Understanding the Federal Employee Retirement System or FERS
The Federal Employee Retirement System is a government program that allocates retirement benefits for civilian US federal government workers. Replacing the Civil Service Retirement System in January 1987, FERS was created through a law passed in 1986 by the US Congress, and has since allowed government retirees to claim annuity-based benefits when they reach the minimum retirement age.
To perform its functions, FERS makes use of three channels that make it accessible to its intended beneficiaries:
1. Thrift Savings Plan
The Thrift Savings Plan, which comes under the auspices of the Federal Retirement Thrift Investment Board, serves as a savings account where employers make contributions for their employees at 1% of their base pay. To grow their retirement fund and maximize their benefits, employees can also add tax-deferred contributions to their accounts alongside a certain percentage that will be contributed by their employers. When workers reach retirement age, they will then have access to their TSP sans tax implications.
2. Social Security
FERS' Social Security channel works as a social insurance scheme where workers receive a variety of retirement, disability and other financial benefits. In cases where a retiree passes away, Social Security can also provide financial aid to the surviving spouse or family. Funding for the system is obtained through government-mandated Federal Insurance Contributions Act (FICA) deductions, or simply tax deductions from both government workers and their employing government agencies.
3. Basic Benefit Plan
The Basic Benefit Plan, known commonly as a pension plan, is a defined benefit scheme under FERS where federal employees, for each year they remain on the job, accrue part of their monthly retirement benefits, depending on their current earnings. The more years they remain working with the federal system, the more monthly benefits they will be receiving by the time they reach minimum retirement age. Even if workers leave prior to reaching MRA, they may still claim a specific portion of their accrued monthly benefits when they actually retire.
In cases where federal employees resign and work for other employers, they will be allowed to bring their TSP as well as their Social Security benefits over to their new job. The only condition being that a person continues to be in active employment, his Social Security benefits will keep accruing while his TSP will be converted into a 401(k). The Basic Benefit Plan, however, is strictly for federal employees. This means, if they leave the federal government system, they will not be able to take the plan with them, and their benefits cease to accrue.
Majority of federal workers hired on January 1, 1984 onward are automatically eligible for FERS, while those who were hired or rehired any time from January 1, 1984 to December 31, 1986 were absorbed into the program by January 1, 1987. Rehires who entered the federal system before December 31, 1983 and had worked a minimum of 5 years in civilian service by December 31, 1986 have the option to stay in the Civil Service Retirement System or switch to FERS not later than six months after being rehired. All employees covered by FERS or want to move to FERS from CSRS will stay FERS-covered.
To perform its functions, FERS makes use of three channels that make it accessible to its intended beneficiaries:
1. Thrift Savings Plan
The Thrift Savings Plan, which comes under the auspices of the Federal Retirement Thrift Investment Board, serves as a savings account where employers make contributions for their employees at 1% of their base pay. To grow their retirement fund and maximize their benefits, employees can also add tax-deferred contributions to their accounts alongside a certain percentage that will be contributed by their employers. When workers reach retirement age, they will then have access to their TSP sans tax implications.
2. Social Security
FERS' Social Security channel works as a social insurance scheme where workers receive a variety of retirement, disability and other financial benefits. In cases where a retiree passes away, Social Security can also provide financial aid to the surviving spouse or family. Funding for the system is obtained through government-mandated Federal Insurance Contributions Act (FICA) deductions, or simply tax deductions from both government workers and their employing government agencies.
3. Basic Benefit Plan
The Basic Benefit Plan, known commonly as a pension plan, is a defined benefit scheme under FERS where federal employees, for each year they remain on the job, accrue part of their monthly retirement benefits, depending on their current earnings. The more years they remain working with the federal system, the more monthly benefits they will be receiving by the time they reach minimum retirement age. Even if workers leave prior to reaching MRA, they may still claim a specific portion of their accrued monthly benefits when they actually retire.
In cases where federal employees resign and work for other employers, they will be allowed to bring their TSP as well as their Social Security benefits over to their new job. The only condition being that a person continues to be in active employment, his Social Security benefits will keep accruing while his TSP will be converted into a 401(k). The Basic Benefit Plan, however, is strictly for federal employees. This means, if they leave the federal government system, they will not be able to take the plan with them, and their benefits cease to accrue.
Majority of federal workers hired on January 1, 1984 onward are automatically eligible for FERS, while those who were hired or rehired any time from January 1, 1984 to December 31, 1986 were absorbed into the program by January 1, 1987. Rehires who entered the federal system before December 31, 1983 and had worked a minimum of 5 years in civilian service by December 31, 1986 have the option to stay in the Civil Service Retirement System or switch to FERS not later than six months after being rehired. All employees covered by FERS or want to move to FERS from CSRS will stay FERS-covered.
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