Federal Employees Retirement System

(An Overview of Your Benefits)

Insurance 

Personnel Service

Management 

FERS 

RI 90-1 

Revised April 1998 

United States Retirement and 

Office of 

Previous edition is usable. 

Federal Employees Retirement System

(An Overview of Your Benefits)
This booklet contains highlights of the Federal Employees Retirement 

System (FERS). It is not meant to provide a detailed explanation of all 

the plan provisions. The information is based on the law in effect at 

the time the booklet went to publication. 

Under the Balanced Budget Act of 1997, Public Law 105-33 for fiscal 

year 1998, employee retirement contributions will increase as follows. 

Deductions for the Civil Service Retirement System and the Federal 

Employees Retirement System would be increased by 0.25% in January 

1999, by an additional 0.15% in January 2000, and by 0.1% more in 

January 2001, for a total increase of 0.5%. These higher contribution 

rates would be in effect through 2002. 

Additional retirement information and all publications of the U.S. Office of 

Personnel Management listed in this pamphlet are available on the Internet. 

OPM Website — http://www.opm.gov/asd 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328 

ISBN 0-16-045533-2 
Table of

Introduction ............. 1

Overview ................ 2

The Components

Social Security Benefits

Basic Benefit Plan

Thrift Savings Plan

Social Security Benefits .... 3

What is Social Security?

Social Security Benefits

Social Security Taxes

Basic Benefit Plan......... 5

Eligibility Participation

Vesting

Creditable Service

Contributions

Refunds

Retirement Options

Immediate or Postponed

Early

Deferred

Benefit Formula

Special Retirement Supplement

Survivor Benefits

Spouse

Former Spouses

Children

Disability Benefits

What Does Disability Mean?

Eligibility

The Benefits

Cost-Of-Living Adjustments (COLA’s)

Form of Payment

Contents 

Thrift Savings Plan ....... 12

Eligibility

Contributions

Agency Automatic (1%)

Contributions

Employee Contributions

Agency Matching Contributions 

Vesting Requirement 

Investment Options 

Government Securities 

Investment (G) Fund 

Common Stock Index 

Investment (C) Fund 

Fixed Income Index 

Investment (F) Fund 

Contributing to TSP 

Tax Advantages 

Loan Program 

Withdrawing Your Funds 

Withdrawal Options 

Leaving Your Money in the TSP 

Automatic Cashout 

Additional Information 

Special Groups of 

Employees ........... 17

Firefighters, Law Enforcement 

Officers, and Air Traffic Controllers

Military Reserve Technicians 

Part-Time Employees 

Members of Congress, and 

Congressional Employees 

Enrolling in FERS ........ 19

New Employees

Rehires and Conversions

Examples .............. 21

For More Information ..... 26

i 
Introduction 

R etirement...a time for reflection, rest, and enjoyment...a rewarding time. 

But, a rewarding retirement doesn’t just happen. It takes careful planning. 

Knowing when you can retire and where you will stand financially are important 

parts of that planning process. The financial security you will have in the future 

depends, in part, on the plans you make today. 

Recognizing the importance of your future, the Federal Government offers a retirement program that helps provide financial security for you and your family. You 

are a participant in the Federal Employees Retirement System (FERS). This is 

one of the most important benefits you receive as a Federal employee. 

FERS is a retirement system that is responsive to the changing times and Federal 

work force needs. Many of its features are “portable,” so that if you leave Federal 

employment, you may still qualify for the benefits. FERS is flexible; you will be 

able to choose what is best for your individual situation. And FERS enables you to 

take an active role in securing your future. 

This booklet highlights the main features of the Federal Employees Retirement System (FERS). 

1
Overview

The Federal Employees Retirement System, or FERS, became effective January 

1, 1987. Almost all new employees 

hired after December 31, 1983, are 

automatically covered by FERS. Certain 

other Federal employees not covered by 

FERS have the option to transfer into 

the plan. 

The Components 

FERS is a three-tiered retirement plan. 

The three components are: 

[ Social Security Benefits 

[ Basic Benefit Plan

[ Thrift Savings Plan

You pay full Social Security taxes and a 

small contribution to the Basic Benefit 

Plan. In addition, your agency puts an 

amount equal to 1% of your basic pay 

each pay period into your Thrift Savings Plan (TSP) account. You are able 

to make tax-deferred contributions to 

the TSP and a portion is matched by 

the Government. 

The three components of FERS work 

together to give you a strong financial 

foundation for your retirement years. 

2
Social Security 

Benefits 

The first part of your benefit is Social 

Security. 

What is Social Security? 

The term “Social Security” means benefit payments provided to workers and 

their dependents who qualify as beneficiaries under the Old-Age Survivors, 

and Disability Insurance (OASDI) programs of the Social Security Act. OASDI 

replaces a portion of earnings lost as a 

result of retirement, disability, or 

death. It is designed to provide benefits 

that replace a greater percentage of 

earnings for lower-paid workers than 

for higher-paid workers. This means 

that Social Security benefits are more 

important for lower-paid workers than 

higher-paid workers. 

As an employee with FERS coverage, 

you have Social Security coverage. You 

also are covered under Social Security’s 

Medicare Hospital Insurance program. 

This pays a portion of hospital 

expenses incurred while you are receiving Social Security disability benefits or 

retirement benefits at age 65 or older. 

Social Security Benefits 

Social Security programs provide: 

[ Monthly benefits if you are retired 

and have reached at least age 62, 

and monthly benefits during your 

retirement for your spouse and 

dependents if they are eligible; 

[ Monthly benefits if you become 

totally disabled for gainful employment and benefits for your spouse 

and dependents if they are eligible 

during your disability;

[ Monthly benefits for your eligible 

survivors; and

[ A lump sum benefit upon your 

death.

