FERS (Federal Employees Retirement System)

Key Takeaways

• FERS is a three-part system combining a pension, Social Security, and the Thrift Savings Plan (TSP) to create a complete federal retirement package.
• Your pension uses the "high-3" formula – 1% of your high-3 average salary times years of service, or 1.1% if you retire at age 62 or later with 20+ years.
• Eligibility is based on your Minimum Retirement Age (between 55 and 57 depending on birth year) and total creditable service.
• TSP contributions offer long-term growth, with up to 5% agency matching and 2025 limits of $23,500, plus catch-up contributions of $7,500 (ages 50–59 and 64+) or $11,250 enhanced catch-up (ages 60–63 under SECURE 2.0).
• The FERS annuity supplement provides bridge income until age 62 for eligible retirees, though it is reduced by the Social Security earnings test.
• Cost-of-Living Adjustments (COLAs) follow "diet" rules, generally CPI minus 1% when inflation exceeds 3%.
• Survivor benefits protect spouses and dependents, offering 50% or 25% continuing income with corresponding reductions in your annuity.
• Contribution rates vary by hire date (0.8%, 3.1%, or 4.4% of basic pay) depending on whether you are under standard FERS, RAE, or FRAE.
• Withdrawals from the TSP are taxable and subject to Required Minimum Distributions (RMDs) starting at age 73 (born 1951–1959) or age 75 (born 1960+) under SECURE 2.0.

What Is FERS?

The Federal Employees Retirement System (FERS) is a comprehensive retirement program for most civilian U.S. government employees hired after 1983. It combines three main components: a basic pension (defined benefit), Social Security, and the Thrift Savings Plan (TSP), which functions like a private-sector 401(k). This three-tier structure was designed to provide both lifetime income and long-term investment growth, ensuring that federal workers have multiple income streams in retirement.

FERS replaced the Civil Service Retirement System (CSRS) in 1987, marking a major modernization of federal retirement policy. Unlike CSRS, which relied solely on a government-funded pension, FERS introduced a more balanced approach. By including Social Security and a portable savings plan, it made federal retirement benefits more comparable to private-sector offerings. This change also made it easier for employees who switch careers between public and private sectors to maintain continuous retirement savings.

The system is administered by the Office of Personnel Management (OPM) and governed by Title 5 of the U.S. Code, Chapter 84. Every pay period, employees contribute a portion of their basic salary (ranging from 0.8% to 4.4% depending on hire date) toward the pension. The employing agency contributes as well, funding both the pension and the TSP match. At the same time, both the employee and employer pay Social Security taxes, ensuring coverage under the broader national system.

Each part of FERS plays a specific role. The Basic Benefit Plan (pension) provides guaranteed monthly income for life, calculated using the "high-3" formula based on the average of an employee's three highest consecutive years of base pay. The TSP allows employees to build personal wealth through tax-deferred or Roth contributions with up to 5% agency matching. Finally, Social Security offers national retirement and disability coverage. Together, these elements make FERS one of the most comprehensive retirement systems for government workers in the world.

How FERS Works

The Federal Employees Retirement System operates through a combination of mandatory contributions, eligibility rules, and lifetime benefit formulas. Each component (pension, TSP, and Social Security) has its own funding mechanism, payout rules, and coordination requirements. Understanding how these parts interact provides context for retirement planning discussions.

1. Eligibility and Retirement Types

Minimum Retirement Age (MRA): Between 55 and 57, depending on birth year.

Immediate Retirement: At MRA with 30 years of service, age 60 with 20 years, or age 62 with at least 5 years.

MRA +10 Retirement: Available for 10–29 years, but subject to a 5% reduction for every year under 62 (unless postponed).

Special Provisions: Law enforcement, firefighters, and air traffic controllers can retire earlier with enhanced formulas.

2. Employee and Agency Contributions

FERS contributions are deducted automatically:

Employee Rates:

• 0.8% for standard FERS
• 3.1% for FERS-RAE (hired in 2013)
• 4.4% for FERS-FRAE (hired in 2014 or later)

Agency Contributions: The government also contributes toward the pension's cost and provides up to 5% matching on TSP contributions.

