FERS retirement annuities are computed based on:
- Years of creditable service for retirement.
- High-3 average salary.
- FERS annuity computation formula.
Creditable service includes all creditable civilian service performed as a Federal employee, honorable active military service, and unused sick leave.
Your high-3 average salary is based on the highest 3 years of basic pay or salary you earned in any consecutive 3-year period. Generally, the final 3 years of service include the highest pay, but pay from an earlier period can be used if it was higher.
Basic pay includes locality pay, night differential pay (for wage grade only), and premium pay for firefighters/law enforcement officers. It does not include night differential pay for general schedule employees or bonuses, allowances, or overtime pay.
Under the Non-foreign Area Retirement Equity Assurance (NAREA) provision of the National Defense Authorization Act for Fiscal Year 2010, beginning January 1, 2010 employees working in non-foreign areas will start receiving locality pay in lieu of Cost of Living Allowance (COLA). The transition from COLAs to locality pay will be phased in over a three-year period beginning in 2010. Employees who separate on immediate retirement between January 3, 2010 and December 31, 2012, are permitted under NAREA to elect a credit for a portion of their COLA in 2010 and 2011 as basic pay for retirement annuity computation purposes. The employees must pay retirement deductions on the portion of the COLA that is being credited as basic pay and the employing agency will pay employer contributions on the basic pay portion of the COLA. Employees who want to make this election must submit their election to the Civilian Benefits Center at the time they separate for retirement. Contact the Benefits Line for additional information.
The basic annuity under the general formula is:
- One percent of the high-3 average salary multiplied by the total years and months of creditable service (if you are under age 62 or have less than 20 years of total creditable service); or
- One and one-tenth percent of the high-3 average salary multiplied by the total years and months of creditable service (if you are age 62 at the date of separation and have at least 20 years of total creditable service).
If you work a part-time work schedule your annuity will be prorated based on the number of hours you work. Your Retirement Specialist can provide additional information.
The annuity supplement is a benefit paid, until age 62, to certain FERS employees who retire before age 62 and are entitled to an immediate annuity. The supplement approximates the value of FERS service in a Social Security benefit. The general purpose of the supplement is to provide a level of income before age 62, similar to any Social Security benefit you may receive at age 62.
The annuity supplement is subject to an earnings test and may be affected if you are employed after retirement.
Your annuity will be reduced if:
- You are younger than age 62 and retire on an early deferred or Minimum Retirement Age (MRA) +10 Retirement. Your annuity will be reduced by five-twelfths of 1 percent for each month, and 5 percent for each year, you are younger than age 62 at the annuity commencing date. An early deferred or MRA + 10 annuity is not reduced if you completed at least 20 years of service and postpone the commencing date until age 60. An early deferred annuity is not reduced if you completed at least 30 years of service.
- You elect a survivor annuity for your current or former spouse. The reduction is dependent on the base you elect for the survivor annuity. You can elect either the full amount or 50 percent as the base for the survivor annuity. Your annuity will be reduced by 10 percent of the survivor base you select.
- You elect a survivor annuity for a person who has an insurable interest. Your annuity will be reduced by 10–40 percent, depending on the difference between your age and the age of the person you name.
- You elect an alternative form of annuity because you are eligible for a nondisability annuity but have a life threatening or other critical medical condition.
OPM will automatically withhold the following from your retirement annuity:
- Federal income tax in the amount that is currently withheld from your salary. Withholdings for State income tax are not automatic. OPM has agreements with some States to allow the withholding of State income tax, but you must specify the dollar amount ($5 or more) you want withheld.
- Premiums for Federal Employees Health Benefits, if you are eligible to continue coverage.
- Premiums for Federal Employees’ Group Life Insurance, if you are eligible to continue coverage.
- Premiums for Federal Dental and Vision Insurance Program, if you are enrolled.
Once you reach age 62, you are eligible for cost of living adjustments to your annuity. If you retire either on disability retirement and are not receiving 60 percent of your average salary or under the special provisions for law enforcement officers, firefighters, or air traffic controllers, you will not need to reach age 62 to receive cost of living adjustments.