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Articles | FERS Supplement and Survivor Benefit Guide (Part I of II)
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FERS Supplement and Survivor Benefit Guide
(Part I of II)
Edward A. Zurndorfer, Certified Financial Planner
The FERS Special Retirement Supplement (or FERS supplement) is a pension benefit paid by the
Office of Personnel Management (OPM) to FERS annuitants who retire before age 62
with an immediate and unreduced FERS annuity.
The purpose of the FERS supplement is to temporarily provide an additional
amount of post-retirement income to a FERS annuitant who retired before age 62.
The income is an approximation of the monthly Social Security benefit that the
retiree will receive at age 62 if the retiree elects to start receiving Social
Security benefits at that time. The supplement is unique for FERS retirees --
there is no comparable provision for CSRS retirees. This column discusses the
retiree annuity supplement, including who qualifies for it, how it is
calculated, when it starts, and when it ends.
A FERS employee (this includes a FERS employee who transferred from CSRS and
is entitled to both a CSRS and a FERS annuity) is eligible for the retiree
annuity supplement at the time of retirement if he or she has at least one
calendar year of FERS service and retires with entitlement to an immediate
annuity under one of the following situations:
- At or after the minimum retirement age (MRA), with at least 30 years of
service;
- At age 60 or older, with at least 20 years of service;
- Under one of the special provisions for law enforcement officers,
firefighters, air traffic controllers, or military reserve technicians;
- At or after the MRA under discontinued service (involuntary) retirement
provisions;
- At or after the MRA under early retirement provisions - due to a major RIF,
reorganization or transfer of function;
- At or after the MRA for members of Congress;
- At or after the MRA under early retirement provisions for members of the
Senior Executive Service, Defense Intelligence Senior Executive Service, and FBI
and DEA Senior Executive Service; or
- Regardless of age for members of the Senior Executive Service, Defense
Intelligence Senior Executive Service, and FBI and DEA Senior Executive Service,
who are eligible for early retirement due to failure to be recertified as a
senior executive.
Note that a FERS retiree is eligible to receive the retiree annuity
supplement only upon attaining the MRA or later rather than at the time of
retirement, and only if he or she has at least one calendar year of FERS
service. If a FERS employee retires before reaching MRA, the retired employee
would be eligible for annuity supplement under one of the following
provisions:
- discontinued service (involuntary) retirement;
- early retirement such as a major RIF;
- members of Congress; or
- early retirement for members of the Senior Executive Service Defense
Intelligence, Senior Executive Service, and FBI and DEA Senior Executive
Service.
The following retirees are not eligible for the retiree annuity
supplement:
- those retirees who retire under the disability rules;
- individuals retiring under the "MRA + 10" provisions;
- individuals who are eligible only for a deferred annuity; and
- individuals retiring at age 62 or later.
One of the aforementioned requirements for a retiree annuity supplement is
that an employee must have at least one full calendar year of civilian service
creditable under FERS computation rules. An employee who serves from January 1
through December 30 or 31 is considered to have performed a "calendar year" of
service. Military service cannot be included in determining if the employee has
one full calendar year of FERS service, unless it is a period of military
service covered by military leave with pay or leave without pay from a civilian
position.
If an employee retires at MRA or later, then the retiree annuity supplement
begins the same month the FERS annuity starts - normally the month after the
employee retires.
Here is an example.
Jose, age 60, retires on Jan. 31, 2010 from federal service after 20
years of service. Jose's retirement becomes effective on Feb. 1, 2010 and his
first FERS annuity and retiree annuity supplement check will be dated March 1,
2010.
The supplement is payable until the earlier of the last day of the month in
which the retiree becomes age 62, or the last day of the month before the first
month for which the retiree would - upon proper application - be entitled to
Social Security benefits. An individual is entitled to Social Security
retirement benefits - upon proper application - beginning on the first day of
the first month throughout which the retiree is age 62 and is fully insured.
According to Social Security rules, an individual attains or becomes age 62
on the day before his or her 62nd birthday. If, for example, a retiree's 62nd
birthday is on February 1, then according to Social Security rules the retiree
becomes age 62 as of January 31.
Consider the following examples:
Example 1. Paul's 62nd birthday is February 1. His annuity supplement
ceases on January 31, whether or not he applies for Social Security benefits.
This is because according to Social Security rules, Paul became age 62 as of
January 31 and is age 62 throughout February.
Example 2. Julie's 62nd birthday is February 2. She is eligible for
Social Security benefits beginning on February 1st, because February is the
first month throughout which she is age 62. Her retiree annuity supplement
therefore ceases as of January 31.
