The Federal Employees Retirement System (FERS) is the current retirement system for employees within the U.S. federal civilian employees

United States civil service

In the United States, the civil service was established in 1872. The Federal Civil Service is defined as "all appointive positions in the executive, judicial, and legislative branches of the Government of the United States, except positions in the uniformed services." . In the early 19th century,...

. FERS was enacted on June 6, 1986, to replace the Civil Service Retirement System

Civil Service Retirement System

The Civil Service Retirement System organized in 1920 and has provided retirement, disability and survivor benefits for most civilian employees in the US federal government. Upon the creation of a new Federal Employees Retirement System in 1987, those newly hired after that date cannot...

 (CSRS) and to conform federal retirement plans in line with those in the private sector.

Eligibility

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 have 5 years of civilian service by December 31, 1986, can choose between remaining CSRS or electing FERS within 6 months of rehire. Once an employee is covered by FERS or elects FERS coverage (from being previously covered under CSRS), 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.

Structure

FERS consists of three major components:

• The FERS annuity, a defined benefit plan,
• Mandatory participation in Social Security
  Social Security (United States)
  In the United States, Social Security refers to the federal Old-Age, Survivors, and Disability Insurance program.The original Social Security Act and the current version of the Act, as amended encompass several social welfare and social insurance programs...
  
   (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
  Thrift Savings Plan
  The Thrift Savings Plan is a defined contribution plan for United States civil service employees and retirees as well as for members of the uniformed services....
  
   (TSP), a defined contribution plan
  Defined contribution plan
  In economics, a defined contribution plan is a type of retirement plan in which the amount of the employer's annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts plus any investment earnings on the money...
  
   which operates like a 401(k)
  401(k)
  A 401 is a type of retirement savings account in the United States, which takes its name from subsection of the Internal Revenue Code . A contributor can begin to withdraw funds after reaching the age of 59 1/2 years...
  
  .

FERS Annuity

The FERS annuity is based on a combination of the length of an employee's Federal service eligible for FERS retirement (referred to as "creditable Federal service, which may or may not equal the actual length of Federal service) and the average of the employee's highest three salaries earned during service (commonly shortened to "high-3").

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.

Retirement eligibility

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
1953–1964	56 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
62	5 years
60	20 years
MRA	30 years
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 service at any age, or 20 years and be age 50. Disability retirements are available for eligible employees with at least 18 months service.

FERS Annuity Calculation

The FERS annuity is calculated on a base of the "high-3" average pay. 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).

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 one 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, or law enforcement officers and similar categories) 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 benefit; the reduction is based on the survivor benefit chosen.

Employees are eligible for a cost of living adjustment (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.

FERCCA Legislation

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

External links

• http://www.opm.gov/retire/pre/fers/index.asp Federal Employees Retirement System (FERS) Website