If you are a FERS employees, you can calculate your retirement annuity by using a simple formula. For most of you it’s 0.01 x your high-3 x your years and full months of FERS service. If you are at least age 62 and have 20 years of service, the multiplier is 0.011. For special category employees, such as law enforcement officers and firefighters, the multiplier is 0.017, but only for 20 years of covered service. Any additional service is multiplied by 0.01.
So far, so good. However, there’s another piece of your annuity that is less easy to figure out. It’s the special retirement supplement. The SRS approximates the Social Security benefit you earned while you were a FERS employee. For most employees it’s added to your earned annuity if you retire at your minimum retirement age (MRA) with 30 years of service or age 60 with 20. (It’s added to the annuities of special category employees regardless of the age at which they retire.)
It’s also added when you reach your MRA if your agency is undergoing a major reorganization, RIF or transfer-of-function and you retire, either voluntarily or involuntarily, at age 50 with 20 years of service or at any age with 25 years.
The SRS ends at age 62, when you first become eligible for a regular Social Security benefit. And it ends whether or not you apply for that benefit. Up to age 62, it’s reduced by $1 for every $2 you earn from wages or self-employment that exceed the Social Security earnings limit, which in 2011 is $14,160. The only exception is for special category employees. If they retire before their MRA, they can earn as much as they want without its having any effect on their SRS. However, when they reach their MRA, they’re treated the same as everyone else.
I said that the SRS is less easy to figure out. That’s because you don’t have access to the information on which the calculation is based. It’s held by two different organizations – OPM and the Social Security Administration – and can’t be put together until you retire. For that reason, a shortcut was devised that would allow you to approximate what you’ll receive in your SRS. Here it is:
1. Take the latest Social Security benefit estimate at age 62, provided to you by the Social Security Administration;
2. Multiply that figure by your total years of FERS service, rounded up to the next higher year;
3. Divide the product by 40.
When you run the numbers, be aware of two things. First, the phrase “total years of FERS service” means just that. It doesn’t include any non-federal government service or any years of civilian or military service for which you’ve made a deposit to the retirement system. Second, the closer you are to retirement, the better the estimate will be.
But just how good is that estimate? I’m hoping that we can get an idea by asking those who have retired and are receiving the SRS to let me know. What has moved me to ask that is a continuing correspondence I’ve had with Bob Benson, a retired DoD employee, who runs www.fedbens.us.
Bob has run the numbers and concluded that a more accurate SRS estimate can be gotten with an even simpler formula: $42 x your years of FERS service. Having run a few examples myself, I can confirm that the results are different, with Bob’s formula producing the higher amount.
What we both want to know is which of these formulas yields the better answer. If I get enough responses, I’ll not only share them with Bob but report on what we learn to all of FEDweek’s readers.