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:

1. discontinued service (involuntary) retirement;

2. early retirement such as a major RIF;

3. members of Congress; or

4. 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:

1. those retirees who retire under the disability rules;

2. individuals retiring under the "MRA + 10" provisions; 

3. individuals who are eligible only for a deferred annuity; and 

4. 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.

face="arial, helvetica, sans-serif">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.