Recently, I attended a federal benefits seminar where a group of about 40 federal employees were learning more about their benefits. About two-thirds of the attendees indicated that they would be retiring in the next five years and the presenter asked them the following question, “How many of you know that if you retire before age 62 in FERS that you may be eligible for a special supplementary benefit payment?” Only about half of the attendees raised their hands. Federal employees working under the FERS retirement system may be eligible for an additional benefit: the Special Retirement Supplement.
I was surprised that a benefit that provides supplementary income wasn’t better known. On the advisor side, we have found that many advisors do know about the Special Retirement Supplement but that there is less understanding generally about the eligibility requirements and the general details of the supplement. Let’s take a look at some of these basic details.
The purpose of the special retirement supplement is to provide additional income during the period between when an employee retires and when they are eligible to begin Social Security at age 62. Based on an estimate of Social Security benefits earned through federal employment, the benefit is intended to replicate the Social Security benefit payable at age 62. Eligible employees who retire prior to age 62 can receive this additional benefit in addition to their regular retirement annuity until they become eligible to file for Social Security at age 62.
Who is eligible for the Special Retirement Supplement?
The supplement is available for FERS members who meet any of the following criteria:
- Voluntary retirement at the Minimum Retirement Age (MRA) with at least 30 years of service.
- Voluntary retirement at age 60 with at least 20 years of service.
- Law enforcement officers, air traffic controllers, and firefighters.
- Members of Congress at age 50 with at least 20 years of service.
- Members of Congress with 25 years of service at any age when they reach their MRA.
- Discontinued service retirees when they reach their MRA.
- Military Reserve technicians who lose their military status who are age 50 with at least 25 years of service.
FERS members may also be eligible for the supplement when they reach their MRA if they retired involuntarily before their MRA or if they retired voluntarily because of a force reduction or major reorganization.
Employees who transferred from CSRS to FERS, who meet other eligibility requirements, may also receive the supplement provided they have at least one full year in the FERS system.
Special Retirement Supplement Calculation
The calculation for the Special Retirement Supplement is fairly straight-forward. The Office of Personnel Management (OPM) will begin by estimating what the employee’s full 40 year career Social Security benefit would be at age 62. This amount is then reduced according to the estimated years worked under FERS.
Special Retirement Supplement
Age 62 Social Security Benefit
FERS Years of service
The supplement does not have a COLA unless the retiree was a special category of employee such as a law enforcement officer or air traffic controller.
Reduction of Supplement
The FERS Special Retirement Supplement is subject to an earnings test similar to Social Security. Retirees receiving the supplement must report their yearly earnings to OPM. If a retiree’s earnings are above the Social Security exempt amount then the supplement will be reduced by $1.00 for every $2.00 of earning over the exempt amount. This reduction does not apply to the regular FERS annuity but it is possible that the supplement can be reduced to $0 depending on the results of the earnings test. Special category employees like law enforcement officers are not subject to the earnings test until they reach their MRA. More details about the Social Security earnings test can be found on the Social Security website.
Including the Special Retirement Supplement in TRAK
One of The Retirement Analysis Kit’s (TRAK) most innovative and unique features is the ability to easily calculate the federal retirement benefits. For FERS employees retiring before age 62, TRAK will automatically apply eligibility criteria to the projections, calculate, and include the Special Retirement Supplement for eligible employees. Just one more reason to use TRAK for all your federal clients!