Federal Government Employee Retirement Benefits

Date:

Moving To A Low Stress/part Time Federal Job

Federal Employees Retirement System (FERS) Overview – 2020 OPM Virtual Benefits Training Event
  • Likelihood of occurring: 3/10
  • Desirably of outcome: 5/10

Lets say that I dont need money any more but I still need health insurance.

In that case, I could search for a new federal job that could meet my lifestyle goals. Ideally it would be a part time job.

I honestly dont think this is a realistic outcome. Im not sure such a job would exist. Secondly, what if I started somewhere new and it was a toxic work culture. I think Id rather take the job I know rather than shoot for a unicorn job that could be a disaster.

Employer And Employee Contributions To Csrs And Fers

Both CSRS and FERS require participants to contribute toward the cost of their future pensions through a payroll tax. Under CSRS, employees contribute 7.0% of base pay to the Civil Service Retirement and Disability Fund . Under FERS, employees first hired before 2013 contribute 0.8% of pay to the CSRDF and they also pay Social Security taxes . FERS employees first hired in 2013 contribute 3.1% of pay to the CSRDF as well as Social Security taxes. FERS employees first hired after 2013 contribute 4.4% of pay to the CSRDF as well as Social Security taxes. Participants in CSRS are not covered by Social Security.19 See Table 4 for a summary of FERS employee contribution rates by date of hire.20

Table 4. FERS Employee Contribution Rates by Date of Hire

Current Law Prior to

4.4%

Compiled by the Congressional Research Service.

Notes: Employee contribution rates are provided for regular FERS employees. Certain special categories of FERS employeesâincluding certain Members of Congress, certain congressional staff, federal law enforcement officers, federal firefighters, air traffic controllers, and nuclear waste couriersâcontribute an additional 0.5 percentage points . Under P.L. 113-67, the Bipartisan Budget Act of 2013, the special category FERS employee contribution is 4.9% for those individuals hired after 2013.

The Federal Employees’ Retirement System

The FERS Basic Benefit Plan is a defined benefit plan for federal employees hired after December 31, 1983. Federal agencies contribute funds to FERS on behalf of employees, in an amount defined by law. Upon retirement, FERS participants receive a benefit based on their highest three consecutive years of pay and number of years of service.

FERS participants are vested after five years of creditable civilian service, meaning they have a right to receive retirement benefits even if they leave federal government employment before retiring. You may find more information about FERS from the U.S. Office of Personnel Management.

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What Does Early Retirement Mean In The Federal Government

I started my website as an early retirement or FIRE blog.

And when I think about my target reader, it is someone who is on top of their finances. They might want to explore early retirement but maybe they havent quite figured out how it impacts all of their benefits from the federal government.

But early retirement means something different to everyone. My blog friend Purple retired at age 30. Retiring at 40 is another popular milestone. However, for this blog article, I define early retirement as anything less than the FERS immediate retirement requirements.

To receive an immediate annuity, you need:

  • Age 57 with 30 years of service
  • Or Age 60 with 20 years of service
  • Or Age 62 with 5 years of service

Social Security Benefits For Federal Workers

FERS Retirement Benefits

The federal government has special retirement programs for its employees. How this affects your Social Security benefit amount depends on when you worked for the federal government.

If you worked for the federal government in 1983 or earlier, you did not pay Social Security taxes on your earnings, and your Social Security earnings record will not show those earnings. This is because the Civil Service Retirement System not Social Securityprovided retirement benefits for federal workers at the time.

A newer program called the Federal Employees Retirement System replaced CSRS. Workers who participate in FERS are eligible for Social Security.

you are covered under the Medicare program

Your CSRS pension could affect your Social Security benefit amount if you:

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Financing Pension Benefits For Federal Employees

As of September 30, 2017, the CSRDF had net assets of $908.7 billion available for benefit payments under both CSRS and FERS. At the same time, the civil service trust fund had an unfunded actuarial liability of $968.1 billion, with $812.5 billion in unfunded liability attributable to CSRS and $155.6 billion in unfunded liability attributable to FERS.31 Federal law has never required that employee and agency contributions must equal the present value of benefits that employees accrue under the CSRS. In contrast, the FERS Act requires that the benefits accrued each year by employees must be fully funded by contributions from employees and their employing agencies.

Updates On Social Security And What To Know For 2022

Your Social Security payments for retirement, disability, family, and survivor do not vary regardless of where you reside in the United States or if you relocate from one state to another. Although states handle many aspects of the federal program, such as SNAP and Medicaid, eligibility standards, payments, and protocols for Social Security are identical nationally. They do not vary by state, unlike those two programs.

While the program itself does not differ from one state to the next, how the program is managed varies.

Most States With Tax Benefits Are Expecting Change

12 states continue to tax Social Security benefits and the federal tax imposed on recipients whose incomes reach a certain threshold. Heres the rundown:

  • Colorado
  • Utah
  • West Virginia
  • While there are no significant changes in store for residents of these states in May, the tax code is constantly changing, so its vital to keep informed about how any recent or upcoming changes may affect you.

