Reg Jones Expert's View

When you retire, a key element in your annuity computation will be your high-3. That’s the average of your highest three consecutive years (to be specific, 78 consecutive pay periods) of what is called “basic” pay.

If you have already reached a retirement eligibility combination of age and service, you can take that number and your and length of service, plug them into a formula, one for CSRS service and one for FERS service, and compute the amount of your annuity. If you haven’t reached eligibility, you can estimate what your high-3 will be when you reach it, and use that.

So, what’s included in basic pay?
* locality pay, including any portion of non-foreign cost-of-living adjustments that has been converted to locality pay under recent legislation;
* special salary pay for recruiting and retention purposes;
* within-grade and quality-step increases;
* premium pay, such as standby time, which primarily affects firefighters, and administratively uncontrollable overtime (AUO), which is paid to certain law enforcement officers;
* environmental differential pay for employees exposed to various degrees of hazard, physical hardship, and working conditions of an unusual nature; and
* night differential pay for wage employees.

Now, what’s excluded from basic pay?
* overtime (except as noted above);
* payment for credit hours earned under alternative work schedules;
* holiday pay;
* military pay;
* bonuses or cash awards;
* allowances;
* night differential pay for GS employees;
* unused sick leave;
* lump-sum payments for unused annual leave; or
* payments from the Office of Workers’ Compensation Programs.

To find out what your basic pay is, look at your pay slip and see how much of it was subject to retirement deductions. The rule is that you only get a payout from the retirement system from a form of compensation if you paid into the system from that compensation.

If you want to plug your high-3 into a formula and estimate what your annuity will be, check out my Expert’s View articles of April 1, 8 and 15 of this year.