To calculate the basic annuity of employee covered by the Federal Employees Retirement System (FERS), one will need to know or have access to the following information:

- The employee’s length of service under FERS;
- the employee’s high-three average salary; and
- the FERS annuity calculation formula.

This column discusses the calculation of the FERS basic annuity. Note that once the annuity is calculated, a retiring FERS or “Trans” FERS employee’s annuity may be reduced because of age or a survivor annuity benefit. A “Trans” FERS employee is an FERS-covered employee who previously was covered under the Civil Service Retirement System (CSRS) (with at least five years of service under CSRS) and switched to FERS in one of two “open seasons” – 1987/1988 or in 1998.

## Determining Length of Service

A FERS employee’s service computation date (SCD) *for retirement* incorporates the employee’s service time that is creditable towards both the employee’s eligibility to retire as well as in the computation of the FERS annuity. Added to the length of service is the employee’s converted unused sick leave hours on the day of retirement. In general, an employee’s SCD for retirement is the employee’s hire date into permanent Federal service, adjusted back in time for deposits for temporary or military service, or forward in time for extended periods of leave without pay or breaks in service.

* *A “Trans” FERS employee’s SCD for retirement is the date that the employee switched to FERS after working at least five years under CSRS. “Trans” FERS employees also get credit for unused sick leave hours as follows: The employee must find out his or her unused sick leave balance at the time of transfer to FERS and his or her unused sick leave balance on his or her retirement date. The lower of these two balances will be used in the CSRS annuity component calculation, while the difference of the two balances will be used in the FERS annuity calculation.

The following chart may be used to determine a FERS employee’s length of service to calculate the FERS annuity:

^{1 }OPM uses a 30 day a month, 12-month a year calendar

^{2 }The sick leave conversion chart may be found at: https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c050.pdf#page=58, page 51

^{3 }In calculating the FERS annuity, OPM uses years and months only

**The following example illustrates how the length of service is calculated for a retiring FERS employee with unused sick leave.**

*Judith retired on Dec. 31, 2017 at the age of 58 with 1,300 hours of unused sick leave. Judith’s SCD for retirement is Nov. 13, 1986. Her length of service for computing her FERS basic annuity is computed using the above chart. *

^{1 }33 days = 1 month and 3 days with 1 month carried over to the month column

^{2 }For purposes of FERS annuity computation, 31 years and 9 months is used. The leftover 3 days are forfeited.

** The following chart is used to determine a “Trans” FERS employee’s length of service used in the computation of the FERS annuity component:**

^{1 }OPM uses a 30 day a month, 12-month a year calendar

^{2 }Unused sick leave hours equal to difference between sick leave balances on day of transfer to FERS from CSRS and day of retirement

^{3 }In calculating the FERS annuity, OPM uses years and months only

**The following example illustrates the length of service determination used in the calculation of the FERS annuity component of a “Trans” FERS employee:**

*Charles, age 66, retired from Federal service as a “trans” FERS employee on Dec. 31, 2017. Charles transferred to FERS in August 1998 with a sick leave balance of 500 hours. When he retired on Dec. 31, 2017, Charles’ sick leave balance was 1,800 hours. Charles’ length of service for computing the FERS annuity component of his retirement is done using the above chart:*

## High 3 Average Salary

The second step in calculating a retiring FERS employee’s FERS annuity is to determine the employee’s high-three average salary. This column discusses how the high-three average salary is determined.

## FERS Annuity Calculation Formula

The final step in calculating a retiring FERS employee’s FERS annuity is to obtain the appropriate accrual factor (1 percent or 1.1. percent) chart. This is because the general formula for computing the FERS annuity is:

**If an employee retires before age 62 with any number of years of service, or if an employee retires at 62 or older with fewer than 20 years of service, then the formula for calculating the FERS annuity is:**

**1 percent x High-Three Average Salary x Total Years and Months of Service **

**If an employee retires at age 62 or older and has at least 20 years of service (including CSRS service for a “Trans” FERS employee), then the formula for calculating the FERS annuity is:**

**1.1 percent** **x High-Three Average Salary x Total Years and Months of Service**

The 1 percent accrual factor table may be found at:

https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c050.pdf#page=64 , p57.

The 1.1 percent accrual factor table may be found at:

https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c050.pdf#page=65 **, **p58.** **

It should be emphasized that a different accrual factor table is used for federal employees who are in the “special provisions” job category, namely:

- law enforcement officials;
- firefighters; and
- air traffic controllers

Returning to the previous examples:

*Judith retired from Federal service at age 58 on Dec. 31, 2017. At the time of her retirement, Judith had 31 years and 9 months of service used in the computation of her FERS annuity. Assume Judith’s high-three average salary is $100,000, then:*

Computation of Judith’s starting FERS annuity:

.01 x $100,000 x 31.75 = $31,750

*Charles retired from Federal service at age 66 on Dec. 31, 2017. At the time of his retirement Charles had 20 years and 0 months of service used in the computation of his FERS annuity. Assume Charles’ high-three average salary is $100,000, then:
*

Computation of Charles’ starting FERS annuity:

.011 x $100,000 x 20.00 = $22,000

Note that Charles is also receiving a CSRS annuity component for his retirement. This was computed based on his total years and months of service under CSRS before he transferred to FERS and using the CSRS annuity percentage accrual factor table.

## Cost-of-Living Adjustments (COLAs)

It should be emphasized that the calculations discussed above are for a retiring FERS employee’s or “Trans” FERS employee’s *starting* FERS annuity. FERS annuitants are eligible to receive cost-of-living adjustments (COLAs) every year. This assumes there is a COLA in a particular year. When these COLAs start depends at what age a FERS employee retires. In particular:

- If a FERS employee retires before age 62, then the FERS annuitant is eligible to receive his or her first COLA in January of the year following the year the annuitant becomes age 62.
- IF a FERS employee retires at age 62 or older, then the FERS annuitant is eligible to receive his or her FERS COLA in January following the year he or she retires.

Note in the example above, Charles was age 66 when he retired on Dec. 31, 2017. He will be eligible for his first COLA in January 2019.

This column discusses COLAs and how they are determined and applied to FERS annuities.