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The FERS annuity supplement, also called the Special Retirement Supplement or SRS, is a valuable benefit for federal employees who plan to retire before the age 62. The supplement is only available to those who are covered by the FERS Retirement System as there is no comparable provision for CSRS employees.

For those that qualify, the FERS supplement can help bridge the income gap in your “early” retirement years. The supplement is paid monthly in addition to the “basic” FERS pension. It provides a level of income between the start of retirement and until you become eligible for Social Security at age 62.

When considering your retirement options, it’s important to understand these five common questions about the FERS supplement.

1. Who is eligible for the FERS supplement?
To receive the supplement, most FERS employees must meet the following service and age requirements:

  • At least 30 years of creditable service and reached Minimum Retirement Age (MRA)
  • At least 20 years of creditable service and reached age 60

Special provisions employees, such as law enforcement officers, firefighters, or air traffic controllers, must meet the following requirements:

  • At least 20 years of creditable service and reached age 50
  • At least 25 years of creditable service

Additionally, if you retire early under involuntary or voluntary retirement provisions due to discontinued service, reduction in force, reorganization, or transfer of function, you may be eligible to collect the FERS supplement once you reach your minimum retirement age.

Unfortunately, disability retirees, individuals at age 62 or older, and those who retire under the MRA+10 provision are not eligible for the FERS supplement.

2. How is the FERS supplement calculated?
Calculating the exact amount of your FERS supplement is complex; however, you can easily compute an estimate of your benefit by knowing your years of creditable civilian service and your age 62 Social Security benefit, which can be found on page two of your Social Security statement. If you don’t have a recent statement, you can obtain one from the Social Security website.

**The formula for estimated FERS supplement

(Years of Creditable Service ÷ 40) × Age 62 Social Security Benefit = Estimated Monthly FERS Supplement

John retires at 57, which is his MRA. He has 30 years of creditable service and his age 62 Social Security benefit is projected to be $1,600 per month.

Step 1: 30 ÷ 40 = .75
Step 2: .75 × $1,600 = $1,200
John will receive $1,200 per month until age 62.

Note: Bought back military service is typically not included in your creditable service for the FERS supplement. The only type of military time that counts for the FERS supplement is service performed during a period covered by military leave with pay or leave without pay from civilian service.

3. Can the FERS supplement be increased or reduced?
The FERS supplement is not increased by any cost of living adjustment (COLA). However, similar to Social Security income, the supplement is subject to an earnings test which may affect the payment amount from year to year. Exceeding the earnings limit may significantly reduce or eliminate your FERS supplement.

For 2021, the FERS supplement is reduced $1 for every $2 of earned income over $18,960. Earned income includes salary and wages received from full-time, part-time or contract work as well as net income from self-employment. The earnings test does not include income from pensions, annuities, investments, TSP or IRA distributions, and rental income. Additionally, the earnings cap excludes any spousal income.

Employees who retire under special provisions are not subject to an earnings limit until they reach their MRA. All supplement recipients who have reached their MRA must report their earnings to the Office of Personnel Management (OPM) each year.

In addition to a possible reduction because of excess earnings, your FERS supplement will be reduced by taxes. The entire supplement is subject to Federal taxes and taxation at the state level varies by state.

4. How do I apply and receive the FERS supplement?
There is no special application to receive the FERS supplement. If you’re eligible to receive the benefit, it will automatically be included with your FERS basic retirement pension until the month that you turn 62.

Bear in mind, the FERS supplement is not included in interim pay while retirement benefits are being processed, but any missed payments are retroactively paid. All payments are managed by OPM.

5. Am I required to start Social Security when the FERS supplement stops?
Although the FERS supplement is designed to provide income replacement until you’re eligible for Social Security at age 62, you’re not required to immediately draw Social Security when the benefit stops. You can choose to start Social Security benefits at any age between 62 and 70.

If you choose to receive Social Security benefits before you reach full retirement age, your monthly benefits will be reduced. When to draw Social Security is a personal decision that depends on several factors that may include your retirement budget, life expectancy, work income, and spousal benefits.

Similar to Social Security benefits, the FERS supplement can be an important income source in retirement. However, the supplement has limitations and it’s important to determine how it may fit into your overall retirement plan.

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Jerel Harvey

Jerel Harvey

Jerel Harvey is the Founder and Managing Principal of Fedway Financial, an advisory firm that provides financial planning, investment management, and benefits training to the federal workforce.

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