If you are a federal employee who was hired after January 1, 1984, you fall under the FERS retirement system. This is different than the Civil Service Retirement System (CSRS) in that the FERS system is known as a three-tier system. The three parts are a Basic Benefit plan, or pension, Social Security, and Thrift Savings Plan.
Basic Benefit Plan
This is considered your FERS pension. You pay into this pension each pay period. Your employing agency withholds the cost as a payroll deduction and pays its portion of this benefit as well. At retirement, you receive a set amount, regardless of how much you’ve contributed. This amount depends on your years of creditable service and your High-3 average salary.
Social Security
This benefit can be taken with you if you leave federal service before retirement. It requires you to pay into just like the Basic Benefit Plan, meaning you pay a portion, deducted from your pay each pay period. This is designed, as the other two, to replace a portion of your income in retirement.
Thrift Savings Plan
This plan can also move with you if you leave federal service. However, it is different than the other two because you decide how much of your pay is put in, how to invest, and how it’s paid out to you in retirement. This plan is similar to a 401k, is tax-deferred, and is automatically set up when you are hired. Your employing agency will make a one percent of your basic pay contribution each pay period. This contribution is not taken out of your pay and is made regardless of whether or not you contribute more. It’s free money. For the first three percent of your pay you contribute, your agency will match dollar for dollar. For the next two percent you put in, the agency matches $0.50 for every dollar you contribute. You are immediately vested in your own contributions, matching contributions, and their earnings.
These three parts work together to provide you with an income after your regular FERS retirement. To learn more about these plans, check out these websites:
