What is my FERS contribution?
Depending on your start date, your contribution will be either be 0.8%, 3.1%, or 4.4% to FERS. The chart below breaks this down based on your start date, to show how much is going to the FERS Basic Benefit Plan and how much is going to Social Security:
[table id=3 /]
How much does my agency contribute?
The rate that your agency will contribute to your FERS has historically gone up over the years as the actuarial analysis of the pension costs has increased. As of October 1st, 2020, the rate at which your agency is responsible for contributing to your FERS is 17.3% if you were a Regular employee hired before January 1st, 2013, and 15.5% if you were hired on or after this date. If you are part of a special category of employee – including but not limited to a LEO, firefighter, Air Traffic Controller, or Congressional employee – your agency will contribute a higher percentage to your FERS. If you are a regular employee of the USPS, your agency will actually contribute slightly less to your FERS.
Can I get a refund of my FERS contributions if I leave federal service?
Yes, you can have your contributions to FERS refunded to you in the form of a lump sum payment if you leave your Government job before becoming eligible for retirement. You can choose to roll the money into another retirement account, such as an IRA or a 401(k), and not pay Federal income tax. If you choose to not roll it into another retirement account, then you would be paying income tax on the amount above $200. If you have at least 5 years of creditable service, you could also choose to just keep it in FERS by deferring retirement until age 60 or 62, depending on your years of service.
Should I ask for a refund of my FERS contributions? What are the Pros and Cons?
When our clients decide to leave their Government job, we typically don’t recommend they ask for a refund of their FERS contributions. The main reason would be because if they ever return to a Government job, whether it’s with the same agency or not, they are “locked-in” to their FERS plan that they first started in. Once a refund has been made, you cannot redeposit these funds back into FERS. Referring to the table above, your start date would show you how much your contribution rate would be into FERS. If historically the rate that federal employees contribute to their FERS has increased, it wouldn’t be out of the question to speculate that this could happen again in the future. By not taking the refund, the way the rule is written today, you would be in the same FERS program that you started with and contribute less if you returned to government service.
Sometimes we run across scenarios where a federal employee does decide to have their FERS contributions refunded. This usually happens when they truly don’t think they will ever return to work for the federal government again, whether due to age or some other reason. Instead, they would rather take that money and invest it themselves since they have no intention of ever returning back their FERS plan. This is more common when they don’t have 5 years of service yet and are not vested.
Sources:
https://www.opm.gov/retirement-services/fers-information/former-employees/