Expert's View

Reg Jones

Last week I focused on the age and service requirements Federal Employees Retirement System employees must meet to be eligible to retire, how to calculate their annuities and how they are increased for inflation. This week I want to do the same for Civil Service Retirement System employees.

Although those of you who are covered by CSRS and CSRS Offset are part of a rapidly diminishing population, you still need to know how your annuity will be calculated when you retire. In fact, it’s probably all the more important to you because the vast majority of you already are eligible to retire at any time whether you know it or not.

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Like FERS, the Civil Service Retirement System is based on a formula of service and salary high-3 that allows you to estimate what your annuity will be when you retire. The nearer you are to retirement, the more accurate your estimate will be.

Another important similarity is that the high-3 is calculated in the same way in both systems, while an important difference is that unlike in FERS, in CSRS there is no such thing as a “minimum retirement age.” If you skipped last week’s column on FERS because it didn’t apply to you, refer back to it for details.

Eligibility to retire under CSRS
There are two things that determine if you are eligible to retire on an immediate unreduced annuity: your years of creditable service and your age. For CSRS employees the combinations look like this:

Age 62 with 5 years of service
Age 60 with 20 years of service
Age 55 with 30 years of service

You can also retire on an immediate unreduced annuity as early as age 50 with at least 20 years of service, or at any age with 25, if your agency is undergoing a reduction-in-force (RIF), reorganization or transfer of function and offers you an early retirement opportunity.

Standard CSRS annuity computation
The formula used to calculate your CSRS annuity is more complicated than the one for FERS:

0.015 X your high-3 X 5 years of service, plus
0.0175 X your high-3 X between 5 years and 10 years of service, plus
0.02 X your high-3 X all years of service greater than 10, with full months past the last full year credited proportionately

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This formula generates your basic annuity amount, which cannot exceed 80 percent of your high-3. However, credit for unused sick leave is not included in that 80 percent limitation. While it can’t be used to increase your years of service and make you eligible to retire, it will be added to your years of service after you’ve become eligible.

CSRS Offset annuity computation
If you are a CSRS Offset employee, you are covered by both CSRS and Social Security. While the standard CSRS annuity computation is used if you retire before age 62, at age 62 your CSRS annuity will be offset (reduced) by the amount of Social Security benefit you earned while covered by CSRS Offset.

While the formula used to calculate the offset is complicated, you can approximate what it would be by using the following formula:

Estimated Social Security benefit X total years of Offset service ÷ 40

To get an estimate of your Social Security benefit, go to https://www.ssa.gov/benefits/calculators.

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Special category CSRS retirement computation
The rules for special category employees, such as law enforcement officers and firefighters are different than those for all other federal employees. If you are one of them, you can retire:

At age 50 with 20 years of covered service or
At any age with 25 years of service

Your annuity will be computed using an enhanced formula: 0.25 x your high-3 x 20 years of covered service, plus 0.2 times all additional years of service, with full months past the last full year credited proportionately.

Cost-of-living adjustments (COLAs)
If you are a newly retired CSRS employee, your COLA would be determined by the month in which you are on the annuity roll. You can retire up through the third day of a month and be on the annuity roll for that month; if beyond the third day, you are on the roll the following month.

For example, if you retired no later than the 3rd of January, you’d be entitled to a full COLA the following January. On the other hand if you retired any time between the end of June and the 3rd of July, you’d be on the annuity roll in July and entitled to one-half of that COLA in the following January annuity payment. From that point forward, you’d be entitled to the full COLA every January.

Next week I’ll cover the rules governing postponed and deferred annuities.

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