Explore how the Federal Employees Retirement System (FERS) provides a comprehensive three-part framework for federal retirement through the Basic Benefit, Social Security, and the Thrift Savings Plan. Learn how different types of federal service, including covered, nondeduction, and refunded service, affect retirement eligibility and the calculation of annuity benefits.
Key Insights
- FERS was established in 1987 to provide a modern retirement system combining a basic pension, Social Security coverage, and the Thrift Savings Plan for investment growth.
- Employees must meet specific criteria for federal employment to earn creditable service toward retirement eligibility and annuity computation.
- Covered service is fully creditable, while nondeduction or refunded service may require a deposit or redeposit to count toward benefits.
- The National Defense Authorization Act for FY 2010 allows redeposits for refunded FERS service, helping employees restore prior service credit.
- Those transferring from CSRS to FERS with at least five years of CSRS service maintain a CSRS component, ensuring fair recognition of earlier service.
- Understanding FERS service credit rules is essential for maximizing retirement benefits and ensuring long-term financial security.
This lesson is a preview from Graduate School USA's Federal Employee Benefits for Administrators course.
The Federal Employees Retirement System (FERS) began on January 1, 1987, introducing a modern, three-part retirement structure for federal employees. Unlike the older CSRS system, FERS combines three key programs that together provide retirement income security for federal workers.
These include the FERS Basic Benefit, often referred to as the pension or annuity, administered by the Office of Personnel Management (OPM); Social Security benefits, overseen by the Social Security Administration (SSA); and the Thrift Savings Plan (TSP), a tax-deferred savings and investment program managed by the Federal Retirement Thrift Investment Board.
To receive credit for federal retirement purposes under FERS, employees must meet three basic tests of federal employment. They must perform official federal functions under lawful authority, be appointed by a federal officer, and work under the supervision and direction of that officer. Service that meets these criteria may count toward both retirement eligibility and the computation of the annuity amount.
Several types of service are creditable under FERS. Covered service includes periods when retirement deductions were withheld from pay and is fully creditable for both eligibility and computation. Nondeduction service, such as certain temporary appointments prior to January 1, 1989, can be made creditable through a deposit with interest. Refunded service may also be restored through a redeposit under provisions of the National Defense Authorization Act for FY 2010, allowing reemployed individuals to reclaim credit for prior service that was refunded.
Employees who transferred from CSRS to FERS with at least five years of CSRS service maintain a CSRS component within their annuity. The applicable CSRS rules continue to apply to that portion of their retirement benefit, ensuring that prior service is recognized fairly.
Understanding FERS creditable service is essential for planning a secure federal retirement. Each decision, whether to make a deposit, a redeposit, or to transfer coverage, can significantly impact future benefits. Federal employees are encouraged to review their service history and consult OPM guidance to make informed retirement choices.
