The Federal Employees Retirement System (FERS) was created by Congress in 1986 as a successor to the Civil Service Retirement System (CSRS). It became effective on January 1, 1987. All new federal civilian employees since that time who have retirement coverage are covered under FERS.
FERS is a three-tiered retirement plan consisting of Social Security, basic FERS annuity, and the Thrift Savings Plan (TSP). The Social Security and the TSP components can go with the employee to his or her next place of employment if he or she leaves the federal government prior to retirement.
Federal employees covered under FERS are covered by full Social Security taxes. FERS requires federal employees to pay their individual shares each pay period as payroll deductions. Annual earnings in excess of the maximum taxable wage base are not subject to the Social Security tax.
The basic FERS annuity is based on the federal employee’s length of service and high-3 average pay. For most federal employees, the formula for computing the annual annuity is one percent of average pay for each year of credible service.
The TSP is administered by the Federal Retirement Thrift Investment Board. A TSP account is automatically set up for employees by their respective agencies. Employees may contribute up to 10 percent of their pay to the TSP. The contributions are tax deferred. The employee’s agency contributes one percent of basic pay earned for the pay period and matches a portion of the employee’s contributions. The maximum government contribution is five percent of pay.
There are a number of legal issues that may come up for federal employees with respect to FERS, including eligibility concerns, disability retirement, repayment issues, and application issues. It is important to resolve these issues with the assistance of counsel. For federal employees in the Federal Employees Retirement System (FERS) many legal issues can arise with respect to retirement eligibility and benefits.