How is the High-3 Calculated with Part Time Employment?

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By on June 14, 2015 in Q&A, Retirement with 0 Comments

Q: I am a FERS employee and am 49 years old. I will have 30 years of federal service in February 2015. I am considering going part-time in a couple of years. I would like to stay part time until I am eligible to retire at age 57. For annuity calculations my high three will be the last 3 years of full time work. However, since that will be approximately 5 years before I retire will OPM use my full time high three or the most recent (part-time) high three years?

A: The rules for calculating a FERS annuity for an employee with part-time service are more complicated than you think. However, since you work for the agency that I retired from, you should be used to complicated rules.

When you retire, your annuity will be calculated as if you were full-time (i.e., they will use the full-time salary for your high-three). They will also use your full length of service (i.e., part-time years are treated as full-time years). OPM will then prorate your annuity on a factor that they derive from dividing the number of hours you actually worked divided by the number of hours you could have worked.

I did some very rough math to show how working part-time your last 5 years would affect you. If you had a high-three of $100,000 and had worked 37 years full-time, your pension would be $37,000 per year. If, however, you worked part-time your last 5 years, you would have a proration factor of 93%, resulting in an annual pension of $34,410.

If your agency were to offer phased retirement as an option, you might want to explore it and see if it is better for you.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at [email protected] to discuss schedules and costs.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.