The FERS Annuity

By: Vanessa Craddock, Federal Benefits Specialist

Published: August 20, 2019

As many Federal employees may know, the FERS retirement program is a three-tiered benefit system: the FERS Annuity, the Social Security retirement, and the Thrift Savings Plan. It is the FERS portion, however, that serves as the foundation of this retirement plan. So what exactly is a FERS Annuity benefit and what can employees do to get the most from it?

The FERS annuity is a lifelong monthly payment an employee will receive upon retirement. It is paid by the US Office of Personnel Management, and is calculated using the following formula:

[$80,000 x 30 years x 1% or 1.1% = $24.000 or $26,400] 

Seems easy, but be careful. All three parts of the formula can be tricky.

(1) The high-3 average salary is the 3 consecutive years an employee’s “basic pay” rates are the highest. Basic pay is regular pay, locality adjusted pay, law enforcement availability pay, night differential pay for wage grade only, and special pay rates used for recruiting/retention purposes. Basic pay does not include overtime pay, bonuses, holiday pay, military pay, travel allowances.

TIP: Any three consecutive years, not just the last three years can be used.

(2) The years of creditable service generally include service for which retirement contributions have been made. This means some employees may have a few months or even years of Federal service which may not be included in retirement processing. If an employee’s initial appointment was one that precluded withholding retirement contributions, no credit is given. Examples would be temporary service, intermittent, internships, and student appointments to name a few.

TIP: Employees should check their retirement service computation date or RSCD (not the leave SCD) to determine their length of service. Remember, the Benefits Specialist in your HR Department can assist you with identifying and paying for certain types of service to make it creditable when possible.

(3) The pension multiplier changes from 1% to 1.1% when a FERS employee starts drawing a benefit at age 62 or older with 20 years or more Federal service.

TIP: An employee who is age 62+ with enough sick leave added to yield 20 years of service will have the 1.1% multiplier.

Last, what are some things employees can do to increase the amount of the FERS annuity benefit?

  • Pay deposits/re-deposits whenever possible
  • Pay military service deposits, which are interest-free if paid before year 3 under FERS
  • Pay for academy service if in receipt of military retired pay
  • Delay retirement until age 62 if you have at least 20 years of service
  • Save sick leave
  • Work more full-time hours than part-time

The FERS annuity is where government health, life, dental, vision, and long term care benefits will come from in retirement. It also continues to be paid upon your death (whether before or after retirement) to your spouse and eligible children in the form of survivor annuity benefits. For these reasons, the FERS annuity benefit is an important retirement source employees should work to maximize.

Vanessa Craddock is retired from OPM; her last position was as Senior Federal Benefits Specialist. Ms. Craddock designed, developed, and instructed a variety of courses: CSRS and FERS Employee Benefits, technical training for health benefits and life insurance, disability retirement, and worker’s compensation. She has been a presenter for NITP since 2000.