To become eligible for benefits, you and 

your family must meet different sets of 

requirements for each type of benefit. 

An underlying condition of payment of 

most benefits is that you have paid 

Social Security taxes for the required 

period of time. 

3
The amount of monthly benefits you 

receive is based on three fundamental 

factors: 

[ Average earnings upon which you 

have paid Social Security taxes, 

which are adjusted over the years 

for changes in average earnings of 

the American work force;

[ Family composition (for example, 

whether you have a spouse or 

dependent child who may be eligible for benefits); and 

[ Consumer Price Index (CPI) changes 

that occur after you become entitled 

to benefits.

Benefits are subject to individual and 

family maximums. 

Once benefits begin, their continuation 

may depend upon your meeting a variety of conditions. For example, if you 

have earnings that exceed specified 

amounts while you are under age 70, 

your Social Security benefits will be 

reduced or stopped. There are special 

Social Security rules that may affect 

the benefits of Federal employees, 

including the Federal Employees Retirement System (FERS) participants. If 

you previously had some service that 

was covered by the Civil Service Retirement System (CSRS) (or another similar 

retirement system for Federal employees), your Social Security benefits may 

be affected by the Windfall Elimination 

Provision. If you transferred to FERS 

and do not complete 5 years of service 

under FERS, any spousal benefit you 

are entitled to under Social Security 

may be reduced because of the Government Pension Offset. If you think either 

of these provisions may affect your 

benefits, ask your servicing personnel 

office or local Social Security office for 

copies of the factsheet, A Pension From 

Work Not Covered by Social Security 

(Publication No. 05-10045) and the 

factsheet, Government Pension Offset 

(Publication No. 05-10007). You may 

also request these publications by calling the Social Security Administration 

on (800) 772-1213 or by downloading 

from the Web at: 

http://www.ssa.gov/pubs 

Social Security Taxes 

Most of the cost of Social Security is 

paid for through payroll taxes. Each 

year you pay a percentage of your salary up to a specified earnings amount 

called the maximum taxable wage 

base. The Federal Government, as your 

employer, pays an equal amount. The 

percentage you each pay for old age, 

survivor, and disability insurance coverage is 6.20% of your earnings up to 

the maximum taxable wage base. 

The maximum taxable wage base is 

$68,400 in 1998. It increases automatically each year based on the yearly rise 

in average earnings of the American 

work force. 

The Social Security tax covers both the 

Old Age, Survivors, and Disability 

Insurance (OASDI) and Medicare Hospital Insurance programs. The Medicare 

portion you and your agency each pay 

is 1.45% of your total pay. All wages 

are subject to the deduction for Medicare. 

4 
Basic Benefit 

Plan 

The second part of the Federal Employees Retirement System (FERS) is the 

Basic Benefit plan. 

Eligibility Participation 

If you were automatically covered by 

FERS, or you elected to transfer from 

the Civil Service Retirement System 

(CSRS) to FERS, you will participate in 

the Basic Benefit plan. 

Vesting 

To be vested (eligible to receive your 

retirement benefits from the Basic 

Benefit plan if you leave Federal service 

before retiring), you must have at least 

5 years of creditable civilian service. 

Survivor and disability benefits are 

available after 18 months of civilian 

service. 

Creditable Service 

Creditable service generally includes: 

[ Federal civilian service for which 

contributions have been made or 

deposited. 

[ Military service, subject to a deposit 

requirement. To receive credit for 

military service, generally, you 

must deposit 3% of your military 

base pay. Interest begins 2 years

5 

after you are hired. With certain 

exceptions, you cannot receive 

credit for military service if you are 

receiving military retired pay. Also, 

see the note that follows on credit 

for National Guard service. 

[ Leaves of absence for performing 

military service or while receiving 

workers’ compensation. 

Unused sick leave is not converted into 

creditable service for any purpose. 

(There is a limited exception for CSRS 

employees who transfer to FERS.) 

Credit is not allowed for civilian service 

after 1988 when no contributions were 

withheld. 

Note: Service in the National Guard, 

except when ordered to active duty in 

the service of the United States, is generally not creditable. However, you may 

receive credit for National Guard service, followed by Federal civilian reemployment that occurs after August 1, 

1990, when all of the following conditions are met: 

[ The service must interrupt civilian 

service creditable under the Civil 

Service Retirement System (or 

FERS) and be followed by reemployment in accordance with the appropriate chapter of the laws concerning Veterans Benefits; and 
[ It must be full-time (and not inactive duty), and performed by a 

member of the U.S. Army National 

Guard, or U.S. Air National Guard; 

and 

[ It must be under a specified law 

and you must be entitled to pay 

from the U.S. (or have waived pay 

from the U.S.) for the service. 

The deposit for National Guard service 

that meets these criteria is limited to 

the amount that would have been 

deducted from your pay for retirement 

if you had remained in the civilian 

service. 

Contributions 

Your contribution to the Basic Benefit 

Plan is the difference between 7% of 

your basic pay and Social Security’s old 

age, survivor, and disability insurance 

tax rate, or 0.80%. 

Refunds 

You may withdraw your basic benefit 

contributions if you leave Federal 

employment. However, if you do, you 

will not be eligible to receive benefits 

based on service covered by the refund. 

There is no provision in the law for the 

redeposit of FERS contributions that 

have been refunded. 

Retirement Options 

There are three categories of retirement 

benefits in the Basic Benefit Plan: 

[ Immediate, and Postponed 

[ Early

[ Deferred

Eligibility is determined by your age 

and number of years of creditable service. 

