What Is an FERS Annuity?

John Lister

The FERS annuity is the retirement benefit paid to retired federal employees in the US. It takes its name from the Federal Employees Retirement System. Unlike some retirement plans, in this context annuity refers to the payment itself, not the financial arrangement that provides the payment. Some employees who retire before the usual age may be eligible for an additional payment.

The main form of the FERS annuity is known as immediate retirement.
The main form of the FERS annuity is known as immediate retirement.

The main form of the FERS annuity is known as immediate retirement, with payments starting 30 days after the person stops work. To receive the standard payment a person must either: reach a minimum retirement age of between 55 and 57 depending on date of birth and have 30 years of service; be 62 with five years of service; or be 60 with 20 years of service. Somebody who reaches the minimum retirement age with between 10 and 30 years of service can take immediate retirement but will normally receive a reduced rate.

There are three other ways to qualify for the FERS annuity. Those with at least 25 years of service, or those aged at least 50 with 20 years of service, can get it as early retirement benefit if made redundant. Those who leave before qualifying for immediate retirement can get deferred retirement, meaning payments start later on. Those who have completed 18 months of service and become unable to work through disease or injury can quality under disability retirement.

The amount paid in FERS annuity is based on the person's average earnings across his three best-paid years. The standard rate is an annual payment of 1.1 percent of this average earnings multiplied by the number of years service. For those who have less than 20 years service upon retirement or are aged below 62 when retiring, the applicable rate is 1 percent rather than 1.1 percent. The payment rate is higher for those who worked in particular jobs such as law enforcement or firefighting, and for Congress members and employees.

There is an additional FERS annuity supplement program, which works in a complex manner. The principal is that if a person becomes eligible to receive the FERS annuity before she is old enough to receive Social Security retirement benefits, she receives an additional payment. This payment is equivalent to the amount the person would have received from Social Security were she already eligible. If the person has any additional income, the annuity supplement may be reduced in the same way as a real Social Security payment would be.

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