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FERS Election Options

Benefits Personnel

Benefits personnel -- this section is for you! The following information will help you respond to questions from employees who are unsure of which retirement system to choose. It is important to encourage all employees who are eligible to transfer to FERS to read the FERS Transfer Handbook! This Handbook contains enough information so that all employees can make a decision on their own. Note that links to the full text of the FERS Transfer Handbook are available throughout this website. Please be sure that employees are aware of this website and that they have taken the time to explore the many resources provided here.

Just because you have been charged with handling FERS transfer inquiries, you may not feel confident that you can answer all employee questions. You may at times feel that there is no way you can become knowledgeable enough of both CSRS and FERS to respond to employee concerns. Remember that you are not supposed to make decisions for employees; you are not to recommend one plan over the other. You are only supposed to present employees with the facts, or point them in the direction of the facts, and let them make their own decisions.

If an employee asks you a question and you are not sure of the answer -- don't guess! Wrong answers can have serious, negative consequences. Research the answer using this website and other available resources. If you are still unsuccessful in finding an answer, you may refer the question to your appropriate agency personnel.

Information Briefs - Employee Assistance

OPM Publications - Elections Administration

FERS Election Forms - Electronic Forms

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Choosing a Transfer Date

For those employees who elect to transfer to FERS, an important decision will be when to make the transfer effective. Elections to transfer are effective on the first day of the pay period beginning after the date the election and any required supporting documents are received by the employing agency. Employees should consider several factors to determine when it is beneficial for them to transfer to FERS.

An early effective date will:

  • Allow you to begin receiving an agency's automatic 1% contribution to the Thrift Savings Plan (TSP) sooner.
  • Allow you to receive the agency's matching contribution to the TSP if you are already contributing sooner.
  • Permit you to increase your contribution to the TSP to a maximum of 10% of basic pay per pay period if you are already contributing sooner.
  • Allow you to begin accumulating Social Security credits that will be added to those earned in other employment throughout your career.
  • Begin accumulating 5 years of FERS service in order to become exempt from the Government Pension (Social Security) Offset rule.

A later effective date will:

  • Allow you to add to your CSRS service time that in turn will increase the CSRS portion of your total retirement annuity (unless you are in CSRS Offset).
  • Provide an opportunity for you to reconsider your decision should major changes occur in your financial, health, or family situation.
  • Provide necessary time to complete any legal issues pertinent to your situation, such as a court order awarding benefits to a former spouse. However, an extension is available if necessary.

An effective date on or before December 31st, of any year will:

  • Start your coverage under FERS prior to January 1st of the following year, earning you one calendar year of FERS service during that year for eligibility for the FERS Special Retirement Supplement, which is important if you anticipate retiring before you reach the age of 62.

Two points to remember:

  • Whatever date you choose, once effective, an election of FERS coverage is irrevocable.
  • If you are planning to leave the Federal service as a FERS employee, your transfer must have become effective prior to your separation.

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Special Retirement Supplement (FERS Supplement) Fact Sheet

If you transfer to FERS and you have at least 1 calendar year (January 1 to December 31) of FERS service when you retire, you will be eligible for the Special Retirement Supplement. The special retirement supplement (also known as the FERS supplement) is unique to FERS. It substitutes for the Social Security part of your total FERS benefit until age 62, when most people become eligible for Social Security. The purpose of the supplement is to provide a level of income before age 62 similar to what you will receive at age 62 as part of a Social Security benefit. The supplement stops at age 62 even if you are not eligible for Social Security. Like Social Security benefits, the supplement is subject to an earnings test, which means the supplement is reduced if your income from earnings or self-employment is higher than an allowable amount.

Eligibility Requirements

In addition to at least 1 full calendar year of FERS service, you must retire on an immediate annuity (that is, one that begins within 1 month of separation) under one of the following provisions to be eligible for the Special Retirement Supplement:

  1. after 30 years of service at or after your MRA (minimum retirement age); or
  2. after 20 years of service at or after age 60; or
  3. under one of the special provisions for law enforcement officers, firefighters, air traffic controllers, or military reserve technicians; or
  4. under discontinued service retirement or early retirement (that is, a major RIF, reorganization, or transfer of function) provisions. However, if you retire on a discontinued service or an early retirement, you will have to wait until you reach your MRA before you can begin to receive the supplement.

