Earlier this month, the Social Security Administration (SSA) announced it was suspending the annual mass mailing of benefit statements for those who will qualify for a Social Security benefit. As an alternative, SSA will try to have the statements available online at their website, by the end of this year. Mr. Astrue, Commissioner of Social Security, also said if they are not able to get the online mode set up by the end of the year, they will revert to the paper statements.
In the meantime, what does this mean for the “quick-and-dirty” estimates of the FERS annuity supplement? These estimates, although flawed, were based on the SSA statements, and were the primary means for planning.
The full process for calculating the annuity supplement is lengthy and intricate. Doing it manually is prohibitive, unless you are the Office of Personnel Management (OPM), and you can hire 40 more full-time employees for the job!
In the absence of the paper SSA statements, to help estimate what the supplement will be in a wide range of cases, I did nine calculations for hypothetical employees.
The calculations were in three tiers, with the first assuming 20 years FERS service and earnings of 70%, 85%, and 100% of the SSA maximum for the individual year. The second tier was 24 years FERS service and the same percentages, and the third was 28 years. (Under current law, the maximum FERS service in 2011 is 28 years – that would be 1983 through 2010.)
Assume employee age of 59 and computation for retirement in 2011. Monthly supplement amounts:
Earnings, as Percent of Ceiling
|FERS Years||70%||85%||100% (max)||20||$779||$849||$908||24||$931||$1,014||$1,089||28||$1,085||$1,182||$1,271|
Maximum earnings, by year:
- Earnings in 2011 are not included. Earnings in prior years where person was not a FERS employee for the entire year are “deemed.”
- To deem a year, the proportion of the first-year earnings to the average total wages for the first year is multiplied by the average total wages for the year in question.
- It is possible to retire with fewer than 20 years FERS service and less than 60 years of age. To do this, one must have enough creditable military time to bring the total Federal service up to 20+ years, and the retirement must be VERA (i.e., early out). Note: MRA+10 does not qualify.
How to use the chart
First, estimate whether you are low (70%), medium (85%), or high (100%) on the earnings scale. Then your approximate supplement will be found in the row for years of FERS service. If your years will be in-between, then interpolate a figure. For example, if your earnings are low and at retirement you will have, for example, 22 years of FERS service, then your estimated supplement would be between $779 and $931.
Or KISS (keep it simple, stupid). Just multiply your years of FERS service by $42, and then adjust higher or lower, depending on whether you were a high or low salaried employee.
I used a dedicated computer program for the above. Contact me for further information.