Retirement & Financial Planning Report

Your high-3 for purposes of your annuity calculation is an average of your highest rates of basic pay over any three consecutive years of creditable civilian service, with each and every pay rate weighted by the length of time it was received. The three-year period doesn’t start on the first day of a year or month or day on which you receive a pay increase. It begins and ends on the dates that produce the highest average pay.

For most employees, high-3 will be based on the three years before the day on which you retire. For others it will lie in their past. Either way, when OPM receives your retirement application, it will have access to your entire pay record, from which it can extract the three years of data needed to construct your high-3.

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While the three years that make up your high-3 have to be consecutive, they don’t have to be continuous. In other words, two or more periods of service can be joined together to produce a high-3.

Your high-3 also won’t be affected if you were on leave without pay during the three year period when your pay was at its highest, but only if that period of LWOP didn’t exceed six-month in a calendar year. Any period beyond six-months would be treated as if it didn”t exist. As a result, your three years would have to be extended by however long you were on LWOP in excess of six-months. For example, if you were on LWOP for nine months, your high-3 would be based on a period of time that was three years and three months long.

Unused sick leave can”t be included when calculating your high-3.

High-3 is determined according to your “basic pay.” That includes:

* 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;

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* 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;

Not included in basic pay are:

* overtime (except as noted above);

* payment for credit hours

* holiday pay;

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* military pay;

* bonuses or cash awards;

* allowances;

* night differential pay for GS employees;

* lump-sum payments for unused annual leave; or

* supplemental payments from the Office of Workers’ Compensation (OWCP).

As for any other types of compensation, a shorthand way to determine whether it is creditable toward your high-3 is this: only pay from which retirement deductions are taken is considered to be basic pay. If necessary, consult your payroll office.