Individuals who retire on disability or under the MRA + 10 retirement provision cannot receive the supplement.

Common Questions and Answers on the FERS Supplement

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Credit for Military Service under CSRS and FERS

FERS Transfer Consideration

Question: If I transfer to FERS, what happens to credit for my military service?

Answer: Except for a very small category of employees described in paragraph 2 (below), nothing will change. It will continue to be creditable in a CSRS component of your benefit, and the same rules that applied when you were under CSRS will continue to apply. These basic rules are:

Military service performed before your transfer from CSRS to FERS:

  1. If you were first employed in a position covered by CSRS before October 1, 1982:

    An individual first employed in a position covered by CSRS before October 1, 1982, may receive credit for post-1956 military service if he or she retires from civilian service prior to age 62. However, if the employee does not make a military deposit, military service will be deleted from the computation of CSRS benefits when the employee reaches age 62, reducing the annuity, if he or she is entitled (or upon proper application would be entitled) to Social Security benefits at the time.

    Therefore, if you were under CSRS before October 1, 1982, and you haven't paid a deposit of 7% of your military basic pay and you switch to FERS, you should think about paying a deposit because the likelihood of your earning a Social Security benefit is now greater.

  2. If you were first employed in a position covered by CSRS on or after October 1, 1982:

    Employees first hired in positions subject to CSRS after September 30, 1982, do not receive credit for post-1956 military service for any purpose unless they make a military service deposit covering the service prior to separation from Federal employment. If a deposit is not made for such service, it is not creditable for either annuity computation or retirement eligibility purposes.

    Therefore, if you are CSRS or CSRS Offset with a CSRS component after your switch to FERS, you must make a military deposit if you have not already done so to receive credit for post-1956 military service.
    1. For employees in CSRS Offset with less than 5 years of non-offset service, all of their service becomes subject to FERS rules, which require that a military deposit (normally 3% of military basic pay) be paid prior to separation to receive credit for post-1956 military service for any purpose.
    2. Military service performed after your transfer from CSRS to FERS is credited under FERS rules -- and requires a deposit that is normally 3% of basic military pay.

For further details about crediting of military service see the pamphlet: Retirement Facts 2: Military Service Credit Under the Civil Service Retirement System (RI83-2).

U.S. Office of Personnel Management
May 1998

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Information For Employees Who Plan to Retire Soon After Transferring to FERS

Age Reductions

Special Retirement Supplement

Survivor Benefits

Miscellaneous

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FERS Election Fact Sheet

Civil Service Retirement System (CSRS) Offset Employees Transferring to the Federal Employees Retirement System (FERS)

An employee with a substantial amount of CSRS Offset service may be seriously disadvantaged by electing to transfer to FERS. If you are covered by CSRS Offset, and you transfer to FERS, your Offset service becomes subject to the less generous FERS rules. Your Offset service will be computed under the FERS rules of 1% of your high-3 average salary for each year, instead of 2% for each year of service beyond 10, without a corresponding opportunity to receive Government matching funds on Thrift Savings Plan (TSP) contributions for that period. (People over age 62 with more than 20 years of service at retirement get 1.1% of the high-3 average salary for each year of FERS credited service.)

In addition, if you have less than 5 years of non-Offset civilian service, all of your CSRS time will become FERS service. Your entire annuity will be computed under FERS rules, but you will still not receive any corresponding Government matching funds on your TSP account for your service prior to transferring to FERS. You can request a refund of the extra money you paid for your non-Offset CSRS service and receive it plus interest.

