National Active and Retired Federal Employees
Florida Federation of Chapters
Federal Retirement Benefits – CSRS and FERS
There are two primary retirement systems that cover
civilian federal employees. Other specialized systems for CIA, Foreign Service,
Members of Congress, Federal Judiciary and others also exist. The Civil Service
Retirement System (CSRS) was created in 1920 and served federal employees for
more than six decades; it was phased out - no new employees were added - as of
December 31, 1983. CSRS employees do not pay into the Social Security retirement
system but do pay the Medicare tax. The current retirement plan, the Federal
Employee Retirement System (FERS), was created as of January 1, 1987. Generally,
all federal personnel hired after 1984 are part of the FERS system. FERS
employees including Members of Congress and the Federal Judiciary pay into the
Social Security retirement system and the Medicare tax.
There was a three year interim period, between January 1, 1984 and January 1,
1987, because a special category was needed for certain rehired federal
employees. For instance, employees who had been hired under the older CSRS
system prior to January 1, 1984 who had five (5) full years of service, who had
a break in federal employment of more than one (1) year, and who were rehired
after January 1, 1984 are CSRS Offset employees. CSRS Offset employees, like
FERS employees, pay into the Social Security retirement system.
Civil Service Retirement System (CSRS) Highlights
The older of the two systems, CSRS, started in 1920 and the basic annuity is a
“defined benefit program”; it provides an annuity that does not depend on other
government benefit programs. Members of the Civil Service Retirement System have
7.00% of their pay deducted each pay period and placed in the CSRS Retirement
Trust Fund as one contribution to their eventual CSRS basic annuity. The US
Government matches this deduction with another 7.00% contribution into the CSRS
Retirement Trust Fund. For the past two decades, CSRS employees have had the
option to participate in the Thrift Savings Plan (TSP) and/or the Voluntary
Contribution Program – ways to increase their retirement incomes.
Because the CSRS was phased out as of December 31, 1983, there are fewer
personnel in the federal work force who are CSRS employees. Most members of the
CSRS are eligible to retire at age 62 with 5 or more years service, at age 60
with 20 or more years service, or at age 55 with 30 or more years service. (Law
Enforcement Officers, Firefighters and Air Traffic Controllers under CSRS are
able to retire at age 50 with 20 or more years of service.) Of course, there are
other types of CSRS retirements: “disability” or “involuntary” or
“reduction-in-force”. Also, there are CSRS Survivor Benefits available if a CSRS
member dies before retirement and retirees may elect to have funds deducted from
their annuities to provide family members CSRS Retirement Survivor Annuity
options.
Federal Employee Retirement System (FERS) Highlights
The newer of the two systems, FERS, started January 1, 1984 and, after a three
year interim period, became operational January 1, 1987. FERS employees rely
upon three benefits – Basic Annuity, Thrift Savings Plan and Social Security –
for their retirement packages. Members of the Federal Employee Retirement System
contribute 7.00% of their pay each pay period; 6.20% goes to Social Security and
0.80% goes to FERS. Also, FERS members may deposit up to 15% of their basic pay
(limited by an IRS ceiling of $15,000.00 per year in 2006) into the Thrift
Savings Plan, a defined contribution program. The agency that employs each FERS
member contributes 1% on that employee’s behalf, whether a FERS member
contributes any funds to TSP or not; and, up to 5% of the contribution made by
each FERS member is matched by the government.
Since FERS has been in effect, with a three-year variation, since January 1,
1984, the majority of federal employees are members of this retirement system.
Under the FERS retirement system, there are two minimum requirements for a
member to be eligible to retire: the FERS employee must have at least five (5)
years of civilian service (if retirement is due to disability, at least 18
months of civilian service) and the employee must be in the FERS system on the
last day of service before retirement. Also, FERS employees must meet Minimum
Retirement Age rules; the MRA varies, based on the year of the FERS employee’s
birth; those born before 1948 have age 55 as their MRA and those born after 1970
have age 57 as their MRA.
The MRA is the earliest age a FERS employee may retire voluntarily; however,
he/she can create an “early out” with ten (10) years of creditable service, with
reduced annuity of 5% for every year the employee is under age 62. Also, a FERS
employee may leave federal service before MRA with at least ten (10) years
service but not more than thirty (30) years service. Once the FERS employee
reaches MRA, he/she receives an annuity reduced by 5% for each year under age
62. However, the Office of Personnel Management (OPM) created a Special
Retirement Supplement for retirees in this category; this program mirrors Social
Security but is paid from OPM funds, from the time a person retires at MRA (ages
55 through 57) until he/she reaches age 62, the minimum age one becomes eligible
for Social Security Retirement Benefits. (At age 62, FERS retirees receive both
their OPM annuity check and their Social Security Retirement check equal to what
they had received from OPM under the Special Retirement Supplement.) Also, a
FERS employee may leave federal service before MRA with at least ten (10) years
service and wait until he/she is age 62 to receive the FERS retirement annuity
in full.
Although there are significant differences between FERS and CSRS retirement
options, there are other types of FERS retirements: “disability” or involuntary”
or “reduction-in-force”. There are FERS Survivor Benefits available if a FERS
member dies before retirement; also, retirees may elect several variations of
how Survivor Benefit options may be paid to family members.
CSRS and FERS Voluntary Involvement in Government Programs
CSRS, CSRS Offset and FERS employees may choose to buy Federal Employee Group
Life Insurance (FEGLI). When employees are hired, the Basic option begins and
remains available during federal employment. Three options (A, B & C) also are
available when employees agree to pay the premiums. Open season times are
scheduled, so employees may change options. Also, employees may continue the
group life insurance options under FEGLI after retirement.
CSRS, CSRS Offset and FERS employees have the option to pay for Long Term Health
Care, administered for the Office of Personnel Management by two insurance
carriers: John Hancock and Met Life. Various degrees of Long Term Health Care
are offered and many federal employees who qualify have this type of policy for
Health Care contingencies.
Several million CSRS, CSRS Offset and FERS employees PLUS retirees pay for
health coverage under the Federal Employee Health Benefits (FEHB) program.
Employees make premium payments for FEHB with pre-tax dollars on a bi-weekly or
monthly basis. The system is voluntary and on average the Government pays about
72% of the total cost of the FEHB. On the other hand, retirees make premium
payments for FEHB with after tax dollars from their annuities on a monthly
basis. The FEHB program is one of the best-run health benefit organizations; it
covers individual employee medical costs up to $4,000.00 per year through
co-payments and deductibles and also allows dependent (spouse care, child care
or elder care) coverage up to $5,000.00 per year. FEHB is a “use it or lose it
system” as there is no carry-over of benefits to the next year.
Some federal employees have opted for either Health Savings Accounts or a Health
Reimbursement Arrangement. The rules are straight forward for both options that
require the employee to be enrolled in and make premium payments for a High
Deductible Health Plan and then meet specific rules of either plan.
Federal employees/retirees pay federal taxes on their salaries/annuities under
pertinent Internal Revenue Service regulations. Also, unless federal employees
and retirees reside in states that have no state income tax on federal
salaries/annuities, they pay state taxes as appropriate. In addition, federal
retirees who also have social security retirement benefits may have to pay
federal taxes of between 50% and 85% on their Social Security benefits.
Additional information about Federal Retirement Benefits and how these interact
with Social Security, the Thrift Savings Program and other entitlements that are
available to members of the current and retired federal work force may be
acquired at appropriate web sites; i.e., OPM, Social Security, TSP, and NARFE.