In some cases, you must have reached 

the Minimum Retirement Age (MRA) 

to receive retirement benefits. The following chart shows the MRA. 

Minimum Retirement Age 

If you were 

born: Your MRA is: 

Before 1948 55 

In 1948 55 and 2 months 

In 1949 55 and 4 months 

In 1950 55 and 6 months 

In 1951 55 and 8 months 

In 1952 55 and 10 

months 

In 1953 through 

1964 56 

In 1965 56 and 2 months 

In 1966 56 and 4 months 

In 1967 56 and 6 months 

In 1968 56 and 8 months 

In 1969 56 and 10 

months 

In 1970 and 

after 57 

6 
Immediate or Postponed 

If you meet one of the following sets of 

age and service requirements, you are 

entitled to an immediate retirement 

benefit: 

Age Years of service

62 5

60 20

MRA 30

MRA 10*

* (Reduced benefit unless postponed to 

lessen or eliminate age reduction) 

Early 

The early retirement benefit is 

avail-able in certain involuntary 

separation cases and in cases of voluntary separations during a major reorganization or reduction in force. To be 

eligible, you must meet the following 

requirements: 

Age Years of service 

50 20

Any age 25

Deferred 

If you leave Federal service before you 

meet the age and service requirements 

for an immediate retirement benefit, 

you may be eligible for deferred retirement benefits. To be eligible, you must 

have completed at least 5 years of creditable civilian service. You may receive 

benefits when you meet one of the following sets of age and service requirements: 

Age Years of service 

62 5

60 20

MRA 30

MRA 10*

* (Reduced benefit unless receipt 

delayed to lessen or avoid age reduction) 

* Reduced benefits means if you retire at the minimum retirement age with at least 10 but less 

than 30 years of service, your benefit will be reduced at the rate of 5/12’s of 1% for each month 

(5% for each year) you are under age 62, unless you have 20 years of service and your annuity 

begins at age 60 or later. You can avoid part or all of the reduction by postponing the commencing date of your annuity. 

7 
Benefit Formula 

How your benefit is calculated: 

Your benefit is based on your “high-3 

average pay.” This is figured by averaging your highest basic pay over any 3 

consecutive years of creditable service. 

Generally, your benefit is calculated 

according to this formula: 

1% of your high-3 average pay 

times 

years of creditable service 

If you retire at age 62 or later with at 

least 20 years of service, a factor of 

1.1% is used rather than 1%. 

To determine your length of service for 

computation, add all of your periods of 

creditable service, then eliminate from 

the total any fractional part of a month 

(less than 30 days). 

Depending on the category of retirement benefits you receive, your benefit 

may be reduced as described in the 

Retirement Options section. For example, the total could be reduced if you 

elect to retire at the minimum retirement age before completing 30 years of 

service. 

Special Retirement 

Supplement 

If you meet certain requirements, you 

will receive a Special Retirement Supplement which is paid as an annuity 

8 

until you reach age 62. This supplement approximates the Social Security 

benefit earned while you were 

employed by the Federal government. 

You may be eligible for a Special 

Retirement Supplement if you retire: 

[ After the Minimum Retirement Age 

(MRA) with 30 years of service;

[ At age 60 with 20 years of service; 

or 

[ Upon involuntary or early voluntary 

retirement (age 50 with 20 years of 

service, or at any age with 25 years 

of service) after the U.S. Office of 

Personnel Management determines 

that your agency is undergoing a 

major reorganization, reduction-inforce (RIF) or transfer of function. 

You will not receive the Special 

Retirement Supplement until you 

reach your MRA. 

If you transfer to the Federal Employees Retirement System (FERS) from the 

Civil Service Retirement System (CSRS), 

you must have at least one full calendar year of FERS-covered service to 

qualify for the supplement. 

If you have earnings from wages or 

self-employment that exceed the Social 

Security annual exempt amount 

($9,120 in 1998), your Special Retirement Supplement will be reduced or 

stopped. 

Survivor Benefits 

The Basic Benefit Plan provides benefits for survivors of Federal employees 

and retirees. 
Spouse 

If you die while you are an employee... 

If you are married, have 18 months of 

civilian service, and die while you are 

an active employee, your surviving 

spouse receives: 

A lump sum payment 

plus 

the higher of 

1/2 of your annual pay rate at death

or 

1/2 of your high-three average pay. 

The lump sum payment, which 

increases by cost-of-living adjustments 

each year, is $21,783.34 in 1998. 

If you had 10 years of service, your 

spouse also receives an annuity equaling 50% of your accrued basic retirement benefit. These benefits are paid in 

addition to any Social Security, group 

life insurance, or savings plan survivor 

benefits. 

To be eligible for benefits, you and your 

spouse must have been married for at 

least 9 months, or there must be a 

child born of the marriage, or your 

death must be accidental. 

If you die while you are a retiree... 

A married retiree’s annuity is automatically reduced to provide spouse survivor benefits unless those benefits are 

jointly waived in writing by the retiree 

and the spouse before retirement. 

Your annuity is reduced 10% to give 

your surviving spouse: 

An annuity of 50% of your 

unreduced benefit 

plus 

a special supplemental annuity 

payable until age 60, if your spouse 

will not be eligible for Social Security 

survivor benefits until age 60. 

You and your spouse may choose 

instead to have your annuity reduced 

by 5% to give your spouse an annuity 

of 25% of your unreduced benefit at 

your death. 

Separate provisions apply to spouses of 

disabled annuitants. 

Former Spouses 

A former spouse may receive survivor 

benefits as provided in a retiree election or a qualifying court order. 

