Federal Employees Retirement System
This handbook is designed to provide you with basic information regarding the Federal Employees Retirement System (FERS). Although the contents will apply to most employees covered by FERS, it is not all inclusive. As a general handbook, it could not possibly include every rule which may apply to individual employees. For example, regulations for employees who transferred from the Civil Service Retirement System (CSRS) to FERS or who are considered CSRS Offset differ somewhat. The methods discussed in this handbook for calculating a retirement annuity are intended to give you a rough estimate. The HRS Office has a computer program that can give you a more accurate calculation; however, again, it is an estimate. FERS retirement annuities are determined by the Office of Personnel Management (OPM). Social Security annuities are determined by the Social Security Administration.
Employees who would like to read more about the Federal Employees Retirement System may check out a more detailed handbook from the HRS Office. Employees who are five years from retirement and who attend the Retirement Workshop offered by the HRS Office are given a copy. Information may also be found on the OPM Web site described later in this handbook.
For additional information, please contact the Benefits Specialist.
Although Gallaudet University employees are not Federal employees, an Act of Congress in 1949 extended retirement benefits under the Civil Service Retirement System to regular status employees of the University. Contributions from employees' pay, matching contributions from the University, and direct appropriations from Congress are used for the purpose of paying annuities, refunds, and death benefits to persons entitled to them.
In 1984, a public law changed the retirement system for Federal employees, including employees of Gallaudet. This new law and a subsequent law replaced the Civil Service Retirement System with the Federal Employees Retirement System (FERS) and required all new employees hired after December 31, 1983 to be covered by Social Security. Employees covered under CSRS were given the option to remain with this system or to transfer to FERS.
Employees who were covered under CSRS prior to 1984, left, and later return to Gallaudet or to Federal service, are eligible to reenter CSRS if they had at least five years of creditable service. However, if the break in service is longer than one year, the employee also becomes covered by Social Security. These employees are considered CSRS "Offset," meaning that CSRS benefits are offset by Social Security benefits. Returning employees eligible for reentry into CSRS, either with or without Social Security coverage, may choose total coverage under FERS as long as the election is made during the first six months after rehire. Employees without five years of creditable service under CSRS are automatically enrolled in FERS with previous service credited under the FERS program.
The Components of FERS
FERS is a three-tiered plan comprised of:
- Social Security Benefits
- A Basic Annuity
- A Thrift Savings Plan
Employees pay full Social Security taxes and a small contribution to the Basic Benefit Plan. In addition, employees are able to make tax-deferred contributions to a thrift savings plan, and a portion is matched by Gallaudet. The Social Security and Thrift Savings Plan keep their full value even if you leave Gallaudet before you retire.
Retirement Eligibility under FERS
Retirement under FERS is primarily Social Security to which other benefits are added. To qualify for Social Security retirement benefits, you must have paid Social Security taxes for at least 10 years (40 quarters) over the course of your lifetime. (This 40-quarter rule applies if you were born after 1928. If you were born before 1929, you need fewer quarters to qualify.) You can receive unreduced Social Security benefits if you wait until age 65 to retire. Starting in the year 2000, this age will gradually increase to 67. Alternatively, you can retire at age 62 and receive a reduced benefit.
Eligibility under the basic annuity portion of your FERS depends on the type of retirement you will receive. There are four kinds of retirement provided under the basic annuity component:
- Involuntary (discontinued service)
You are eligible for an optional, unreduced retirement annuity upon meeting one of the following minimum combinations of age and length of service:
||Minimum Years of Service
|Minimum Retirement Age*
*The minimum retirement age is based on the year when you were born.
|If you were born...
||Your MRA is...
||55 and 2 months
||55 and 4 months
||55 and 6 months
||55 and 8 months
||55 and 10 months
||56 and 2 months
||56 and 4 months
||56 and 6 months
||56 and 8 months
||56 and 10 months
You can receive an optional reduced basic benefit as soon as you reach the Minimum Retirement Age and have 10 years of service. The benefit is reduced by five percent per year for each year payment begins before age 62.