    For example, Colorado recently modified its regulations to allow retirees to deduct more of their federally taxable Social Security income. The maximum deduction used to be $24,000, but it will be unlimited starting in 2022, thus eliminating Social Security taxes for everyone over 65.

    Utah increased its Social Security tax credit for low-income people in February.

    State Supplemental Security Income Benefits Vary

    Contact Information:Phone:

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    Summary: Make Your Federal Retirement Work For You

    I hope you enjoyed my quick summary of how federal retirement works. However, if you need more detailed information, I strongly encourage you to check out the OPM website. While the OPM website contains the official government descriptions of federal retirement, I know many people find it difficult to understand. Therefore, I tried to create this post as an easy to understand guide to the major signposts.

    If you found this post useful, please share it with friends! Id also love it if you subscribed so I can send you my latest posts.

    Sam

    Who Qualifies For Oas

    Your Federal Retirement Annuity for CSRS and FERS

    Unlike the CPP, you dont have to have paid into the OAS pension to receive it. This means you can receive an OAS pension even if youve never worked, or if youre still working past the age of 60. You will however need to be either a Canadian citizen, or a legal resident who has lived in Canada for at least 10 years.

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    Retirement Systems And Programs

    The Civil Service Retirement Act, which became effective on August 1, 1920, established a retirement system for certain Federal employees. It was replaced by the Federal Employees Retirement System for Federal employees who first entered covered service on and after January 1, 1987.

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    When May I Retire Within Csrs

    Just like with FERS, CSRS has its own requirements for determining your eligibility. What makes the CSRS system unique, however, is there are five categories of benefits that may be receivable:

    • Optional
    • Discontinued service
    • Disability

    Each category of benefits comes with its own special rules. Overall, though, your requirements for eligibility will include:

    • Your age
    • Your total years of creditable service
    • The type of retirement you will choose
    • If you have attained the Minimum Retirement Age for your agency
    • If applicable, whether you satisfied other unique age-based rules

    Used and unused sick leave, as well as differences in civilian versus military service, may affect how years of creditable service are calculated.

    Check with your Federal Benefits counselor for more information relating to your situation.

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    How Long Will You Live In Retirement

    Based on current estimates, a 65 year old man can expect to live approximately 18 years in retirement, and a 65 year old woman can expect to live about 20 years, but many people live longer. Planning to live well into your 90s can help you avoid outliving your income.

    The worksheet takes into account some factors that impact your retirement savings. First, investing – because it involves risk. Second, inflation – because todays dollars will usually buy less each year as the cost of living rises. Your target savings rate includes any contributions your employer makes to a retirement savings plan for you, such as an employer matching contribution. If, for example, you are in a 401 plan in which you contribute 4 percent of your salary and your employer also contributes 4 percent, your saving rate would be 8 percent of your salary.

    If you are not currently saving this amount, dont be discouraged. The important thing is to start saving even a small amount and increase that amount when you can. Come back and update this worksheet from time to time to reflect changes and track your progress.

    Here are a few tips on how to save smart for retirement:

    To track other resources you may have in retirement, start by getting your Social Security statement and an estimate of your retirement benefits on the Social Security Administrations website, www.socialsecurity.gov/mystatement.

    Get started today for a secure financial future!

    Is My Job Covered By Fers

    Federal Employees

    If youre a new employee who just passed her background check and took the oath of office, youll want to make sure that your job is covered by FERS.

    The best way to understand if your job is covered by FERS is to look at your SF-50. Box 30 lists your Retirement Plan. How your federal retirement works depends on the code in the box.

    • FERS: Federal Employee Retirement System .
    • FERS-Spec: Similar to FERS but for special positions such as law enforcement. Employees in this system have a lower minimum retirement age and a different contribution rate.
    • FICA: Social security only.
    • CS: Civil Service Retirement System.

    If you cant get your hands on your most recent SF-50, you should also be able to find some clues in other places. Your paystub will show some deductions for retirement and may include details about which retirement system you are in. Additionally, if the National Finance Center processes your paycheck, you should receive a benefits statement once a year which states which retirement system you are in.

    If you want to know how federal retirement works, reading your benefits statement is a great place to start!

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    What Is The Federal Employees Retirement System And How Does It Work

    Unless you are a government employee, youve likely never heard of the Federal Employees Retirement System , but if you work in the public sector or plan to in the near future, FERS is an acronym you will soon know well.

    The Federal Employees Retirement System, or FERS, is the retirement plan for all U.S. civilian employees. The plan covers all employees in the executive, judicial, and legislative branches of the federal government.

    FERS, however, does not cover military personnel or employees of state or local governments. Employees under FERS receive retirement benefits from three sources: the basic benefit plan, Social Security, and the Thrift Savings Plan, or TSP.

    If You Were Hired Before Jan 1 1984

    If youre an older civilian service employee of the federal government who was hired on or before Dec. 31, 1983, you may have access to the Civil Service Retirement System , which provides retirement, disability, and survivor benefits.