Children 

If you have 18 months of civilian service and die while you are an active 

employee, or if you have retired, your 

children may be eligible to receive an 

annuity. This benefit is payable to each 

unmarried child: 

[ up to age 18;

[ up to age 22 if a full time student;

[ at any age if the child became disabled before age 18. 

9
The amount of the the Federal Employees Retirement System (FERS) benefit 

depends on the number of children and 

if the children are orphaned. In 1998 

the FERS surviving child benefit is 

$344 per month per child for each of 

three children; $413 if orphaned. The 

total children’s benefit is reduced dollar for dollar by any Social Security 

children’s benefits that may be payable. 

Disability Benefits 

FERS disability benefits can help you 

replace part of your income if you are 

unable to work for a prolonged period. 

What Does Disability Mean? 

You are considered disabled under 

FERS if you are unable to perform useful and efficient service in your position because of disease or injury. 

However, you will not be considered 

disabled if you decline your agency’s 

offer of a position which accommodates your disability and is at the same 

grade or pay level and is within your 

commuting area. 

You may also qualify for Social Security disability benefits if you are unable 

to work in any substantial gainful 

activity. 

Eligibility 

To qualify for FERS disability benefits, 

your disabling condition must be 

expected to last at least 1 year, and 

you must have at least 18 months of 

creditable civilian service. 

The Benefits 

The first year: 

60% of your high-3 average pay 

minus 

100% of any Social Security 

disability 

benefits to which you are entitled.

After the first year and until age 62, if 

your disability prevents you from performing your job and you do not qualify for Social Security disability benefits, your benefit will be: 

40% of your high-3 

average pay. 

If you do qualify for Social Security 

benefits, your FERS disability benefit 

will be reduced by 60% of the Social 

Security benefit to which you are entitled. The resulting total you receive 

from both FERS and Social Security 

will be at least 40% of your high-3 plus 

40% of your Social Security disability 

benefits. 

If your earned annuity rate (1% x high 

3 average salary x years of service) is 

higher than the above rates after the 

reduction for Social Security, you will 

receive the higher benefit. 

When you reach age 62 your disability 

benefit will be recomputed. Essentially, 

you will receive the annuity you would 

have received if you had not been disabled, but had continued working until 

age 62. For purposes of this recomputation, your average salary will be 

increased by all FERS cost-of-living 

adjustments that took effect while you 

were receiving a disability annuity. 

10
If you are a disability retiree under age 

60 and your total income from work in 

a calendar year exceeds 80% of the current pay level of your former job, the 

disability benefits will be discontinued. 

You also may be required to provide 

proof periodically that you have not 

recovered from your disability. 

Cost-of-Living 

Adjustments (COLA’s) 

Survivors and disability retirees receive 

a COLA regardless of their ages; however, disability retirees receiving 60% of 

their average pay do not receive a COLA 

during the first year. All other retirees 

begin to receive COLA’s at age 62. 

The Special Retirement Supplement for 

retirees is not increased by COLA’s; the 

supplement for survivors is increased 

by COLA’s. 

Form of Payment 

FERS Basic Benefits are a monthly 

annuity that is paid the first business 

day of the month after it accrues. For 

example, the payment for December is 

made on January 2. 

The amount of the annual COLA percentage is based on the increase in 

the Consumer Price Index (CPI): 

Increase in CPI Annual COLA 

Percentage 

Up To 2% Same as CPI 

increase 

2% to 3% 2% 

3% or more CPI increase 

minus 1% 

11
Thrift Savings 

Plan 

The third part of your Federal Employees Retirement System (FERS) benefit 

is the Thrift Savings Plan (TSP). The 

TSP is a tax-deferred retirement savings and investment plan that offers 

you the same type of savings and tax 

benefits that many private corporations 

offer their employees under 401(k) 

plans. By participating in the TSP, you 

have the opportunity to save part of 

your income for retirement, receive 

matching agency contributions, and 

reduce your current taxes. 

Your thrift account is the part of your 

retirement that you control — you 

decide how much of your pay to put in 

your thrift account, how to invest it, 

and, when you retire, you decide how 

you want your money paid out. 

The best way to assure that your retirement income meets your needs is to 

start investing in the Thrift Savings 

Plan at the beginning of your Federal 

service, and to continue to do so 

throughout your career. This is your 

way to invest in your own future — to 

invest in yourself. It is particularly 

important for higher-paid employees to 

save enough through the TSP since 

Social Security replaces less income of 

higher-paid workers than it does for 

lower-paid workers. 

Additional information about the benefits and features of the TSP has been 

issued by the Federal Retirement Thrift 

Investment Board and is available from 

your agency employing office or the 

TSP Web site (www.tsp.gov). In addition to the “Summary of the Thrift Savings Plan for Federal Employees” (stock 

number TSPB08), separate booklets on 

the loan program, withdrawal options, 

and annuities are available. 

Eligibility 

All Federal employees covered by FERS 

are eligible to participate in the Thrift 

Savings Plan (TSP). However, if you are 

a newly hired FERS employee, you 

must wait a certain period of time — 

generally, 6 to 12 months — before you 

can begin to participate in the TSP. If 

you are a rehired FERS employee, when 

you can begin to participate in the TSP 

depends upon your previous TSP eligibility. 

See the “Summary of the Thrift Savings 

Plan for Federal Employees” for the 

specific rules on TSP eligibility, or ask 

your personnel office when you will 

become eligible to participate in the 

plan. 

