Calculating Your "High-Three" Average Salary

By on February 16, 2010 in Current Events, Retirement with 0 Comments

Everybody knows what the high-three is – right? But who knows how to calculate the high-three?

Definition
 
The high-three average salary is the highest salary obtained by averaging salaries over a three-year, or 36-month, period.The 36 months must be consecutive, but not necessarily uninterrupted.

 

In calculating the high-three, use basic salary only, with basic salary defined as compensation from which retirement deductions are taken – this would omit overtime, incentive awards, etc but would include locality pay. Also, each ending date for a salary is treated as starting date for the next salary. 
 
Finally, because service time is counted through, not to, be sure to add one day to the time span for the final salary, while subtracting one day from the span of the earliest (i.e., first) salary.
  1. Divide each salary by 365. Note the results.
  2. Multiply the results of 1. by the number of days the salary was in effect. Again, note the results.
  3. Add the results of 2.
  4. Divide by 3. This is the high-three average salary.
 
Example:   Final salary = $85,631. Retire date = March 5, 2010.
 
Salary
Divided by 365 From To Days Total
$85,631 $234.60 1/3/10 3/5/10 62* $14,545.54
$82,044 $224.78 2/18/09 1/3/10 319 $71,704.21  
$79,892 $218.88 4/21/08 2/18/09 303 $66,321.30
$77,550 $212.46 1/2/08 4/21/08 110 $23,371.23
$76,123 $208.55 3/6/07 1/2/08 301** $62,775.40

      1,095 $238,717.69
$238,717.69 / 3 = $79,572
 
The above procedure is, admittedly, tedious and error-prone. A far faster, easier, and just as accurate way to calculate the high-three is to use the software at www.fedbens.us (#3 on the menu).
 
 Note: OPM, in doing the official determination, uses 360-day years and 30-day months.  This results in a slight difference, compared to the method described above.  For the above data, the OPM method would yield a high-three of $79,584, which is $12, or 0.01507%, more.
 
 
* Add one day, due to through, not to.
** Subtract one day from the earliest interval.

 

 

© 2016 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.

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