Involuntary (discontinued service) Retirement
You must separate from service due to the elimination of your position or because of a reduction in force and you are not given another reasonable job offer, or you separate because you are unable to fulfill the requirements of high standards of performance (does not include gross misconduct).
||Minimum Years of Service
||You must separate from service due to the elimination of your position or because of a reduction in force and you are not given another reasonable job offer, or you separate because you are unable to fulfill the requirements of high standards of performance (does not include gross misconduct).
||Same as Above
If you involuntarily separate from service at Gallaudet due to the elimination of your position or a reduction in force and you are not given another reasonable job offer, you may be eligible for involuntary (discontinued service) retirement. To be eligible for an unreduced annuity, you must have reached the age of 50 and have completed 20 or more years of service, or you may be eligible if you have 25 years of service regardless of your age. A special retirement supplement begins at the minimum retirement age and continues until age 62. Discontinued service retirement may also apply if you are unable to fulfill the requirements of high standards of performance, perhaps due to a deterioration of capabilities or a significant change in the job.
If you leave service prior to retirement eligibility and leave your funds on deposit with FERS, you may be eligible to receive an unreduced deferred annuity upon reaching the age of 62 if you had at least five years of service, or at age 60 if you had 20 years of service, or at the MRA if you had at least 30 years of service. You can also receive a deferred annuity when you reach the MRA if you had 10-29 years of service; however there will be a reduction for each year payment begins before age 62.
You may be eligible for disability retirement if you become totally disabled for useful and efficient service and have completed at least 18 months of civilian service. Total disability means your inability, because of disease or injury, to perform satisfactorily and efficiently the duties of your position or the duties of a similar position. Considerable medical documentation is required, and decisions for disability retirement are made by the Office of Personnel Management. Disability retirement may also be supplemented by the University's long-term disability insurance. Employees who apply for FERS disability benefits must also apply for Social Security disability benefits or show that they are not eligible for them.
Crediting Civilian and Military Service for Basic Annuity Benefits
When determining your total length of service for basic annuity benefits, all work performed as an employee of the Federal government and Gallaudet University for which FERS deductions were made is considered creditable service.
As a general rule, military service in the armed forces of the United States counts for retirement purposes if it was active service, terminated under honorable conditions and was performed before separation from a civilian position under the retirement system. An exception to the general rule is that no credit for any military service is given to an employee who is receiving military retired pay unless the retired pay was awarded due to a service-connected disability. An employee who is receiving military retired pay may elect to waive the retired pay and have the military service added to civilian service in computing the annuity.
In order to have post-1956 military service treated as creditable service under FERS, employees must deposit three percent of the basic pay earned during the period of military service. Upon entering employment covered by FERS, employees have a two-year grace period to submit the required deposit without interest.
Employees who performed service prior to 1989 for which FERS basic deductions were not made (e.g., during a temporary appointment at Gallaudet) may receive credit for this service in computing an annuity by making a deposit to cover this period of time. If a deposit is not made, the service will not count. Non-deduction service performed after December 31, 1988 cannot be credited under FERS rules for any purpose.
If you previously worked for Gallaudet or the Federal government and received a refund of FERS deposits, you may not repurchase credit. Credit for such service is irrevocably lost.
If you need to make a deposit, you should contact the HRS Office at least one year before your retirement date or earlier to arrange repayment. This procedure takes some time.
All periods of creditable service are totaled into years and months. Unused sick leave accrued under a formal accrual system is also counted as creditable service. Unused sick leave may not be used on the "front end" in order to leave service earlier than the eligibility date. If you retire prior to January 1, 2014, 50% of your unused sick leave will be counted as creditable service. If you retire on or after January 1, 2014, 100% of your unused sick leave will be counted.
For CSRS employees who transferred to FERS, the CSRS annuity component will be computed using the amount of unused sick leave the employee had at the time of transfer or has at the date of retirement, whichever is less.
Types of Annuities
Social Security pays you monthly benefits if you are retired and have reached at least age 62. Social Security also pays monthly benefits during your retirement to your spouse and dependents if they are eligible. In addition, Social Security provides monthly benefits if you become disabled and benefits for your spouse and dependents if they are eligible during your disability, monthly benefits for your eligible survivors, and a lump sum benefit upon your death.
The Basic Annuity
When you retire, you will receive an annuity check each month based on your length of service and salary. Cost-of-living adjustments do not begin until you reach age 62. You may elect to receive one of three types of annuities:
- Annuity without a survivor benefit
- Annuity with a survivor benefit to a spouse or former spouse
- Annuity with a survivor benefit to a named person having an insurable interest
You can choose which type of annuity you want; however, if you are married, you are automatically granted the annuity with a survivor benefit unless you and your spouse jointly waive the benefit in writing (notarized) before retirement. A survivor annuity is important if you intend for your spouse to have health insurance coverage following your death.