12
Contributions Agency Matching Contributions 

Once you become eligible to participate 

in the Thrift Savings Plan, there are 

three types of contributions that may 

be made to your account: 

[ Agency Automatic (1%) Contributions

[ Employee Contributions

[ Agency Matching Contributions

Agency Automatic (1%) Contributions 

Your agency will set up a Thrift 

account for you and will automatically 

contribute an amount equal to 1% of 

your basic pay each pay period. These 

Agency Automatic (1%) Contributions 

are not taken out of your salary, and 

your agency makes these contributions 

whether or not you contribute your 

own money. 

Employee Contributions 

You may make your own contributions 

by payroll deductions. The money you 

contribute is taken out of your pay 

before Federal and, in almost all cases, 

State income taxes are calculated. You 

may contribute up to 10% of the basic 

pay you earn each pay period up to the 

Internal Revenue Service (IRS) limit, 

which is $10,000 in 1998. (This limit 

may be adjusted each calendar year 

according to the Internal Revenue 

Code.) 

When you make employee contributions, your agency will make matching contributions to your TSP 

account according to the following 

schedule: 

Your Agency Contribution 

Match 

First 3% of Basic 

Pay 

$1.00 for each 

$1.00 you contribute 

Next 2% of Basic 

Pay 

$0.50 for each 

$1.00 you contribute 

Next 5% of Basic 

Pay 

0 

The agency contributions are not taken 

out of your salary; they are an extra 

benefit to you. While your agency will 

only provide matching contributions on 

your contributions up to 5% of your 

basic pay each pay period, you still 

benefit from before-tax savings and 

tax-deferred earnings on amounts you 

contribute in excess of 5% of your basic 

pay each pay period. 

The examples at the end of this booklet 

illustrate the importance of Thrift Plan 

participation in your total benefits 

package. The examples also show the 

effect on a FERS retirement package of 

contributing 3% of pay and 5% of pay . 

Vesting Requirement 

When you separate from Federal service, you must meet the Thrift Plan vesting requirement to be entitled to, or 

vested in, your Agency Automatic (1%) 

13 
Contributions and attributable earnings. For most employees, this vesting 

requirement is 3 years of Federal, generally civilian, service. 

Congressional employees and certain 

other non-career employees must complete 2 years of Federal, generally civilian, service. Employees who die in 

service are automatically vested in 

their Agency Automatic (1%) Contributions. 

You are immediately vested in your 

own contributions and your Agency 

Matching Contributions and in the 

earnings attributable these contributions. 

Investment Options 

There are three Thrift Savings Plan 

investment Funds. The Funds differ in 

the rate of return and amount of risk 

involved. You may invest any percentage of future contributions to your 

account in any of the three investment 

Funds. You can also transfer any portion of your existing account balance 

among the three Funds. 

The three Funds are described briefly 

below. For more detailed information 

about these Funds, see the “Summary 

of the Thrift Savings Plan for Federal 

Employees” or the “Guide to TSP 

Investments.” 

Government Securities 

Investment (G) Fund 

The G Fund consists of investments in 

short-term non-marketable U.S. Treasury securities specially issued to the 

Thrift Savings Plan. All investments in 

the G Fund earn interest at a rate that, 

by law, is equal to the average of market rates of return on U.S. Treasury 

marketable securities outstanding with 

4 or more years to maturity. There is 

no credit risk for G Fund securities 

because they are guaranteed by the 

U.S. Government. 

Common Stock Index Investment 

(C) Fund 

The C Fund is invested in a Standard & 

Poor’s 500 (S&P 500) stock index fund, 

that is made up of the common stocks 

of all of the companies represented in 

the S&P 500 index. The C Fund gives 

participants the opportunity to diversify their investments by investing 

broadly in the U.S. stock markets and 

to earn the relatively high investment 

returns stocks sometimes provide. The 

risk of investing in the C Fund is that 

the value of stocks can decline sharply, 

resulting in losses. 

Fixed Income Index Investment 

(F) Fund 

The F Fund is invested in a bond index 

fund that tracks the performance of the 

Lehman Brothers Aggregate (LBA) bond 

index. The bond index consists primarily of high quality fixed-income securities representing the U.S. Government, 

corporate, and mortgage-backed securities sectors of the U.S. bond market. 

The F Fund offers the opportunity for 

increased rates of return in periods of 

generally declining interest rates. The F 

Fund carries credit risk and market risk 

and, thus, has potential for negative 

returns that can result in losses. 

14 
Contributing to TSP 

To begin contributing to the Thrift Savings Plan, you must complete an Election Form (TSP- l) and submit it to your 

agency employing office during a TSP 

open season. There are two open seasons each year — May 15 to July 31 

and November 15 to January 31. 

Tax Advantages 

There are two major tax advantages to 

the Thrift Savings Plan (TSP). First, you 

pay current Federal income taxes on 

your salary after your TSP contributions have been deducted. Second, you 

do not pay current Federal income 

taxes on the earnings you receive on 

your TSP account balance. Most states 

allow the same pre-tax and tax 

deferred savings on their income taxes. 

These tax advantages continue until 

you withdraw your account balance — 

usually at retirement when your tax 

bracket may be lower. If you leave Federal service before you are eligible to 

retire, you may transfer your account 

balance to an Individual Retirement 

Arrangement Account or other eligible 

retirement plan and continue to defer 

taxes. 

Loan Program 

If you have at least $1,000 of your own 

contributions (including attributable 

earnings) in your account you may borrow from it. 

There are two types of loans: general 

purpose, which does not require you to 

document or specify the purpose of 

your loan, and residential, which is 

only for the purchase of a primary residence and requires documentation. 

You pay interest on the loan at the 

G Fund rate in effect at the time your 

application is received. Both the principal and the interest you pay go back 

into your own TSP account. See the 

booklet “Thrift Savings Plan Loan Program” for more information about the 

TSP loan program. 

