FERS Accrual & High-3

I Where the FERS pension sits in your retirement

The Federal Employees Retirement System was designed in 1986 as a three-part structure: a modest defined-benefit annuity, Social Security, and the Thrift Savings Plan. Congress deliberately made the FERS annuity smaller than the CSRS pension it replaced, on the theory that the TSP with an agency match and full Social Security coverage would make up the difference. That theory holds only if you actually fund the TSP. For a federal employee contributing 5% and no more, the annuity does most of the heavy lifting and the retirement is thin. For an employee maxing the TSP across a full career, the annuity is often the smallest of the three legs — and still the most valuable, because it is the only one that is guaranteed, inflation-adjusted, and payable for life regardless of market conditions.

That guarantee is why the accrual mechanics deserve more attention than they usually get. A TSP balance can be rebuilt after a bad decade. A FERS annuity is fixed at the moment you separate: the High-3 is locked, the service is counted, the multiplier is determined by your age and years on that date, and any age reduction applied is permanent. There is no correcting it later. The decisions that set those variables — when you separate, whether you bought back military time, whether you burned your sick leave balance in your final two years — are made years in advance and are irreversible once the paperwork clears.

This article covers the annuity itself. The companion pieces cover the other two legs: Topic 12 on TSP contribution strategy for the 2026 limits and the agency match, Topic 13 on Traditional vs Roth for the tax-treatment decision, and Topic 14 on fund allocation for the investment side. Social Security for federal employees, including the 2025 repeal of WEP and GPO, is covered separately in the Social Security and WEP/GPO guide.

II The formula — three inputs, one number

The FERS basic annuity is defined at 5 U.S.C. 8415. Stripped to its essentials:

The same three inputs produce very different outcomes, and the leverage is not evenly distributed. High-3 is largely determined by your grade and locality trajectory over a career — you can influence it, but slowly. Years of service accumulate at a fixed rate of one per year, plus whatever you add through military buyback or sick leave. The multiplier, by contrast, is a binary switch that flips on a single day. That asymmetry is why the age-62 question dominates most FERS retirement-date analysis.

Special category employees use a different multiplier

Law enforcement officers, firefighters, air traffic controllers, and certain other special-category positions accrue at 1.7% for the first 20 years of covered service and 1.0% for each year beyond that. They are also subject to earlier eligibility (age 50 with 20 years of covered service, or any age with 25 years) and to mandatory separation, generally at age 57. If you are in a covered position, every calculation in this article still applies except the multiplier and the eligibility ages. Special-category employees also receive COLAs regardless of age, which is a meaningful advantage discussed in section XII.

III High-3 mechanics — what counts and what does not

Your High-3 is the average of your highest 36 consecutive months of basic pay. Two details in that sentence carry most of the weight.

Consecutive, not calendar. The 36 months must run without a gap, but they do not have to align to calendar years and they do not have to be your final three years. If you took a downgrade, moved to a lower-locality area, or accepted a term position at reduced pay late in your career, an earlier 36-month window may produce a higher average. OPM computes the window that yields the highest figure. This matters more than most employees realize for anyone who relocated from a high-locality area — a GS-13 who moves from San Jose (with a locality rate above 46%) to a Rest of U.S. duty station takes a pay cut of roughly $30,000 that flows directly into the annuity calculation if the move happens within three years of retirement.

Basic pay only. The High-3 includes base salary and locality pay. It also includes certain special rate supplements, law enforcement availability pay, and — for covered employees — certain premium pay categories authorized by statute. It excludes overtime, bonuses, performance awards, recruitment and retention incentives, night differential for most General Schedule employees, Sunday premium, hazard pay, cash awards, and travel reimbursements. A GS-13 who earns a $10,000 performance award every year for a decade has added nothing to their High-3.

