by Brian Swerdlow

Even long-time government employees may not know much about the FERS Supplement. This supplement is a valuable but often overlooked benefit for those in the Federal Employees Retirement System (FERS) who retire before age 62.

Who qualifies for the FERS Annuity Supplement?

FERS employees who end their service before age 62 and are entitled to an immediate annuity can claim a FERS Supplement. However, there are some notable exceptions.

You are not eligible for the FERS Supplement if:

  1. You are a disability retiree.
  2. You decide to retire under MRA + 10 provision.
  3. You’re eligible only for a deferred annuity.
  4. You retire at age 62 or later.

Who qualifies for the FERS Annuity Supplement?

Calculating the FERS Supplement can be complicated and involves several steps. Here’s a simplified overview of the calculation process:

  1. You need to formulate a “full career” earnings history. This step involves using your basic pay during civilian service that is creditable under FERS and your deemed wages for years after you turned 21 and before your first full year of FERS service.
  2. You’ll want to update the earnings history to account for inflation.
  3. Then, you will compute the supplement using a formula similar to what is used by the Social Security Administration (SSA) to calculate Social Security benefits. This calculation will include the maximum reduction for early retirement.
  4. Multiply the calculation result by a fraction to approximate the proportion of an entire career Social Security benefit earned under FERS.

Note: The FERS Supplement does not increase with cost-of-living adjustments (COLAs).

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Is the FERS Supplement the same as a Social Security benefit?

Although derived from Social Security Administration (SSA) laws, the FERS Supplement differs from your Social Security benefit. It won’t necessarily match your Social Security benefit dollar for dollar since the formula used to calculate the FERS Supplement is not the same as that used for Social Security benefits. Social Security considers earnings during a worker’s entire career, updates these earnings for inflation, and uses a distinct computation formula. Applying for Your FERS Supplement

Also, unlike Social Security, you don’t have a specific website or online application where you can apply for the FERS Supplement. You will automatically receive it if you qualify for a FERS Supplement. Your supplement will also automatically stop when you reach the age of 62.

However, it’s advisable to confirm with the Office of Personnel Management (OPM) that your file is flagged as eligible for the FERS Supplement after you retire. Ensuring proper documentation is in place can provide peace of mind.

There are earnings limitations for the FERS Supplement

If you choose to work after retiring from Federal Service and get a FERS Supplement, your earnings from employment are subject to the Social Security Administration’s earning limitations, which change annually.

In 2023, the income limit is $19,560. OPM will reduce your benefits by $1 for every $2 you earn above this limit. The reduction in the retiree pension supplement in a given year is based on excess earnings from the previous year.

Suppose you are no longer eligible for the supplement due to age (turning 63 or older). In that case, there will be no reduction for excess earnings since the reduction is only applied to the retiree annuity supplement.

How are earnings reported for the FERS Supplement?

Each year you work after retiring from Federal Service under FERS, and before reaching age 63, you must complete an Annuity Supplement Earnings Report. This report ensures that your FERS Supplement is accurately adjusted based on income.

Summing it up:

Understanding the FERS Supplement is essential for government employees, especially those planning to retire before age 62. While it can provide valuable support, the FERS Supplement has intricacies and limitations you must understand.

Careful consideration of eligibility, calculations, and potential earnings is necessary to incorporate the FERS Supplement into your retirement strategy successfully. Seeking professional guidance from someone well-versed in government employee retirement is highly beneficial for maximizing the FERS Supplement and other federal benefits. Remember, a well-planned retirement can provide financial security and peace of mind in your post-service years.