The FERS Retirement Annuity Supplement and How it is Calculated

From Ed Zurndorfer, “What is the FERS Retirement Annuity Supplement & How is it Calculated?”

The retiree annuity supplement is paid to certain FERS-covered employees who retire before age 62 and who are entitled to an immediate FERS annuity. The general purpose of the supplement is to provide a level of income to a FERS annuitant before the annuitant reaches age 62.

To help better understand what the FERS retiree annuity supplement is and how it fits into the overall FERS retirement, the FERS retirement consists of three components, namely: (1) The FERS annuity; (2) the Thrift Savings Plan (TSP), and (3) Social Security. A FERS employee who retires between minimum retirement age (MRA) and age 62 (under a regular retirement) will receive the FERS annuity and can elect to receive penalty-free (no 10 percent penalty) TSP income starting as early as age 55. But the earliest age an individual can receive Social Security retirement benefits is age 62. For a pre-age 62 FERS retiree, the FERS retiree annuity supplement fills that “gap” of Social Security income.

Eligibility for the Retiree Annuity Supplement

A FERS employee is immediately eligible for the retiree annuity supplement if:  (1) The employee has at least one calendar year of FERS service; and (2) retires with entitlement to an immediate FERS annuity. An immediate annuity would occur if the employee retires: (a) at or after MRA with at least 30 years of service; (b) at age 60 with at least 20 years of service; (c) under one of the special provisions for law enforcement officers, firefighters, air traffic controllers or military reserve technicians; or (d) at MRA under early retirement provision or at MRA under discontinued service (involuntary) retirement provision.

Some FERS-covered employees who retire before their MRA are eligible for the FERS annuity supplement when they reach their MRA, including those employees: (1) with discontinued involuntary service retirement; (2) with early retirement due to a major RIF, reorganization, or transfer of function; (3) members of Congress; and (4) with early retirement for members of the Senior Executive Services, Defense Intelligence Senior Executive Services, and FBI and DEA Senior Executive Services. FERS employees who retire under the following categories are not eligible for the FERS retiree annuity supplement: (1) Employees who retire on disability: (2) eligible retirees under the “MRA + 10” (“postponed retirement”) provision; (3) employees who are eligible only for a deferred annuity; and (4) employees retiring at age 62 or later.

Also, in order to be eligible for the FERS annuity supplement, a FERS-covered employee must have at least one full calendar year of civilian service creditable under FERS computation rules. An employee who serves uninterrupted from

January 1st through December 30th or 31st is considered to have performed a “calendar year” of service for this purpose. OPM calculates the retirement annuity supplement based on the employee’s Social Security earnings history as a FERS employee.

Note that military service cannot be counted in determining FERS service unless it is a period of military service covered by military leave with civilian pay. FERS service includes civilian service in which the employee contributes to the FERS Retirement and Disability Fund via payroll deduction. Any “bought-back” temporary (civilian) service is also included in the calculation of the FERS annuity supplement.

Starting and Ending Date of the FERS Annuity Supplement

The FERS annuity supplement is paid monthly by the Office of Personnel Management (OPM). For an eligible FERS annuitant, the annuity supplement starts the same month as the FERS annuity.

The retiree annuity supplement is payable through the earlier of the following dates: (1) the last day of the month in which the FERS annuitant becomes age 62; (2) the last day of the month before the first month for which the annuitant would, upon proper application, be entitled to Social Security benefits. For retirement and Social Security purposes, an individual attains or becomes age 62 on the “first moment” of the day before his or her 62nd birthday. That means if an annuitant’s

62nd birthday is on June 1st, then he or she becomes age 62 on May 31st. Any “fully insured” individual is entitled to Social Security retirement benefits beginning on the first of the month following the month throughout which he or she is age 62.

Example 1. Joseph’s 62nd birthday was Mar. 1, 2019. His retiree annuity supplement stopped on Feb. 28, 2019, whether or not he is entitled to Social Security benefits because he attained age 62 on Feb. 28, 2019.

Example 2.  Francine’s 62nd birthday was Mar. 3, 2019. She will be eligible for Social Security benefits beginning in May 2019 because April 2019 is the first full month throughout which she will be age 62. Therefore, Francine’s retiree annuity supplement stops on Mar. 31, 2019. This is because Mar. 31, 2019 is the earlier of the last day of the month Francine becomes age 62 (Mar. 31, 2019) and the last day of the month preceding the month Francine becomes eligible for Social Security benefits (Apr. 30, 2019).

*** Written by Edward A. Zurndorfer, who is a Certified Financial Planner™, Chartered Financial Consultant, Chartered Life Underwriter, Certified Employee Benefits Specialist and Enrolled Agent in Silver Spring, MD. He is the owner of EZ Accounting and Financial Services, an accounting, tax preparation and financial planning firm also located in Silver Spring, MD.  He is a seminar speaker at Federal employee retirement seminars throughout the country for the National Institute of Transition Planning, Inc. He is also a weekly columnist for Raymond James is not affiliated with and does not endorse the opinions or services of FEDZONE or Edward A. Zurndorfer or any of the above listed organizations. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer and/or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While the employees of Serving Those Who Serve are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Telephone number, 301-681-1652. 

FERS Retirement Annuity