To understand why these rules are as they are, you need to go back to the Social Security Reform Act of 1983. That legislation required that new Federal employees who were first hired after 1983 have Social Security coverage. It also required that former Federal employees with prior CSRS-covered service who returned to Federal service after a break of 365 days or more have Social Security coverage as well. The Social Security reforms also established interim CSRS rules to coordinate Social Security and CSRS benefits for employees so affected. The Congressional intent was that additional legislation would soon establish a permanent new retirement system and that everyone hired after 1983 would be covered by it.

However, when the original FERS Act of 1986 was passed to create the permanent new retirement system for new employees, the Congress also allowed employees who were under the interim provisions, but who also were vested under CSRS, to remain in what is now called CSRS Offset coverage. In addition, the Congress gave all employees who were vested under regular and interim CSRS coverage an opportunity to join FERS during the 1987 open season, or after a break in service of 4 days or more.

The section of the law that created the rules for how prior service would be treated upon transfer to FERS specifically provides that CSRS Offset and CSRS Interim service become subject to FERS rules when an employee elects FERS. There is no indication in the legislative history that multiple opportunities to elect FERS were contemplated, either through an employee's work history or through an open season other than the original one under the FERS Act.

Each person who has an opportunity to elect FERS should carefully weigh all of the pros and cons associated with each system, based on his or her own individual circumstances. Rarely, if ever, will every aspect of one system be better for an individual than every corresponding aspect of the other system. Although transferring to FERS presents some serious disadvantages to employees with substantial amounts of CSRS Offset service, there may be other considerations in your personal circumstances that override this concern.

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Disability Benefits Under CSRS and FERS

Introduction

CSRS and FERS both provide disability benefits. The benefits offered by the two plans are alike in some ways and different in others. Depending on your personal situation, the benefits offered by one plan or the other may be better for you.

Unless you have a serious chronic illness or a life-threatening medical condition, you will probably base your choice between CSRS and FERS more on what you want your retirement benefit to be than on the disability benefits offered. You should be aware of the differences between the plans, though, in case one or the other clearly meets your needs better. Note that, if you transfer to FERS, all of your disability benefits will be paid according to FERS rules.

This section explains the key features of the disability benefits given by both plans. It also points out some areas to think about in deciding which plan is better for you.

Eligibility

CSRS requires you to have at least 5 years of creditable civilian service before you can qualify for disability benefits. FERS requires 18 months of civilian service.

Those who apply for disability benefits under CSRS Offset or FERS must also apply for Social Security disability benefits or show that they are not eligible for them.

There are separate eligibility requirements that you must meet in order to qualify for Social Security disability benefit. You must meet Social Security eligibility requirements and have earned a specified number of Social Security credits before becoming disabled.

Definition of Disability

CSRS and FERS both use the same definition of disability. In order to be declared disabled under either plan, you must be unable to do your job, and must not turn down a suitable vacancy within your agency that is within your commuting area and at the same grade or pay level as your current position.

The definition used to determine your eligibility for Social Security disability payments is more strict than under CSRS and FERS. It requires you to be unable to perform any job, rather than just your current job. So even if you have the required number of Social Security credits, you may qualify for FERS or CSRS disability payments, but not qualify for Social Security disability payments.

How Much Disability Benefits Will Be

CSRS

Under CSRS, your disability benefit will generally be equal to your projected benefit at age 60 or 40 percent of your high-3 average salary, whichever is less. If you have more than 22 years of service when you become disabled, you will receive your accrued benefit, which will amount to more than 40% of pay. Cost-of-living-adjustments will be added annually at the full rate of inflation. See Retirement Facts 4, Disability Retirement Under the Civil Service Retirement System (RI 83-4)(PDF file).

CSRS Offset

Under CSRS Offset, your basic annuity is computed under CSRS rules described in the preceding paragraph. In addition, if you qualify for Social Security benefits, OPM must reduce your annuity by the value of your Offset service in your Social Security disability benefit. The calculation is the same as for a regular retirement.

FERS

FERS uses a different benefit formula that takes into account any Social Security disability benefits you may be eligible for.

During your first year of disability, FERS will pay you 60% of your high-3 average salary minus 100% of an approximation of any Social Security benefit you qualify for. No COLA's will be paid during this year.

