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More on the FERS Supplement

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Last week, I wrote about the Federal Employees Retirement System Annuity Supplement. Some people refer to this benefit as the Social Security supplement rather than the FERS supplement, since the purpose of this benefit is to bridge the time between employees’ retirement under FERS and their eligibility for Social Security benefits. That’s one way to look at it: Although the FERS supplement is based only on civilian federal service, not Social Security-covered employment in the private sector or military service, it does provide supplemental income prior to Social Security eligibility.

As I noted last week, not everyone who retires under FERS is entitled to the supplement. To get one, you must:

  • Be under age 62. (The supplement will end at 62, regardless of whether you apply for Social Security then or not).
  • Not be retiring under the disability provisions of FERS.
  • Not be applying for a deferred retirement. (A deferred retirement is payable to an employee who leaves federal service with at least five years of creditable civilian service and before being eligible for immediate retirement.)
  • Be eligible for an immediate, unreduced retirement.

The latter group includes who are retiring:

  • At their minimum retirement age (between 55 and 57, depending on year of birth) or later with at least 30 years of service.
  • At age 60 or 61 with at least 20 years of service.
  • Under early retirement provisions. For these people, the supplement is payable after they reach their MRA.
  • Under one of the special provisions for law enforcement, firefighters and air traffic controllers. For them, the supplement is payable immediately.

Reader Responses

Last week’s column provoked a lot of responses from readers. I thought I’d highlight some of them.

This is not “a little extra,” as the title indicates. This benefit has been around since FERS was implemented in the 1980s. It was always part of the three-tiered retirement benefit: FERS, the supplement until age 62 and then Social Security, and the Thrift Savings Plan. To the uniformed reader, the author has written this in such a way that federal employees are now getting something new and yet another benefit that private sector employees do not.

This is correct; the supplement was always included in the FERS benefit program. It was designed to make it possible for a federal employee to be able to plan to retire younger than age 62. This helped to make FERS more comparable with the original CSRS system by providing a complete retirement at the minimum retirement age for a career civil servant.

It is another benefit that private sector employees don't get. For the vast majority of us in private industry, all we have is Social Security (unavailable until at least age 62) and whatever we have been able to save in 401(k) savings plans with an employer match that is a fraction of the 5 percent federal contribution on TSP accounts. Retirement at age 55-62 is simply not possible.

There are some private sector retirement plans that offer a similar benefit. It is sometimes referred to as a bridge payment. But you’d have to have a defined benefit (pension) as part of your retirement package, and those are indeed increasingly rare in the private sector.

FERS became effective on Jan. 1, 1987. Hence it is not possible for the hypothetical 'Sue' in the column to retire with 30 years under FERS until January 1, 2017. But 'Sue' could have a Civil Service Retirement System component to her pension if she had switched.

Sue could have 30 years of service today as a FERS employee. It is correct that FERS became effective at the beginning of 1987, but it covered all employees who were first hired after 1983 and generally those who had less than five years of creditable civilian service at that time. This included those employees first hired as civilians after 1983, but who might have served in the military. Military service is creditable under FERS for veterans who pay a military service credit deposit and who are not receiving military retired pay benefits (with some exceptions).

Could you further explain the sentence in parentheses in the example about “Lloyd”? (“He was entitled to the supplement for the first year since the annual earnings reduction cannot exceed the total annuity supplement to which the individual was entitled in the first year.”) Could you also explain the last sentence? (“He will be entitled to resume the supplement in August 2013 -- the month of his 60th birthday -- and the benefit will end at age 62.”) Why would the supplement resume in August 2013? Does it only begin after a birthday month?

When an employee retires and is entitled to the supplement, it will be paid to them, regardless of whether or not they return to work. At the end each year until age 62, the retiree will be asked to report their earned income from that year, which will determine their eligibility to receive the supplement for the following year.

Suppose, for example, Syd retired in August and received a supplement of $1,000 per month for September, October, November and December. His supplement for the following year could not be reduced by more than $4,000, regardless of how much he earned from August to December. Therefore, if Syd earned $60,000 the following year -- which would have completely eliminated the supplement for that year -- it would only be reduced by $4,000 and the remaining $8,000 would still be paid. When Syd reaches age 62, there would be no supplement payable, so there would be no further reduction for excess earnings.

In Lloyd’s situation from last week’s column, he became entitled to the supplement on his 56th birthday, which was his MRA. Any earnings he had after he became entitled to the supplement were subject to the earnings test. An employee who retires at their MRA or later would be subject to the earnings limit for all earnings after their date of retirement. An employee who retires under special provisions (i.e. law enforcement, firefighter, etc.) would not be subject to an earnings limit until the MRA is met, although they would receive the supplement immediately at the time of their retirement.

Interesting. I'm glad for this article, as I heard that the supplement was eliminated by the last Congress.

There was a bill, the Securing Annuities for Federal Employees Act of 2012 (H.R. 3813), introduced in the 112th Congress by Rep. Dennis Ross, R-Fla., that proposed eliminating the FERS supplement. But it didn’t pass.

Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at www.tammyflanagan.com and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on NITPInc.com.

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