By Reg Jones
The “high-3” is an essential element in the formula used to calculate your annuity. But what does the term high-3 mean? And how do you figure out what yours is?
The high-3 defined
Your high-3 is the average of your highest rates of basic pay over any three consecutive years of creditable civilian service, no matter when they occur in your career, with each pay rate weighted by the length of time it was received.
That three-year period starts and ends on the dates that produce the highest average pay. It starts on the first day that leads to the highest three-year average, not on Jan. 1, the first day of the month, or the date of a pay change.
Basic pay is the amount of salary from which retirement deductions are taken. It includes the salary you receive for your position and level as shown on an official pay table, including locality pay for the 48 contiguous states. In some cases, it may include such things as night and/or environmental differentials, premium pay, and special pay rates for recruiting and retention purposes.
However, it doesn’t include such things as bonuses, military pay, cash awards, holiday pay, travel pay outside the regular tour of duty, non-foreign area cost-of-living adjustments or lump-sum payments covering unused hours of annual leave. Nor does it include any salary supplements provided to employees who are covered by workers’ compensation.
Finding the start date
Your highest three consecutive years of average pay usually will usually be the ones that immediately precede the day you retire. If that’s the case, all you need to do to find the starting date for your high-3 calculation is to subtract three years from the date you plan to retire plus one day.
For example, if you want to retire on Jan. 3, 2015, your calculation would start with Jan. 4, 2015: Jan. 4, 2015 minus three years = Jan. 4, 2012.
One day is added because every year ends on the day before the next one begins. For example, the new year begins on Jan.1, but the old year ends on Dec. 31. So, if your birthday is Oct. 17, then Oct. 16 is the final day of the preceding year.
However, if your high-3 occurred earlier in your career, you’ll have to identify the last date on which your pay was at its highest then follow the process above to find the beginning date for your high-3.
Breaks in service
The three years used to calculate your high-3 don’t have to be continuous; however, they do have to be consecutive. For example, if your highest salary years were interrupted by a break in service, your high-3 could be made up of one period of service, a break of any length, and a second period of service. As long as your periods of service are consecutive, it doesn’t matter how many breaks in service you have.
Leave without pay
If you’ve been on LWOP for no more than six months in any calendar year, that period will be included in your high-3 calculation. Any period of LWOP beyond six months in a calendar year will not be included, and will be treated as a break in service.
Unlike LWOP, if you were called to active duty in the armed forces, the six-month limit doesn’t apply. However, as a rule, you would have to make a deposit to the retirement fund to get credit for any period of LWOP.
Non-deduction or refunded service
A deposit also may be required if you have any periods of non-deduction or refunded service that fall within your highest three years of average salary. As a rule, this situation only arises if your high-3 occurred earlier in your career and likely when you were covered by CSRS.
Putting a dollar sign on your high-3
To find your high-3 average salary, you’ll have to go back through your pay slips or Standard Form 50s to locate each pay change and how long you received it. Each pay rate must then be weighted by the length of time it was received. So, for example, if you received $75,000 for three months in a year and $78,000 in the remaining nine, your average pay for that 12-month period would be $77,250 ($75,000 ÷ 12 = $6,250 x 3 = $18,750 + $78,000 ÷ 12 = $6,500 x 9 = $58,500, and $18,750 + $58,000 = $77,250).
October 17th, 2014 | Disability retirement
Q. I am a GS-1811 with just over 16 years of federal service. I was grandfathered into federal service at 42 and will have to retire at 62 (I am 59). Additionally, I have bought back 12 years of Army active-duty time. My Agency has proposed my removal for performance reasons, which I can directly attribute to my worsening Adult ADD. They are leaning toward an involuntary disability retirement vice removal. If I am disability retired, will my 12 years of bought-back Army time be included in the annuity calculation? Will it also be included in the subsequent calculation when my disability retirement is converted to a regular retirement at age 62? Read the rest of this entry »
October 16th, 2014 | Creditable service: CSRS
Q. My wife is under CSRS with 31 years of service, but we are concerned that she may be moved into CSRS Offset upon retirement. What is the minimum retirement age for someone in this position?
A. CSRS Offset applies only to employees who had a break in service that exceeded a year and ended after 1983, and had five years of service as of Jan. 1, 1987. If that doesn’t describe your wife’s situation, then she is a pure CSRS employee. Like any CSRS or CSRS Offset employee, she can retire at age 55 with 30 years of service.