(Note that Social Security disability payments and the reduction in your FERS benefit will not begin until 5 months after you qualify for Social Security disability. You will receive full FERS benefits during this period.)

During your second and any future years until age 62, your basic FERS benefit will amount to 40% of your high-3 salary. If you are entitled to Social Security disability benefits, your FERS annuity will be reduced by 60% of the approximate amount of your Social Security benefit. COLA's match the inflation rate if it is 2% or less. If the inflation rate is more than 3%, the COLA will be 1% less than the inflation rate.

The total FERS and Social Security benefit you receive will be equal to at least 40% of your high-3 salary plus 40% of your Social Security disability benefits. You may also get your Thrift Savings Plan account when you become disabled.

Your basic FERS disability benefit will be recomputed at age 62. At that time, you will receive your accrued FERS retirement benefit. In this case your accrued FERS benefit would be based on years of service that include the time you were receiving disability benefits. Also, the average salary used would be based on what you were earning at the time you became disabled, increased by all cost-of-living-adjustments under FERS during that period.

CSRS and FERS

Under the Social Security law, your Social Security disability check must be reduced if the combined amount of your employees' compensation payment and/or public disability benefit is more than 80% of what is called your "average current earnings." Public disability benefits come from employment not subject to Social Security taxes, such as CSRS. Since FERS includes Social Security, this type of reduction is less likely under FERS.

Continuing Eligibility for Disability Payments

Under both CSRS and FERS, if you retire on disability and then decide to work again, your disability benefits may be affected. If your total income from work is more than 80% of the current salary of the position you retired from, your disability benefits will end. They may also end if you go back to work for the Federal Government.

Also, at times you may be required to prove that you still meet the CSRS and FERS definition of disability.

Conclusion

In general, the combined FERS and Social Security disability benefit (if you qualify for the Social Security benefit) will be larger than the CSRS benefit. However, it is more difficult to qualify for the Social Security disability benefit. and you must be covered for the number of years required by Social Security. Even if you do not qualify for Social Security, the FERS benefit is likely to be larger. Depending on your recent coverage under Social Security, you may have to work under FERS for 5 years before Social Security disability protection is available.

Note also that, when your FERS benefits are recomputed at age 62, you may stand to lose a significant portion of your benefit. Remember when you transfer to FERS, you take your CSRS credit with you. If your combined CSRS and FERS benefits (under regular rules) are more than the benefit produced by the FERS disability rules, you will receive the combined benefit. This means that the possibility of becoming disabled may be less of a concern for CSRS employees with substantial CSRS service because of the larger accrued benefit that transfers to FERS based on that service. However, if disability benefits are a serious concern for you, you should ask your agency to do estimates of benefits under both CSRS and FERS before you make a transfer decision.

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Involuntary Retirement and "Early-Out" Retirement

Introduction

This information sheet discusses what your benefits will be under CSRS and FERS if you must retire involuntarily because of a reduction in force, reorganization, transfer of function, or similar circumstance, or you choose to retire early under a voluntary "early out" opportunity. (These provisions do not apply if you are separated because of misconduct or delinquency or if you refuse a reasonable offer of another position.)

CSRS

Under CSRS if you retire involuntarily, you are eligible for an immediate annuity at any age with 25 years or more of service, or age 50 with 20 years of service or more. Your benefit will be reduced 2% for each year that you retire under age 55. This is a permanent reduction that will be applied to your entire annuity, including your payments after you reach age 55. The same rules apply for early voluntary retirements.

FERS

Under FERS, if you retire involuntarily, you are also eligible for an immediate annuity at any age with 25 or more years of service, or at age 50 with 20 years of service or more. The difference between CSRS and FERS in this case, however, is that your FERS annuity is not reduced if you retire before age 55. However, you would not begin to receive the Special Retirement Supplement until you reach your Minimum Retirement Age (55-57). This benefit continues until age 62. The same rules apply for early voluntary retirements.