Withdrawing Your Funds 

The Thrift Savings Plan is a long-term 

plan for retirement savings with special 

tax advantages. Generally you cannot 

withdraw your TSP account until you 

separate from Federal service. 

15
Withdrawal Options 

After you separate from Federal service, 

there are three basic ways to withdraw 

your account: 

[ Have the TSP purchase a life annuity for you.

[ Receive your account in a single 

payment.

[ Receive your account in a series of 

monthly payments.

You can have the TSP transfer all or a 

part of a single payment or, in some 

cases, a series of monthly payments, to 

an Individual Retirement Arrangement 

or other eligible retirement plan. 

Leaving your money in the 

TSP 

If you do not want to withdraw your 

account when you leave Federal service, you can leave your entire account 

balance in the Thrift Savings Plan. 

However, you must withdraw your TSP 

account or begin receiving monthly or 

annuity payments by April 1 of the 

year following the year you reach 

70 1/2. 

Automatic Cashout 

After you separate from Federal service, 

if your vested account balance is 

$3,500 or less, your entire account will 

be paid to you automatically in a single 

payment unless you elect another withdrawal option or to leave your money 

in the Thrift Savings Plan. The TSP will 

notify you before automatically cashing 

out your account and allow you the 

opportunity to elect as specified above. 

Additional information 

See the booklet, “Summary of the 

Thrift Savings Plan for Federal Employees,” or the booklet, “Withdrawing 

Your TSP Account After Leaving Federal Service” (stock number TSPBK02), 

both issued by the Federal Retirement 

Thrift Investment Board, for more 

information about withdrawal options. 

16
Special Groups

Firefighters, Law 

Enforcement Officers, and 

Air Traffic Controllers

These groups of employees receive an 

unreduced benefit at age 50 with 20 

years of service, or at any age with 25 

years of service. If you are in one of 

these employee groups, you contribute 

an additional .5% of pay to the Federal 

Employees Retirement System (FERS). 

Your annual annuity is: 

1.7% of your high-3 average pay 

times 

20 years of service 

plus 

1.0% of your high-3 average pay 

times 

years of service exceeding 20. 

You also receive a Special Retirement 

Supplement until age 62 that approximates the Social Security benefit 

earned in Federal service. After you 

reach the Minimum Retirement Age 

(MRA), if you have earnings from 

wages or self-employment that exceed 

the Social Security annual exempt 

amount, your supplement will be 

reduced or stopped. In addition, you 

are entitled to an annual Cost-of-Living 

Adjustment (COLA), regardless of your 

age. 

of Employees

Military Reserve 

Technicians 

If you are a military reserve technician 

who loses the military status required 

to maintain your position, you may 

retire and receive an unreduced annuity if you are at least age 50 with 25 

years of service. 

In addition, a Special Retirement Supplement is payable until age 62. After 

you reach your Minimum Retirement 

Age (MRA), if you have earnings from 

wages or self-employment that exceed 

the Social Security annual exempt 

amount your supplement will be 

reduced or stopped. 

Part-Time Employees 

In calculating the annuity for employees with part-time service, the average 

high-3 consecutive years of pay will be 

based on the full-time pay rate. The 

benefit based on the full-time rate is 

reduced according to the part-time 

schedule. 

17
Members of Congress and 

Congressional Employees 

Members of Congress receive an unreduced annuity at age 50 with 20 years 

of service, or at any age with 25 years 

of service. Congressional employees 

must meet the age and service requirements explained in the Basic Benefit 

Plan section. 

If you are a Member of Congress or a 

Congressional employee, with at least 5 

years of Congressional service, your 

annuity will be: 

1.7% of high-3 average pay 

times 

years of Congressional service 

up to 20 

plus 

1.0% of high-3 average pay 

times 

any other service. 

A Special Retirement Supplement is 

payable from the Minimum Retirement 

Age to age 62. If you have earnings 

from wages or self-employment that 

exceed the Social Security annual 

exempt amount, your supplement will 

be reduced or stopped. 

Cost-of-Living-Adjustment’s (COLA’s) 

are payable to Congressional retirees 

before age 62 only if they retire for disability. 

Members of Congress and Congressional employees contribute an additional .5% of pay to the Federal 

Employees Retirement System (FERS). 

18
Enrolling in FERS 

New Employees 

Most new employees hired after 

December 31 1983, are automatically 

covered by the Federal Employees 

Retirement System (FERS). The exceptions are employees in appointments 

that are limited to 1 year or less, most 

intermittent employees, anyone who is 

not eligible for Social Security coverage, or certain persons with nonFederal service which is creditable 

under the Civil Service Retirement 

System (CSRS). 

Rehires and Conversions 

The general rules on whether you are 

covered by CSRS, CSRS Offset, or FERS 

after a break in service or conversion 

from one type of appointment to 

another are stated below. Just how 

those rules apply to you must be determined by your personnel office. 

If you leave Federal Government service and return within 1 year and you 

were previously covered under CSRS 

(without Social Security), then you will 

generally be covered by CSRS upon 

reemployment. However, you may elect 

within 6 months of reemployment to 

transfer to FERS, in which case you 

will also be covered by Social Security. 

If you leave Federal Government service and return after more than 1 year 

and you were previously covered under 

CSRS, then you are automatically covered by Social Security and: 

[ If you have less than 5 years under 

CSRS, you are automatically covered by FERS.

[ If you have 5 or more years under 

CSRS, you are covered by CSRS Offset. Your CSRS contributions are 

reduced by 100% of your Social 

Security Old-Age, Survivor Disability Insurance (OASDI) fund taxes. 

Your CSRS benefit will be offset by 

any Social Security benefit attributable to your Federal service.