An annuity without a survivor benefit enables you to receive your full retirement benefit for the duration of your lifetime only.
An annuity with a survivor benefit to a spouse or former spouse consists of two options: you may leave your surviving spouse 50 percent or 25 percent of your full annuity. Your spouse must consent in writing (notarized) to the reduced 25 percent benefit. If you choose the 50 percent benefit, the reduction in your annuity will be approximately 10 percent; the 25 percent benefit results in a 5 percent reduction in your annuity.
An annuity with a survivor benefit to a named person having an insurable interest means that an unmarried retiring employee can name an individual to receive a survivor benefit. The named person is, however, required to have a reasonable expectation to receive some kind of financial benefit from the continuance of your life. Generally, only a close relative might have this kind of insurable interest. If a person other than a near relative is named, proof of insurable interest may be required. Your annuity is reduced by a percentage amount based on the difference between your age and the age of the person you name.
Special Retirement Supplement
Employees meeting certain requirements are eligible for a Special Retirement Supplement which is paid as an annuity until you reach age 62. This supplement approximates the Social Security benefit earned while you were employed by Gallaudet or the Federal government. You may be eligible for a Special Retirement supplement if you retire:
- After the Minimum Retirement Age with 30 years of service
- At age 60 with 20 years of service
- Upon involuntary retirement
You will receive the Special Retirement Supplement beginning at the applicable MRA until age 62
Thrift Savings Plan
When you retire, you may receive your savings account in the form of an annuity, a single payment, or a series of monthly payments. You can ask to have your payments begin as soon as possible or you can specify a future date. You cannot, however, choose a future date that is later than March of the year following the year in which you turn 70½. Your TSP may also be transferred to an Individual Retirement Account (IRA) or other eligible retirement plan. You are always vested in your own contributions and the agency matching contributions. After three years of FERS service, you are vested in the agency automatic contribution. To obtain more information, please visit the TSP website.
It is difficult to predict what an individual will receive from Social Security. The amount of monthly benefits you receive is based on your average earnings, your family composition, and the consumer price index. You may request an estimated personal earnings and benefits statement from the Social Security Administration through the SSA Web site (see "Important Web Sites" below) or by completing a request form available in the HRS Office.
The amount of the second tier of your retirement program -- your basic annuity -- depends primarily on your length of creditable service and your "high three" average base salary. The amount of your basic annuity is reduced if you retire with an optional reduced benefit or if you elect a survivor benefit and/or for Federal health and life insurance premiums.
Your "high three" average salary is obtained by averaging the highest rates of base pay in effect during any three consecutive years of service. For example, if you worked at Gallaudet for 30 years, and your highest rates of pay during three consecutive years were $30,000, $32,000, and $34,000, your average "high three" would be $32,000. (The actual computation is much more complex.)
To arrive at a rough estimate of your basic annual unreduced retirement annuity, use the following worksheet:
1. YOUR ESTIMATED HIGH 3 AVERAGE BASE SALARY AT TIME OF RETIREMENT: _______________
2. MULTIPLY LINE 1 BY ..01: _______________
If you retire at age 62 or after and have at least 20 years of service, multiply line 1 by .011.
3. LENGTH OF SERVICE AT THE TIME OF RETIREMENT: ______________
Round to the closest year. Since months worked are taken into consideration in the actual computation, your estimate may be high or low depending on which way you round.
4. MULTIPLY LINE 2 BY LINE 3: ________________
This is an estimate of your basic unreduced annuity at the time of your retirement.
Again this is a rough calculation; the actual formula is far more complex and takes months worked into consideration. The HRS Office has a computer program that can give you a more accurate estimated basic retirement annuity calculation.
The amount of your basic retirement annuity may be augmented by a Special Retirement Supplement which is paid until you reach age 62. This supplement approximates the Social Security benefit earned while you were employed. You are eligible for the special retirement supplement if you retire at the minimum retirement age with 30 years of service; at age 60 with 20 years of service; upon involuntary retirement (beginning at the MRA until age 62).