The practical implication for anyone within five years of retirement: a promotion or a quality step increase that raises basic pay is worth substantially more than an equivalent one-time award, because the pay raise compounds into the High-3 and then into every annuity payment for life. A $6,000 raise sustained through the final three years raises the High-3 by roughly $6,000, which at 30 years of service and a 1.1% multiplier adds about $1,980 per year to the annuity — permanently, with COLA. A $6,000 award is $6,000, once, taxed as supplemental wages. The High-3 Estimator models the difference across a projected career trajectory, and the 2026 GS Pay Calculator gives you the basic-pay figures for all 58 locality areas that feed it.

Part-time service and the proration rule

Part-time service is handled with a proration factor. OPM computes the High-3 as if you had worked full time for those periods, then multiplies the resulting annuity by the ratio of hours you actually worked to full-time hours over your career. The effect is that part-time service reduces the annuity proportionally without depressing the High-3 average itself. Employees who move to part-time schedules late in a career should model this carefully — the proration applies to the full career, not just the part-time years.

IV Creditable service, deposits, and sick leave conversion

Creditable service is the second input, and it is where most of the recoverable money hides. Four categories feed it.

FERS-covered civilian service. Every year in a position covered by FERS, with retirement contributions withheld from your pay, counts automatically. Your contribution rate depends on when you were hired: 0.8% of basic pay for employees first covered before 2013, 3.1% for FERS-RAE employees first covered during 2013, and 4.4% for FERS-FRAE employees first covered in 2014 or later. The rate has no effect on the benefit — a FRAE employee paying 4.4% earns exactly the same annuity as a legacy employee paying 0.8%.

Military service, if you buy it back. Active-duty military service counts toward FERS only if you make a deposit — generally 3% of your military basic earnings, plus interest if you miss the interest-free grace period. For most veterans the deposit pays for itself within a few years of retirement. The full ROI analysis, the interest-accrual timeline, and the interaction with military retired pay are covered in Topic 15 on military buyback, with the numbers modeled in the Military Buyback Calculator.

Non-deduction and refunded civilian service, if you deposit or redeposit. Temporary appointments, WAE positions, and other non-deduction service before 1989 can be purchased through a civilian deposit. Service you were refunded for after separating can, in some cases, be repurchased through a redeposit. The rules, interest calculations, and the question of when it is actually worth paying are covered in the civilian deposits and redeposits guide.

Unused sick leave. At retirement, your unused sick leave balance converts to creditable service at 2,087 hours per year — the same figure OPM uses for the annual work-hours divisor. That works out to roughly 174 hours per additional month of credit. A balance of 1,044 hours adds about six months. A balance of 2,087 hours adds a full year.

That asymmetry produces a clear planning rule for the final years of a career: annual leave is paid out in cash at separation, sick leave is not. If you are choosing which to use for a discretionary absence in your last three years, use annual leave sparingly and sick leave only when you genuinely need it, because every unused sick hour converts to annuity and every unused annual hour above the carryover ceiling is lost. Leave mechanics, carryover limits, and the use-or-lose calculation are covered in the Benefits pillar's leave guidance.

How OPM counts partial years

OPM computes service in years, months, and days, then converts to a decimal. Odd days beyond a full month are dropped from the annuity computation — they do not round up. An employee with 29 years, 11 months, and 20 days of service is credited with 29 years and 11 months, or 29.9167 years. On a $120,000 High-3 at the 1.1% multiplier, that discarded 20 days is worth about $220 per year for life. Separating on a date that completes the month is free money, and it is the most commonly missed detail in retirement-date selection.

V The 1.0% vs 1.1% multiplier and the age-62 threshold

Under 5 U.S.C. 8415(i), a FERS employee who separates at age 62 or older with at least 20 years of creditable service earns a 1.1% multiplier instead of the standard 1.0%. Both conditions must be met. Age 62 with 19 years gets 1.0%. Age 61 with 30 years gets 1.0%. Age 62 with 20 years gets 1.1%.

The increase applies to every year of service, not merely the years above 20. That is what makes it a 10% permanent raise rather than a marginal adjustment. And because COLAs are applied as a percentage of the annuity, the dollar gap between the two multipliers widens every year of retirement.

