An important part of being a federal employee is your retirement system. During federal employment you pay into a retirement system that will provide you with a pension and health coverage amongst other aids.
Most federal employees are familiar with the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS), but many may not know that two new retirement systems were introduced in 2013 and 2014. These two retirement systems are for FERS Revised Annuity Employees (FERS RAE) and FERS Further Revised Annuity Employees (FERS FRAE).
FERS RAE
FERS employees hired on or after January 1, 2013, but before January 1, 2014, are generally considered FERS Revised Annuity Employees (FERS RAE). The distinguishing feature of a FERS RAE: they pay 3.1% into the federal retirement system instead of the usual .8% of a regular FERS.
FERS FRAE
In general, FERS employees hired after December 31, 2013, are considered FERS Further Revised Annuity Employees (FERS FRAE). FRAEs pay 4.4% into the federal retirement system instead of the .8% of a regular FERS.
It is important to note that both FERS RAE and FERS FRAE do not experience any changes to annuity computation or retirement eligibility.
Unfortunately, despite the increase in cost, there is not an increase in benefits. The chart below spells out the differences between these three retirement systems:
| FERS | FERS RAE | FERS FRAE | |
|---|---|---|---|
| Hire Date: | On or after January 1, 1984 | On or after January 1, 2013, but before January 1, 2014 | After December 31, 2013 |
| Contribution Rate: | 0.8% | 3.1% | 4.4% |
If you worked in federal service, left, and came back on or after January 1, 2013, you may fall under an exception to the rules listed above. Per OPM, if an employee “as of December 31, 2012, had performed at least five years of civilian service creditable or potentially creditable under FERS, including service subject to CSRS or CSRS-Offset,” that employee would not be covered by FERS RAE. In this case, you would be covered under whichever retirement system you originally had – FERS, CSRS, or CSRS-Offset.
Disclosure: The information contained in these blogs should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also president of Christy Capital Management, Inc. (CCM), a registered investment advisor.
