ROAD TO RETIREMENT
Te CSRS program is a defined benefit that guarantees an income to an employee throughout their retirement years through designated annuity payments. Employ- ees covered by CSRS contribute 7, 7.5 or 8% of their pay with the employee’s agency matching those contributions. Annuities are determined by an employ- ee’s age, length of service and an average of the highest three years of base salary, commonly referred to as the “high-3.” Once the average high-3 salary is deter- mined, a formula is applied using different percentages based on years of service to calculate the annuity amount: 1.5% of the average high-3 for the first five years; 1.75% for the next five years; then 2% for all years greater than 10, with the maxi- mum benefit received being 80% of the high-3 salary. For those covered by CSRS, the minimum retirement age (MRA) is 55 with at least 30 years of civil service, age 60 with at least 20 years of service or age 62 with at least five years of service. If you retire before the age of 55, the annu- ity is reduced by 1/6 of a percent for each month under age 55.
Employees covered by this plan gener- ally do not contribute to Social Security and, therefore, are not eligible for Social Security retirement benefits. However, an employee may be eligible for Social Secu- rity benefits if they previously held other jobs that required a Social Security tax contribution.
FERS was enacted in 1987 as a replace- ment
to CSRS. All federal civilian
employees hired after this date are covered by FERS, which is both a defined benefit and a contributory retirement plan. It is designed as a three-part retirement system that includes a basic pension plan, Social Security benefits and the Trift Savings Plan (TSP). FERS employees have Social Security deducted from their pay, which entitles them to Social Security benefits
84 Army AL&T Magazine Summer 2025
upon retirement. Tey also contribute a portion of their salary towards their FERS pension plan. Te amount with- held depends on when the employee was hired: Employees hired prior to 2013 contribute 0.8% of their salary, employees hired in 2013 contribute 3.1% and those who were hired in 2014 or later contribute 4.4%. Agencies also contribute a percent- age towards their employees’ FERS.
Similar to CSRS, the FERS plan has a calculated annuity based on length of service and an employee’s average high-3 salary; however, the annuity is calculated using a different formula. Employees under the age of 62, or employees who
are 62 or older with less than 20 years of service, are entitled to 1% of their high-3 salary for each year of service. If an employee retires at age 62 or older with more than 20 years of service, they are entitled to 1.1% of their average high-3 for each year of service. In addition, those covered by FERS must meet an MRA, which is determined by birth year. If you decide to retire at your MRA with at least 10 years of service, but less than 30, your annuity will be reduced.
To supplement Social Security and the FERS basic pension plan, employees may also contribute to the TSP—the federal government’s version of a 401(k) plan,
MAP OUT YOUR PLANS
It is never too early to begin your retirement plan. Determine how much you will need to be financially secure and ensure that you properly carry over your health and life insurance. Don’t forget to designate beneficiaries for all your accounts. (Photo by
Rawpixel.com, Shutterstock)
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