Federal Employees Retirement System (FERS)
FERS is the dominant system today. It replaced CSRS on January 1, 1987. Today Federal Employees who came into service on or after January 1, 1984, are covered by this retirement system.
Under FERS, Federal Employees have benefits from three different sources:
- FERS basic annuity
- Thrift Savings Plan
- Social Security benefits
Payments from the basic annuity and Social Security will be in fixed-dollar sums. On the other hand, retirement money from the TSP will depend on the quality of the money management practices over the years.
Thrift Savings Plan
The Thrift Savings Plan (TSP) is a tax-deferred retirement savings and investment plan that offers Federal employees the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. By participating in the TSP, Federal employees have the opportunity to save part of their income for retirement, receive matching agency contributions, and reduce their current taxes.
Social Security Benefits
The retirement system suitable to cover you will play a big part in whether your benefits include Social Security.
FERS retired employees will receive Social Security benefits, though FERS retirees may also receive a supplemental benefit before they reach age 62, but only under certain circumstances.
CSRS retired employees may receive benefits if they worked for 40 quarters, with 10 years in the private sector. However, their benefits may be subject to the Windfall Elimination Provision (WEP).
If as a CSRS covered retiree you are subject to WEP, a modified formula will be used to calculate your earned Social Security benefits. However, this formula won’t be used to calculate survivor benefits upon death.
Retirees under CSRS with active military time and eligibility for Social Security benefits may have unique considerations. You will want to consider your options carefully, as the wrong decision could mean reductions in the CSRS annuity.
A knowledgeable Benefits Educator can help you determine how different situations might apply to your Social Security payments.