Special Transfer Rules

If you transfer to FERS and retire involuntarily, you are eligible for an immediate annuity at any age with 25 or more years of service or at age 50 with 20 or more years of service. Your retirement benefit will be calculated using the CSRS formula for your years of service under CSRS, and the FERS formula for the years after you transfer. Any CSRS Offset service will be converted to FERS. The CSRS portion of your benefit will be permanently reduced by 2% for each year that you are below age 55 when you retire. No reduction will be applied to the FERS portion of your benefit but you will not begin to receive a Special Retirement Supplement until your Minimum Retirement Age. The same rules apply for early voluntary retirements.

Transfer Considerations for Involuntary Retirees and Early Voluntary Retirees

Whether or not you may be involuntarily retired should not be a key factor in determining which retirement plan you choose. You should be aware of the differences between CSRS and FERS, however.

If you meet the age and service requirements and retire early, your CSRS benefit will be reduced if you are under age 55; your FERS benefit will not. However, the CSRS retirement benefit is larger than the FERS benefit to begin with. Even with the reduction, the CSRS benefit is likely to be larger than the FERS benefit. This is especially true if you retire below your Minimum Retirement Age under FERS, because your Special Retirement Supplement will not be paid until you reach your Minimum Retirement Age. FERS COLA's do not begin until age 62, but CSRS COLA's start immediately.

If you think you may leave Government service involuntarily and you will not meet the age and service requirements for early voluntary or involuntary retirement, FERS is probably the better choice, as it is in general for those who do not plan to retire from the Federal service. This is especially true if transferring to FERS could give you eligibility for an MRA + 10 retirement, which could allow you to keep your Federal health and life insurance as a retiree.

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Survivor Benefits Under CSRS and FERS

Introduction

CSRS and FERS both provide survivor benefits, but the benefits offered by the two plans differ greatly. Depending on your personal situation, the benefits offered by one plan may be better for you than the other plan's benefits.

Recipients of Survivor Benefits

Under CSRS, FERS, and Social Security, survivor benefits can be paid under various conditions to current and former spouses and children. Social Security benefits can also be paid to dependent elderly parents. Surviving spouses must meet certain age and length of marriage requirements in order to qualify for benefits. You can also elect benefits for a spouse you marry after retirement under both FERS and CSRS. The rules for who is eligible for spousal benefits are the same for FERS Basic Benefits and CSRS. Under both CSRS and FERS, children's benefits are payable to each unmarried child:

  • up to age 18;
  • up to age 22 if a full-time student; and
  • at any age if the child became disabled before age 18.

Also, under both CSRS and FERS, your Thrift Savings Plan account will be available to your designated survivor. If you want more information about CSRS and FERS survivor benefits (including court ordered benefits for a former spouse), several pamphlets on OPM's website have more information.

If You Die as an Employee

CSRS

CSRS will pay benefits to the eligible survivors of an employee who had at least 18 months of creditable civilian service.

Under CSRS, if you die while you are a Federal employee, your eligible spouse will receive 55% of your accrued benefit. If a larger benefit would result, your spouse would receive the smaller of the following computations: 55% of 40% of your high-3 annual salary or 55% of what your annuity would have been if you had worked until age 60.

Your eligible children will receive an annuity that is based on how many children you have and whether or not your spouse is still living. This is true under CSRS whether you die as an employee or retiree.

If you are a CSRS Offset employee and your spouse or children are eligible for survivor benefits based on your service, OPM must reduce the benefit that is paid to your surviving spouse and children. This reduction is computed in the same way as the reduction in a retirement annuity.

FERS

FERS also pays benefits to the eligible survivors of an employee who had at least 18 months of creditable civilian service. Your CSRS service counts to meet this requirement.

Under FERS, if you die while you are a Federal employee, and have more than 18 months of creditable civilian service but less than 10 years of total service, your eligible spouse will receive a two-part FERS benefit. It includes a lump-sum payment that is adjusted each year for inflation ($21,783.34 for 1998), plus the greater of half of your high-3 average pay or half of your annual rate of pay at death. Social Security and other survivor benefit payments will not affect this lump-sum benefit.