Over a 25-year retirement with 2% annual COLAs, the $120,000 High-3 with 25 years of service is worth roughly $96,000 in additional lifetime annuity — before accounting for the survivor benefit, which is computed on the higher base as well.

The practical decision usually comes down to a matter of months. An employee who reaches 20 years of service at age 61 and 8 months faces a choice between separating then at 1.0% or working four more months to separate at 62 and collect 1.1% for life. Four months of additional salary plus a permanent 10% annuity increase is not a close call. The same logic applies to an employee who turns 62 with 19 years and 4 months — eight more months of work converts the multiplier and adds eight months of service credit on top.

Two traps are worth naming. First, sick leave does not help you reach the 20-year threshold, so an employee sitting at 19 years and 9 months of actual service with a large sick balance still has three months to go. Second, the multiplier is determined by your status at separation, not at the date your annuity starts. A postponed retiree who separates at 57 with 25 years and starts the annuity at 62 is still on the 1.0% multiplier — postponing the annuity start avoids the age reduction but does not earn the 1.1%.

VI Minimum Retirement Age and the four eligibility doors

Your Minimum Retirement Age is a function of birth year and nothing else. It rose from 55 to 57 in two-month increments as the FERS cohort aged, and for the overwhelming majority of the current federal workforce it is 57.

MRA by itself is not a retirement date. It is a gate that opens two of the four doors to an immediate annuity. The four combinations under 5 U.S.C. 8412:

• MRA with 30 years of service — immediate, unreduced annuity. Eligible for the FERS supplement.
• Age 60 with 20 years of service — immediate, unreduced annuity. Eligible for the FERS supplement.
• Age 62 with 5 years of service — immediate, unreduced annuity. Gets the 1.1% multiplier if service is also at least 20 years. No supplement, because you are already Social Security eligible.
• MRA with 10 years of service — immediate but reduced annuity, at 5% for each year you are under 62. No supplement. Covered in detail in the next section.

Two additional pathways exist outside the standard four. VERA (Voluntary Early Retirement Authority) must be offered by your agency during a reorganization, RIF, or restructuring, and requires age 50 with 20 years of service or any age with 25 years. VERA retirees receive an unreduced annuity and are eligible for the FERS supplement at MRA, which makes it a substantially better deal than MRA+10 when it is on the table. Discontinued service retirement applies to involuntary separations at the same age-and-service thresholds. Both are situational, agency-driven, and cannot be planned around — but if a RIF notice lands, knowing the thresholds is the difference between a reduced annuity and a full one. The Workplace pillar covers RIF mechanics and the timing of separation offers.

VII MRA+10 and the 5%-per-year reduction

If you reach MRA with at least 10 years of service but fewer than 30, and you are under 60 with fewer than 20 years, you can retire immediately on a reduced annuity. The reduction is 5% for each year you are under age 62, prorated monthly, and it is permanent. It does not disappear when you later turn 62.

One exception is worth knowing. If you have 20 or more years of service, postponing the start to age 60 puts you through the age 60 + 20 years door instead, which carries no reduction at all — you do not need to wait until 62.

MRA+10 retirees also lose the FERS annuity supplement entirely. That is frequently a larger loss than the reduction itself: a supplement of $1,200 per month from 57 to 62 is $72,000 of income that an MRA+30 retiree collects and an MRA+10 retiree does not. Between the permanent reduction and the forfeited supplement, taking MRA+10 immediately is one of the most expensive decisions available in the federal retirement system — and the alternative, postponing the annuity start, is usually available and usually better.

VIII FERS Pension Estimator

Enter your figures below. The tool determines your MRA from your birth year, converts your sick leave balance to service credit, applies the correct multiplier, tests your eligibility against all four doors, applies any age reduction and survivor reduction, and tells you what waiting until age 62 would be worth in your specific case.

IX Deferred vs postponed retirement — the FEHB fork

These two terms are used interchangeably in hallway conversation and they are not the same thing. The difference is worth six figures in lifetime health coverage.