3. High-3 and Basic Annuity Formula

Your high-3 average salary is the average of your highest three consecutive years of basic pay.

Formula:

• 1% × High-3 × Years of Service
• 1.1% if retiring at age 62 or older with 20+ years

For example: If your high-3 is $95,000 and you retire at 62 with 22 years, your annual pension is: 1.1% × $95,000 × 22 = $22,990 per year (before COLAs and survivor reductions).

4. Thrift Savings Plan (TSP)

The TSP is similar to a private-sector 401(k).

Agency Contributions: 1% automatic plus up to 4% matching if you contribute 5% of your salary.

2025 Limits: $23,500 elective deferral, plus catch-up contributions of $7,500 (ages 50–59 and 64+) or $11,250 enhanced catch-up (ages 60–63 per SECURE 2.0 Section 109). Total contribution potential: $23,500 (under age 50), $31,000 (ages 50–59 or 64+), or $34,750 (ages 60–63).

Investment Options: G, F, C, S, I, and Lifecycle (L) funds offering varied risk levels.

RMDs: Begin at age 73 (born 1951–1959) or age 75 (born 1960+) under SECURE 2.0."

5. FERS Annuity Supplement

This temporary payment bridges income between retirement and Social Security eligibility (age 62).

Eligibility: Immediate retirees with at least 30 years at MRA or 20 years at 60+.

Reduction: Subject to the Social Security earnings test—reduced by $1 for every $2 earned above $23,400 (2025 threshold).

Ends: Automatically at age 62.

6. Cost-of-Living Adjustments (COLAs)

COLAs partially offset inflation but are "diet" versions under FERS:

• If CPI ≤ 2% → COLA = CPI
• If CPI 2–3% → COLA = 2%
• If CPI ≥ 3% → COLA = CPI − 1%

Most retirees receive COLAs starting at 62, except special groups such as law enforcement and firefighters.

7. Survivor Benefits

Married employees can elect:

Full Survivor Benefit (50%) – Costs 10% of your annuity.

Partial Survivor Benefit (25%) – Costs 5% of your annuity.

If no survivor election is made, spousal consent is required. Survivor benefits ensure continued income for a surviving spouse or dependents.

Note: Married employees are automatically enrolled in the full 50% survivor benefit unless they elect otherwise with written, notarized spousal consent.

8. Taxation and RMDs

Your FERS annuity is taxable as ordinary income. TSP withdrawals are also taxable, except for Roth portions, which may be tax-free if rules are met. RMDs for the TSP start at age 73 (for those born 1951–1959) or age 75 (for those born 1960 or later) under SECURE 2.0, but the FERS pension is not subject to RMDs.

Planning Through Your Federal Career

The following steps outline how federal employees commonly progress through the FERS system, from initial enrollment to retirement planning:

- Join FERS and the TSP immediately upon federal employment to begin earning pension and matching contributions.

- Track creditable service to meet the eligibility requirements for a full annuity.

- Increase TSP contributions to capture the full 5% agency match and benefit from tax-deferred growth.

- Plan your "high-3" average salary—promotions and locality pay adjustments directly impact your pension formula.

- Consider retirement timing carefully (e.g., MRA + 30 years, or age 60 + 20 years of service) for maximum lifetime benefits.

- Elect survivor coverage before separation to protect your spouse's income security.

- Review COLA and supplement rules to understand early-retirement income sources.

- Plan taxes and withdrawals ahead of Required Minimum Distribution (RMD) age to manage income efficiently.

How FERS Compares to Other Federal and Private Retirement Systems

FERS vs CSRS

The following comparison reflects the key differences between federal retirement systems commonly discussed in government benefit planning education:

FERS + TSP vs Private 401(k)

This comparison highlights how the FERS system's hybrid design differs from private-sector retirement plans commonly used by non-federal employees.