October 13th, 2014 | CSRS annuity computation
Q. My husband (age 56) and I (age 53) are reaching the time when we are considering retirement and want to clarify a few things. I am covered under CSRS with 33 years of service. I have worked other jobs but I do not have enough credits to be eligible for Social Security. He is National Guard and will retire with over 30 years of service. He is also a government technician covered under FERS and will be eligible for Social Security. We are both retiring with survivor benefits. I know my husband’s Social Security would offset my CSRS. Will I be able to draw his National Guard military annuity without it affecting my CSRS retirement? What about FERS? Read the rest of this entry »
October 9th, 2014 | discontinued service retirement
Q. Could you please explain what the term “delinquency” refers to with regards to a discontinued service retirement?
A. Delinquency is a term that includes, but is not limited to, failure to do what law or duty require, an offense or a misdemeanor, a debt or other financial obligation on which payment is overdue.
October 8th, 2014 | Military service deposits
Q. I was hired in January 1991 at U.S. Army TACOM in Warren, Michigan, as a Desert Storm Temporary. I worked for full two years. I also was on active duty in the Marine Corps from 1982 to 1989. I was hired full time at TACOM in 2007. I was able to buy 7 years from my active-duty service for retirement purposes. Is there any way that I can purchase my Desert Storm Temp time as a GS09? Read the rest of this entry »
Tags: military credit
October 8th, 2014 | RETIREMENT
Q. I was called to active duty in 2009 to serve in Iraq. However, when I was ordered to active duty, I used my annual leave and my military leave during my short stay. While serving on active duty, I was getting paid and retirement deductions were being deducted from my pay, along with all the other deductions. So, my question is: Shouldn’t that time be counted toward federal credit? Especially since retirement deductions were being taken and I was using leave the whole time. Read the rest of this entry »
Tags: military retirement
Q. I’m under FERS, and my Service Computation Date is Nov. 26, 1983. A co-worker in my organization has an SCD of Nov. 7, 1983 and is under CSRS. What is the SCD cutoff date for FERS vs. CSRS? Read the rest of this entry »
Q. I am a retired FERS employee — 59 years old, with 25 years of federal service. I retired two years ago under VERA VSIP. My employer (Defense Department) was reducing the workforce due to budget cuts and abolished my job.
I paid into Social Security for 42 years. I have some health issues and am considering applying for Social Security disability. My question is: Will Social Security disability retirement affect my FERS annuity? Read the rest of this entry »
October 6th, 2014 | Retirement date
Q.I read that Aug. 1 is a best date to retire. Why not July 31? That is for those who work a 4-5-9 schedule (i.e., Aug. 1 is a non-work flex Friday).
A. As a CSRS employee, your only requirement is that you retire no later than the third day of a given month. Whoever wrote that Friday, August 1 was the best day to retire was probably accepting the fact that most employees complete their workweek on a Friday. By leaving at the close of business on that day, they’d receive a full week’s pay. Since you are on a flex schedule, nothing would prevent you from retiring at the end of your last work day. By doing so, you’d be on the annuity roll on Aug. 1, instead of Aug. 2. FYI. Since you’d be leaving in the middle of a pay period, you wouldn’t get any credit for annual or sick leave you would have earned if you had retired at the end of a pay period.
October 3rd, 2014 | Early retirement
Q. I’m a FERS postal carrier with 26 years of service. I am about to turn 49. What penalty will I face if I leave the post office at age 54 with 31 years of service? Read the rest of this entry »
October 3rd, 2014 | Creditable service: FERS
Q. I have been employed in New York and I’m under the NYS Employee Retirement System. Would any portion of my New York civil service time count as creditable service in the FERS system if I were to gain employment under the federal retirement system?
A. No, it would not.
October 2nd, 2014 | Military service deposits
Q. I am retired Army with 22 years and nine months being paid my monthly retirement check. I retired in May 2011. I started as a GS FERS employee in February 2013. I am in a target GS 12 position, which basically means that I will be a GS 12 in February 2017. I did the DFAS Payback estimator for military time and it stated that I would owe about $18,000. My monthly retirement check right now is about $2,200 a month. I know that I will have to waive that once I retire from civilian service in order to combine the civil service time and the military time. How much more in retirement would I get as a GS FERS employee, and is it worth the $18,000? I have heard that retirees don’t buy back their time because it is not worth it. I heard that this program is designed for the person who did any number of years but did not retire. Is that true? Do you know of retirees that buy back their time? Read the rest of this entry »
October 2nd, 2014 | Early retirement
Q. I retired last year under FERS at age 56 with 28 years and seven months service. I took an early out. I would have had my full 30 years in January 2015. I applied as a rehired annuitant this month with the same agency and everything looked like I was going to be hired, but the manager called and said I didn’t qualify for the annuity offset waiver because I had taken an early out, and they were only allowed to hire those people who qualified for the waiver at this time. Is it true that if you take an early out, you do not qualify for the waiver?
October 1st, 2014 | Creditable service: FERS
Q. I resigned from the federal government May 21 with a retirement SCD date of March 22, 1988, so I am vested in FERS. When I elect to apply for a refund of my FERS, do I get everything that I have in my FERS account or just the portion that I put in?