Postponed retirement is available if you reach your MRA with at least 10 years of service. You separate, leave your contributions in the retirement fund, and elect to start the annuity at a later date to shrink or eliminate the 5%-per-year reduction. Critically, when the annuity begins you may reinstate FEHB and FEGLI, provided you were continuously enrolled for the five years immediately before separation. You apply using OPM Form RI 92-19, and FEHB must be re-elected within 30 days of the annuity commencing.

Deferred retirement applies if you separate with at least 5 years of creditable service but do not meet the age-and-service test for an immediate annuity — typically because you left before reaching MRA. You leave your contributions in the fund and claim the annuity later, generally at 62 (or at MRA with 30 years, or MRA with 10 years subject to the reduction). But FEHB and FEGLI are gone permanently. There is no reinstatement path. Deferred retirees also never receive the FERS annuity supplement.

The dollar stakes are easy to underestimate. FEHB in retirement continues with the government paying roughly 70% of the premium, and it coordinates with Medicare. For a retiree covering a spouse from 62 to 85, the government share alone is well into six figures over the coverage period, and there is no equivalent product available on the individual market at that price with no medical underwriting. An employee who separates at 56 with 12 years of service — one year short of MRA — has taken a deferred retirement and permanently forfeited that. An employee who works twelve more months to reach 57 qualifies for postponed retirement and keeps it.

During the gap between separation and the annuity start, postponed retirees are uninsured through FEHB. Temporary Continuation of Coverage (TCC) is available for up to 18 months at the full premium plus a 2% administrative charge, which is expensive but bridges part of the gap. Longer gaps typically require a spouse's employer plan or an ACA marketplace policy. The benefits at separation guide walks the full checklist of what continues, what converts, and what ends on your last day.

X The FERS annuity supplement

The FERS annuity supplement — formally the Special Retirement Supplement, often just "the SRS" — is a bridge payment that approximates the Social Security benefit you earned during your FERS civilian service. It exists because FERS lets certain employees retire before 62 while Social Security does not start until at least 62.

Who gets it: employees who retire on an immediate, unreduced annuity before age 62. In practice that means MRA with 30 years, age 60 with 20 years, VERA, and discontinued service retirement. Special-category employees who retire under their own provisions receive it immediately on retirement, even if they are below MRA.

Who does not: MRA+10 retirees, postponed retirees, deferred retirees, and anyone who retires at 62 or later (who is already Social Security eligible).

The amount is roughly your estimated age-62 Social Security benefit multiplied by the ratio of your years of FERS civilian service to 40. An employee with 30 years of FERS service and a projected $2,400 monthly Social Security benefit at 62 receives approximately $2,400 × (30 ÷ 40), or $1,800 per month. Military service bought back does not count in the numerator, because it is Social Security-covered service that already appears in your earnings record.

That earnings test is the detail that catches second-career retirees. A FERS retiree who separates at 57 and takes a $70,000 contractor job earns $45,520 above the 2026 limit, which wipes out $22,760 of supplement — in most cases the entire benefit. The withholding is not deferred or recovered later the way Social Security withholding is; supplement dollars lost to the earnings test are simply gone. OPM administers the test through an annual survey, so the reduction typically shows up a year after the earnings occur, which produces some unpleasant surprises. The FERS Supplement Estimator models the interaction between projected supplement, planned post-retirement earnings, and the annual limit.

XI The survivor election — 50/10, 25/5, or none

At retirement you make an irrevocable election about what your spouse receives after your death. Unlike CSRS, FERS offers no sliding scale. There are exactly three choices.

• Full survivor annuity — your spouse receives 50% of your unreduced annuity for life. Your own annuity is reduced by 10%.
• Partial survivor annuity — your spouse receives 25% of your unreduced annuity for life. Your own annuity is reduced by 5%. The percentages are fixed; you cannot elect a different partial amount.
• No survivor annuity — no reduction, and no survivor income.

