Though this article is addressed specifically to special category employees, those who want a refresher in exactly what the Special Retirement Supplement is, can read it as well.
First, we need to define Special Category Employee (SCE). For the purpose of the Special Retirement Supplement (SRS), an SCE is an employee who can voluntarily retire at an age under their Minimum Retirement Age (MRA). Those would be law enforcement officers, firefighters, Air Traffic Controllers, and some military technicians.
Second, a review of the Special Retirement Supplement is in order. The SRS is a payment that is made by the Office of Personnel Management (OPM) and is designed to approximate the amount of an age 62 Social Security benefit that is due to civilian service under the FERS retirement system. FERS retirees, with the exception of retired Special Category Employees, begin receiving the SRS at their Minimum Retirement Age. Retired Special Category employees begin receiving the SRS immediately upon retirement. The SRS ends at age 62.
What follows is an accurate way of estimating the SRS. In this example we are using a FERS retiree whose MRA is age 56 who retired with 30 years of civilian service and an estimated annual age 62 Social Security benefit of $1200 a month.
- The age 62 Social Security benefit is divided by 40. Forty represents the number of years that the Social Security Administration considers a full career. In our example, the result is $30.
- The amount derived above is multiplied by the number of full years of FERS civilian service. In our example, $30 multiplied by 30 is $900. The Special Retirement Supplement will be $900 a month.
The estimate for a Special Category Employee would be done in a similar fashion. Let’s say a law enforcement employee retires at age 49 with 25 years of FERS civilian service and the same estimated age 62 Social Security benefit of $1200. Their SRS would be $750.
Because SCEs are allowed to receive their Special Retirement Supplement at an age earlier than regular employees, our Special Category Employee with a $750 SRS would be able to collect it beginning upon their retirement at age 49. If our SCE received the SRS for the full 13 years up to age 62, they would receive $117,000.
In contrast, the regular employee who retired at their MRA of 56 would receive their $900 a month SRS for only 6 years, giving them a total of $64,800. If a regular employee retired at age 49 by electing early retirement during a Voluntary Early Retirement Authorization (VERA), they would not be eligible for their SRS until they reached their Minimum Retirement Age.
The SRS receives no annual cost of living adjustment.
There is an earnings test that applies to the Special Retirement Supplement, and retired Special Category Employees are treated differently regarding the earnings test than are regular retirees. The earnings test that applies to the SRS is the “first tier” Social Security earnings test. In 2015, this test results in a reduction of $1 in the SRS for every $2 or earned income over $15,720. Earned income is income from wages, salary, tips and self-employment income, and does not include pensions, investment income, etc.
Both Special Category and regular retirees are subject to the earnings test beginning at their Minimum Retirement Age. However, SCEs are not hit by the earnings test between the time they retire and the time they reach their MRA. Let’s re-do the above example, assuming that both the SCE and the regular employee earned so much money that the earnings test wiped out their SRS.
Our regular employee would receive nothing from the SRS, as they are not entitled to it until they reach their MRA – exactly the same age where the earnings test kicks in. Our Special Category Employee would have received seven years of SRS that was not subject to the earnings test (from 49 to 56). They would have received $63,000 up to the time the earnings test began to apply.
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