Have you ever put twenty bucks in your pocket and forgotten it was in there? Then you are wearing those pants again and you reach in the pocket and there is your twenty-dollar bill!
It is a great feeling, but what if that happened with your federal retirement? What if you found out you get more money than you thought? Many federal workers don’t understand the FERS supplement and what it means to them.
It means you can get extra money during part of your retirement. Keep reading to find out all you need to know about the FERS supplement and see if you are eligible to receive it.
What Is FERS Supplement?
The Federal Early Retirement Supplement (FERS) is for federal employees who retire before they reach the age of 62. It is one part of the total federal retirement package.
The benefit can last multiple years depending on when you retire from federal work.
If you retire at 58 and are fully eligible, you will get the FERS supplement for four years. If you retire at 61, you can receive the supplement until you reach 62.
The supplement stops the month of your birthday when you reach 62. Some estimates say that half of all Federal employees will be eligible for FERS when they retire.
One of the most confusing parts of FERS for some people is they hear all kinds of names for it. There are many different names, but they all refer to the same program.
You understand the federal government’s desire to make things confusing! Here are the common names for FERS:
- The Social Security Supplement
- The Special Retirement Supplement (SRS)
- The Annuity Supplement
- The FERS Supplement
No matter the name, all of these refer to the same program that is available for all federal employees.
Purpose of FERS
The FERS social security supplement provides income until the retiree reaches the minimum retirement age of Social Security. This means at 62 the FERS supplement stops.
You don’t have to start taking your Social Security retirement at 62. In fact, many retirees hold off so the SS amount will be higher. Either way, your FERS automatically stops at 62.
Eligibility for the FERS Supplement
The first rule of eligibility is in the first letter of FERS. It is only for federal employees. The FERS supplemental annuity is designated for people who are federal employees only.
Workers who are under the Civil Service Retirement System (CSRS) are not eligible for the FERS supplement.
You must also have a normal immediate retirement. You cannot have a minimum retirement age (MRA) + 10. You must have 30 years of creditable service to meet the MRA.
You can also have 20 years of service if you retire at 60 years of age. If you retire at 62 or after, you don’t get the FERS annuity supplement.
Employees who must retire early will find that FERS is a big benefit to their retirement. Here are some of the employees affected:
- Federal Firefighters
- Federal Law Enforcement Officers
- Air Traffic Controllers
- Nuclear Materials Couriers
These positions and ones like it can even start using their FERS earlier than others based on their specific mandated retirement age.
How to Figure Out Your FERS Supplement
Calculating the exact amount of your FERS social security supplement is hard to do. Social Security has published a way to calculate the exact amount yourself. Most people prefer to use a simple formula that gives them a good estimate.
- Years of Credible Service/40 X Your SS benefits at 62 = Est. FERS Supplement
Once you understand how to get the numbers, the formula is an easy one to use.
Years of Credible Service
Credible service years are those that count towards your federal retirement. Some military service counts if it was a time when you had military leave with pay. It also counts if you had leave without pay from civilian service.
Federal employees also have the right to use unused sick leave toward their service years.
In order to retire as a federal retirement employee, you must meet the Minimum Retirement Age (MRA.) This age varies for some based on their birthday.
- Born in 1965: 56 and 2 months
- Born in 1966: 56 and 4 months
- Born in 1967: 56 and 6 months
- Born in 1968: 56 and 8 months
- Born in 1969: 56 and 10 months
- Born in 1970: +57
You may be able to retire before your age based on your total number of years. However, FERS won’t start until your official MRA date.
40 is the base point for federal retirement, so your years toward retirement are divided by that.
SS Benefits at 62
The Social Security Supplement FERS uses the amount of your Social Security at age 62 no matter your actual retirement age. The amount at 62 will be the lowest amount on the SS table.
This is why many people don’t start taking their benefits at 62. This does make sense if you don’t need them yet, but for FERS calculations, they use this number.
Social Security will base your benefits on your total lifetime earnings. They work your earnings through their own formula to account for inflation. Then they identify the 35 years you earned the most.
They base your estimates on those 35 years. You can find out your estimated amount by going to the Social Security website and opening an account.
Est FERS Supplement
Once you put all of the other numbers in, you will get an estimate that will be pretty close to your actual FERS amount. Let’s say you have 35 years of credible service and your benefits at 62 are $1000 a month:
- 35/40 = .875
- .875 x 1000 = 875
Your monthly supplement would come out to around $875 a month. There are some other details that can help you calculate your FERS, but this gets you started.
