FERS Supplement for Survivors and Early Retirement Strategy
Retirement under the Federal Employees Retirement System (FERS) includes a comprehensive benefits package for federal employees, and a key component of this package is the FERS Special Retirement Supplement (SRS). This supplement is designed to bridge the gap for FERS employees who retire before they are eligible to receive Social Security benefits. Although there were talks in Congress earlier in the year about eliminating the SRS, the FERS annuity supplement was not cut in the latest budget legislation.
This is particularly important for federal employees with special provisions that entail a mandatory retirement date. One example would be air traffic controllers. Because they have to retire before they can collect Social Security, this benefit was designed to provide extra income as Social Security is considered one of the significant “legs” that make up the FERS Retirement “three-legged stool” along with the TSP (Thrift Savings Plan) and the pension.
One of the lesser-known benefits related to the SRS is the spousal benefit for survivors, which this article will explore first. Then, after an overview of the SRS and how our online calculator can help with formulating your federal retirement plan.
Understanding the Spousal Benefit for Survivors
For surviving spouses of federal employees, one lesser-known piece of the survivor benefits puzzle is the FERS Special Retirement Supplement spousal benefit, a temporary financial support that bridges the gap between loss and Social Security eligibility.
What Is the FERS Supplement Survivor’s Benefit?
The Federal Employees Retirement System (FERS) Spousal Supplement is a temporary monthly payment available to surviving spouses who:
- Are entitled to a FERS current spouse survivor annuity
- Are under age 60
- Will be eligible for Social Security survivor benefits at age 60 based on the deceased federal employee’s work history
- Are not currently receiving Social Security mother, father, or disability benefits from the deceased’s account
This supplement is paid in addition to the regular FERS survivor annuity and is designed to provide financial support until the surviving spouse reaches the age at which Social Security survivor benefits kick in.
Duration and Limitations of SRS Survivor’s Benefit
Unlike the regular FERS survivor annuity, which typically continues for life, the Spousal Supplement ends at age 60. It does not depend on whether the surviving spouse actually claims Social Security benefits at that age; the cutoff is hardwired into the benefit structure.
Key Features of Supplement to Survivor’s Annuity
- Not subject to the Social Security earnings test: Unlike the standard SRS for federal retirees, the survivor supplement won’t be reduced if the surviving spouse continues working.
- Adjusted for inflation: The supplement receives annual Cost-of-Living Adjustments (COLAs), helping it retain value over time.
For many surviving spouses, age 60 marks a financial turning point, but the years leading up to it can be precarious. The FERS Spousal Supplement offers a critical buffer, ensuring that those who’ve lost a partner aren’t left without support while waiting for Social Security eligibility.
General Overview of the FERS Special Retirement Supplement
The FERS Special Retirement Supplement, often called the FERS supplement, is a temporary annuity supplement paid to eligible FERS employees who retire before they reach the age to collect Social Security benefits. The FERS supplement aims to approximate the Social Security benefit that the retiree would be entitled to receive at age 62. The Office of Personnel Management (OPM), not the Social Security Administration (SSA), oversees the administration of the FERS, including the SRS. The supplement is computed similarly to a Social Security retirement benefit, and it is designed to assist federal retirees during the period before they are eligible to draw Social Security.
Eligibility Requirements for the FERS Supplement
To be eligible for the FERS supplement, a federal employee must meet specific age and service requirements under FERS. Typically, this involves reaching the minimum retirement age (MRA) with at least 30 years of creditable service or reaching age 60 with at least 20 years of service. Certain categories of federal employees, such as law enforcement officers, who have early retirement provisions, have to retire when they are younger than age 62 and are eligible for a pension at 50 with 20 years of creditable civilian service, or any age with 25 years of FERS service. You must retire with an immediate retirement benefit under FERS, a deferred retirement, postponed annuity, or a disability retirement do not qualify to receive the supplement.
Early Retirement Supplement and the Impact on Federal Benefits and Retirement
The FERS supplement has a considerable impact on the overall retirement benefits of eligible federal employees. For employees who retire before age 62, receiving a FERS supplement can significantly increase their immediate annuity income. However, it’s crucial to remember that the FERS annuity supplement is subject to an earnings test. This means that earned income above a certain earnings limit will reduce the SRS benefit. The earnings test is similar to that applied to Social Security retirement benefits. The FERS basic annuity continues unaffected, but the supplement will be impacted. Once the retiree becomes entitled to Social Security at 62, even if they don’t claim benefits at that age, the supplement will stop, and the retiree will then rely on their FERS annuity, TSP savings, and Social Security retirement benefit for their retirement income.
Want to learn more about FERS? Sign up for an online federal retirement workshop.