    Because you havent had Social Security taxes deducted from your paycheck, you wont be eligible to receive Social Security benefits unless youve earned them through another job or qualify through your spouse.

    If you do qualify for Social Security, your CSRS pension may reduce your benefits.

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    What Is The Cost In Retirement

    One of the advantages of having FEHBas compared to private health insuranceis that the cost of health insurance remains the same for federal employees after they retire. The government keeps paying a portion of your health insurance for you. This can amount to big savings on health care costs, since FEHB pays 72-75% of the cost.

    This is a big advantage over private employer coverage. For example, a private employer will often pay for part of your health benefit costs while you’re employed, just like the FEHB. However, once you retire in the private sector, you most often can not keep your employee health benefits. Instead, you must transition to an individual health insurance plan or to Medicare if you are old enough. This change could mean that your cost of health insurance will increase after you retire.

    One primary difference for those with FEHB is that because your retirement annuity is paid monthly, you might see a shift in the payment frequency or amounts. However, you should not pay more in total.

    Your spouse, domestic partner, or other family members could also save money on their health insurance if they are also eligible for coverage under your FEHB. If you have been divorced and are on good terms with your ex-spouse, you could check to see whether they might be able to get access to your FEHB.

    Have You Ever Looked At Your Paycheque And Wondered Wheres It All Going

    Part 1 – FEHB Regulations and Retirement

    For a start, youll notice there have been a few deductions made before your take-home pay. Some of this money pays your taxes, a bit more covers employment insurance , but another portion has been going towards retirement income benefits. These benefits are one of the three main types of retirement income, the other two being workplace pensions and personal savings.

    In this article, we take a closer look at retirement income benefits – whats available to you from the Canadian government.

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    Civil Service Retirement System

    CSRS actually pre-dates the Social Security program, as it was effective on August 1, 1920. If you are a Federal Employee who was hired before January 1, 1984, then you are likely grandfathered into CSRS.

    According to OPM.gov, CSRS is designed as a defined-benefit, contributory retirement system.

    What Does My Fers Benefits Package Include

    The FERS pension annuity is just one of many benefits that FERS employees earn. Here are some of the other great benefits that are included in your FERS benefits.

    • Federal employee health benefits : Not only does federal employment come with great health benefits, but you can take your FEHB with you into retirement. I calculate that this benefit is worth at least $500,000.
    • FERS supplement: If you retire from the federal government before you can withdraw social security, the government will pay you an extra pension approximately equivalent to what your social security benefit will be.
    • Disability benefits: If you become disabled and no longer are able to work, you can receive a FERS disability pension.
    • Death benefits: If you die while employed by the federal government and you have at least 10 years of service, your spouse can collect the survivor benefit of the pension you have earned. Your spouse may also be eligible for a lump sum payment.

    The FERS Supplement is like an extra pension you get until you can withdraw social security.

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    The Thrift Savings Plan

    The TSP is a defined contribution retirement plan similar to the 401 plans provided by many private-sector employers. The TSP is a key component of FERS, especially for workers in the middle and upper ranges of the federal pay scale, who are unlikely to achieve adequate retirement incomeâas measured by the replacement rateâfrom Social Security and the FERS basic annuity.

    In 2019, federal employees can contribute up to $19,000 to the TSP.14 Employees aged 50 and older can contribute an additional $6,000. These employee contributions may be made on a pre-tax basis, in which case neither the contributions nor investment earnings that accrue to the plan are taxed until the money is withdrawn. Alternatively, P.L. 111-31 authorized a qualified Roth contribution option to the TSP. Under a Roth contribution option, employee salary deferrals into a retirement plan are made with after-tax income. Qualified distributions from the Roth TSP plan optionâgenerally, distributions taken five or more years after the participant’s first Roth contribution and after the age of 59½âare tax-free.

    TSP participants are immediately vested in their contributions to the plan, all federal matching contributions, and any interest, dividends, or capital gains attributable to those contributions. Participants are fully vested in the 1% agency automatic contribution to the TSP after three years .

    Table 2. Government Matching Rate on TSP Contributions by FERS Participants

    Employee

    Congress Guts Federal Retirement Benefits

    Federal Employees Retirement Services
    • Likelihood of occurring: 3/10
    • Desirably of outcome: 1/10

    If youve gotten to this point in the post you understand why I dont want to retire early.

    But what if Congress gutted federal retirement benefits?

    The biggest reason to stay in a federal job after reaching financial independence is to keep FEHB for life. If Congress gets rid of that benefit, there is little reason to stay in a federal job.

    Over my nearly 20 years of federal service, Congress has often debated changes to the FERS retirement system. There are almost always proposals to change the annuity formula or get rid of the FERS supplement.

    If the FEHB or FERS supplement were eliminated, so would the incentive to stay until MRA.

    I am not aware of proposed changes to FEHB. However, if Congress cut FEHB, it would be bittersweet. On one hand, Id no longer have golden handcuffs keeping me tied to my desk. On the other hand, Id lose a major benefit.

    In other words, if the FEHB or FERS supplement were eliminated, there would be no incentive to stay until MRA.

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