In addition, if you had 10 years of service, your eligible spouse will also receive an annuity equal to one-half of your accrued Basic Benefit.

FERS childrens' benefits also depend on whether your spouse is still living and how many children are eligible for benefits. In addition, children's benefits are reduced dollar for dollar by Social Security children's benefits that may be payable.

Social Security also provides survivor benefits to the eligible survivors of an employee who met the minimum Social Security eligibility requirements. The number of Social Security credits needed to qualify depends on when the employee was born and how old he/she was at the time of death. The minimum number of credits required is 18 months.

Under CSRS and FERS these benefits are available without additional cost to you, that is, at the regular deduction rate for CSRS and FERS benefits.

If You Die After You Retire

CSRS

If you are a CSRS retiree when you die, your eligible spouse will be paid 55% of the amount you were receiving as your annuity or a lesser amount that you and your spouse agreed on when you retired.

As a married retiree, your annuity will be reduced in order to provide for this survivor benefit unless you and your spouse waive this benefit. The amount of the reduction is 2.5% of the first $3,600 of your annual benefit, plus 10% of the amount over $3,600. For most career retirees, this amounts to a 7% to 8% reduction. Note that the 55% benefit is based on the amount of your annuity before this reduction is taken. You may also choose, if your spouse agrees, a smaller survivor benefit.

If you want more information about survivor benefits, see the pamphlet Retirement Facts 5, Survivor Benefits Under the Civil Service Retirement System (RI 83-5(PDF file).

If you are a CSRS Offset retiree, OPM must reduce the survivor annuity if your widow(er) or children are entitled, or would be entitled upon proper application, to Social Security benefits as your widow(er) or children. This reduction is done in the same manner as the reduction in a retiree's annuity.

FERS

If you are a FERS retiree when you die, your eligible spouse will be paid 50% of the amount of your annuity, plus a Special Retirement Supplement if your spouse is younger than age 60 and not yet eligible for Social Security benefits.

As a married retiree under FERS, your annuity will be reduced in order to provide for this survivor benefit unless you and your spouse waive the reduction. Under FERS, the reduction is larger than under CSRS. It is a full 10% of your entire annual benefit amount. Again, the 50% benefit is based on the amount of your annuity before this reduction is taken. You and your spouse also can choose a smaller survivor benefit of 25% of your annuity, with a 5% reduction in your benefit. However, under FERS you cannot choose other benefit levels as you can under CSRS.

Children's benefits are the same for both retirees and employees.

If You Die After You Leave Federal Service, But Before You Retire Under FERS

If you have at least 10 years of service and die after you leave Federal service but before you begin to receive your annuity, a survivor benefit is payable to your spouse under FERS. The amount of the benefit payable to the surviving spouse is one-half of your accrued basic retirement benefit. The benefit will begin at the time you would have reached age 62, or sooner if your survivor elects a reduced benefit. For your spouse to be eligible, you must not take a refund of your contributions. No similar benefit exists in CSRS. Social Security benefits are also payable to survivors of employees who meet the Social Security requirements. These benefits are based on the Social Security benefit for which the employee was eligible. Benefits vary based on the age and situation of the survivor.

Transfer Considerations

If you transfer, the FERS survivor rules will apply to all of your benefit--even the CSRS part. This includes:

  1. the 10% or 5% reduction to provide survivor benefits after you retire;
  2. the 50% or 25% benefit levels (this was up to 55% under CSRS); and
  3. Cost of living increases generally equal to consumer price index increase less 1%; and
  4. the 18 month FERS service requirement for lump sum death-in-service benefits.

Conclusion

The survivor benefits under FERS and CSRS differ substantially. Your individual circumstances will determine which system is better for you. Also, you need to remember that FERS rules apply to all of your survivor benefits.

As a general rule, surviving spouses who will receive a substantial spousal Social Security benefit will be better protected by FERS. Surviving spouses who are employed and/or earn a Social Security benefit on their own will receive greater benefits from CSRS.

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Sample Employee Situations

The following sample situations may help you in directing an employee to specific information. These situations may also help you in recognizing the important factors in various employee profiles.

