Every year I hear federal employees freak out about a proposed elimination of the FERS supplement.
“Congress proposed changes to our benefits!”
“They’re going to take our pensions away!”
“You should retire now before your pension is worthless!”
New employees must be terrified to learn there is a bill in Congress that could slash their retirement. And based upon the way their colleagues talk about it, I’m sure they think these proposed “cuts” are worse than they actually are.
On the other hand, I’ve heard these rumors for over 20 years. These rumors of the proposed elimination of the FERS supplement are about as scary as a little shepherd crying about a wolf. Or a little chicken talking about the sky falling.
I find these discussions highly ironic because
- Many federal employees don’t even understand what their FERS Supplement is or how it works
- Congress has been trying to eliminate the FERS supplement the same way Sisyphus tries to push a rock up the hill.
In this post I’ll try to explain how the FERS Supplement works, how long Congress has proposed its elimination, and why I’m not worried about it.
Table of contents
- What is the FERS Supplement
- Eligibility for the FERS Supplement
- How to calculate your FERS Supplement
- Proposed elimination of the FERS Supplement
- Related Questions
Please do not confuse my personal blog for financial advice, tax advice or an official position of the U.S. Government. This post may contain affiliate links. If you make a purchase after clicking on a link, I get a small percentage of the sale at no additional cost to you.Get Gov Worker’s top 4 tips for federal employees!
What is the FERS Supplement
The FERS Supplement is an additional pension that you may be eligible for. The government designed the FERS Supplement to match your Social Security Benefit until you become eligible for Social Security at age 62.
In other words, the FERS Supplement ensures that your combined income from pension + social security remains the same from the date of your retirement until you die.
At this point I feel it is necessary to talk about a major misconception people have about FERS. Often, I see people talk about sticking around until age 62 to get a bigger pension. (The FERS annuity calculation goes up by 0.1% per year at age 62). However, what these people fail to realize is that by working until age 62 they’re giving up the FERS Supplement.
If you are eligible for the FERS Supplement, then you’re trading 5 years worth of supplement payments for a slightly larger payments after age 62. While I haven’t run the numbers, I’m not sure that either scenario is a slam dunk.
Also- I truly hope that if you’re a regular reader of my blog, you will be in a position where you will be free to make decisions about what you want to do. (As opposed to you having to work longer because you cannot afford to retire).
Furthermore, I want my readers to be in a position that if one of the proposed eliminations of the FERS Supplement comes to fruition that it doesn’t affect their retirements. If you’re making healthy TSP contributions, I think you will be in good shape no matter what Congress does with the FERS Supplement.
Eligibility for the FERS Supplement
One reason I find my colleagues’ angst about the proposed elimination of the FERS Supplement surprising is that very few of them would be eligible for the FERS Supplement.
You are NOT eligible for the FERS Supplement if you
- Are older than age 62
- Take a deferred retirement or other type of early retirement*
- Have less than 30 years of service
(* If you take a VERA, the rules about FERS Supplement becomes very complicated)
To be eligible for the FERS Supplement, you need to be eligible for an immediate and unreduced FERS annuity. For most current employees this requires that they be at 57 years old with 30 years of service.
Employees who receive an immediate unreduced annuity because of workforce restructuring (such as a VERA) can receive a FERS Supplement. However, they don’t start receiving it until age 57.
How to calculate your FERS Supplement
Let me just start out by saying that it is nearly impossible to calculate your FERS Supplement. OPM explains how to calculate the FERS Supplement in Chapter 51 of the FERS handbook. It is 46 pages long.
Let me repeat that– the government requires 46 pages to explain how to calculate your FERS supplement. At first I thought I could put the calculations in this post, but in actuality it would require an entire post.
The calculations are complicated because the FERS supplement is a fraction of your social security primary insurance amount (PIA). The PIA is set by the Social Security Administration and depends upon their bend points, which change yearly.
If you knew the PIA of your federal service, you could calculate your FERS supplement by the following formula:
FERS Supplement = PIA *(1/40)* (Years of federal service)
In other words, if you worked for 30 years, you would receive 75% of your expected social security benefits (earned from federal service).
