Expert's View

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Reg Jones

Last week I wrote about the origin of the government’s two main retirement systems – CSRS and FERS – and pointed out their differences. What I didn’t do was spell out the characteristics of one group of federal employees whose retirement benefits straddle both systems: CSRS Offset.

If you were a CSRS employee who worked for at least 5 years then left the government, had a break in service of more than 1 year, and returned to government service after December 31, 1983, you were given a choice. You could either be covered by FERS or by CSRS and Social Security. If you chose the latter, you were covered by a new employment category called CSRS Offset.

CSRS Offset also applies to those hired in 1984-1986 and who had at least five years of service at the time the formal launch of FERS on January 1, 1987 (the others were put under FERS).

Because you are covered by both CSRS and Social Security as a CSRS Offset employee, you are eligible for benefits under both systems. When you retire, you’ll be entitled to the same amount of retirement benefit you would get if you were exclusively covered by CSRS. However, the money will come from two different places: the Office of Personnel Management and the Social Security Administration.

As a CSRS Offset employee, your retirement annuity will be calculated the same way that it is for any CSRS employee:

* .015 percent x your “high-3” average salary x 5 years of service, plus

* .0175 x your high-3 average salary x 5 years of service, plus

* .02 x your high-3 x all other year and months of service.

The sum of those three calculations will be your estimated retirement annuity. The nearer you are to retirement, the more accurate that estimate will be.

If you retire before age 62, you’ll receive a pure CSRS annuity. Then when you become eligible for a Social Security benefit at age 62, your annuity will be offset by the amount of Social Security benefit you earned while a CSRS Offset employee. The offset is automatic and will occur whether or not you apply for a Social Security benefit.

When you are close to age 62, OPM will ask the SSA for an entitlement determination. SSA will send OPM two benefit computations – one for all Social Security-covered earnings, the other without earnings attributable to CSRS Offset service. (If you retire at or after age 62, the offset calculation will be made when you retire.)

OPM will calculate the reduction that needs to be made in your gross CSRS annuity. By law, it will be the lesser of:

* The difference between your Social Security monthly benefit amount with and without CSRS-Offset service; or

* The product of your Social Security monthly benefit amount, with federal earnings, multiplied by a fraction, where the numerator is your total CSRS Offset service rounded to the nearest whole number of years and where the denominator is 40.

Expressed as a formula, the latter calculation above looks like this:
Social Security Benefit x Total Years of Offset Service / 40

If you are planning to retire before age 62, you should apply for a Social Security benefit a few months before you reach your 62nd birthday. That will give SSA time to process your case and avoid any interruption in the total benefits you are entitled to receive. If you don’t do that in a timely manner, your CSRS annuity will still be offset; however, you will eventually get all the Social Security benefit you are entitled to in a retroactive payment.

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See also,

CSRS and FERS – Why They Exist, Why They Differ

Exceptions to the 10 Percent Early Withdrawal Penalty

What Happens to Your Retirement Application

Your FERS Annuity is Worth More Than You Think

Retiring from a Federal Job – Getting Started

FERS Retirement Guide 2022