earnings on those contributions
- "New Retirement System for Federal Employees". Monthly Labor Review. 1986.
- "New Retirement System for Federal Employees". Monthly Labor Review. 1986.
- FERS Information: Computation at OPM.gov
- An employee retiring under this criteria is not eligible for deferred retirement.
- If an employee retires at the MRA with at least 10 years creditable service, but less than 30 years, the benefit is reduced by five percent for each year the employee is under age 62, unless the employee has at least 20 years creditable service and does not receive benefits until age 60.
- Federal Erroneous Retirement Coverage Corrections Act (FERCCA) definition at OPM.gov
- The TSP Allocation Guide, a free primer on maximizing TSP contributions and returns.
- The Fed Trader TSP Strategies website maintained by The Fed Trader
- FERS and other Federal Retirement information, including TSP, FSAFEDS, CSRS and more
- http://www.opm.gov/retire/pre/fers/index.asp Federal Employees Retirement System (FERS) Website
- Federal Employees' Retirement System: Budget and Trust Fund Issues Congressional Research Service
- Cost-of-Living Adjustments for Federal Civil Service Annuities Congressional Research Service
- Federal Employees’ Retirement System: Benefits and Financing Report issued January 30, 2014 Congressional Research Service