The Many Flavors of Federal Retirement

By:  Maureen Wilkin, Federal Benefits Specialist

Published:  December 20, 2018

 

If you are a current Federal employee you are most likely covered by the Federal Employees Retirement System (FERS). Or you might be covered by the Civil Service Retirement System (CSRS). Then again, you could be covered by either of those, but be in a Special Retirement occupation.   If you have a temporary appointment, you are covered only by Social Security.  There seems to be a limitless number of retirement coverage categories.  That’s quite a menu of possibilities or “flavors.” 

Understanding which retirement coverage you have and why can be challenging for employees.  The regulations governing these determinations are complex, even for trained benefit specialists.  Let’s try to sort this out and simplify as much as possible.

CSRS covered employees are those first hired into a retirement covered position before 1984.  If they ever left Federal service for more than one year after 1984, they became covered by CSRS-Offset upon reentering Federal service. CSRS-Offset provides CSRS coverage as well as Social Security coverage.

FERS covered employees are generally those first hired into a retirement covered position since January 1, 1987.  If hired between January 2013 and January 2014 they are FERS-RAE covered employees. Employees hired since 2014 are covered by FERS-FRAE.  The only difference in FERS, FERS-RAE and FERS-FRAE coverage is the rate of employee contribution to the retirement fund.  FERS-RAE and FERS-FRAE have a greater rate than that of FERS.

When FERS was implemented in 1987, CSRS employees were given the opportunity to elect to go into the FERS system.  They were given a second opportunity in 1998.  If they did change, from that time forward their retirement coverage designation became Trans-FERS. That means they have a CSRS component to their retirement based on having had at least five years of previous employment creditable in the CSRS system.  Their eventual retirement will be governed by FERS rules for eligibility.  The annuity will be calculated using the CSRS formula for their CSRS service and the FERS formula for their FERS service.  Both calculations will be combined into one benefit payment.

CSRS or FERS employees in certain occupations have Special Retirement designations. These occupations are Law Enforcement, Air Traffic Controller and Firefighter.  These occupations have mandatory retirement at certain ages.  The rate of employee contribution to the retirement fund is greater than that for regular retirement and the age and service requirements for retirement eligibility are different than those for regular retirement.  These occupations receive enhanced annuity calculations.

Employees serving in temporary appointments are covered by Social Security only.  That service is not creditable for retirement calculation purposes unless a service credit deposit is made into the appropriate retirement system by the employee while actively employed and covered by CSRS or FERS. Temporary service since January 1, 1989 cannot be made creditable for retirement.

Eligibility for CSRS or FERS retirement is based on two factors: years of creditable service and age. There are options for retirement using a combination of these factors depending upon the retirement system and the circumstances involved: immediate retirement, voluntary early retirement, disability retirement, special retirement or deferred retirement.

Annuity calculations are based on either the CSRS formulas (general or special) or the FERS formulas (general or special). Employees with CSRS-Offset coverage will have their CSRS annuity offset at age 62 by an amount based on their estimated Social Security benefit at age 62.  The annuity of a Trans-FERS covered employee is the combination of the CSRS calculation for their CSRS service and the FERS calculation for their FERS service.

Working a part-time schedule of work does not affect an employee’s eligibility for retirement. However, the calculation of their annuity will take into account how much of their career was less than full time work.  The CSRS and FERS calculations for part-time service are different.

Benefits for surviving family members are not the same under the CSRS and FERS retirement systems. Those attributable to the death of an employee are different from those attributable to the death of an annuitant. When an annuitant dies there are potential survivor benefits for a spouse, former spouse, and dependent children.  The surviving spouse benefits will be determined by what the annuitant elected on their retirement application.  However if the annuitant had a living former spouse with a certified court order in place with the Office of Personnel Management (OPM) awarding them a survivor benefit, that court order would take precedence.  Trans-FERS surviving spouse benefits are the same as regular FERS.  There is no proration of the CSRS component.

Benefits for surviving dependent children of CSRS and FERS annuitants are NOT related to the amount of annuity.  It’s also important to know that the definition of a dependent child for this benefit differs greatly from other Federal benefit programs such as health insurance (FEHB).  The actual benefit is based on a formula that varies over time.  That formula also takes into consideration receipt of any Social Security children’s benefits for surviving children of FERS annuitants.

This has been a basic discussion of retirement coverage and its implications for Federal employees. Knowing which coverage you should and do have as a Federal employee is important.  Retirement plan coverage is not just a key factor in your Federal employment and benefit history; it is also the foundation for your retirement planning.