The full election is the default. Choosing partial or none requires your spouse's written, notarized consent, which OPM will not waive.

The reduction is computed on your unreduced annuity, so the survivor benefit grows with COLAs on both sides — your cost rises in dollar terms and so does your spouse's eventual benefit. On a $40,000 annuity, the full election costs $4,000 per year today and buys a $20,000-per-year inflation-adjusted lifetime income for your spouse. Framed as insurance, it is a life policy with no medical underwriting, no premium increases, and a COLA-adjusted payout, priced at 10% of the annuity. There is no comparable product available on the private market at that cost.

Two situational notes. If you marry after retirement, you may elect a survivor annuity for the new spouse, but OPM applies two reductions: the ordinary survivor reduction plus a permanent actuarial reduction that repays what your annuity would have been reduced by since your commencing date, with interest. That actuarial reduction continues even if the marriage later ends. And if you remarry the same person you were married to at retirement, you cannot elect a larger survivor annuity than you originally elected.

XII COLA — the diet formula and the age-62 wall

FERS annuities receive cost-of-living adjustments, but on less generous terms than CSRS or Social Security. Two separate rules apply.

The diet COLA. FERS uses a tiered formula tied to the CPI-W increase: if inflation is 2.0% or less, FERS retirees receive the full amount; if it lands between 2.0% and 3.0%, they receive a flat 2.0%; if it exceeds 3.0%, they receive the CPI-W figure minus one full percentage point.

The age-62 rule. Most FERS retirees receive no COLA at all until age 62, regardless of when the annuity started. An employee who retires at MRA with 30 years spends five years watching the annuity stay flat in nominal terms while prices rise. Exceptions apply to disability retirees (whose COLAs begin in month 13), survivor annuitants, and special-category employees, all of whom receive adjustments regardless of age.

The CPI-W rose 2.8% from the third quarter of 2024 to the third quarter of 2025. The increase took effect December 1, 2025 and first appeared in January 2026 payments. Because 2.8% landed inside the 2-to-3 percent band, the FERS figure was clipped to a flat 2.0%. A $16 monthly gap looks trivial in year one; it compounds against a permanently lower base every year after.

Over a long retirement the compounding matters more than any single year suggests. Legislation to equalize FERS and CSRS COLAs has been introduced repeatedly and has not passed. Until it does, the planning implication is that a FERS annuity slowly loses purchasing power relative to inflation, which argues for building more inflation-resistant assets into the TSP side of the plan rather than treating the pension as a full inflation hedge. Topic 14 on fund allocation covers the equity exposure question for retirees, and the TSP Projector models balances across long horizons.

XIII From gross annuity to deposited dollars

The formula produces a gross figure. Several deductions come off before the money reaches your account, and retirees who budget from the gross number are consistently surprised by the first payment.

• Survivor reduction — 10% for the full election, 5% for partial.
• Age reduction — 5% per year under 62 for MRA+10 retirements, applied permanently.
• Federal income tax — the annuity is almost entirely taxable. A small portion is a tax-free return of your own after-tax contributions, recovered over your life expectancy under the Simplified Method.
• State income tax — varies widely. Some states exempt federal annuities entirely; others tax them as ordinary income. This is a live variable in relocation planning.
• FEHB premiums — continue in retirement at the same government-share split, but are no longer deducted pre-tax as they were under premium conversion while employed. That effectively raises the cost of the same plan on day one of retirement.
• FEGLI premiums — Basic coverage costs rise sharply after 65 unless you elect a reducing option; Option B in particular becomes expensive at older ages.
• FEDVIP and long-term care premiums — if enrolled, these continue and are withheld from the annuity.

There is also a timing issue. OPM adjudicates new retirement cases over a period of months, during which retirees receive "interim payments" of roughly 60% to 80% of the estimated net annuity, with no FEHB or FEGLI withholding applied. The shortfall is trued up retroactively once the case is finalized. Retiring with three to six months of cash on hand is not optional advice; it is the standard experience.

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