If you really want to know your FERS Supplement estimate, you should probably get the number from your human resources department. If the National Finance Center processes your paycheck, you’ll get an estimate in your yearly benefits statement.
Proposed elimination of the FERS Supplement
It seems as if eliminating the FERS Supplement is one of Congress’s favorite budget saving proposals.
Every year, it seems like federal employees can find a headline about “Congress proposing cuts to federal retirement”. Typically the proposed elimination of the FERS Supplement is packaged with proposals to
- Change the annuity formula to a “high-five” average instead of “high-three” average salary.
- Reduce or eliminate cost-of-living adjustments for federal retirees
As I write this in Fall of 2021, I do not believe there is not a current proposal to eliminate the FERS Supplement. However, I am sure it is something we’ll continue to hear about the next time we have divided government.
Should you worry about the proposed elimination of the FERS Supplement?
While I read the click-bait headlines about losing our retirement benefits every year, my FERS benefits haven’t changed during my 20 year federal career.
However, twice during that time new federal employees were required to contribute more towards their FERS retirement. (The FERS-revised-annuity group and FERS-further-revised-annuity group). These changes occurred during some of the biggest budget fights I can remember when Congress was dealing with the “Sequestration” they imposed upon themselves.
I obviously don’t have a crystal ball. I am not going to tell your benefits will be safe and secure for the remainder of your life. Nothing is guaranteed.
I was sure that my FERS benefits were going to be reduced in the Fiscal Cliff budgets we experienced in 2013 & 2014. And they weren’t changed at all.
Living through that experience made me realized how hard it is for Congress to change things for current federal employees.
If I had to guess, I would say that sometime before I retire, *new* federal employees will not receive a FERS Supplement. But I am not going to lose any sleep over a proposed FERS Supplement elimination for current federal employees.
A final note about worrying about the proposed elimination of the FERS Supplement
Obviously, there is nothing that you, as a federal employee, can do about the proposed elimination of the FERS Supplement. Congress is either going to eliminate your benefit (unlikely) or they won’t (more likely).
While it’s natural to worry about your financial security in retirement, worrying about the FERS Supplement isn’t helpful because you can’t control it.
If you are worried about losing the FERS Supplement because you can’t afford to retire without it, there IS something you can do.
You can increase your TSP/IRA/taxable investment contributions.
Spending your mental energy on what you can control is a much better use of your energy and can have a much bigger affect on your financial security in retirement.
How long does the FERS supplement last?
You can receive a FERS supplement from the time you retire until you turn 62 years old. According to the FERS Handbook you continue receiving the supplement until
- The last day of the month before the first month for which you would be entitled to actual Social Security benefits
- The last day of the month in which you reach age 62
Does taking the FERS Supplement affect Social Security
No. The FERS Supplement is designed to replace Social Security for retirees too young to draw Social Security. When you turn 62 you no longer receive the FERS supplement.
Is Social Security taken out of FERS retirement ?
Your FERS annuity is subject to taxation and counts as “provisional income”. For more details, check out my post on taxes and your FERS pension.
Can I collect FERS and Social Security
Yes! FERS employees pay into social security. If you want more information, you can check out my full post about federal employees and social security.
In short, Congress has been debating eliminating the FERS Supplement for forever. Just like Sisyphus, they almost get the proposal past the finish line just to watch it vaporize in front of their eyes.
If you’re a federal employee close to retirement, it’s likely that you will receive your FERS Supplement. On the other hand, there is always a possibility that it will be elimated.
Given the track record of Congress, I don’t think it’s worth spending time worrying about the proposed elimination of the FERS Supplement. Instead, focus on the aspects of retirement that you can control.Get Gov Worker’s top 4 tips for federal employees!
SamSam i.e. "Gov Worker" started working for the government at age 18 and loved it so much that he never left. He started GovernmentWorkerFI in 2019 to help fellow federal employees understand their benefits, take control of their finances, and live their best lives.
How Does Federal Retirement Work: A Simple How To Guide For Federal Employees
Are you a federal employee who has no idea how your federal retirement works? This guide breaks down FERS benefits for federal employees.
The million dollar day of work— Understanding your full FERS retirement compensation
FERS is more than a pension. The non pension parts of the FERS retirement compensation package are worth more than a million dollars! Find out more here!