# How is Your Federal Employee Annuity Calculated?

on October 16, 2012

Your annuity is what is known as a “defined benefit” annuity.  This means it is based, essentially, on just two numbers:  length of creditable service, and high-three average salary.  Contributions to the pension fund are not part of the annuity calculation.  (Defined contribution plans, in contrast, base the annuity on the total contributed to the fund, by employer and employee.)

Length of service:

This is years and whole months, with each month being one-twelfth of a year.  Service time is increased by sick leave, with each 174 hours equivalent to one month.  For FERS employees the amount of sick leave is first reduced by one half, before applying this factor.  (For retirements on/after January 1, 2014, the reduction is abolished.)

Examples:  John and Mary each have 20 years 7 months of service, and 800 hours of sick leave. They each have 20.58333 years. But John, being CSRS, gets credit for 4 additional months, which brings his total up to 20.91666 years.  Mary (FERS) is credited with 2 months more, making her total 20.75 years.

Normally, “leftover”  service time – days under 30 – is dropped, and leftover sick leave – hours under 174 – is dropped.  But if these two leftovers, together, add to a full month, then the employee gets credited with one additional month.

High-three

This is the highest average salary over any 36 consecutive months during the employee’s career, with each salary weighted in proportion to how long it was in effect.  The high-three can be earlier, but in most cases it will be the last three years of the person’s Federal employment.

Once you know the service time and the high-three, you are ready for the arithmetic.

FERS:  For Mary, simply divide the service time by 100, and then multiply by the high-three.  Let’s say Mary and John each have a high-three of \$75,294.  For Mary, (20.75 / 100) = 0.2075.  Then (75294 * 0.2075) = \$15,623, or \$1,301 monthly.

CSRS, for John, is more complicated.  Multiply the high-three by 1.5% for each of the first five years, 1.75% for each of the next five years, and 2.0% for the remaining time.  Add these three together and the result is the annuity.  John’s annuity would be:

 (1.5 * 5 = 7.5) 7.5% of \$75,294 = \$5,647 (1.75 * 5 = 8.75) 8.75% of \$75,294 = \$6,588 (2.0 * 10.91666) 21.83332% of \$75,294 = \$16,439 \$28,674

Add the three components together, and the resulting annuity is \$28,674, or \$2,389 per month.

Note for FERS Retirees:  With the exception of disability and MRA+10 retirements, FERS employees who retire under age 62 are entitled to an annuity supplement.  If it is a VERA retirement, the supplement does not start until the employee reaches the MRA (Minimum Retirement Age).  Calculation of the supplement is quite intricate and lengthy.  See separate article.

Because CSRS employees pay 7.0% into the retirement fund, in contrast to the 0.8% paid by FERS members, the CSRS annuity is significantly higher.

Exceptions:

• In both retirement systems, fire fighters, law enforcement, and air traffic controllers — known as “special category” employees — pay more into the pension fund, and receive a larger annuity for the first 20 years of service.  For CSRS the first 20 years yield a flat 50%, and FERS employees get 34%.
• If a retiring FERS employee is 62 or more, and has 20+ years, the percent per year is 1.1 instead of 1.0.

Above calculations, including the supplement, can be performed quickly and easily at:  fedbens.us

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

### 34 Replies

1. Vinee says:

does this same calculation on Selling Annuity follows even today?

2. citizenofus1776 says:

What about us who started work in July 1984 before FERS was fully functional? I understand we fall under CRS-Offset until FERS had the TSP component activated, but nothing appears on that in my retirement calculations.

3. ALguest says:

How many months do you get the annuity?

4. ALguest says:

I get how to calculate the annuity per month. Â How may months do you get it?

5. FersKid says:

I get how to calculate the monthly annuity. Â How long does the annuity last? Â Until death?

6. LongTimeFed says:

Luckily, our annuity is based on base pay plus locality pay — the actual amount you’ve been receiving in your paycheck.

7. Golfpro1946 says:

I have a real mess. I worked for 10 years under CSRS full time. Then after a baby I switched to part time under CSRS for another number of years. Then during the last FERS open season (the only one I can remember since it began), I switched to FERS and have worked under FERS since then.Â  The lastÂ 8 years have been full time.Â I want to retire at age 58 and I will have 36 years.Â  What a mess huh ? What part of my work years are used for the FERS computation and what for the CSRS and is the high 3 used for both even though it was earned under FERS.Â  I do not have a lot of faith that OPM will get this right as they have given me estimates that are all over the place.Â Â Â  Does anyone know where I can get the rules to do this complex computation ?

8. Dennis says:

BUT, is the High Three the combined Base and the Locality pay (i.e., Be of \$131,000 plus Locality pay of \$31,000 is \$162,000, as High Three?

• Realseabee says:

Â Federal employee pay for FERS retirement computation is Base + Locality pay. No other pay is calculated.Â  I do not know if CSRS is the same.