Example 3. Dawn's 62nd birthday is February 3. She is eligible for her
Social Security benefits beginning in April because March will be the first
month that Dawn will be 62 for the entire month according to Social Security
rules. Since her 62nd birthday is in February, her retiree annuity supplement
benefit will cease as of February 28.
Calculation of the FERS
Special Supplement
The formula for calculating the retirement annuity supplement is:
[total civilian service creditable under FERS
(rounded to the nearest full year)/ 40] times [the anticipated Social Security
retirement benefit as if the annuitant were age 62]
Note the following:
1. Total civilian service creditable under FERS includes: (a) full years of
FERS-covered service; (b) years in which an employee took leave without pay for
periods of six months or less; (c) full calendar years of temporary or
"nondeduction" service before Jan. 1, 1999 for which the employee made a full
deposit; and (d) effective Oct. 28, 2009, full calendar years of FERS service in
which an employee departed federal service, requested a full refund of employee
FERS contributions but redeposited the funds in full when the employee returned
to federal service and before retirement.
2. Total civilian service under FERS does not include: (a) a period of leave
without pay exceeding six months; (b) those years of FERS service in which a
departed employee requested a refund of employee FERS contributions but no
redeposit was not made subsequent to the employee's return to federal service;
and (c) military service on which an employee made a deposit.
3. Each year, employees receive a statement from the Social Security
Administration detailing what the employee will receive in current dollars in
projected monthly benefits as if the employee were age 62, full retirement age
and age 70. At the time a FERS employee who is eligible for the retiree annuity
supplement retires, OPM will check with the Social Security Administration to
determine what the retiring employee's projected Social Security annual benefit
at age 62.
The following examples illustrate this point:
Example 1. Tom, a FERS " transferee", started federal service in July
1975 and worked continuously under CSRS until July 1998. Tom then transferred to
FERS during that open season and retired from federal service on Nov. 30, 2009
at age 60. The calculation of the annuity supplement is as
follows:
Steps for estimating the monthly Retiree Annuity Supplement
amount
1. Projected Social Security monthly benefit as if Tom were age 62,
based on lifetime Social Security
earnings $1,500
2.
Calculate civilian service creditable under FERS, rounded to the
nearest full year (7/1998 to 11/2009 = 11.3
years)
11
3. Divide the total years of FERS service by 40 (11/40 =
0.275)
0.275
4. Multiply the career Social Security benefit in Step 1 by
the amount determined in Step 3 ($1,500 x
27.5%)
$412.50/per month
Example 2. Dennis, a FERS covered employee, entered federal service on
Feb. 1, 1989 and retired on Jan. 31, 2009 at age 60. The calculation of the
annuity supplement is as follows:
Steps for estimating the Retiree Annuity Supplement
amount
1. Projected Social Security monthly benefit as if Dennis were age 62,
based on lifetime Social Security
earnings
$2,000
2. Calculate civilian service creditable under FERS, rounded to
the
nearest full year (2/1/1998 to 1/31/2009 = 20
years)
20
3. Divide the total years of FERS service by 40 (20/40 =
0.50)
0.50
4. Multiply the career Social Security benefit in Step 1 by
the amount determined in Step 3 ($2,000 x
50%)
$1,000/per month
Example 3. Lawrence started federal service on Feb. 5, 1985 and retired
on Jan. 31, 2010 under an "early out" provision. Lawrence was 49 years old at
the time of his retirement. His MRA is age 57. His FERS retiree annuity
supplement will start the month in which he becomes 57 (MRA). The calculation of
the annuity supplement is as follows:
Steps for Estimating the Retiree Annuity Supplement
1. Projected Social Security monthly benefit as if Lawrence were age 62,
based on lifetime Social Security
earnings
$1,000
2. Calculate civilian service creditable under FERS, rounded to
the
nearest full year (2/1985 to 1/2010 = 25
years)
25
3. Divide the years of FERS service by 40 (25/40 =
0.625)
0.625
4. Multiply the career Social Security benefit in Step 1 by
the amount determined in Step 3 ($1,000 x
62.5%)
$625/per month
Note: Lawrence's retiree
annuity supplement will become effective the month Dennis becomes age 57.
The FERS supplement -- like Social Security benefits for those recipients who
draw benefits before their full retirement age (FRA) and who work -- will be
reduced if a FERS annuitant has excess outside "earned" income as a result of an
"earnings" test. This is discussed in Part II of this
topic.
About the Author
Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in
Silver Spring, MD. He is a seminar speaker at federal employee retirement
seminars throughout the country for the National Institute of Transition
Planning, Inc. , and an author of numerous publications on federal employee
benefits.
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