Federal Employees Retirement System


The Federal Employees' Retirement System 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 and to conform federal retirement plans in line with those in the private sector.
FERS consists of three major components:
Since January 1, 1984, employees with fewer than 5 years of non-military 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 and contributed their full employee share to Social Security. Employees with more than 5 years of non-military 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. Once an employee elected to switch to FERS the choice was irrevocable.

FERS annuity

Eligibility

Most new federal employees hired on or after January 1, 1987, 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; the portion of time under the old system is referred to as "CSRS Offset" and only that portion falls under the CSRS rules. 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 six months of rehire, but should the employee elect to switch from CSRS to FERS coverage, the election is irrevocable. 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.

Contributions

Employees hired prior to January 1, 2013 contribute 0.8 percent of salaries to their FERS annuity to their annuity, while employees hired in 2013 contribute 3.1 percent and employees hired in 2014 and thereafter contribute 4.4 percent ; this percentage does not change so long as the employee remains in Federal service. The government matching portion is dependent on the employee's job classification and is based on actuarial assumptions, and is subject to change.
Unlike TSP, where an employee can choose not to participate and thus not have any withdrawals from salary, FERS contributions are mandatory. However, at retirement or separation from Federal service, one may ask for a refund of contributions made; only employee contributions are refunded, government matching contributions are not refunded and are lost. However, a spouse or former spouse must be notified, and a refund will not be allowed if it would end a court-ordered right for a spouse or former spouse to obtain benefits from the employee's Federal service. And if the employee returns to Federal service, a refund voids entitlement to an annuity based on the former service unless repaid upon return.

Retirement Qualifications for Annuity

In order to qualify for the standard FERS annuity an employee must have reached a minimum retirement age and have a specified number of years of "creditable Federal service". Credit for certain levels of military service may be repurchased for a specified percentage of prior salary plus accrued interest; such repurchase is optional and can be made at any time prior to retirement. Part-time work is counted on a pro-rated basis. Any leave without pay days are counted as if having worked, limited to six months in a year.
The MRA is based on the employee's birth year as shown on the table below:
Birth YearMRA
1947 or earlier55 years
194855 years, 2 months
194955 years, 4 months
195055 years, 6 months
195155 years, 8 months
195255 years, 10 months
1953–196456 years
196556 years, 2 months
196656 years, 4 months
196756 years, 6 months
196856 years, 8 months
196956 years, 10 months
1970 or after57 years

Immediate and Deferred Retirement

For an immediate retirement or a deferred retirement the employee must meet one of the following combinations of age and years of actual creditable service:
Employees facing either involuntary separation, or voluntary separation in lieu of a "reduction in force" can, in some cases, qualify for early retirement. The employee must either be age 50 with 20 years of actual creditable service, or have 25 years of actual creditable service at any age.
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. The following conditions are required:
The FERS annuity is based on a specified percentage, multiplied by the length of an employee's Federal service eligible for FERS retirement and the average annual rate of basic pay of the employee's highest-paid consecutive 36 months of service.
The "high-3" pay includes all items for which retirement deductions are withheld; this includes basic pay, locality pay adjustments and shift differentials, but not overtime, bonuses/awards, severance pay or buyouts, payments for unused annual leave and credit hours, or "hazard pay". All salaries earned during the "high-3" period are time-weighted, and include COLA's, within-grade increases, and promotions. The "high-3" period normally is the final three years of service but does not have to be.
The FERS annuity is structured to provide employees an incentive to continue working for at least 20 years in Federal service and until age 62, since employees retiring at or after age 62 with 20 years of service or more have the annuity calculated at 1.1 percent of the high-3 average times the number of years worked, while employees not meeting those criteria have the annuity calculated at 1 percent of such. Separate calculations exist for certain workers and for employees who transferred from CSRS to FERS. An employee retiring under age 62 will receive a "special retirement supplement" which duplicates what an employee would earn under Social Security at age 62, but at age 62 the supplement ends. Disability retirement annuity payments are offset totally by any Social Security disability payments for the first 12 months, and then partially afterwards until age 62; at that time the annuity is treated as if the employee had worked for the entire period of disability, and the "high-3" and resulting annuity is recalculated taking into account any COLA's that would have been earned between the original retirement and age 62.
Unused sick leave is converted, at 100% of the balance for employees retiring in 2015 and after, to additional creditable service based on a conversion table, where 2,087 hours equals one full year of additional creditable service. The leave can only increase the amount of creditable service for annuity purposes; it cannot be used to create an eligibility which did not exist.
The actual calculation of creditable service adds years, months, and days separately for civilian employment, military employment repurchased, and unused sick leave.
No other types of earned leave are factored into the annuity calculation. Unused annual leave hours are "cashed out". Where applicable, earned but unused credit hours are also cashed out upon retirement at the same rate as annual leave. Other types of unused leave are not paid and are thus lost if not used before retirement.
Generally, an employee has the right to determine his/her "date of final separation" ; the following day is the employee's retirement date. The annuity does not begin until one full calendar month has passed since the employee's retirement. Thus, an employee retiring on June 30 will have his/her annuity begin on August 1, but an employee retiring on July 1 will not have his/her annuity begin until September 1.
Married employees will have their annuity reduced by a survivor benefit unless the spouse specifically in writing consents to receiving less than a full benefit; the reduction is based on the survivor benefit chosen.
Employees are eligible for a COLA 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.
Because employee contributions are post-tax, a portion of any FERS annuity received is not taxable. However, the non-tax portion is relatively small ; and even though the non-tax portion would be paid back within a few months after retirement, tax law requires it to be spread out over a period of years depending on the annuitant's age.

Payment at Death

If an employee/retiree dies and a survivor benefit was not chosen, then any unpaid balance of employee contributions is paid to the beneficiary designated.
If the employee/retiree did not designate any beneficiary, then the "statutory order of precedence" is used, as follows:
The Federal Erroneous Retirement Coverage Corrections Act 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 and the offset provisions of CSRS. FERCCA may also provide one or more of the following: