8.3 Federal Employee Retirement Benefits: FERS, CSRS & the Thrift Savings Plan
Key Takeaways
- FERS combines a basic annuity, Social Security, and the Thrift Savings Plan; the basic annuity is 1% of high-3 average salary per year of service, or 1.1% if the employee retires at 62 or older with at least 20 years.
- FERS minimum retirement age (MRA) is 56 for people born 1953 through 1964 and rises to 57 for those born in 1970 or later; retiring at the MRA with 10 to 29 years of service reduces the annuity 5% for each year under 62 unless the annuity is postponed.
- The FERS supplement approximates the Social Security benefit earned in federal service, is paid only to certain immediate retirees until 62, and is reduced under an earnings test similar to Social Security's.
- A full FERS survivor annuity (50% of the retiree's unreduced annuity) reduces the retiree's annuity by 10%; a 25% survivor annuity costs 5%, and electing less than the maximum requires the spouse's consent.
- To keep FEHB health coverage in retirement, an employee generally must be enrolled for the five years immediately before retiring; starting in January 2026, the TSP also allows Roth in-plan conversions, with the tax paid from outside funds.
8.3 Federal Employee Retirement Benefits: FERS, CSRS & the Thrift Savings Plan
Core Principle: Federal employees have a three-part retirement system with its own eligibility ages, formulas, COLA rules, and survivor elections, plus valuable retiree health coverage. RICP 354 expects planners to fit federal benefits into the overall income plan. That means coordinating the annuity, the FERS supplement, Social Security, the TSP, and FEHB, and recognizing that many decisions (such as survivor elections) are irrevocable.
The Two Retirement Systems
| Feature | FERS (Federal Employees Retirement System) | CSRS (Civil Service Retirement System) |
|---|---|---|
| Who | Most employees hired since 1984 | Most employees hired before 1984 who did not switch to FERS |
| Components | Basic annuity + Social Security + TSP with agency matching | Larger annuity; no Social Security coverage for federal service; TSP without matching |
| Annuity formula | 1% of high-3 per year (1.1% at 62+ with 20+ years) | 1.5% for the first 5 years, 1.75% for the next 5, 2% after 10 (maximum generally 80% of high-3) |
| COLAs | Generally start at 62 (except special categories and disability); "diet" COLA | Full CPI-based COLAs |
High-3 is the highest average basic pay over any three consecutive years, usually the last three. Overtime and bonuses do not count.
FERS Eligibility
| Retirement Type | Age and Service | Annuity Reduction |
|---|---|---|
| Immediate, unreduced | 62 with 5 years; 60 with 20 years; MRA with 30 years | None |
| MRA + 10 | MRA with 10–29 years | 5% for each year under 62, unless the annuity is postponed (and unreduced at 60 with 20+ years) |
| Early (involuntary / VERA) | 50 with 20 years, or any age with 25 years | No age reduction, but no COLA until 62 |
| Deferred | Left before retirement eligibility with 5+ years; annuity starts at 62 (or MRA with 10–29 years, reduced) | Depends on age at commencement |
| Disability | 18 months of service and qualifying disability | Special formula |
Minimum Retirement Age (MRA)
| Year of Birth | MRA |
|---|---|
| Before 1948 | 55 |
| 1953–1964 | 56 |
| 1970 and later | 57 |
(Birth years 1948–1952 and 1965–1969 phase in by 2 months per year.)
Formula Example
Linda retires at 62 with 25 years of service and a high-3 of $110,000:
- 1.1% × 25 × $110,000 = $30,250 a year before any survivor reduction.
- If she retired at 60 with the same service, she would receive 1% × 25 × $110,000 = $27,500.
The FERS Supplement (Special Retirement Supplement)
The FERS supplement fills the gap until Social Security eligibility at 62:
- Paid to employees who retire on an immediate, unreduced annuity before 62: MRA + 30, 60 + 20, or special-category retirements such as law enforcement, firefighters, and air traffic controllers.
- Not paid to MRA + 10 retirees or deferred retirees.
- Approximates the Social Security benefit earned from FERS service (roughly the estimated Social Security benefit at 62 × years of FERS service ÷ 40).
- Ends at 62, even if the retiree delays Social Security.
- Subject to an annual earnings test like Social Security's, using wages and self-employment income above the exempt amount (except for some special-category retirees before their MRA).
Planning point: Because the supplement stops at 62, FERS retirees must decide whether to claim Social Security at 62 or fund a bridge to a later claiming age.
COLAs
- FERS "diet COLA": If CPI rises 2% or less, the full CPI increase is paid. Between 2% and 3%, the COLA is 2%. Above 3%, it is CPI minus 1%. Regular FERS retirees generally receive COLAs only from age 62; special-category and disability retirees receive them earlier.
- CSRS: Full COLA.
- FERS supplement: No COLA.
Survivor Benefits
- FERS: A married employee receives a reduced annuity with a 50% survivor annuity unless the spouse consents to less. The full survivor election reduces the retiree's annuity by 10%, and a 25% survivor election costs 5%.
- CSRS: The maximum survivor annuity is 55% of the retiree's annuity.
- Why it matters: Electing a survivor annuity is usually required for a surviving spouse to keep FEHB coverage.
The Thrift Savings Plan (TSP)
| Feature | Detail |
|---|---|
| Contributions (2026) | $24,500 elective deferral; catch-up $8,000 at 50+, $11,250 at ages 60–63 |
| FERS agency contributions | Automatic 1% plus matching up to 4% (total up to 5%) |
| Funds | G Fund (government securities that cannot lose principal), F, C, S, and I Funds, and target-date L Funds |
| Withdrawals | Installments, partial withdrawals, or a life annuity purchased through the TSP. Rollovers to IRAs are allowed. |
| Rule of 55 / 50 | Separation in or after the year of turning 55 (50 for public safety, or 25 years of service) avoids the 10% additional tax |
| Roth in-plan conversions | Available starting January 28, 2026. Traditional balances can be converted to Roth within the TSP; tax must be paid from outside funds. |
| RMDs | Traditional balances follow RMD rules; Roth TSP balances have no lifetime RMDs starting in 2024 |
Health and Life Insurance in Retirement
- FEHB: To continue Federal Employees Health Benefits in retirement, an employee generally must have been enrolled for the five years of service immediately before retirement (or since first eligible) and retire on an immediate annuity. The government continues to pay its share of premiums.
- Medicare coordination: At 65, FEHB retirees choose whether to enroll in Part B. Many FEHB plans reduce cost-sharing for Part B enrollees, but Part B adds a premium.
- FEGLI: Basic life insurance can continue if the employee had coverage for the five years before retirement, with elections about how much it reduces after 65.
CSRS Retirees After the WEP/GPO Repeal
CSRS work was not covered by Social Security. Before 2024, many CSRS retirees with private-sector Social Security had their own benefits cut by WEP and their spousal or survivor benefits offset by GPO. The Social Security Fairness Act (signed January 5, 2025) ended both for benefits payable for January 2024 and later. CSRS retirees should confirm their recalculated benefits, and those who never applied for spousal or survivor benefits should apply promptly.
Advisor-Client Case Scenario: Michael's FERS Decision
Michael, born in 1968, has an MRA of 56 and 8 months. He has 30 years of FERS service at 57 and a high-3 of $140,000.
- Retire at MRA + 30 (57): Annuity = 1% × 30 × $140,000 = $42,000, with no age reduction. He receives the FERS supplement until 62, subject to the earnings test, but no COLA on the annuity until 62.
- Work to 62: Annuity = 1.1% × 35 × his (likely higher) high-3, plus five more years of TSP growth. No supplement is needed, and COLAs apply immediately.
- Plan: Michael values leaving at 57. His advisor elects the full survivor annuity to protect his wife and her FEHB, keeps his FEHB coverage, and uses the supplement plus TSP withdrawals as the bridge. He delays Social Security past 62 and does modest TSP Roth in-plan conversions during the low-income years.
Exam Tip
- FERS formula: 1% × high-3 × years, or 1.1% at 62+ with 20+ years.
- MRA: 56 (born 1953–1964) rising to 57 (born 1970+). MRA + 10 is reduced 5% per year under 62.
- FERS supplement: Paid only to immediate unreduced retirees before 62, ends at 62, and is subject to an earnings test.
- Diet COLA: CPI ≤2%: full; 2–3%: 2%; >3%: CPI − 1%. Regular FERS retirees get COLAs from 62.
- Survivor: Full FERS survivor annuity costs 10%; 25% costs 5%. Needed for the spouse to keep FEHB.
- FEHB in retirement: 5 years of enrollment immediately before retirement.
- TSP: Roth in-plan conversions began in January 2026.
A FERS employee retires at age 62 with 22 years of service and a high-3 average salary of $100,000. What is the annual basic annuity before any survivor reduction?
Which FERS retiree is eligible for the FERS special retirement supplement?
CPI rises 3.5% in a given year. What cost-of-living adjustment does a 64-year-old regular FERS retiree receive on the basic annuity?