Ask The Experts: Retirement

By Reg Jones

Finding Your High-3

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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

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.

Military leave

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).

Military annuity and CSRS

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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 »

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Matching contributions

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Q. I’m a CSRS employee with more than 41 years of service and plan to continue my federal employment well beyond 41 years. I understand that CSRS employees contribute 7 percent of their salary into the retirement fund and that the government matches that 7 percent contribution into the fund. I’m told that, after completing 41 years, 11 months of service, I will reach the maximum annuity benefit of 80 percent. At that point, the 7 percent retirement contributions will continue to be taken from my pay and placed into an interest bearing account to be refunded when I retire. When that happens, does the government continue to pay its matching 7 percent contribution into the interest bearing account as well? Read the rest of this entry »

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Service credit and sick leave

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Q. I am a FERS employee with 32 years of service credit. I was in CSRS for 5 years, 10 months and 28 days. I left the government but came back 3 years later as a FERS employee. When I retire I will have 28 days of CSRS service credit and 25 days of FERS Service Credit. Will 7 days of my excess sick leave (56 hours) be applied to my remaining days of 23 to give me an extra month toward retirement?

Read the rest of this entry »

Survivor benefit fees

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Q. I am CSRS and making a decision about whether or not to take out survivor benefits. The rule used to be you if you take out survivor benefits and your spouse dies, you had the lower annuity the rest of your life. The rule now is if you take out survivor benefits and your spouse dies, your reduced annuity can revert to full annuity. If I decide to take out survivor benefits based on the current rule and they reverted back to the old rule, would I have an opportunity to opt out of the survivor benefits since my decision is based on the current rules? Read the rest of this entry »

Civil service annuity and Social Security

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Q. I am retired from the Postal Service under CSRS and get the maximum annuity. What happens if I become eligible for Social Security? (I work a part-time job two days a week.) Right now I have 28 credits. Should I make sure I do not get 40? What happens if I am eligible and do not apply for it? Would that prevent me from losing any of my annuity? I want to make sure I do not mess up or reduce my pension from civil service. Read the rest of this entry »

Calculating CSRS, FERS annuities

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In my last two columns I described the kinds of active duty service in the armed forces that are potentially creditable in your CSRS or FERS annuity, and what you have to do to get that credit. This time I’ll quickly go over the rules governing the computation of CSRS and FERS annuities for most federal employees. That way you’ll be able to see what the difference would be between a pure civilian annuity and one that includes credit for active duty service for which you’ve made a deposit.

Eligibility rules

Under CSRS, you can retire immediately if you are age 55 and have 30 years of service, 60 with 20 or 62 with 5. Under certain circumstances, you can retire at age 50 with 20 years of service or, if you have 25 years of service, at any age. However, your annuity will be reduced by 1/6 of a percent for each month you are under age 55. That’s 2 percent per year.

Under FERS, you can retire immediately at your minimum retirement age (MRA) with 30 years of service, 60 with 20 or 62 with 5, You can also retire at your MRA with at least 10 years of service but fewer than 30. However, if you retire under the MRA+10 provision and have fewer than 20 years of service, your annuity would be reduced by 5 percent for every year you were under age 62, age 60 if you had at least 20 years of service.

You could also retire early at age 50 with 20 years of service or, if you have 25 years of service, at any age. However, unlike CSRS retirees, there wouldn’t be any age penalty.

Note: To find out which kinds of active duty service in the armed forces are considered creditable and under what conditions, go to www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c022.pdf. To find out the same thing about civilian service, go to www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c020.pdf.

CSRS computation

Here’s how you compute a CSRS annuity:

*  1.5% x your high-3 x 5 years of service, plus
* 1.75% x your high-3 x 5 years of service, plus
* 2% x your high-3 x all remaining years and full months of service

This formula generates the basic annuity amount, which cannot exceed 80 percent of your average high-3 salary. However, unused sick leave is not included in that 80 percent limitation.

Two simple examples will illustrate the difference between making a deposit for four years of active duty service and not doing so. For simplicity’s sake, we’ll say your high-3 is $100,000 and you have 30 years of actual service.

* Without a deposit, your annuity would be $56,150.
* With a deposit, your annuity would be $64,250.

FERS computation

Here’s how to compute a FERS annuity:
.01 x your high-3 x all years of service
If you are age 62 and have at least 20 years of service, use this formula:
.011 x your high-3 x all years of service

Once again, some simple examples will illustrate the difference between making a deposit for four years of active duty service and not doing so. And I’ll use the same high-3 – $100,000 – and 30 years of actual service.

* Without a deposit, your annuity would be $30,000.
* With a deposit, your annuity would be $34,000.

If you were entitled to the .011 multiplier

* Without a deposit, your annuity would be $33,000.
* With a deposit, your annuity would be $37,400.

Note: Whether you are covered by CSRS or FERS, unused sick leave can’t be used to make you eligible for retirement. It can only be added to your years of service after you meet the age and service requirements.

The special retirement supplement

Because FERS is a retirement system that includes Social Security, if you retire before age 62, you’ll be entitled to the special retirement supplement, unless you are retiring under the MRA+10 provision.

The SRS approximates the amount of Social Security benefit you earned while a FERS employee. It doesn’t include periods of active duty service, whether or not you have made a deposit.

Using the FERS example above, if you are a FERS employee with 30 years of actual service and have made a deposit to get credit for your active duty service. That time will be included when determining your total years of service and used in your annuity computation. However only your actual service will be used in calculating your special retirement supplement. That’s because the SRS is paid out of the Civil Service Retirement and Disability Fund, not the Social Security Fund. However, when you apply for a Social Security benefit, it will be based on all your years of Social Security-covered employment.

