Federal Employees Retirement System (FERS)

All employees first entering the government after 1984 are covered by the Federal Employees Retirement System (FERS), a system designed to parallel the best retirement programs in the private sector. Three distinct benefits plans make up the FERS:

• FERS Basic Benefit
• Thrift Savings Plan
• Social Security

FERS Basic Benefit

The Basic Benefit is the part of the FERS directly tied to an individual's Federal service. The amount of the benefit depends upon two factors: the employee's length of creditable service and the average annual salary for his or her three highest years of federal civilian earnings. The Basic Benefit formula is different for Special Agent and Professional Staff employees. Employees with former military service may also receive FERS credit for their military service.

Special Agent FERS Basic Benefit
FBI Special Agents may receive the full FERS Basic Benefit if they retire at age 50 with 20 years of federal law enforcement officer service, or at any age with 25 years of such service. The annual FERS Basic Benefit for retiring Special Agents is 1.7 percent of the "high-3 average salary" (the average annual salary earned during the 36 consecutive months of federal employment that would produce the highest average), multiplied by 20 (representing the first 20 years of creditable service), plus one percent of the "high-3" times the number of remaining years of service. The annual pension is increased each year by a "cost-of-living adjustment" (or COLA), reflecting the bulk of the annual change in the cost of living measured by the Consumer Price Index.

FBI Professional Staff FERS Basic Benefit
An FBI Professional Staff employee may retire and receive a reduced monthly FERS Basic Benefit pension as early as his or her Minimum Retirement Age (which falls between ages 55 and 57 depending on date of birth), if he or she has at least ten years of creditable federal service (at least five of which must be civilian). Professional Staff employees may receive unreduced pensions under the FERS if they retire at their Minimum Retirement Age with at least 30 years of service, at age 60 with at least 20 years of service, or at age 62 with at least five years of civilian service. For retiring full-time Professional Staff employees, the annual FERS Basic Benefit equals one percent of the employee's "high-3 average salary" (the average annual salary earned during the 36 consecutive months of federal employment that would produce the highest average), multiplied by the number of years of service. If a Professional Staff employee retires at age 62 with at least 20 years of service, the percentage is raised to 1.1 percent. The annual pension is also increased each year by a "cost-of-living adjustment" (or COLA), reflecting the bulk of the annual change in the cost of living measured by the Consumer Price Index.

FERS Credit for Personnel with Military Service
Former military personnel may receive credit for their active-duty military service. In order to do so, however, they must make a deposit to the FERS fund, as if they had been civilian federal employees during their time in the military. The deposit amount is equal to three percent of their total base pay for their active-duty military service. The deposit to the FERS fund must be made before retirement. If this deposit is completed within the first three years after joining the government, it is interest-free. Otherwise, interest is compounded annually until the deposit is completed. If an employee dies during his or her federal service, the surviving spouse will be given a chance to complete the deposit before the survivor benefits are determined.

For more information, please visit:
http://www.opm.gov/retire

Federal Thrift Savings Plan

The Federal Thrift Savings Plan (TSP) is the government equivalent of the private sector’s 401-K plans. The TSP is a savings vehicle that allows federal employees to invest earnings on a pre-tax basis in select funds and delay paying taxes on these investments until they are withdrawn after retirement.

Employees may choose to invest their TSP contributions in a variety of funds, including: (1) a fund invested strictly in government securities, which is guaranteed not to lose any money; (2) a fund invested in municipal and corporate bonds; (3) a fund invested in large-company stocks, all listed on the New York Stock Exchange and included in the Standard and Poor's 500 index; (4) a fund invested in medium and small company stocks, listed on a variety of exchanges including NASDAQ and included in the Wilshire 4500 index; and (5) a fund invested in international corporate stocks, listed on foreign exchanges and included in the Morgan Stanley Europe, Australasia, and Far East index.

Employees may move deposited money between funds on a daily basis, or re-designate the fund(s) to which they wish to contribute, through the TSP's Internet site or the TSP ThriftLine telephone service. Employees may also change the percentages of pay they contribute to the TSP at any time.

All FBI employees covered by the FERS are members of the TSP and have accounts even if they personally aren't contributing to them. FERS-covered employees are allowed to invest any dollar amount or percentage of their pay up to the annual IRS-allowed maximum investment ($15,000 in 2005). The government puts an amount equal to one percent of an employee's salary into his or her TSP account, even if the employee invests nothing. If the employee puts anywhere from one to five percent of his or her own salary into the TSP, the government makes a matching total contribution. While the government doesn't match more than the first five percent, all of the money invested by an employee is sheltered from federal and most state taxes until he or she withdraws the money at a later date.

When an employee retires he or she may receive the proceeds of his or her TSP account (including all accumulated interest) in one, or a combination, of three ways: a single lump-sum payment, a series of monthly payments, or a life-long annuity. Any withdrawal is both a depletion of the account balance and taxable income when it is received.

Employees can also borrow money from their own TSP accounts at market-based interest rates through the TSP's loan program — loan amounts are not taxable if they are repaid to the TSP account on time. Short-term loans (repaid in one to four years) may be made for any general purpose, or extended-length loans (repaid in up to 15 years) may be made to purchase a primary residence. All of the repaid money (both the amount of the loan and the interest on the loan) is returned to the borrowing employee's TSP account.

The TSP is also a portable benefit. If an employee leaves the government, that employee may "roll over" his or her TSP account into a private-sector individual retirement account or corporate retirement plan (thereby preserving the tax savings and building the private sector account). Current law also allows money from such private accounts to be "rolled over" into an existing TSP account, as well as when a former employee returns to the government.

For more information on the Thrift Savings Plan, please visit:
http://www.tsp.gov

Social Security

Federal workers hired for the first time after 1984, and those returning to the government after that date with at least a one year break in service, pay the full Social Security and Medicare tax each pay period as people do in the private sector. An amount equal to 6.2 percent of an employee's salary is contributed to Social Security, while an additional 1.45 percent is contributed to Medicare. The government also contributes to both benefits on behalf of each covered employee.

Social Security provides a monthly pension payment to retirees, and retired federal employees can qualify for these payments as part of the FERS. Private, military, and federal employment subject to Social Security taxes all count in determining an individual's Social Security benefits. An individual's benefits are based on his or hers average income subject to Social Security taxes, with consideration given to whether the individual has dependent family members.

Medicare benefits, which are separate from Social Security, provide health care coverage to individuals age 65 or over who have the appropriate Medicare credits by then. Medicare Part A provides protection against hospitalization and surgical costs, and Part B provides coverage for other physician and treatment services. Most retired federal employees also continue their coverage under the Federal Employees Health Benefits program, which can assist with medical services not covered by Medicare.

For more information on social security, please visit:
http://www.ssa.gov

For more information on Medicare, please visit:
http://www.medicare.gov

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