One advantage of working for the federal government is the security of knowing that you’ll be taken care of in your old age. Federal civilian employees are guaranteed robust retirement coverage under the Federal Employees Retirement System (FERS), but the system can be hard to navigate.
If you are scratching your head trying to understand FERS retirement, don’t worry; we’ve got you covered. This guide will explore the ins and outs of the Federal Employees Retirement System, including the minimum retirement age, retirement benefits, and how it compares to legacy systems.
What is FERS Retirement?
The Federal Employees Retirement System (FERS) provides retirement coverage for all federal civilian employees. FERS is a hybrid system combining the defined benefits of a traditional pension and contributions similar to a 401(k) plan used in private companies.
FERS vs. CSRS
There are currently two co-existing retirement systems for federal employees: The Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS).
The CSRS is the original retirement plan for non-military federal government workers created in 1920. It works like a traditional pension. Regular payroll deductions are saved and disbursed as annuity payments when a federal employee retires.
The CSRS retirement benefits are intended to completely cover the expenses of a retired federal employee in old age and ensure roughly the same standard of living they enjoyed while in federal service. The retirement annuity is subject to an annual cost of living adjustment (COLA) pegged to inflation. See What the FERS COLA increase is in 2023!
Over the 20th century, rising life expectancy began to strain the retirement system, so the federal government decided to create a new system combining multiple retirement benefit sources. The Federal Employees Retirement System was launched in the mid-1980s.
All new federal civilian employees have enrolled automatically in FERS retirement, but some retired federal employees continue to receive annuity payments under the Civil Service Retirement System.
See the federal pay raise for 2023
FERS Benefit Sources
The FERS retirement plan is a mixed system that combines a defined basic benefit plan with contribution-based retirement benefits. FERS benefits come from three different sources. Let’s explore each one in depth.
Basic Benefit Plan
The Basic Benefit Plan works similarly to a traditional defined-benefit pension. The agency automatically sets aside a portion of a federal employee’s paycheck each pay period.
In addition to these routine payroll deductions, the agency pays a set amount. In retirement, the employee will receive monthly annuity payments based on their highest pay and years of creditable service.
A portion of FERS retirement depends on SSA COLA . In addition to payroll deductions for the Basic Benefit Plan, the agency withholds a standard social security deduction every pay period.
Thrift Savings Plan (TSP)
FERS retirement also includes the federal government equivalent of a 401(k) called a Thrift Savings Plan(TSP). New federal civilian employees are automatically enrolled in the plan, and a percentage of the employee’s basic pay is automatically placed into the TSP account each month. The agency pays a matching contribution if you pay at least 5 percent.
Calculating the FERS Basic Benefit
Your FERS basic benefit annuity is calculated according to your basic pay and years of creditable service. The “high-3” method is used, meaning the three highest years of salary are averaged.
In most cases, this is the average of your three final years of service, and it’s generally equal to your salary at your final pay grade.
FERS Basic Benefit Formula
Most federal employees under the FERS retirement system will receive annuity payments monthly based on the following formula:
|Under Age 62 at Separation for Retirement, OR Age 62 or Older With Less Than 20 Years of Service
|1 percent of your high-3 average salary for each year of service
|Age 62 or Older at Separation With 20 or More Years of Service
|1.1 percent of your high-3 average salary for each year of service
Basic Benefit for Special Classes of Federal Employees
To support retention and recruitment, provisions in federal law award additional retirement benefits to the following categories of federal employees:
- US Marshalls and other federal law enforcement officers
- Air Traffic Controllers
- Capitol Police
- Supreme Court Police
- Nuclear Materials Couriers
- Members of Congress and congressional employees with at least five years of service
The basic benefit for these groups is calculated by multiplying 1.7% times years of creditable service for the first 20 years plus an additional 1% for each year after.
How the Thrift Savings Plan (TSP) Works
The Thrift Savings Plan is a retirement investment account similar to a 401(k) you can take to your next job if you leave federal service. Each federal employee can set aside a certain amount of their monthly salary and put it into their choice of investment vehicles that vary in risk and return.
When hired at a federal agency, you’re automatically enrolled in a tax-deferred Thrift Savings Plan account at the default contribution rate of 5 percent. This means that 5 percent of your paycheck will be withheld, and the agency will deposit it in your TSP account.
You can increase and lower your contributions or stop them altogether, but you only qualify for matching contributions if your contribution rate is at least 5 percent.
The TSP allows federal employees to customize their portfolios by choosing from a set of individual investment funds that have different levels of risk:
FERS Retirement Eligibility and Minimum Retirement Age
In most cases, you must meet the minimum retirement age (MRA) and spend a specified amount of time working for the federal government before you can begin receiving FERS retirement benefits. Consult the chart below to find out what your minimum retirement age is:
|If you were born
|Your MRA is
|55 and 2 months
|55 and 4 months
|55 and 6 months
|55 and 8 months
|55 and 10 months
|56 and 2 months
|56 and 4 months
|56 and 6 months
|56 and 8 months
|56 and 10 months
|In 1970 and after
To be eligible to receive an immediate retirement benefit that begins 30 days after your last day on the job, you must meet the minimum criteria for age and years of creditable service:
|Years of Service
Those who retire at the minimum retirement age of more than 10 but fewer than 30 years of service will not receive full benefits until they turn 62. The benefit is reduced by 5 percent for each year under 62.
If you have suffered a disabling injury or illness while working, you may be eligible for disability retirement at any age, provided that you meet the following conditions:
- You have worked at least 18 months
- Your disability is expected to last one year or more
- Your agency is unable to accommodate your disabling condition
- Your disabling condition prevents you from effectively working in your current position
The Federal Employees Retirement System (FERS) provides retirement coverage for all new federal civilian employees. Every federal employee hired after 1983 is automatically covered by the FERS retirement plan. Congress created FERS in the 1980s to replace the Civil Service Retirement System.
FERS benefits have three sources: Basic Benefit Plan, Thrift Savings Plan, and Social Security. The basic benefit and social security are withheld automatically and paid out as a fixed annuity, while employees can manage their contributions and retirement investments under the TSP. Consult the website of the Office of Personnel Management for more information.