In determining whether you have 5 

years of service which is creditable 

under CSRS, count all civilian service 

as of your last separation from service, 

even though it may not have been covered by CSRS deductions, or you may 

have received a refund of CSRS deductions. You will receive credit for your 

CSRS service if you make any payments 

for your past service that may be 

required.

Even if you were never covered by 

CSRS, you are eligible for CSRS Offset 

coverage if you had 5 years of creditable civilian service before January 1, 

1987.

If you are rehired under CSRS or CSRS 

Offset, you may elect to transfer to 

FERS within 6 months of reemployment. If you elect to transfer to FERS, 

the following rules apply.

19
[ Your credit in CSRS is frozen, but [ Unused sick leave is credited under 

your combined CSRS and FERS 

annuity will be based on the average of your highest 3 consecutive 

years of pay. 

CSRS rules based on the amount 

accumulated at the date of transfer 

or date of retirement, whichever is 

lower.

[

[

You will receive a full Civil Service 

Retirement System (CSRS) cost of 

living adjustment on the CSRS portion of your annuity.

Your service after the date of transfer is treated under the Federal 

Employees Retirement System 

(FERS) rules. (If you were under 

CSRS Offset, your offset service is 

also treated under rules.) In addition, all of your service is treated 

under FERS rules if you have less 

than 5 years of non-Offset CSRS 

service when you transfer.

[ You have Social Security coverage 

when you enroll in FERS.

[ You will receive Government contributions to your TSP account and 

avoid the 6-12 month waiting 

period for participation.

If you are converted from an appointment that is excluded from FERS coverage to an appointment that is not 

excluded, generally you will automatically be covered by FERS. If you are not 

automatically covered by the plan, you 

will have a 6-month opportunity to 

transfer to it. 

[

[

All service (CSRS and FERS) counts 

toward years needed to be eligible 

for retirement, disability, survivor, 

and Thrift Saving Plan benefits 

under FERS.

All survivor and disability benefits 

are paid under FERS rules.

Note: If you are eligible to elect FERS 

coverage because of being rehired or 

converted to a different appointment, 

you should read the FERS Transfer 

Handbook — A Guide To Making Your 

Decision, RI 90-3, before making a 

decision. Your personnel office should 

provide it to you. 

20
Examples

The following examples illustrate the 

annual benefits that you can expect to 

receive under the Federal Employees 

Retirement Sytem (FERS). In reviewing 

these examples, note that the benefits 

shown are estimates based upon certain assumptions about future salary 

increases, investment returns, and 

other factors that directly affect your 

final level of benefits. 

Keep in mind the following features of 

specific benefit components: 

[ Two types of FERS benefits are 

shown. The “FERS basic benefit” is 

your regular annuity based on total 

years of service and your high-3 

average salary. The “special supplement” is a substitute for Social 

Security that may be payable to you 

from when you retire under FERS 

until age 62. In most cases your 

actual Social Security benefit at age 

62 will be higher than the FERS 

supplement you receive before age

62. 

[ Estimated Social Security benefits 

do not include any spousal or 

dependent benefits that may be 

available. These additional payments could significantly increase 

the total value of your Social Security benefits.

[ Estimated benefits from the Thrift 

Savings Plan are shown in terms of 

a “single life annuity” purchase 

with your account when you 

retire. The annuity includes 3% 

annual cost-of-living adjustments 

to help protect its purchasing power 

during your retirement years. These 

projected benefits are based on 

career-long investments at the 

stated percentages of pay. Your 

actual Thrift Savings Plan benefits 

will depend on your account’s 

investment earnings and the specific payment form you elect when 

you retire.

Examples 1 and 2 are good illustrations of how Social Security provides a 

larger percentage of income to lower 

income employees than to higher 

income employees. Example 2 also 

shows that the higher income employee 

needs to save more in his TSP account 

to receive the same percentage of his 

final salary as the lower paid employee 

in example 1.

All benefits are shown in 1996 dollars. 

Annual benefits have been rounded to 

the nearest hundred dollars and percentages may not total exactly due to 

rounding. The economic assumptions 

used to create these examples are:

Inflation 3.5% 

All wages 3.5% 

Federal wages 3.5% 

Nominal Interest 7.5% 

Real Interest 4.0% 

21
Example 1. Anne 

Main Features: 

[ FERS coverage begins at age 25 in 1996

[ Retirement at age 57 with 32 years of service in 2028

[ Entry at Grade 3, Step 1

[ Retirement at Grade 7, Step 10, salary $32,600

[ 3% Thrift Savings Plan contribution (plus 4% from agency)

Anne’s estimated retirement benefits at age 57 under FERS are: 

Initial FERS Benefit Dollar Amount As % of Final Year’s 

Salary 

Basic FERS Annuity $9,600 29% 

Special Supplement $6,200 19% 

Thrift Savings Plan $6,600 20% 

Total Annual Benefits $22,300 69% 

The special annuity supplement is payable until age 62. Anne’s regular Social 

Security retirement benefits starting at age 62 would be about $7,200 — 22% of 

her final salary. 

If Anne had contributed 5% of her salary to the Thrift Savings Plan, rather than 3%, 

her yearly Thrift Savings Plan benefit would have been $9,400. This would 

increase Anne’s total initial FERS benefit to $25,200 per year — 77% of her final 

yearly salary of $32,600. 

