Civil Service Retirement System (CSRS)

The Civil Service Retirement System (CSRS) applies to federal employees hired before CSRS was replaced by the Federal Employees Retirement System (FERS).  While CSRS has been superseded by FERS, few federal employees under CSRS elected to convert to FERS, and there are still tens of thousands of federal employees yet to retire under CSRS.  CSRS retirement benefits are relatively generous, and the retirement age is linked to a formula which includes your age and years of service, which if 80 or more, allows you to retire.  The minimum age to retire is age 50, and the minimum years of service is 20 years.  For example, if you are 50 with 30 years of service (50+30=80), you are eligible to retire.

In the case where an agency has received authority for a reduction-in-force (RIF), and early retirement is authorized, you may elect to retire under the 80 rule, or 25 years of service at any age.  But all the penalties for retiring under age 55 apply. 

The amount of retirement benefit is a percentage of the average of your highest three years of earnings, which is a maximum of 80% at 41 years and 11 months of service.  The formula is 1.5% per year for the first five years of service, plus 1.75% per year for the next five years of service, plus 2% per year for all service over ten years. 

If you retire before age 55, there is a penalty of 2% for each year under age 55.  The penalty for early retirement is a permanent reduction in your retirement benefit.

There are also reductions for survivor benefits, if you elect them, and you must have your spouses concurrence to reject survivor benefits.  Unused sick leave may be converted to time applied towards computing your applied percentage, but not toward computing your minimum retirement age, unless early retirement under a RIF action has been authorized.

CSRS benefits, once initiated, are adjusted annually for inflation.

EXAMPLE:
Assume you were hired by the federal government at age 25 under CSRS, and planned to work for 30 years, and retire at age 55.  Your age plus years of service would be 55 + 30 = 85, which is greater than 80, so you would be eligible to retire.  Assume also that your high three average annual salary right now is $90,000.  To be conservative you leave out unused sick leave, and annual leave.  You have no spouse, so there would be no survivor benefit reduction. 

Your retirement percentage for years of service would be 56.25%  [(5x1.5%) + (5 x 1.75%) + (20 x 2%) = 56.25% ].   Your initial retirement annuity (in today's dollars) would by 56.25% x $90,000 = $50,625 per year.  Each subsequent year that amount would be adjusted upward by  a Cost-of-Living-Adjustment (COLA) calculated from the Consumer Price Index , which is the same calculation used to estimate the annual rate of inflation.

If we assume you will need 80% of your income today (.80 x $90,000), or $72,000,  to sustain the same quality of life, and you will have no other inflation-adjusted retirement income, then you supplemental retirement income need would be calculated as follows:

        R_O = R_T - R_SS - R_M  = $72,000 - 0 - $50,625 = $21,375 per year

Thrift Savings plan

CSRS allows its members to participate in a taxed-deferred thrift savings plan, but the government makes no matching contributions for CSRS participants.  The thrift savings account would be part of your supplemental retirement plan, and not part of your inflation-adjusted CSRS retirement benefit. 

CSRS and Social Security

If you have worked long enough under  both CSRS (20 years minimum) and Social Security (10 years minimum) you are eligible to draw both CSRS benefits and Social Security retirement benefits.  However, under federal Windfall Elimination legislation (also called the double-dipper elimination act) the CSRS benefits will be reduced dollar for dollar by your Social Security benefits. So there is little incentive for a CSRS employee to work and pay into Social Security.  If you want to work after you retire, do it as a contractor, or military, and not as an employee subject to FICA and Socials Security deductions. 

The Civil Service Retirement System is managed by the Office of Personnel Management (OPM).  You can contact them on line at www.opm.gov.

Federal Employees Retirement System (FERS)

The Federal Employees Retirement System (FERS) replaces the old Civil Service Retirement System (CSRS).  FERS is a combination of Social Security and a Thrift Savings Plan (TSP).  The normal Social Security benefit calculation under FERS is the same as private sector employees under Social Security.  For further information on benefit calculation, see Social Security.

However, early retirement rules under FERS are somewhat different than for the private sector Social Security.  Under FERS, the minimum age to retire is age 55, but with a 5% penalty for each year under 62.  The penalty can be avoided by deferring benefits until age 62.  In the case where an agency has received authority for a reduction-in-force (RIF), and early retirement is authorized, you may also elect to retire with either age 50 and 20 years of service, or 25 years of service at any age -- without any age penalty.  

Thrift Savings plan

FERS's taxed-deferred thrift savings plan includes matching government contributions (up to a limit).  The thrift savings account should be treated as part of your supplemental retirement port folio, and not part of your inflation-adjusted FERS's Social Security retirement benefit. 

The Federal Employees Retirement System is co-managed managed by the Office of Personnel Management (OPM) and the Social Security Administration.  You can contact OPM on line at www.opm.gov.

Railroad Retirement System

The Railroad Retirement System predates Social Security.  However, there isn't much difference today between a Railroad Retirement  benefit and a Social Security benefit.  The Railroad Retirement System is co-managed by the Railroad Retirement System Board and the Social Security Administration. 

Bear in mind that any retirement benefits from federal sources, such as the Civil Service Retirement System  and/or the Railroad Retirement System, may  proportionately reduce your Social Security retirement benefits, if any.   

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©2008, Simon Revere Mouer III
all rights reserved