Retirement & Financial Planning Report

If you are one of the many FERS employees who have at least five years of CSRS service under their belts, you will have a CSRS component in your annuity when you retire. And the calculations used to determine your annuity will be different for the FERS and CSRS elements.

Whether you’ll be eligible to retire is controlled by FERS rules. Assuming that you meet the following age and service requirements: 62/5, 60/20, or your minimum retirement age (MRA) and 30, you will be eligible for an immediate retirement. In that case, your FERS annuity will be calculated using the following formula: 1% x your high-3 average salary x your years and full months of FERS service. If you are age 62 or older and have at least 20 years of service, multiply your high-3 by 1.1%.

You CSRS component will be calculated using the standard CSRS formula: 1.5 percent x your “high-3” average salary x your first 5 years of service plus 1.75 percent x your high-3 average salary x the years and full months of service between 5 and 10 years plus 2 percent x your high-3 average salary x all years and full months of service over 10 years. The sum of these two formulas is your basic annuity amount.

There also are variations in how the two components are treated. Under FERS, if you are under age 62 when you retire, your FERS benefit will be reduced by 5 percent for every year you are under that age unless you: 1) have at least 20 years of service and your annuity begins at age 60 or later or 2) are eligible to retire early because of a reduction-in-force, reorganization or transfer of function.

Further, if you are under 55 when you take an early retirement, a CSRS portion of your annuity will be reduced by 2 percent for each year you are under age 55 (a provision that applies to relatively few anymore since CSRS applies only to those first hired before 1984). And while there won’t be any age reduction in the FERS benefit, you will not receive any FERS annuity supplement that approximates your Social Security benefit until you reach your MRA.