If you are covered by FERS and retire before age 62, you may be eligible for a pension supplement called the Special Retirement Supplement (SRS), also known as the FERS Supplement. Because Social Security is a key component of your FERS pension, the SRS is designed to bridge the gap between when you retire and when you become eligible for Social Security (age 62). The SRS can be confusing, so we will review the key components such as the eligibility, amount, and earnings test for the supplement, as well as the options available to special category employees (i.e., air traffic controllers, law enforcement, and firefighters).
Eligibility
To be eligible for the SRS, you must be under age 62 and eligible for immediate retirement. Those eligible usually belong to three groups:
- Those that retire with 30 years of service at their MRA (minimum retirement age), or
- Those who retire with 20 years of service at age 60, or
- Special Category Employees that retire as early as age 50 with 20 years of covered service or any age with 25 years of covered service.
Note: Employees who retire under the MRA+10 provision, deferred retirement, or disability retirement aren’t eligible for the SRS.
Benefit Amount
To estimate your SRS, take your Social Security benefit estimate at age 62, divide it by 40, and then multiply the result by the number of years you’ve been a FERS employee (rounded to the nearest whole number).
(Years of Creditable Service ÷ 40) × Your Age-62 Social Security Benefit = Your Estimated FERS Supplement
For example:
Juan retires on his 60th birthday after 30 years of service.
His age-62 Social Security benefit is projected to be $2,000 per month.
30 ÷ 40 = 0.75
0.75 × $2,000 = $1,500
Juan’s estimated SRS benefit is about $1,500 per month until age 62.
Note: Keep in mind that the FERS supplement is taxable income and doesn’t include cost-of-living adjustments (COLA). You can obtain your estimated social security benefit by creating an online Social Security account.
Earnings Test
Like Social Security benefits, your SRS is subject to an earnings test. If you have earnings from wages or self-employment that exceed the Social Security annual earnings limit, your SRS will be reduced or stopped until your earnings fall below the threshold. The earnings limit for 2020 is $18,240, and for every $2 that exceeds this limit, your SRS will be reduced by $1. Keep in mind that the earnings test does not include investment income, rental income, or TSP and IRA distributions.
Note: If you’re a special category employee, you do not have a wage limit. Meaning regardless of how much you earn, your supplement will not be reduced or stopped until you reach your Minimum Retirement Age (MRA). Once you reach your MRA, you’ll be subject to the earnings limit, just like any other FERS retiree.
Special Category Employees
The FERS SRS is especially significant to special category employees who must retire early, such as air traffic controllers, law enforcement, firefighters, customs and border protection officers, and nuclear materials couriers. These designated employees have a mandatory retirement age due to the high physical demands required of their positions. The mandated retirement age for most of these employees is 57 or 56 for air traffic controllers.
The SRS is generally payable at retirement for these employees when they retire as early as age 50 with 20 years of covered service or even earlier with 25 years of covered service.
Final Thoughts
The FERS supplement is a generous pension benefit that can help you achieve your retirement goals. However, you must understand the supplement’s basic components so that you can make informed decisions. Since retiring “early” from the Federal Government doesn’t always mean you’ll no longer work, doing the planning to weigh your options and how continuing to work impacts your supplement can go a long way. If you don’t feel confident in creating your financial plan or want a professional opinion, you should consult with a qualified financial planner.
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2023 Legislative Change Notice
The SECURE ACT 2.0 passed and impacted many of the articles on this website. While the articles were correct when written, it’s impossible to re-write every article. Please consult a qualified professional (i.e., CFP®, CPA, or attorney) before implementing any strategy.
