Federal employees participate in one of two retirement systems. The Civil Service Retirement System (CSRS) was established in 1920 and covers only employees hired before 1984. Participants in the CSRS do not pay Social Security payroll taxes and they do not earn Social Security benefits. For a worker retiring after 30 years of federal service, a CSRS annuity will be equal to 56.25% of the average of his or her highest three consecutive years of basic pay. Because the Social Security trust funds needed additional cash contributions to remain solvent, the Social Security Amendments of 1983 ( P.L. 98-21 ) required federal employees hired after 1983 to participate in Social Security. To coordinate federal pension benefits with Social Security, Congress directed the development of a new retirement system for federal employees hired after 1983. The result was the Federal Employees' Retirement System (FERS) Act of 1986 ( P.L. 99-335 ). The FERS consists of three elements: Social Security, the FERS basic retirement annuity and the FERS supplement, and the Thrift Savings Plan (TSP). All federal employees initially hired into federal employment on or after January 1, 1984, are enrolled in the FERS, as are employees who voluntarily switched from CSRS to FERS during "open seasons" held in 1987 and 1998. Of 2,751,000 federal civilian and Postal Service employees enrolled in these federal retirement plans as of September 30, 2013, 2,477,000 (90%) were participating in the FERS and 274,000 (10%) were under the CSRS. Federal employees are fully vested in the FERS basic retirement annuity after five years of service. The earliest age at which a worker can retire under FERS was 55 for workers born before 1948. The minimum retirement age (MRA) under FERS began to increase in 2003 for workers born in 1948, and it eventually will reach the age of 57 for those born in 1970 or later (see Table 1 ). In 2015, a worker who has completed at least 30 years of service can retire with an immediate, unreduced annuity at the age of 56. An employee with 20 or more years of service can retire with an immediate, unreduced annuity at the age of 60, and an employee with at least five years of service can retire with an immediate annuity at the age of 62. Under FERS, employees (or former employees) who have completed 10 or more years of government service can elect to receive a reduced retirement annuity at the minimum retirement age. For those who choose this option, their annuities are permanently reduced by 5% multiplied by the number of years between 62 and the individual's age at the time the annuity begins. For example, an employee who retires at 56 years old with fewer than 30 years of service would have his or her annuity reduced by 30% below the amount that would have been paid if the individual were aged 62 or older at retirement. Of the 52,230 federal employees covered by CSRS who retired under normal, voluntary rules in FY2013, 39% were between the ages of 55 and 59. They had an average of 34.4 years of civilian federal service (and 0.7 years of military service). Thirty-five percent of federal workers who took normal retirement under CSRS in FY2013 were aged 62 or older. The average age of all federal workers covered by CSRS who retired in FY2013 under normal, voluntary retirements was 61.3 years. Their average length of civilian federal service was 35.5 years (and 0.9 years of military service). Because relatively few employees hired before 1984 elected to switch to FERS, individuals who have been retiring under FERS have tended to be those who joined or rejoined the federal work force relatively late in their careers. In FY2013, 51,861 federal employees retired with immediate annuities under FERS. Their average age was 63.7 years, and their average length of civilian service in the federal government was 20.7 years (and 1.2 years of military service). The average length of service for workers retiring under FERS will rise over time as the proportion of federal employees who spent their entire careers under FERS continues to increase. The FERS basic retirement annuity is a defined benefit (DB) pension. The amount of the pension benefit is determined by multiplying three factors—the employee's number of years of service, the annual benefit accrual rate, and the salary base—as is shown in the following formula: Pension A mount = Years of Service × Accrual Rate × S alary Base In both CSRS and FERS, the salary base is the average of the employee's three highest consecutive years of basic pay, sometimes called "high-three pay." The annual benefit accrual rate is the percentage of the salary base that a worker earns in pension benefits for each year of service. Under FERS, retirement benefits accrue at the rate of 1.0% per year. A worker with 30 years of service will have accrued a pension benefit equal to 30% of the FERS salary base. Employees with 20 or more years of federal service who retire at the age of 62 or later are credited with a benefit accrual rate of 1.1% for each year of service. For example, a worker under FERS who retires at 61 years old with 29 years of service would receive a FERS annuity equal to 29% of his or her high-three average pay. Delaying retirement by one year would increase the annuity to 33% of high-three average pay because the benefit accrual rate would be 1.1% for each year of service rather than 1.0% per year of service. Under CSRS, employees accrue pension benefits at rates that increase with length of service. The CSRS benefit accrual rate is 1.5% for each of the first 5 years of service; 1.75% for the 6 th through 10 th years of service; and 2.0% for each year of service after the 10 th year. This results in a retirement annuity equal to 56.25% of high-three average pay for a worker who retires with 30 years of service. Congress intended the FERS to be a complete retirement package consisting of Social Security, the FERS annuity, and the Thrift Savings Plan. Because Social Security retirement benefits cannot begin before the age of 62, Congress included in the FERS a temporary supplement for federal workers who retire before the age of 62. The FERS supplement is equal to the portion of the Social Security benefit to which the worker will be entitled at the age of 62 that is attributable to his or years of federal employment under FERS. The FERS supplement is paid until the age of 62 to workers who retire at the minimum retirement age (currently 56) or older with at least 30 years of service, or at the age of 60 with at least 20 years of service. The FERS supplement terminates at the age of 62, regardless of whether the individual applies for Social Security retired worker benefits at that time. Cost-of-living adjustments (COLAs) protect the purchasing power of retirement benefits from being eroded by inflation. COLAs increase the nominal amount of retirement income, but they do not increase its real value. COLAs have been in effect since 1962 for CSRS, and since the inception of FERS. Retirement benefits paid under CSRS are fully indexed for inflation, as measured by the Consumer Price Index for Wage and Salary Workers (CPI-W). The FERS basic annuity is fully price-indexed only if the annual rate of inflation is 2% or less. FERS benefits are partially indexed if inflation is in excess of 2%. If the CPI-W increases by 2% or less, the FERS monthly benefit is increased by the annual percentage increase in the CPI-W. If the CPI-W increases by 2% to 3%, the increase in the FERS annuity is limited to 2%. If the CPI-W increases by more than 3%, the increase in the FERS annuity is equal to the rise in the CPI-W minus one percentage point. Under FERS, COLAs are provided only to retirees who are aged 62 or older, annuitants under the age of 62 who retired because of a disability, and survivor annuitants. The Thrift Savings Plan is a defined contribution (DC) retirement plan similar to the 401(k) plans provided by many employers in the private sector. Newly hired federal employees who participated in a 401(k) plan can, if they choose, roll over their 401(k) account balances into the TSP. Workers who leave the federal government for jobs in other sectors of the economy can leave their money in the TSP—where it will continue to accrue interest, dividends, and capital gains according to the performance of the funds in which they have chosen to invest—or they can roll over their TSP funds on a tax-deferred basis into another tax-qualified retirement savings account such as an IRA or a 401(k) plan. All TSP participants are immediately and fully vested in their contributions to the plan, federal matching contributions, and any growth in the value of their investment from interest, dividends, and capital gains. Participants are fully vested in the 1% agency automatic contributions to the TSP after three years (two years for congressional employees and executive-branch political appointees). P.L. 106-361 (October 27, 2000) allows "rollover distributions" into the TSP from other tax-qualified retirement savings plans, such as those authorized for private-sector firms under Section 401(k) of the tax code and for non-profit organizations under I.R.C. Section 403(b). This law also allows employees to begin making tax-deferred contributions to the TSP immediately upon becoming employed by the federal government. P.L.