Over the last few months, I have spoken with dozens of special provision federal employees who were frustrated with how little information was out there about their benefits and retirement. After all, the special provision retirement rules differ from the normal system in five big ways.
The Federal Employees Retirement System (FERS) positions that are normally covered under the special provisions are the following:
- Air Traffic Controllers
- Firefighters
- Law Enforcement Officers
- Capitol Police
- Supreme Court Police
- Nuclear Materials Couriers
Big Difference #1: When You Can Retire
One of the biggest differences between the regular FERS federal employees and special provision FERS federal employees is when they are eligible to retire with an immediate annuity/retirement.
Regular FERS federal employees have to reach one of the following ages and years of service combinations:
| Age | Years of Service |
|---|---|
| 62 | 5 |
| 60 | 20 |
| MRA | 30 |
| MRA | 10 |
Note: MRA stands for Minimum Retirement Age and is based on the year in which you were born. As the chart says, regular FERS federal employees can retire at their MRA with 10 years of service but their pension will be reduced for every year they retire before age 62.
For most retiring soon, their MRA will be between ages 56 and 57.
Now, as Special Provision FERS federal employee, you are eligible for an immediate retirement if you reach one of the following age and years of service combinations:
| Age | Years of Service |
| 50 | 20 |
| Any Age | 25 |
As you can see, under the special provisions, there are opportunities to retire with a full retirement much sooner than other federal employees under FERS.
This may be very attractive for those who would like to start a new career or just retire early.
Big Difference #2: How Your Pension is Calculated
Not only can a special provision FERS federal employee retire early, he or she can also get a bigger pension from the first 20 years of work.
For FERS, the pension calculation looks like this:
High-3 Salary x Creditable Years of Service x Multiplier = Gross Annual Pension
The big difference between regular FERS federal employees and special provision FERS federal employees is the multiplier.
- Regular FERS federal employees have a multiplier of 1% or 1.1% if they retire at 62 with at least 20 years of service.
- Special provision FERS federal employees will have a multiplier of 1.7% for the first 20 years of service and 1% for every year after that.
Example
To see the impact that this difference can make, let’s run through an example.
Let’s say our regular FERS federal employee, George, and our Firefighter FERS federal employee, Frank, both worked 25 years and both retired at age 57. They both had high-3 average salaries of $100,000.
George’s gross annual pension would be:
$100,000 x 25 x 1% = $25,000
Note: George’s pension would also be reduced because a regular FERS federal employee needs to have 30 years to retire with an unreduced pension at his or her MRA, and in this example, George only had 25.
Frank’s gross annual pension would be:
$100,000 x 20 x 1.7% + $100,000 x 5 x 1%
= $34,000 + $5,000
= $39,000
As you can see, Frank’s pension is almost double George’s simply because his multiplier is much higher.
Big Difference #3: TSP at 50 (Or Earlier)
When regular FERS federal employees retire early, they can access their Thrift Savings Plan (TSP) as early as age 55 without an early-withdrawal penalty. This is 4 and ½ years earlier than IRAs which make you wait until 59 and ½ to withdraw without a penalty.
However, special provision FERS federal employees can access their TSP accounts as early as age 50 if they retire in the year they turn 50 or older. Since special provision FERS federal employees tend to retire much earlier than regular FERS, this can be a huge benefit.
Update: Because of recent changes, future Special Provisions retirees will be able to access their TSP accounts before age 50 assuming they are eligible for a full retirement. For example, if someone retires with 25 years of service at age 45, then he would be able to have immediate access to his TSP with the normal 10% early-withdrawal penalty.
Big Difference #4: COLAs Before Age 62
Cost of living adjustments (COLAs) are annual increases that retirees get on their pensions to help offset the effects of inflation every year.
When regular FERS federal employees retire before age 62, their pensions don’t get any COLAs until they turn 62. This means that if a regular FERS federal employee retires at age 57 (MRA), his or her pension will not increase until age 62.
Special provision FERS federal employees have the huge benefit of receiving COLAs no matter what age they retire. This means that if a law enforcement officer retires at 45, he will receive a COLA to his pension all the way up to age 62 and beyond. This can make a huge difference in maintaining a standard of living despite rising prices.
Big Difference #5: FERS Special Supplement Earnings Test
Many have heard that if you make too much money while receiving Social Security benefits, your Social Security benefits may be decreased. What is less known, however, is that the same could happen to your FERS special supplement (also called the FERS Supplement) if you make over certain limits.
In a nutshell, if you make too much money from a job or business while receiving the FERS supplement then your FERS supplement can be reduced down to zero. This is called an earnings test.
However, Special Provision retirees aren’t subject to the earnings test on their supplement until they hit their MRA. This means that special provision employees can make as much money as they’d like between the time they retire from federal service and when they hit their MRA.
For example, let’s say a special provision employee retired at age 45. His FERS supplement would not be reduced no matter how much he made until his MRA. From his MRA to age 62, it would be subject to the earnings test just like regular FERS.
Final Thoughts
Being a special provision FERS federal employee has a lot of benefits that can make planning for retirement much easier. The most important thing is to understand what you have to be able to get the most out of them.