You may think an employee fits nicely into one of the categories listed below. However, after you have finished reviewing these categories, check the following considerations which could critically impact an employee's decision.

Younger, shorter service employees:

  • Least likely to stay with the Federal Government until retirement
  • Have the most alternatives to Federal Government employment
  • FERS provides greater portability thus ensuring a better retirement benefit if the employee leaves the Federal Government

Older, long-service employees approaching retirement age:

  • Higher benefit formula and COLA's suggest CSRS
  • There may not be time to accumulate 10 years for Social Security coverage
  • Portability is generally not a factor however,
  • FERS could be a logical choice if service to retirement under FERS would allow employee to acquire enough Social Security credits to qualify for a Social Security benefit

Middle-aged, middle service employee (e.g., age 40 with 15 years of service):

  • If certain of staying until retirement from the Federal Government, especially retirement before age 60, CSRS would be a strong choice for benefit formula and COLAs
  • If post-retirement employment is likely, FERS Special Retirement Supplement could be reduced by Social Security earnings test, however,
  • The longer the older employee intends to work, the better FERS looks due to greater Social Security benefits, TSP, and COLA after age 62
  • If the employee is fairly likely to leave the Federal Government before retirement, FERS can provide a form of benefit insurance by beginning to accrue a more portable benefit and making deferred benefits available at age 55
  • Employee who is most likely to stay but still would consider leaving is likely to be torn between the two systems
  • Trade-off is between a slightly lower benefit at retirement but greater portability under FERS, and a higher benefit at retirement but no portability under CSRS; again, FERS is a form of insurance, at a cost
  • In this case, the decision should hinge on factors like expected retirement age, ability to save in TSP, amount of Social Security credit to date, and spouse's Social Security coverage

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Special Considerations Before Making a Decision

Be wary of categorizing an employee too early. The following is a list of special considerations which may critically impact an employee's decision. More information on all of these considerations is available in the FERS Transfer Handbook.

  • Social Security Spouse Benefit - Social Security provides spousal benefits which can amount to an additional 50% benefit to a family when the spouse reaches age 65. This benefit makes the Social Security tier of the FERS attractive to married couples where one spouse has not worked, or has little work experience.
  • Public Pension Offset (also called the Government Pension Offset) - If an employee is receiving a CSRS benefit, the current Social Security law reduces the Social Security benefit and any Social Security survivor or spousal benefit by a certain amount. If an employee transfers into FERS and accumulates at least 5 years of FERS service, that Social Security reduction will be avoided.
  • Earnings Test - Except for disability benefits, CSRS benefits are not reduced if an employee continues to work outside the government after retirement. The FERS supplement and all Social Security benefits received until age 70 are tested for earning and reduced at fairly low levels. In 1998, the annual exempt amount of earnings is $9,120 if you're under 65, and $14,500 if you're age 65-69. You can earn up to these amounts without affecting your Social Security income. If you earn more than these amounts, however, your Social Security benefit will be reduced. If you are under age 65, it will be reduced by $1 for every $2 above the limit that you earn by work. For people age 65 and over, $1 in benefits is withheld for each $3 in earnings above the limit. If you are age 70 or above, your Social Security benefits will not be reduced because of your earnings. The amount you can earn each year before your benefit is affected increases yearly. How much it increases is based on how much average wage levels increase in the United States as a whole.
  • Windfall Elimination Provision - Under this provision, Social Security benefits are reduced below their normal level if an employee has less than 30 years under Social Security. This prevents employees who earned all their Social Security quarters at low wages early in their career, then left Social Security for a full career in the CSRS, from receiving Social Security benefits equal to workers who spent a full career under Social Security. This reduction continues to apply to those who transfer to the FERS, and may be detrimental to certain transferees.

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CSRS Individual Retirement Records and FERS Registers of Separations and Transfers

Chapter 81 Attachment C

Section 81A2.2-3 Frozen SF 2806's and Redesignating the SF 2806

A. General Rule

When a CSRS employee elects to become covered by FERS, the SF 2806 must be "frozen" or "redesignated." Whether the SF 2806 is "frozen" or "redesignated" depends on whether the employee had enough prior service to have a CSRS component in a future annuity.

