All federal employees – those covered by the Civil Service Retirement System (CSRS), CSRS Offset, the Federal Employees Retirement System (FERS), or a combination of CSRS and FERS (TransFERS employees) – will receive either a CSRS annuity, a FERS annuity, or both annuities that are computed based on their length of service and their highthree average salary. In spite of legislation before Congress to change the highthree average salary to the highfive average salary over the past 25 years, nothing has been passed into law. This column explains what the high3 average salary is, and how it is computed.
What is the High3 Average Salary?
The high3 average salary is the largest annual rate resulting from averaging an employee’s basic pay in effect over any period of three consecutive years of creditable civilian service. Each annual rate is weighted by the length of time it was in effect. Each year, an employee’s basic pay is shown on the employee’s SF 50 (Notice of Personnel Action) with adjustments occurring during the year because of step increases, job promotions and other factors explained below. The three year period in which the average pay starts and ends on the dates that produce the three consecutive years of highest pay. For most employees, this is the three year period ending on the day an employee retires.
How to Determine the Beginning Date of Three Year Period
To determine the beginning date of the three year period, follow these steps:
Step 1. If the employee’s retirement date is any day other than the last day of the month, add one to the day of the month. If the employee retires on the last day of the month, use that day.
Step 2. Subtract 3 years, 0 months and 0 days from the retirement date in Step 1 (year – month – day).
Note that in computing a CSRS or FERS annuity, the Office of Personnel Management (OPM) uses a 30 day per month, 12 months per year calendar, or a 360 day a year calendar.
Here are two examples that illustrate:
Example 1. Jason retired from federal service on Dec. 31, 2017. The beginning date of his three year period for computing the high3 average salary is Dec. 31, 2014, as shown below
Year 
Month 
Day 

Date of Retirement 
2017 
12 
31 
Minus: 3 years 
3 
0 
0 
Beginning Date of Three Year Period 
2014 
12 
31 
Example 2. Carol retired from federal service on Jan. 3, 2018. The beginning date of her three year period for computing the high3 average salary is Jan. 4, 2015, as shown here:
Year 
Month 
Day 

Date of Retirement 
2018 
1 
3+1 = 4 
Minus: 3 years 
3 
0 
0 
Beginning Date of Three Year Period 
2015 
1 
4 
An exception to using the federal employee’s salaries coinciding with the last three years of federal service occurs when the employee had higher pay rates during a prior three year period of service. Then the latter three year consecutive period should be used.
The three years of service used in the computation of the high3 average need not be continuous, but must be consecutive. Two or more separate periods of employment may be combined provided there is no intervening service. Consider the following example.
Action 
Date 
Annual Pay Rate 
Hired
Pay Change Pay Change Resigned 
471996 7152006 6222007 6212008 
$65,600 $73,400 $75,800 $76,200 
Rehired
Pay Change Pay Change Retired 
10152016 182017 172018 11142018 
$84,550 $84,700 $85,200 $85,200 
To compute the highthree average salary, the periods 6222007 to 6212008 and 10152016 to 11142018 are used to equal 3 years, 0 months and 0 days of total service.
Service time that is entitled for retirement eligibility purpose but not for annuity computation purposes, includes:
 Temporary (nondeductions) service under CSRS that occurs after Sept. 30, 1982. However, if a full deposit including interest charges is made for this service time, then the service time will count for computation of the CSRS annuity; and
 CSRS service time ending after Feb. 28, 1991 for which employment retirement contributions were refunded when a CSRS employee left federal service and was not redeposited when the employee returned to federal service. However, if the withdrawn contributions are redeposited together with interest charges, then the service time will be used in the computation of the CSRS annuity.
Types of Pay Included
The basic annual pay used in the calculations of the high3 average salary is the salary for which retirement deductions (CSRS or FERS) are withheld. The following types of pay are included:
 Regular pay
 Localitybased pay
 Environmental differential pay (formerly called hazardous pay)
 Premium pay for standby time
 Law enforcement availability pay
 Night differential pay for Federal Way System (Blue Collar) employees only
 Special pay rate for recruiting and retention purposes
Types of Pay Not Included
The following types of pay are not used in the calculation of the high3 average salary:
 Lump sum payment for accrued and accumulated unused annual leave paid to a retiring employee
 Bonuses and overtime, holiday, Sunday premium and military pay
 General schedule (GS) night differential pay and foreign or non –foreign post differential
 Travel allowances
 Recruiting or retention bonuses
 Payment for credit hours
6 Steps to Calculate the High3 Average Salary
The following procedure is used to calculate the high3 average salary:
 As discussed above, subtract the beginning date from the end date to determine the total time.
 Use the Time Factors (360 day factor chart available from OPM’s CSRES and FERS retirement handbook (Chapter 50, page 50, onepage PDF) to determine the fraction of a year that the period covers.
 Enter the annual rate of pay for the time period.
 Multiply the time factors by the annual rate for the total basic pay.
 Add the entries in the Total Basic Pay column.
 Divide the sum of the Total Basic pay by 3 to determine the high3 average salary.
In conjunction with these steps, the following chart is used to compute the high3 average salary
Beginning (1) 
Ending Date (2) 
Total Time (Years – MonthsDays) (3) 
Time Factor (4) 
Annual Rate/Salary (5) 
Total Basic Pay [(4) x(5)]= (6) 
Sum of Total Basic Pay =
High3 Average Salary = Sum of Total Basic Pay/3
In example 1, Jason retired from Federal service on Dec. 31, 2017. His annual salary history for the period Dec. 31, 2014 through Dec. 31, 2017 is:
Dec. 31, 2014 – Jan. 3, 2015 Jan. 4, 2015 – Jan. 2, 2016 Jan. 3, 2016 – Jan. 1, 2017 Jan. 2, 2017 – Dec. 31, 2017 
$60,405 $62,287 $64,323 $68,209 
Jason’s high3 average salary is $64,898, as computed here:
Beginning (1) 
Ending Date (2) 
Total Time (Years – MonthsDays) (3) 
Time Factor (4) 
Annual Rate/Salary (5) 
Total Basic Pay [(4) x(5)]= (6) 
12/31/2014 
1/3/2015 
004 
.011 
$60,405 
$664 
1/4/2015 
1/2/2016 
01129 
.997 
$62,287 
$62,100 
1/3/2016 
1/1/2017 
01129 
.997 
$64,323 
$64,130 
1/2/2017 
12/31/2017 
01128 
.994 
$68,209 
$67,800 
Sum of Total Basic Pay = $194,694
High3 Average Salary = $194,694/3 = $64,898
Important Considerations
It is important for employees to understand that the longer an employee is at a higher salary, the more effect (increase) will be on the employee’s high3 average salary. Retiring employees should therefore understand that postponing one’s retirement for an upcoming salary increase, a step increase or governmentpay increase, and then retiring less than a month after the pay increase becomes effective will have a very negligible effect on the highthree average salary.