What is the Special Retirement Supplement (SRS) and why is it important for FERS employees?
A full career FERS employee with 30 or more years of Service can retire at their minimum retirement age (MRA) which is between the ages of 55 and 57, depending on the year in which the employee was born. (See Future Retirees: Do You Know Your MRA?) FERS employees who have 20 years of service are eligible to retire at the age of 60. However, regardless of the year in which an employee is eligible to retire under FERS, their earliest age of eligibility for Social Security retirement benefits based on their own earnings is age 62.
Social Security is expected to be a part of the retirement package of FERS employees; in fact, the reason FERS was created was to bring federal employees under Social Security. Congress created a supplemental payment to tide over FERS retirees who chose to retire before they hit the age of eligibility for Social Security. The most common name for the supplement is the Special Retirement Supplement but some folks call it the Social Security Supplement, the Retiree Annuity Supplement or the “bridge payment”.
The SRS applies to retirees between their MRA and age 62, though there are some exceptions. It is designed to replace the portion of an age 62 Social Security benefit that is due to civilian employment under the FERS system (military time that has been bought for FERS retirement does not count in computing the SRS). Social Security covered wages at another job prior to federal employment is also not counted. Therefore, it is possible that the SRS will not equal what an age 62 Social Security benefit would be.
The SRS is not paid by the Social Security Administration; rather it is paid by the Office of Personnel Management. What follows is a simplified example of how the SRS would be calculated.
Let’s say that an employee’s MRA is age 57 and they retire at that age with 30 years of federal service. Their monthly age 62 Social Security benefit is expected to be $1000. In computing the SRS, the years of federal service are divided by 40 (the number of years that Social Security considers to be a full career), and the resulting fraction (3/4 or 75%) is multiplied by the age 62 Social Security benefit to give the amount of the SRS. In this case, the SRS would be $750. If the employee were retiring with 20 years of service, the fraction would be ½ (or 50%) and the SRS would be $500 per month
The retiree would receive the SRS until age 62. At that time the SRS would end, whether or not the retiree chose to apply for Social Security at that time. The SRS ends when one becomes eligible for Social Security Retirement benefits – not when one applies for them.
But wait – there’s more! The same earnings test that applies to Social Security benefits received before reaching the full Social Security retirement age will apply to the Special Retirement Supplement. For 2011, one may earn up to $14,160 before the earnings test kicks in. Once it kicks in, every $2 in earned income above $14,160 will result in a $1 reduction to the SRS. The test applies only to earned income, not to pensions, dividends, etc.
But wait – there’s even more! The SRS does not receive a cost-of-living adjustment.
What exceptions are there to the SRS?
- Special category employees (law enforcement, firefighters, etc.) may receive the SRS at the time they retire, even if they are younger than their MRA. They are also not subject to the earnings test until they reach their MRA. (See The FERS Special Retirement Supplement (and Special Category Employees) )