FERS Supplement and Earnings Limitations

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August 2023 I will turn 62 and stop receiving the OPM Social security . After August for the remainder of 2023 will I still be subject to the earnings limitation? I don’t plan to start drawing actual social security. ” – Ed.

Is the FERS Supplement Subject to the Social Security Earnings Test?

Yes, the  FERS Annuity Supplement, sometimes called the FERS Special Supplement, is subject to the earnings limitation that the Social Security Administration (SSA) imposes. 

Let’s explore how this works for those retiring when they have reached their Minimum Retirement Age (MRA) under the Federal Employee Retirement System (FERS) but have NOT reached the Full Retirement Age (FRA) according to Social Security. 

In this article, we will walk you through some essential FERS retirement concepts that you will need to understand to determine what if any, amount of income you receive will reduce your FERS Special Supplement.

When can you retire from FERS?

When it comes to determining your retirement eligibility under the Federal Employee Retirement System, there are a few components that make up your retirement benefits:

  • Minimum Retirement Age 
  • Credible Service 
  • High Three

Minimum Retirement Age (MRA) under FERS

Under the Federal Employees Retirement System (FERS) in the United States, the minimum retirement age (MRA) is the age at which federal employees can retire with certain benefits, including an immediate annuity. The MRA varies depending on your birth year, and it falls between 55 and 57.  MRA is determined by your birth year, unrelated to the year you started federal service. 

Here’s a breakdown of the minimum retirement age based on birth year for FERS employees:

  • If you were born before 1948, your MRA is 55 years old.
  • If you were born in 1948, your MRA is 55 years and 2 months old.
  • If you were born in 1949, your MRA is 55 years and 4 months old.
  • If you were born in 1950, your MRA is 55 years and 6 months old.
  • If you were born in 1951, your MRA is 55 years and 8 months old.
  • If you were born in 1952, your MRA is 55 years and 10 months old.
  • If you were born in 1953 or later, your MRA is 56 years old.

 

It is possible to retire before you reach your MRA; however, your benefit will most likely be reduced.

As you can see, retiring when you reach your MRA, can occur before you are eligible to receive benefits under Social Security.  There are 3 important ages that the Social Security Administration uses to calculate your benefits; more on those in a minute, but first, let’s finish out how your FERS retirement is calculated.

Credible Service

The second component in determining your eligibility for retirement benefits under FERS is your credible service. 

Creditable service is used to determine when you are eligible to retire. In conjunction with your MRA, you must determine how many credible years of service you have in FERS.

Remember that you are specifically looking for your Retirement Service Computation date which can be found on your Certified Summary of Federal Service, NOT your Service Computation Date, used for calculating sick leave.

Your High Three (hi-3) under FERS

Determining your high three is the third aspect of calculating your retirement under FERS. Your high three is the three consecutive years in which your earnings are the highest. For most people, that will be the later part of their career, even perhaps, their last three years. However, it does not have to be.  If you have transferred to another position or taken a pay cut, it may not be.

When does your FERS Special Supplement Start?

If you retired after achieving your MRA but before age 62, you will most likely receive your FERS Special Supplement from the Office of Personnel Management (OPM).

Your FERS Supplement will start when you retire and automatically stop when you reach age 62. Don’t worry about telling OPM you have reached age 62 and you need your FERS Special Supplement to stop – they are really good about remembering that.

Three Most Important Ages You Need to Know for Social Security

One of the most frequent conversations we have with federal government employees is, “Should I take my social security when I am first eligible to do so?”

There are 3 critical ages you need to know about social security.

  • Age 62
  • Your Full Retirement Age (FRA)
  • Age 70

 

Age 62 is the earliest you can start drawing on social security benefits. However, this will result in a permanently reduced benefit. Just because you CAN draw social security benefits at age 62 does not mean that you necessarily SHOULD.

Your Full Retirement Age (FRA) is the number the Social Security office uses to determine when you are eligible for your full benefits. This number is based on your date of birth. When you reach your FRA and draw social security benefits, you will receive 100% of your social security benefits.

The next age that you need to be aware of when it comes to determining your social security benefits is age 70.  When you delay your benefits from FRA to age 70, the latest age that you can draw benefits, you will receive an increase in your benefits for delaying.  This might be an advantageous strategy for FERS employees who want to maximize their retirement benefits.

How does FERS Special Supplement tie into MRA / FRA?

Under FERS, you can retire from federal service when you reach your minimum retirement age. For many federal employees, that could be age 56. However, you can only draw social security benefits once you reach age 62 at the earliest. 

To fill this gap between when you can retire from federal service and when you can draw your social security benefits, OPM sends federal employees the FERS Special Supplement. 

The FERS Special Supplement supplements your retirement income until you can draw social security. Remember, though just because you CAN draw social security at age 62 does not mean you should. This is a cash flow question.  You want to ensure that you have a strategy maximizing your benefits.

The Social Security Administration imposes an earnings limitation on individuals receiving benefits. Every year, the SSA publishes what those limitations are.  

If you are receiving social security benefits and earn over the published amount, your social security benefits are reduced $1 for every $2 you go over the limit. 

The same is true of the benefits that you receive from the FERS Special Supplement. If you are receiving the FERS Special Supplement, your benefits are reduced $1 for every $2 you go over the limit. 

Your FERS pension is not affected by the earnings limitation.

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