Use the following table to determine the appropriate action.

IF AT TIME OF TRANSFER TO FERS THEN THE AGENCY

The employee has a total of at least 5 years of potentially creditable non-offset civilian service under CSRS rules.

Freezes the SF 2806 for just the CSRS non-offset covered years (see paragraph B below) and initiates an SF 3100.
The employee has less than 5 years of potentially creditable non-offset civilian service under CSRS rules. Transfers all information from the previous SF 2806 to a redesignated SF 3100. In some cases, this may result in employees' eligibility for a refund of excess retirement contributions. (See paragraph C below and Chapter 33, Return of Excess Contributions.)

Note:

If the employee entered service for the first time on or after 1-1-84, but before 1-1-87, he or she was automatically transferred to FERS without any voluntary action. The SF 2806 was redesignated as an SF 3100 effective January 1, 1987.

B. Procedures for "Frozen" SF 2806

General Rule –
The "frozen" SF 2806 is used for employees who transfer to FERS with

5 or more years of creditable civilian service other than CSRS Interim or CSRS Offset Plans as of the effective date of the election to transfer to FERS. A frozen record does not impart FERS credit.

The table below outlines the procedures an agency must follow to "freeze" the SF 2806.

STEP ACTION

  1. Stop posting the SF 2806 at the end of the pay period in which the election to transfer to FERS is made. Post the effective date of the transfer, the final balance of the employee's retirement withholdings, and the employee's sick leave balance to the frozen SF 2806.
  2. Start a new SF 3100 that begins with the first pay period after receipt of the election to transfer to FERS. The 3100 should be notated with the effective date of conversion.
  3. Enter "FROZEN RETIREMENT RECORD" on the "Do Not Use" portion of the SF 2806.
  4. Transfer the applicable SF 2806's from the CSRS withholding control account to the FERS withholding control account.

Note:

Examples 16 and 17 illustrate the SF 2806 and SF 3100 in the case of frozen service.

C. Procedures for Redesignating SF 2806

Agencies must redesignate the SF 2806 as an SF 3100 when an employee transfers to FERS with less than 5 years of creditable non-offset CSRS service. (This usually applies to certain CSRS Offset employees who elect to transfer to FERS.) In such cases, all prior CSRS service covered by the record becomes subject to FERS rules and the employee may request a refund of excess contributions, if there are excess contributions.

The table below outlines the procedures an agency must follow to redesignate the SF 2806 as an SF 3100.

STEP ACTION

  1. Stop posting the SF 2806 at the end of the pay period in which the election to FERS is received by the agency. Agencies maintaining hard copy SF 2806's should strike a total on the actual record as of the end of the pay period in which the election was received.
  2. Initiate a new FERS Individual Retirement Record on an SF 3100 for the transferring employee. Total the accumulated salary deductions through the election period and redesignate the SF 2806 as an SF 3100.
  3. Annotate the redesignated CSRS record in the REMARKS column (4) as follows: "Elected FERS Effective, (date)." Enter in the "Do Not Use" portion of the SF 2806 the following: "FERS RETIREMENT RECORD."
  4. Indicate the effective date of transfer to FERS on both the redesignated SF 2806 and the new SF 3100.
  5. Transfer the redesignated CSRS Individual Retirement Record account balance to the agency's FERS control account.

Note:

Examples 18 and 19 illustrate an SF 2806 redesignated as an SF 3100.

D. Automatic Redesignations

Automatic redesignations were required for employees --

  • Who first entered Federal service on or after January 1, 1984, but before January 1, 1987; or
  • Who were covered by CSRS Interim rules and who had less than
  • 5 years of creditable civilian service by January 1, 1987.
  • For the history on the FERS open season see the appendix of Chapter 11, Elections of FERS Coverage. For special rules and election opportunities that applied to certain high level officials, see Chapter 101, Special Retirement Provisions for Senior Officials.

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