Recently I wrote about the Civil Service Retirement System, but did not cover CSRS offset. (See How Much Will CSRS Federal Employees Receive When They Retire?) I have since received several inquiries about how CSRS offset works. Two of the inquiries were from readers who are in CSRS offset! (Also see,
FERS and Your Future Retirement: How Much Will You Receive After Retirement?)
Membership in CSRS offset is generally restricted to those who were in the “old” CSRS for five or more years prior to 1987, who resigned, and who were re-hired after an absence of at least one year. Under these conditions the employee can choose to become a member of FERS or return to CSRS, as an offset employee. (If the absence was less than one year, the employee is returned to CSRS.)
How is CSRS Offset Different?
The CSRS offset retirement program is different from the CSRS in several ways. Employees have 0.8% of salary deducted for CSRS (instead of the usual 7.0%), and 6.2% for Social Security, for a total of 7.0%. Regardless of whether they have retired, at age 62 the offset against their annuity is calculated.
The offset is the increase in the age-62 Social Security benefit attributed to the offset service, as determined by Social Security, but not more than the pro-rated difference as computed by the Office of Personnel Management (OPM).
OPM divides years of offset service by 40, and then multiplies by the Social Security benefit. Example: 18 years as CSRS offset divided by 40 = 0.45, or 45%. If the age-62 SS benefit is, say, $900, then the offset would be (0.45 * 900), or $405. If this is less than the figure calculated by Social Security, this is the offset.
Comparing CSRS Offset to FERS
Generally, the combination of Social Security and reduced annuity is considered to be marginally superior to the annuity alone. But how does CSRS offset compare to FERS?
- Unlike FERS members, the offset person receives no matching money for his contributions to the Thrift Savings Plan. This can be significant.
- The offset person receives no FERS annuity supplement. This, too, can be substantial, but it is not relevant for retirements that start at age 62 or higher, because the supplement ends at 62.
- Retirement at MRA + 10 is not an option for CSRS offset.
- The annuity for CSRS offset is nearly double that of FERS. FERS employees get 1.0% of high-three for each year of service, while offset employees get 1.5% for each of the first 5 years, 1.75% for each of the next 5 years, and 2.0% per year for all years over 10.
- Under current law, retired offset employees receive annual COLA increases prior to age 62, while FERS annuitants do not.
- If the offset employee is not eligible for a Social Security benefit, there is no offset.
- A CSRS offset employee retiring under “early out” provisions has his annuity reduced by 2% for each full year under age 55, while there is no such penalty for a FERS employee.
Please note above is just a summary. For a more detailed, comprehensive description of CSRS offset, readers are encouraged to review this OPM document. Calculations for individual cases can be carried out using the software at: www.fedbens.us