Federal Employees Retirement System (FERS) is a retirement system for the civilian employees working in the Federal Government of the United States. It was created by congress in 1986 and became effective on the 1st of January in 1987. It has been covering the retirement coverage of all Federal civilian employees ever since.
Major Plans offered by FERS:
FERS is a three-tiered retirement plan that consists of following major components:
- Social Security
- Basic Benefits Plan
- Thrift Savings Plan
Employees that are covered under the FERS are required to pay into Social Security funds similar to the rate of private employees. It benefits the employees based on their individual and family maximums. A percentage of your salary is deducted each month up to a specified amount.
A person who is enrolled in social security has to pay 6.2% of his earnings and the agency will be paying its part equally as well.
Basic Benefits Plan
Under this plan after retirement, FERS will pay you monthly benefits based upon the time period you’ve worked under FERS, your income, and the age you retire. Based on that, it is also known as a monthly annuity. In this plan, the employees pay 0.80% of their basic pays.
Thrift Savings Plan
TSP is the largest defined tax-deferred contribution plan in the world. The employee benefitting from this plan gets to decide how much amount he would like to place in his thrift account, how to invest it, and, after retiring, how he wants his money to be paid. The thrift account is automatically set up by the agency. TSP helps the beneficiaries save part of their income for retirement, acquire matching agency contributions, and reduce their current taxes.
Eligibility Criteria for FERS
The eligibility criteria for FERS is generally based on the age of the one seeking to benefit from it and the number of years he has spent in creditable service. You need to have reached Minimum Retirement Age (MRA) to be eligible for FERS.
Types of Retirement
Disability retirement is granted if the employee with the disability has completed 18 months of Federal civilian service. The disability must be expected to last at least one year. The employee meeting the requirements may receive benefits from all three parts of his retirement plan.
It is granted to the employee retiring at Federal MRA which is 57 years for anyone born after 1969. Retirement taken earlier due to discontinued service owing to involuntary separation can also be included in this.
Voluntary retirement is granted to the employee seeking to be retired before his maximum working age given that he meets the requirements set for his case. It can be sought at the age of 55 or with 25 years of service.
Deferred retirement is granted to the former federal employee meeting the following age and service requirements:
- 62 years of age with 5 years of service
- 60 years of age with 20 years of service
- Minimum retirement age (MRA) with 30 years of Service, or
- MRA with 10 years of Service (but with reduced social benefits).