Disability benefits are more complex. During the first year, a disability benefit is 60 percent of your high-three average pay minus 100 percent of any Social Security disability benefits to which you are entitled. After the first year and until age 62, if your disability prevents you from performing your job and you do not qualify for Social Security disability benefits, your retirement benefit will be 40 percent of your average high-three pay. If you do qualify for Social Security benefits, your disability retirement benefit will be reduced by 60 percent of the initial Social Security benefit. Again, remember that a disability retirement annuity may be supplemented by the University's long-term disability insurance in order to provide income of approximately 60 percent until age 65.
The benefits you receive from your Thrift Savings Plan as well as your Tax Sheltered Annuity Investment depend on several things: how much you invest and for how long, and the earnings of the investment funds you choose.
Selecting a Date to Retire
The formulas and example above for your basic annuity are based on full years of service; however, you do not have to work a full year in order to receive credit for time worked in that year. For example, if you were hired in August, you do not need to wait until August to retire. If you retire earlier than August, you will receive credit for months instead of the full year. However, keep in mind that 30 days is considered a month; anything less does not count.
Which day of the month you retire may be an important consideration. All annuities based on voluntary retirement begin on the first day of the following month. For example, if you retire on May 10 or on May 30, your annuity will begin on June 1.
Applying for a Refund or an Annuity
If you terminate from the University, you may apply for a refund of the funds you have contributed to the basic annuity portion of the retirement system. (You may not apply for a refund of Social Security deposits.) To apply, you must complete an "Application for Withdrawal of Retirement Funds" which is available in the HRS Office. You may also elect to leave your funds on deposit if you plan to have future service under a Federal retirement system or wish to apply for a deferred retirement at age 62. If you withdraw your FERS contributions, you may not later buy back your time in service.
If you are retiring from the University under the optional or involuntary provisions, you should contact the HRS Office approximately 30 days before your scheduled retirement date. The HRS Office will give you the appropriate forms for an annuity application and procedures and forms for converting your health insurance, and life insurance if you are covered under FEGLI.
To apply for your basic retirement annuity, you must complete an "Application for Immediate Retirement" and return it to the HRS Office. As soon as the HRS Office receives your "Removal Personnel Action Form" from your department, and your final paycheck has been processed, the HRS Office will submit your application along with an "Individual Retirement Record" to the Office of Personnel Management for processing. It may take up to six to eight weeks before you receive a special payment annuity check, which is an interim payment until the final calculation is verified and completed by OPM, and another six to eight weeks before you receive your regular official annuity.
If you need to apply for disability retirement, you will be required to provide medical documentation and a statement from your supervisor attesting that your condition prevents you from performing useful and efficient service. The University will also have to confirm that no reasonable accommodation or transfer can be made. If disability retirement is approved, you may be asked to provide periodic medical certifications, up until the age of 60, to confirm that the disabling condition continues to exist.
In order to apply for your Social Security benefits, you will need to contact your local Social Security Administration office.
You are eligible to make withdrawals at the time of your retirement from your Thrift Savings Plan. Withdrawals may be in the form of a life annuity, a single payment, or a series of monthly payments. You can ask to have your payments begin as soon as possible or you can specify a future date. You cannot, however, choose a future date that is later than March of the year following the year in which you turn 70½. The Thrift Savings Plan Service Office can answer questions about your account and send you withdrawal materials.
Health, Life, and Dental Insurance Benefits
Following retirement, your Federal Employees Health Benefits (FEHB) may be continued under the group plan as long as you were covered for at least the last five consecutive years prior to retirement. Your portion of the health benefits premiums will be deducted from your annuity check on a monthly basis. You must have elected a survivor annuity and be enrolled in self and family coverage in order for your spouse to be eligible for continued health insurance at the time of your death.
Federal Employees Group Life Insurance (FEGLI) also continues (with the exception of accidental death/dismemberment) as long as you were enrolled for at least the last five consecutive years prior to your retirement. FEGLI optional life insurance coverage may also continue. Following COBRA provisions, dental insurance may continue for up to 18 months following separation, but you must pay 102 percent of the total monthly premium.
Employees who apply for a deferred annuity are not eligible for FEHB or FEGLI coverage.
Retirees who are receiving an annuity may be reemployed at Gallaudet; however, annuity payments and salaries may not be combined. The salaries of reemployed annuitants who retired voluntarily (i.e., excluding discontinued service and disability) will be offset by the amount of the annuity. Check U.S. Office of Personnel Management - Retirement Service for additional information.