Hi. I have congressional experience and a break in service and I have just retired to the executive branch and I was wondering how the high 3 is calculated when I have 2 different 2 different work periods and different multipliers because congressional service when I was there was a 1.7 % multiplier anyway, if you could assist, I appreciate it. – Carrie.
Have you ever worked for the federal government, had a break in service, then returned, and wondered how to calculate your pension? Which years count, and how are different periods of service treated? This article addresses these questions and helps clarify the High-3 calculation and FERS multipliers.
Understanding FERS Eligibility and Service Requirements
In order to retire with the eligibility of an immediate unreduced pension, you must meet specific service requirements. These include:
- Reaching your Minimum Retirement Age (MRA) with 30 years of federal service.
- Being at least 60 years old with 20 years of federal service.
- Being at least 62 years old with five years of federal service.
Breaks in Service
If you had a break in service, the good news is that your previous federal service still counts towards your retirement, as long as you didn’t withdraw your FERS contributions when you left. This reassures you that your past service is not lost, providing a sense of security and confidence in your retirement planning. This is why it’s often advisable not to withdraw your retirement contributions. When you return to federal service, your prior years are added to your new service years to determine your eligibility to retire.
Calculating Your Pension with Different FERS Multipliers
Carrie’s question highlights a common concern: How are different periods of service calculated if they fall under different FERS multipliers?
1. Different FERS Multipliers:
- Some years of service may be calculated at a higher multiplier, such as 1.7%, while others might be at the standard 1%.
- For instance, your pension will reflect this mix if you have ten years of service calculated at 1.7% and 20 years at 1%.
2. Combining Service Periods:
- The years served at 1.7% are calculated separately from those at 1%.
- Using the example above:
- 10 years at 1.7% equates to 17% of your pension.
- 20 years at 1% equates to 20% of your pension.
High-3 Average Salary Calculation
The “High-3” refers to your highest 36 consecutive months of basic pay. It’s an essential factor in determining your pension amount.
1. Identifying Your High-3:
- This period typically occurs towards the end of your career when your salary is highest.
- Regardless of the different multipliers applied to your service years, the High-3 is calculated based on your highest consecutive 36 months of pay.
2. Applying the High-3:
- The High-3 average salary is used across all your years of service, whether they fall under the 1.7% or 1% multiplier.
- This approach ensures that your pension calculation benefits from your highest earning years.
Requesting a FERS Benefit Statement
To understand how your pension is calculated, it’s beneficial to request a FERS benefit statement. This document outlines:
- Your total years of service.
- The different periods of service and their respective multipliers.
- Your High-3 average salary.
Practical Advice
- Verify Your Records: Ensure that all your service years are accurately recorded, especially if you had a break in service.
- Understand Your High-3: Identify the period that constitutes your High-3 average salary to anticipate your pension amount.
- Consult with HR: If you have questions or discrepancies in your benefit statement, consult your HR department or a federal retirement specialist.
Conclusion
Understanding how different work periods and FERS multipliers affect your pension can be complex, especially with breaks in service. You can better anticipate your retirement benefits by clarifying the High-3 calculation and ensuring your service records are accurate.
Micah Shilanski 00:08
Have you ever worked for the federal government, had a break in service, then came back to work and wondered, how do you calculate your pension? What years count and don’t count? Well, stay tuned for this FERS Federal Fact Check. Hi, I’m Micah Shilanski from Plan Your Federal Retirement, and I’m excited because we had a caller call in with some questions about her retirement. So let’s take a quick listen to Carrie’s question.
Carrie 00:28
Hi, I have congressional experience and a break in service, and I’ve just retired to the executive branch, and I was wondering how the high three is calculated when I have two different work periods and different multipliers, because congressional service when I was there was a 1.7% multiplier. Anyway, if you could assist, I’d appreciate it. My name is Carrie. Thank you.
Micah Shilanski 00:53
Well Carrie, thank you so much for calling in, and it’s a really a wonderful question talking about that break in service now, regardless if you’re on the congressional side or not, let’s talk about some similarities on how your service is going to work. In order to retire, you must have that Minimum Years of Credible Service for Retirement, and you’ve got to have those years completely, and that’s the year so that you’re paying into this retirement system. Now the great news is it doesn’t matter if you have a break in service or not the years that you worked before, as long as you did not withdraw your funds, which is one of the reasons I say never withdraw your FERS contributions, I know we’re going to get some comments, and people disagree with that great news we have different opinions, but I like leaving your FERS retirement money in there. So if you work for the federal government, and you left your money in there, then you had a break in service, then you came back to the federal government later, how are we going to calculate those years? Well, in order to be eligible retired, let’s go under the normal rules, MRA and 30-60, 20-62, and 5, you just add up your entire years of service without the break. Did you meet one of those requirements? Did you have 30 years of service with your minimum retirement age, 20 years with at age 60 or 5 years at age 62, if that’s going to determine if you’re eligible to retire, that’s the first step. Then Carrie, the second part of your question, how are you going to compute that length of service, you have some years at a higher multiple, 1.7% versus, let’s just say 1% to make my math really easy, the way it’s going to work is the years that you worked at this 1.7% is that’s how they’re going to calculate. So let’s say you work 10 years at 1.7% you’re going to get that 10 years at 1.7% or 17% of your pension will be based on that. Then let’s say this other 20 years you worked at 1% okay, well that’s going to be the case, then you’re going to get 20 years at 1% which is 20%. Now 20% and 17% of what that’s your high three, which is another part of your question Carrie, your high three is your highest 36 months of consecutive pay. So the question is, where on this timeline were you paid more or less. So at the end of your career, let’s assume you were probably paid more, great news is that’s the high three they’re going to use to calculate your entire pension, even though you have some of this other 10 years in our example is 1.7%, great news is they’re going to use that and use your current high three the highest 36 months of consecutive pay. So it is a kind of a nice benefit that’s going to be there they don’t kind of prorate it, they don’t put it over time, it’s just that highest 36 months of consecutive pay. This is a great reason why you should be requesting a FERS benefit statement, so you can see how this information is calculated, and then make sure you understand those numbers say, if you understand them, that’s great, if you need to reach out to somebody to help you understand, an HR person, potentially us, we’re happy to chat about that, because we want to make sure you have the best benefits possible. If you have questions about your federal retirement then give us a call, shoot us a text, let us know about those questions, we would love to answer them. Until next time, Happy Planning!
