CSRS and FERS: Understanding the U.S. Government's two retirement systems.
There are several significant differences between these two systems.
Federal Employee’s Retirement System (FERS)
FERS is for federal employees hired after December 31, 1983
The Federal Employees Retirement System is the primary mechanism for US government employees to save for retirement. It consists of three components:
- Your pension
- A savings plan
- Social Security
FERS was created by the US Congress in 1986 and became effective at the beginning of 1987. It was meant to replace the Civil Service Retirement System that Federal Employees participated in before January 1, 1987.
Here are the basics on FERS:
- The retirement Annuity is based on a formula after meeting age and service requirements. Payable at age 60 with 20 years; age 62 with 5 years, or at minimum retirement age (MRA – age 55 going to age 57 by 2026) with 30 years.
- Most FERS employees pay 0.8% plus 6.2% Social Security (7%), toward their retirement Annuity. Medicare tax (1.45%) paid in addition.
- At retirement, you may elect whether your surviving spouse will receive 50% or 25% of your retirement annuity when you die.
The Civil Service Retirement System (CSRS)
The Civil Service Retirement Act, which became effective on August 1, 1920, established a retirement system for certain Federal employees. It was replaced by the Federal Employees Retirement System (FERS) for Federal employees who first entered covered service on and after January 1, 1987.
Here’s are the basics on CSRS:
- The Civil Service Retirement System (CSRS) is a defined benefit, contributory retirement system.
- Employees share in the expense of the annuities to which they become entitled.
- CSRS-covered employees contribute 7, 7 1/2 or 8 percent of pay to CSRS and, while they generally pay no Social Security retirement, survivor and disability (OASDI) tax, they must pay the Medicare tax (currently 1.45 percent of pay).
- The employing agency matches the employee’s CSRS contributions.
- CSRS employees may increase their earned annuity by contributing up to 10 percent of the basic pay for their creditable service to a voluntary contribution account.
- Employees may also contribute a portion of pay to the Thrift Savings Plan (TSP). There is no Government contribution, but the employee contributions are tax-deferred.
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