Understanding FERS Retirement
The Federal Employees Retirement System (FERS) is the primary retirement plan for most federal civilian employees hired after 1983. It's designed as a three-part system working together to provide retirement income:
FERS Basic Benefit (Pension)
A defined benefit based on your years of service and high-3 average salary.
Social Security
Benefits earned based on your entire work history (federal and non-federal).
Thrift Savings Plan (TSP)
A defined contribution plan similar to a 401(k), with employee contributions and agency matching.
During a Reduction in Force (RIF), understanding how these components work and what options are available is crucial for making sound financial decisions.
FERS Eligibility During a RIF
Your eligibility for different FERS retirement options depends on your age and years of creditable service at the time of separation.
Standard Immediate Retirement Eligibility
| Age | Minimum Service | Notes |
|---|---|---|
| 62+ | 5 years | Standard retirement |
| 60+ | 20 years | Standard retirement |
| MRA* + | 30 years | Standard retirement |
| MRA* + | 10 years | Eligible, but annuity permanently reduced if taken before age 62 (unless postponed) |
| * MRA (Minimum Retirement Age) is 55-57, depending on birth year. | ||
Special RIF-Related Retirement Options
- Discontinued Service Retirement (DSR): If separated involuntarily (RIF qualifies), you can retire immediately if you meet DSR age/service rules (Age 50/20 years service OR Any Age/25 years service). This is often the most advantageous option if eligible, but requires choosing between DSR and severance pay.
- Deferred Retirement: If you have at least 5 years of creditable civilian service but don't meet immediate or DSR eligibility, you can leave your contributions in the system and apply for a deferred annuity later, typically starting at age 62 (or MRA with 10+ years service, possibly reduced). You generally cannot continue health/life insurance with deferred retirement.
FERS Annuity Calculation
Your FERS basic annuity (pension component) calculation depends primarily on your High-3 average salary and years of creditable service.
- Standard Formula: 1% × High-3 Average Salary × Years of Creditable Service
- Enhanced Formula (Age 62+ w/ 20+ Years Service): 1.1% × High-3 Average Salary × Years of Creditable Service
High-3 Average Salary: The average of your highest basic pay over any 36 consecutive months of service.
Creditable Service: Generally includes all federal civilian service under FERS, plus any bought-back military time and potentially unused sick leave converted to service time.
RIF Impact on Calculation
- Discontinued Service Retirement (DSR) Reduction: If retiring under DSR before age 55 (but meeting age 50/20 or any age/25 rules), the basic annuity calculated above is permanently reduced by 2% for each year (prorated monthly) you are under age 55. (See DSR details)
- High-3 Consideration: If you accepted a lower-graded position to avoid an earlier RIF, ensure your High-3 calculation uses your actual highest earning periods.
FERS Annuity Estimator (Simplified)
Get a rough estimate of your FERS basic annuity. This does not include Social Security or TSP, nor does it calculate the DSR age reduction (refer to DSR page for that). Use for general planning only.
Special FERS Considerations During a RIF
If you are eligible for an immediate annuity (including DSR), you are not eligible for severance pay. You must choose one or the other if offered both (e.g., if eligible for DSR but separation occurs before application is processed). This decision is generally irrevocable.
Compare the long-term value of a lifetime annuity and continued benefits (DSR) versus the immediate, short-term payments of severance pay. Learn more about Severance Pay.
Steps to Take Regarding FERS During RIF
- Verify Eligibility Early: As soon as you receive RIF notice, contact HR to confirm your service computation date (SCD) and potential eligibility for immediate, DSR, or deferred retirement.
- Request Official Estimate: Ask HR for a formal retirement estimate showing potential annuity amounts, survivor options, and benefit continuation costs.
- Counseling Session: Schedule a detailed session with an HR retirement specialist or a qualified federal benefits advisor.
- Evaluate Options: Carefully compare DSR vs. Severance Pay (if eligible for both), considering the long-term financial impact and benefit continuation.
- TSP Decisions: Decide whether to leave funds in TSP, roll over, or withdraw, considering tax implications and fees. Address any outstanding loans.
- Benefit Continuation: Determine your health (FEHB), life (FEGLI), dental/vision (FEDVIP), and long-term care (FLTCIP) continuation strategy based on your retirement choice.
- Submit Application (If Retiring): If pursuing immediate or DSR, submit the correct application (SF-3107 for FERS) and supporting documents well before your separation date (aim for 30-60 days prior).