• LongTimeFed says:

Yes, CSRS is the same.Â

9. Imusjunkit says:

What components of Salary contribute or don’t contribute to the high 3 calculation?Â  E.g. Locality wage vs. AK & HI COLA, oversees hazardous duty pay, overseas housing allowances?Â  What if a GS-13 moves from one locality to another in the middle of the high 3?

• Dennis says:

Can someone please answer, as IÂ also have Base plus Locality pay, so need to know if it is the combined number?

• Realseabee says:

Federal employee pay for FERS retirement computation is Base + Locality pay. No other pay is calculated.Â  I do not know if CSRS is the same.

• groundedflyboy says:

So, I guess that excludes shift differentials, etc…?

• Realseabee says:

“What if a GS-13 moves from one locality to another in the middle of the high 3?”

High three “3” does not mean the last three. High three is your three highest years over your entire employment. That is the short answer. The long answer is that they look at all your pay periods and collect the highest 78 which is three years worth. The really long complicated answer is that bonuses, award pay etc is not counted and must be subtracted.

And we wonder why it takes so long to get full retirement pay.

10. Terry says:

If a retired employee pasess away before the money he has put into his pension is used up, is that money returned to him? Is it taxed ?

• Guest says:

Yes, employee contributions that were not paid to the retiree are paid as a survivor benefit or as a lump sum to a beneficiary. Because those funds were taxed before they were contributed, they are not taxed upon distribution.

11. Realseabee says:

Can’t say anything about CRCS, but it seems that the author is taking the long route to figuring your FERS annuity. On a calculator just do:

Pay times one percent (or 1.1) times years. ExampleÂ  79294*1.0%*20.75=15623.Â

Seems like a simple to remember and calculate it. I learned it from a someone at the finance center some years ago.

12. LongTimeFed says:

Dear Mr. Benson,

I am a CSRS-Offset Fed with 32 years of service, 7 of which were working in Congress. Can you please tell me how my Congressional service will be calculated along with my agency service? Both are federal service, but neither OPM nor my agency seem to know the answer.Â  I am a GS 14 Step 10, and 61 years old. Thank you.

• fedbens says:

Some congressional employees are just like the rest of us.Â  The others pay more into the retirement fund and receive a larger annuity, plus there are a few other differences.

I would suggest checking the House of Representatives website for HR and then contact them.Â  Another excellent source is Reg Jones, columnist at federaltimes.com .Â  He answers questions, and as a former SESer at OPM, he is a world class expert.

Good luck!

• LongTimeFed says:

Thanks!

• AlsoLongTimeFed says:

I’m a long-time CSRS Fed, too.Â  Can anybody answer that question?Â  Whether the annuity calculation for CSRS employees is Base pay + Locality pay?

13. Cattykid70 says:

not a good comparison as someone with 20 yrs of service cannot be under CSRS since they would have started working in the early 90’s when everyone was in FERS.

• fedbens says:

A person could, prior to 1983, have worked five or more years under CSRS, resigned,Â  and then returned years later asÂ CSRS offset.

For CSRS offset, the annuity is calculated exactly the same as for “regular” CSRS.

So, yes the person in the example could be real.

14. icanliejoe says:

• Cathy Newell says:

Guess what! Federal employees are taxpayers too!

15. FEGLI FERS 58 and 22 says:

This is a very well written article.Â  Can I retire at 58 with 22 years of full time continuous service and get my life insurance when I leave this summer as FERS?Â  I want no penalty since I am only 58 and asked for postponed annuity and I will pay premiums 2 yrs. butÂ I was told I cant keep FEGLI insurance if I am not working till age 60.Â  I was told I have to give government 20 percent of my annuity in order to keep it at 58.Â

• fedbens says:

When the employee is under 60, he needs at least 30 years service.Â  As you were told, the MRA+10 option is available, but you get penalized 5% for each year under age 62.Â  Expensive.

• Mgblenk says:

can you get other life insurance?Â  FEGLI is pretty expensive compared to private life insurance based on my experience.Â  I would only get/keep it if I couldn’t qualify for less expensive insurance.

• fedbens says:

In the near future, I’m doing a piece on Federal life insurance.Â  In the meantime, let me say the basic life insurance is partially paid for by the Government, while the three optional forms of life insurance are not.

Basic is definitely a good value.Â  Shop elsewhere and you can beat the premiums of the optional forms.

• Guest says:

If you separate from service now, you would be eligible to have BOTH your health and life insurance reinstated when you request your UNREDUCED annuity at age 60.

16. WORLDBFREE says:

Actually law enforcement under Fers is 1.7% per year for the first 20 years if you started in 2008 or later.

• Mike1 says:

how about for thouse who started before 2008?

• fedbens says:

The 1.7% is included for FERS law enforcement, in the 34% for the first 20 years, covered under “Exceptions” in my article.