A. You’d get what you contributed to the retirement system, plus accrued interest.
September 30th, 2014 | Military service deposits
Q. I am a federal employee with 21 years military service. I receive military retirement pay and a separate disability from VA. I am considering retiring in five years. If I buy my military time back now, can I keep receiving my military retirement until I retire from the federal government? Do I still receive my VA pay after federal retirement?
A. The answer to both questions is yes.
September 26th, 2014 | Creditable service: FERS
In my last column (read it here) I wrote about the age and service requirements for Civil Service Retirement System (CSRS) employees to retire. In this one, I’ll focus on Federal Employees Retirement System (FERS) employees.
FERS age and service requirements to retire
Age 62, with 5 years of service.
Age 60, with 20 years of service.
Minimum retirement age (MRA), with 30 years of service.
MRA, with 10* years of service.
Age 50, with 20 years of service.
Any age, with 25 years of service.
Age 62, with 5 years of service.
Age 60, with 20 years of service.
MRA, with 30 years of service.
MRA, with 10* years of service.
* If you retire under the MRA plus 10 provision, your annuity will be reduced by 5 percent for every year (5/12 percent per month) you are under age 62.
Note: FERS special category employees, such as law enforcement officers, firefighters and air traffic controllers, may retire at age 50 with 20 years of covered service or at any age with 25.
Immediate retirement means that you have the age and service needed to retire on an immediate, unreduced annuity. Once you have that combination, you can retire whenever you want to. You can take early retirement, if your agency is offering that opportunity through a Voluntary Early Retirement Authority and/or a Voluntary Separation Incentive Payment. It’s also an option — called discontinued service retirement — if you are being separated through a reduction-in-force or for poor performance. A deferred retirement is one where you leave government before being eligible to retire and apply for an annuity when you meet the eligibility requirements.
FERS credit rules
Figuring out your age is simple. Figuring your length of service can be harder, unless your career has been continuous, with no breaks in service or any service credit to be added or deducted. However, for those whose career is made up of bits and pieces, you need to know what kinds of service can be included.
If you are covered by FERS, you’ll get credit for any FERS service for which deductions were taken and not refunded. As for service where you left government and asked for a refund of your contributions, for 20 years FERS employees were barred from recapturing that service if they came back to work for the government. All that changed with Public Law 111-84. Now any FERS employee who retires on or after Oct.28, 2009, can redeposit that money, plus interest, and get full credit for it.
You’ll also get credit for nondeduction service performed before Jan.1, 1989, if you’ve made a deposit for that service. And you’ll get credit for periods of military service performed before Jan.1, 1957. You’ll also get credit for periods of service performed after Dec. 31, 1956, but only if you make a deposit for that post-1956 time. And, if you are receiving military retired pay, you’ll probably have to waive it to get any credit.
Finally, if you transferred to FERS from CSRS and had at least five years of CSRS service, you’ll have a CSRS component in your annuity, unless you got a refund of your retirement contributions. If you did, you can still make a deposit and get credit for that time.
Computing your length of service
Your annuity will be based on your total years and months of creditable service. Any days that don’t add up to a full month will be converted to hours and added to any hours of unused sick leave you have to your credit. If you have enough of those hours, they’ll be converted to months and used in the computation of your annuity.
The method for converting those hours to months needs an explanation. Here’s how it’s done:
In order to produce 12 equal annuity payments, each month is treated as if it was 30 days long. To convert those leftover hours into additional retirement months, the number of hours in a work year — 2,087 — are divided by 360 (12 months x 30 days).
As a result, each additional month is roughly 174 hours long.
September 26th, 2014 | discontinued service retirement
Q. I will be 52 and have 29 years of technician service (32 years National Guard) under FERS. If I was diagnosed with a medical condition that ended my military career, would I be eligible for the non-reduced pension/Social
Security Offset/ and access to my TSP, since I have 25 years, I am age 50 and would be losing my military position through no fault of my own? Read the rest of this entry »
September 22nd, 2014 | Eligibility
Q. I worked for the FAA from June 1969 and left after I married to raise my family in September 1975. I will be 62 in September. Am I eligible for any FAA pension?
A. If you left your retirement contributions in the retirement fund when you left, you’d be entitled to an annuity at age 62. To get that benefit, go to http://www.opm.gov/forms/pdf_fill/opm1496a.pdf, download a copy of the form, fill it out, and send it to OPM.
September 16th, 2014 | Deferred retirement
Q. I’m a federal law enforcement officer with 16 years covered and three years federal service not covered. If I decide to take a deferred retirement will I still get the enhanced 1.7 x the number of years x my high three and 1 x the number of non-law enforcement years X my high-3? I also bought back 13 years of military service. How will those years be added? Read the rest of this entry »