Retirement & Financial Planning Report

Every federal employee knows that a retirement annuity is based in part on the highest three consecutive years of average base salary. But far fewer know what things are included in the phrase “base salary.” That can turn into an unpleasant surprise for some who have been counting on a higher retirement entitlement that it turns out they will get.

Your base salary is the dollar amount you earn from which retirement deductions are taken.


The base rate of pay is the one fixed by applicable law or regulations for your position. For GS employees, it also includes such things as:
• locality pay;
• within grade increases;
• special pay rates established for recruiting and retention purposes; and
• certain kinds of premium pay, largely affecting firefighters and law enforcement officers.

For wage system employees, basic pay includes environmental differential pay.

On the other side of the coin are those things that are excluded from base pay, and, thus, from being used in determining your high-3. For example:
• bonuses, allowances, holiday, military pay, and overtime;
• foreign post differentials;
• non-foreign area allowances and differentials; and
• payment for credit hours earned under a compressed work schedule.

To find out what other types of pay are creditable for retirement purposes, do a little with your pay statement to learn if deductions are being taken out for anything other than the pay listed for your grade, step and locality. Also, you can go to your payroll office and either confirm what you’ve found out or ask them why certain kinds of pay you’re receiving aren’t being treated as creditable in your high-3.