If you’re a federal government employee nearing your retirement transition, knowing where your post-job pension will come from is a good idea. You could be enrolled in the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). There is also a third possibility: FERS with a CSRS component.
Whatever your situation, understanding the components that make up your government pension is essential and can help you better plan for your retirement.
Reviewing the Retirement Systems
Let’s take a closer look at the available government retirement systems.
CSRS: Voluntary contributions
If you were hired by the federal government before 1984, your retirement annuity is covered by CSRS. You contribute up to 8% of your salary to the system, part of which goes to a Thrift Savings Plan (TSP). Under CSRS, you don’t pay Social Security retirement but do pay Medicare tax.
FERS: Automatic contributions
The FERS covers your retirement annuity if you were hired by the federal government after 1987. The same applies if you transferred from CSRS to FERS between 1984 and 1987. In both cases, your agency set up an automatic deduction from your salary that pays into Social Security, a Basic Benefit Plan and the TSP. Your agency matches your TSP contribution up to 4%.
FERS with a CSRS component: An add-on annuity
Under certain situations, you could have coverage through a FERS with a CSRS component. This happens when:
Under this system, your retirement is covered under FERS, with a CSRS add-on to your annuity. Though the annuity is mixed, FERS rules determine retirement eligibility.
More on the TSP
The TSP is a crucial component of all government retirement systems. Contributions to the TSP depend on the system involved and the hire date.
For instance, if you’re a FERS employee who was:
You must fill out the election paperwork through your agency to contribute more.
Meanwhile, under the CSRS, your employer set up a TSP account after you elected to contribute through your agency’s payroll system. You can also determine what percentage to contribute by submitting a TSP-1 Election Form.
The benefit of a TSP is that there’s no maximum contribution limit. You can contribute as much as you want to increase your retirement pension.
Calculating Retirement Benefits
You need your high-3 average salary to calculate retirement benefits under FERS, CSRS or FERS with a CSRS component. As indicated by the charts below, the FERS component focuses on age and years of service, CSRS puts more weight on employment history.
| FERS Component | |
| Age of Retirement | Formula |
| Under 62 at retirement
– OR – 62 or older with under 20 years of service |
1% of high-3 average salary for each year of service |
| 62 or older with 20 or more years of service | 1.1% of high-3 average salary for each year of service |
| CSRS Component | |
| Employment Duration | Formula |
| First five years of CSRS service | 1.5% of your high-3 average salary for each year of service |
| Second five years of CSRS service | 1.75% of high-3 average salary for each year of service |
| Over ten years of CSRS service | 2% of high-3 average salary for each year of service |
If you are under a FERS with a CSRS component, you calculate both plans and then add the totals.
What About Social Security?
FERS pays into your Social Security account, while CSRS does not. In either situation (or if you have the FERS with a CSRS component), it’s important to understand the impact of Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) on your benefits.
WEP: No withholding
The WEP means you could experience a reduction in Social Security benefits if your pension comes from an employer who didn’t withhold Social Security taxes. This might be the case if you receive an annuity from the CSRS (as this system doesn’t set aside Social Security payments).
But there are some exceptions like:
GPO: Non-covered pension adjustment
The GPO adjusts Social Security spousal or widow/widower benefits if they receive pensions from employers that didn’t withhold Social Security taxes. This is a non-covered pension, and it applies to state and federal agencies or non-U.S. employers.
The GPO reduces Social Security benefits by two-thirds of the monthly pension.
Continuing Federal Employee Health Benefits (FEHB)
Your retirement system doesn’t matter when it comes to continuing FEHB post-retirement. Here’s what’s required:
You continue to pay a percentage share of the FEHB premiums after you leave work; these are deducted from monthly CSRS or FERS annuities.
As an aside, the Office of Personnel Management (OPM) suspended applications to the Long Term Care Insurance Program (FLTCIP) in 2022 to allow the carrier time to assess benefit offerings and sustainable premiums.
CSRS and FERS Retirement Planning
Be sure to start your retirement paperwork and administrative process early, at least five years before your retirement date. Start with your personnel office, which has all your information and the necessary forms.
It’s also a good idea to work with a Certified Financial Planner™ who has experience with government pensions and benefits. A CFP® professional can help you navigate the complexities of retirement planning in the context of your global financial picture, including decision-making and required paperwork, while providing advice about maximizing your benefits.
Serving Those Who Serve is a Fed-focused financial advisory firm with a team of seasoned CFP® professionals and staff with in-depth experience working with government pension plans. To learn more or to set up a no-obligation meeting, visit our website, email [email protected] or call 301-216-1111.
Calculating Retirement Benefits
You need your high-3 average salary to calculate retirement benefits under FERS, CSRS or FERS with a CSRS component. As indicated by the charts below, the FERS component focuses on age and years of service, CSRS puts more weight on employment history.
If you are under a FERS with a CSRS component, you calculate both plans and then add the totals.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
The FedLife Podcast is your in-depth, biweekly deep dive into the world of federal benefits and retirement planning. Hosted by federal benefits expert Ed Zurndorfer and Dan Sipe of Serving Those Who Serve, each 30-minute episode unpacks the complexities of FERS and CSRS retirement, FEHB and Medicare, survivor benefits, tax planning, and more. Designed for federal employees and retirees who want more than just the basics, FedLife goes beyond the headlines to explore the rules, nuances, and strategies that can make a meaningful difference in your retirement. Remember: it’s your Fed life, make it a great one.
The Fed15 Podcast is your weekly 15(ish)-minute briefing on federal benefits and financial planning, built specifically for federal employees and retirees. Hosted by Dan Sipe and Katelyn Murray of Serving Those Who Serve, each episode delivers clear, actionable guidance on topics like FERS and CSRS retirement, TSP strategies, FEHB, survivor benefits, tax planning, and more! Whether you’re five years from retirement or already there, The Fed15 helps you cut through the noise, avoid costly mistakes, and make confident decisions about your federal benefits.