Cost of Living Adjustments
Your FERS payment is not subject to a cost of living adjustment. Once they figure the amount out, it doesn’t change. The only changes come when earned income reductions apply to your total amount.
Reductions in Your FERS Supplement
Your FERS receives the same treatment as Social Security overall. There are tax considerations and possibly earned income adjustments that can happen. These will reduce your FERS amount
FERS and Taxes
The FERS tax rate calculation comes from each individual and their retirement tax rate. However, 100% of your FERS amount is taxable. Social Security is only taxable up to 85%.
If you are in the 15% tax bracket during retirement, your FERS amount would look like this:
875 x 15% = 131.25
875 – 131.25 = 743.75
So you can expect your net monthly amount to be lower based on your tax bracket. Your actual tax bracket will depend on all of your income during your retirement years.
FERS and Earned Income
Many people who retire early take other jobs or part-time jobs. This will affect your FERS amount based on how much you make. FERS will reduce your supplement based on your total earned income for the year.
FERS reduces your supplement based on a 2 to 1 ratio above their earned income limit. The 2022 earned income limit is $19,560. Here is an example of calculating your deduction if you make $24,000 a year:
- 24000 – 19560 = 4440
- 4440/12 = 370
- 875 – 370 = 505
Earned income is anything you make that comes to you on a W-2. It also includes your net income from a business if you are self-employed.
The Annual Time Frame of the FERS Supplement
The United States Office of Personnel Management (OPS) administers all aspects of FERS. They are the ones who set the time frame for your monthly income and they calculate any deductions for earned income.
Each year, OPM sends out an annual survey for the current supplement recipients to fill out. The surveys are sent every April and have a deadline for return in early June.
In this survey, each respondent will put their previous year’s income. This amount will be taken into consideration and will affect the July FERS payment for each recipient.
Once the number changes, it will remain the same until the next year’s report.
Using the figures above here is an example to show how it works. Bob starts receiving his FERS supplement of $875 a month in August of 2021. He receives his first survey in April and fills it out.
He shows that his earned income for 2021 was $24,000. His FERS payment won’t change until July of 2022. Starting in July, his amount will be reduced to $505 a month.
It will remain $505 until the next July after he fills out the new survey form. He will be taxed on either amount based on his current tax bracket. Any FERS income will be seen as income for taxes.
However, the FERS income does not apply toward the total earned income that FERS uses in its model. This means that Bob’s $875 he was receiving does not count toward his $24,000 yearly income.
Rumors and Questions
Many people hear the term FERS, annuity supplement, Social Security Supplement, etc., and get confused. It does seem confusing, but with just a little work, you can understand all the aspects of it.
How Long Will FERS Last?
There are a lot of rumors about whether or not Congress will cancel FERS. Trying to understand what Congress does is hard enough and no one wants to try to predict the future!
As of now, FERS is still available and every person available to receive it will receive it.
Do I Have to Apply for FERS?
You don’t! OPM will include it along with your regular monthly pension payment. Their records should indicate that you are eligible for FERS and will automatically put you in the system.
How Long Till I Get My FERS?
When you retire, it does take OPM a while to go through and properly process your full retirement. They start with a quick check on your application and will send initial payments based on that.
These payments are anywhere from 60%-70% of your pension payments. After they have gone through your full application and approved it, you will receive your full pension payments.
They will also include back pay based on your actual numbers. This will include any pension funds they didn’t send and your FERS if you are eligible.
This is a process that does take a while to complete. OPM will often take six to twelve months to complete a full application.
What If I’m Eligible for FERS but Am Not Receiving It?
Once your full application has been processed and you are receiving your full pension, you may notice you aren’t getting FERS. If that happens and you think you are eligible, contact OPM and request an audit of your application.
You can sign in on their online portal to handle many of your OPM matters on your own.
Do I Have to Take My Social Security at 62 if I Get FERS?
You don’t have to start taking your Social Security at 62. Your FERS payment is a separate part of your retirement and has no effect on your Social Security payment.
You can delay your SS payment until later so it is a higher amount. No matter what you do with SS, your FERS payment stops the month of your 62 birthday.
Take Charge of Your Federal Retirement
You have earned your FERS supplement and you want to make sure you get what you deserve. Don’t be afraid to ask questions and seek to understand all the eligible benefits you get with your retirement.
My Federal Plan helps federal workers and postal workers understand all the elements related to their retirement. We will guide you through the maze of your federal retirement.
Contact us about a free retirement planning session. We will talk with you about what to expect and help you understand everything. Our licensed retirement professionals have the knowledge to help you today.