22
Example 2. Bob 

Main Features: 

[ FERS coverage begins at age 25 in 1996

[ Retirement at age 57 with 32 years of service in 2028

[ Entry at Grade 7, Step 1

[ Retirement at Grade 13, Step 10, salary $68,700

[ 3% Thrift Savings Plan contribution (plus 4% from agency)

Bob’s estimated retirement benefits at age 57 under FERS are: 

Initial FERS Benefit Dollar Amount As % of Final Year’s 

Salary 

Basic FERS Annuity $20,200 29% 

Special Supplement $8,800 13% 

Thrift Savings Plan $12,700 18% 

Total Annual Benefits $41,700 61% 

The special annuity supplement is payable until age 62. Bob’s regular Social Security retirement benefits starting at age 62 would be about $10,500 — 15% of his 

final salary. 

If Bob had contributed 5% of his salary to the Thrift Savings Plan, rather than 3%, 

his yearly Thrift Savings Plan benefit would have been $18,100. This would 

increase Bob’s total initial FERS benefit to $47,100 per year — 69% of his final 

yearly salary of $68,700. 

23
Example 3. Charles 

Main Features: 

[ FERS coverage begins at age 40 in 1996

[ Retirement at age 60 with 20 years of service in 2016

[ Entry at Grade 7, Step 1

[ Retirement at Grade 12, Step 8, salary $54,800

[ 3% Thrift Savings Plan contribution (plus 4% from agency)

[ 15 years prior Social Security

[ Final pre-Federal salary $23,500

Charles’s estimated retirement benefits at age 60 under FERS are: 

Initial FERS Benefit Dollar Amount As % of Final Year’s 

Salary 

Basic FERS Annuity $9,900 18% 

Special Supplement $4,900 9% 

Thrift Savings Plan $5,500 10% 

Total Annual Benefits $20,300 37% 

The special annuity supplement is payable until age 62. Charles’s regular Social 

Security retirement benefits starting at age 62 would be about $9,700 — 18% of his 

final salary. (They include his pre-Federal employment.) 

If Charles had contributed 5% of his salary to the Thrift Savings Plan, rather than 

3%, his yearly Thrift Savings Plan benefit would have been $7,900. This would 

increase Charles’s total initial FERS benefit to $22,700 per year — 41% of his final 

yearly salary of $54,800. 

24
Example 4. Donna 

Main Features: 

[ FERS coverage begins at age 25 in 1996

[ FERS service ends at age 45 in 2016

[ Deferred benefit at MRA with reduction

[ Entry at Grade 7, Step 1

[ Separation at Grade 12, Step 8, salary $54,800

[ 3% Thrift Savings Plan contribution (plus 4% from agency)

[ 17 years work after leaving government


Donna can begin receiving deferred FERS benefits at age 62. She also can begin 

receiving them as early as age 57, which is her Minimum Retirement Age. If she 

receives them at age 57, they are reduced 5% per year that she is under age 62 — a 

25% reduction. 

Donna’s estimated retirement benefits at age 57 under FERS are: 

Initial FERS Benefit Dollar Amount As % of Final Year’s 

Salary 

Basic FERS Annuity $4,900 9% 

Special Supplement $0 0% 

Thrift Savings Plan $8,100 15% 

Total Annual Benefits $13,000 24% 

Donna does not receive the special annuity supplement. Donna’s regular Social 

Security retirement benefits based on her Federal employment starting at age 62 

would be about $11,000 — 20% of her final salary. However, since she continued 

working elsewhere, her age 62 Social Security benefit is based on the cumulative 

total benefit she earned. 

If Donna had contributed 5% of her salary to the Thrift Savings Plan, rather than 

3%, her yearly Thrift Savings Plan benefit would have been $11,500. This would 

increase Donna’s total initial FERS benefit to $16,400 per year — 30% of her final 

yearly salary of $54,800. 

25
For More

There are several sources of assistance 

if you have questions or want more 

information about the components of 

your benefits package. 

[ Your Agency's Personnel Office— 

in your agency for questions concerning your individual situation. 

Your personnel office has your 

records and is in the best position 

to answer questions about the basic 

benefit and TSP rules. In addition, it 

should have the following publications to help answer questions. 

Publications of the Federal Retirement Thrift Board: 

Website — http://www.tsp.gov

&Summary of the Thrift Savings 

Plan for Federal Employees 

(TSPBK08) 

&Investments: Options and 

Operations (TSPBK03) 

&Thrift Savings Plan Loan 

Program (TSPBK04) 

&Annuities (TSPBK05) 

&Withdrawing Your TSP Account 

After Leaving Federal Service 

(TSPBK02) 

&Information About Court Orders 

(TSPBK11) 

Publications of the U.S. Office of 

Personnel Management: 

Information

Website — http://www.opm.gov 

&Information for Separating 

FERS Employees Who Are Not 

Eligible for an Immediate Annuity, RI 90-11 

&Information about Reemployment for FERS Annuitants, 

RI 90-18 

&Court-Ordered Benefits for 

Former Spouses Under CSRS, 

FERS, FEHB, and FEGLI, 

RI 84-1 

&Work-Related Injuries and 

Fatalities — What You and 

Your Family Need to Know 

About Your Benefits, RI 84-3

&Life Events and Your Retirement and Insurance Benefits 

(For Employees), RI 84-3 

&Temporary Continuation of 

Coverage (TCC) under the 

Federal Employees Health Benefits Program, RI 79-27 

&FEGLI Booklet, RI 76-21 

&Thinking About Retirement?, 

RI 83-11 

[ Social Security Administration — 

for questions concerning your 

Social Security benefits. You may 

call (800) 772-1213 with questions 

or to request a copy of your earnings record and estimated future 

benefits. 

Website — http://www.ssa.gov 

26
Retirement & Insurance Service

Serving over 10 million customers, Federal employees,

annuitants, and their families.

Retirement & Insurance Service

Serving over 10 million customers, Federal employees, annuitants, 

and their families.