by Brian Swerdlow

The FERS Supplement, also known as the Social Security Supplement or Special Retirement Supplement, is officially referred to as the Retiree Annuity Supplement (RAS) by the Office of Personnel Management (OPM) in Chapter 51 of the CSRS/FERS Handbook.

Despite common misconceptions, this benefit applies not only to employees under the Federal Employee Retirement System but also to foreign service employees under the Foreign Service Pension System. For these employees, the RAS functions similarly to its role for Civil Service FERS Special Category Employees, including law enforcement officers, firefighters, and air traffic controllers, as outlined in 22 U.S. Code § 4071d(c).

So, what is the Retiree Annuity Supplement (RAS)?

The RAS provides additional income in your monthly annuity check during retirement, serving as a financial bridge until you become eligible for Social Security. For Foreign Service retirees, the RAS is not listed separately on the annuity statement. For FERS retirees, the statement has RAS as a separate line item.

Who is eligible for the RAS?

To qualify for the RAS, you must retire with an immediate, unreduced pension and be under the age of 62. The supplement ceases at the end of the month before you turn 62, regardless of whether you start claiming Social Security benefits. You can choose to begin Social Security benefits anytime between ages 62 and 70.

Immediate unreduced annuity examples include:

  • Minimum Retirement Age (MRA) + 30 years of service (age 57 for those born in 1970 or later)
  • Age 60 + 20 years of service
  • Age 50 + 20 years of service for Special Category Employees (SCE), Foreign Service, and certain others
  • 25 years of service at any age for SCE (excluding certain Foreign Service Special Agents)

Those retiring under deferred, postponed, disability, or MRA + 10 retirement plans are not eligible for the RAS. In cases of involuntary retirement or voluntary retirement due to a Reduction in Force (RIF) or major reorganization before reaching MRA, you can receive the RAS once you attain MRA. Members of Congress must wait until MRA to start receiving their RAS if retiring at age 50 with 20 years of service or at any age with 25 years of service.

Calculating the Supplement

The exact calculation of the RAS is complex, but following these steps can yield a simple estimate.

  1. First, determine your years of creditable service.
  2. Next, divide this number by 40.
  3. Then, multiply the result by your estimated Social Security benefit at age 62.

For example, if you have 23 years of service and an estimated Social Security benefit of $2,400 at age 62, your RAS would be approximately $1,380. (23/40) * $2,400 = $1,380.

Only include whole years of creditable civilian service, excluding military time and sick leave balance.

How is RAS taxed?

The RAS is fully taxable as ordinary income at the federal level. State taxation varies based on state laws regarding federal pensions and retirement income. The Social Security Administration does not oversee RAS, and RAS does not affect your Social Security benefits.

Supplement Reduction Due to Excess Earnings

Once you reach MRA, your RAS can be reduced based on earned income above the Social Security exempt amount ($22,320 for 2024). For every $2 earned above this amount, the RAS is reduced by $1. This reduction applies to all federal employees, irrespective of the retirement plan. However, the reduction only affects the RAS, not the annuity.

 

Earned income includes wages, salaries, and net self-employment income. It does not include annuity payments, withdrawals from retirement accounts, rental income, dividends, interest, capital gains, spousal income, inheritance, gifts, alimony, and other specific sources.

Example of Excess Earnings Reduction

Consider Edward, who retires at age 52 with a RAS of $1,500 per month ($18,000 per year). Until he reaches his MRA, Edward’s RAS is unaffected by his post-retirement job income. On his 57th birthday (MRA), if Edward earns $40,000 for the remainder of the year, he must report this to the appropriate agency (DS-5026 for Foreign Service or RI 92-22 for Civil Service). Edward will have a reduction in his RAS based on his excess earnings, calculated as follows:

  1. Earned income after MRA: $40,000
  2. Excess amount: $40,000 – $22,320 = $17,680
  3. Reduction: $17,680 / 2 = $8,840
  4. New RAS: $18,000 – $8,840 = $9,160 annually or $763 per month.

Spousal Supplement

If a retiree passes away, their spouse under age 60 may receive a spousal supplement until they can claim Social Security survivor benefits at age 60. The spouse must meet specific criteria, including receiving a survivor annuity and not being eligible for Social Security parent or disability benefits. The calculation for the spousal supplement is more complex. It is the lesser of the hypothetical CSRS survivor annuity minus the FERS survivor annuity or the hypothetical Social Security survivor benefit at age 60. The spousal supplement is not subject to an earnings test and is adjusted by FERS COLAs.

Conclusion

The FERS Retiree Annuity Supplement, often referred to as the special retirement supplement, provides a crucial financial bridge for federal retirees between retirement and Social Security eligibility at age 62. Understanding its eligibility criteria, calculation, and potential reductions due to earned income can help retirees maximize their benefits.