How the Federal Employee Pension System Works



How the Federal Employee Pension System Works

Jul 13, 2010 Mark Butler

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Federal Pension Rules are Published by OPM - US Government

Federal employment comes with a federal pension. So how is the pension calculated? That depends on the employee's time in federal service and the grade.

While there will always be those who decry the public servant, the reality is that the federal government needs dedicated employees to serve the public and accomplish what the lawmakers direct and fund. The advantages of federal employment include a pension, vacation time and a generous sick leave policy. Not all jobs are in Washington, DC and getting a federal job isn’t easy, even for a veteran with preference. Before seeking out a federal job, it is best to understand things like pensions and leave accrual. This article discusses how the federal pension plan works.

The Federal Employee Retirement System (FERS)

Unlike many jobs in the private sector, government workers, including federal employees enjoy a pension system that provides for some level of lifetime earnings in exchange for public service. For federal employees this is theFederal Employee Retirement System (FERS) and with the Thrift Savings Plan (TSP) and Social Security, a federal employee can have a reasonable retirement. Enrollment in FERS is automatic for new federal employees, and it comes at a cost of 1 percent of salary as the employee’s contribution to the pension plan. The federal government picks up the rest of the cost.

The pension a federal employee earns is 1 percent of salary for each year of federal service and it is based on the average of the highest 36 months of federal pay. In order to retire with this amount, the federal employee must meet one of four different ways as published by OPM. Some of these involve a term called Minimum Retire Age (MRA) which is between 55 and 57 depending on the year of birth.

Read more at Suite101: How the Federal Employee Pension System Works

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