A word about special category employees

Law enforcement officers, firefighters and air traffic controllers may retire at age 50 with 20 years of covered service. FERS employees may also retire at any age with 25 such years. All special category employees receive an enhanced benefit for which they pay by contributing more to the retirement system.

The rules for crediting are the generally the same for special category employees as they are for all other employees. However, there are a few variations on those rules. First, active duty service that precedes employment as a special category employee can’t be used to meet the years of service requirements for the enhanced benefit. Second, active duty service that interrupts a special category career is creditable toward the enhanced benefit, but only if the employee returns to a covered position and makes a deposit for that time.

Insurable interest annuity

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Q. I just read a question on your site about a son getting a possible payout from what is left of his mother’s CSRS retirement when she passed away. I’m confused. If this is the case, meaning there is a death benefit when the CSRS employee passes, why would anyone select a survivor benefit? Read the rest of this entry »

Social Security spousal benefit

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Q. I am 60 years old with a USPS pension (CSRS). I have earned 40 credits with side jobs to collect Social Security at age 62. My wife is 56. Can I get Social Security using her work record to increase what I get? Mine is $330/month before WEP. Please let me know the best scenario for me. Read the rest of this entry »

CSRS deferred retirement

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Q. I was eligible for subject retirement at age 62 on Feb. 19, 2012, but I didn’t apply for it and am now applying at age 65. What will happen to the annuity I could have taken during the three years I was eligible but did not apply for? Read the rest of this entry »

Unused sick leave over 41 years 11 months CSRS service

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Q. I have over 41 years 11 months creditable service under CSRS. I also have unused sick leave to take me over the 80% max threshold. I used the chart to convert sick leave hours into months and days (rounding up). Does sick leave just get added to the credible service years, months and days, or is it done separately? Also if it is added to the credible service and the days are dropped, does that mean that I can potentially lose up to a month of sick leave days? If so, should I begin taking sick days when I need them, instead of using annual leave, so I don’t just lose them?
Read the rest of this entry »

Disability retirement conversion to other retirement

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Q. I was retired on CSRS disability with 30 years of service at age 52. OPM has sent me a letter that I have made too much money for 2010 through 2012. I would have been eligible for full retirement in July 2009 (and will be age 60 in July 2014). What are my options? Can I convert to full retirement or discontinued service retirement? Can I do this retroactively to 2009? Read the rest of this entry »

Surviving spouse’s retirement benefits

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Q. My husband retired under CSRS, and I expect to retire under FERS in a few years. When he retired, he elected survivor benefits for me, and I will do the same for him. What will be the rate the survivor will receive: only their benefit or their benefit plus the survivor portion? The answer will make a big difference in how comfortable we can live in retirement, before and after one of us passes. Read the rest of this entry »

Military deposit refund for CSRS

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Q. I am CSRS and presently employed be the Air Force. I paid my military deposit in full, and as I will never have Social Security quarters, I would like to have it refunded back to me. Although OPM cannot quote the regulation, they said that if I was still making payments on it I could request a refund but because it is paid in full I cannot. Can you quote the regulation that states that? Can you quote the regulation that says that I can have this refunded! Read the rest of this entry »

CSRS Offset, Social Security and WEP

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Q. I am 69 years old and will be 70 in December of this year. I was rehired by the government in January 2013 after a 31 year break in service. I had almost 12 years of prior service and I withdrew my CSRS retirement fund when I left the government in 1981. I am now planning to retire at the end of March of 2016 when my High-3 will be reestablished at my current GS12-10 salary. Since I have over 30 (consecutive) years of substantial earnings under Social Security, will the windfall elimination provision come into play when I retire?

Also, I did not repay the amount I withdrew in 1981, and additionally, I am currently collecting my Social Security benefit and have been since 2010. How will these circumstances effect my CSRS retirement and/or Social Security benefit when I finally retire at the date I mentioned? Read the rest of this entry »

Calculating service time

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Q. Is the annuity based on years of service or years and months? If I retire with creditable service of 29 years and nine months, will I only receive an annuity based on 29 years or will the additional months months be factored in (pro-rated)?
Read the rest of this entry »

CSRS annuitant considering reemployment

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Q. I’ve read where normally one’s salary is cut by the amount of annuity he or she is receiving, but what happens if the new salary is less than the existing annuity? Read the rest of this entry »

CSRS and Social Security disability

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Q. I was a federal worker covered by CSRS from 1975 to 1989. On leaving, I left my deposits there in the hope I would return. I did not, but I joined the reserves and worked the private sector.

In 2008, I was discharged from the military. I was 53 when discharged.  I am considered unemployable by the VA and also receive Social Security Disability benefits.  There was a big hole in my Social Security deposit sheet the years I worked for the federal government and therefore receive a reduced SS  disability benefit.

Since I am considered disabled currently, am I eligible for an offset or do I have to wait till I am 62? Read the rest of this entry »

CSRS survivor benefits

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Q. My wife’s uncle (age 87 with 42 years CSRS) asked me to find out if his wife would continue receiving his retirement should he die first. His wife is under social security retirement after a career in nursing. She is 85, both have been retired for a long time. In this scenario, how would her future retirement be computed? Read the rest of this entry »

Social Security benefits and federal pension

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Q. I am retired from the FBI.   I have 22 years covered under CSRS and 11 under FERS.  Because my FERS supplement ends in August when I turn 62, I plan to apply for Social Security,  who has advised my monthly benefit payment will be 1120.00.  My FERS supplement is approx 500.00 per month.  My question is:  When I begin receiving social security benefits in August, will I receive the entire 1120.00 or will it be reduced? Read the rest of this entry »