Is it hard to find clear answers to your federal employee benefits questions? You aren’t the only one to face this challenge. In various government surveys, many federal employees say that their benefits are important to them. However, gaps exist in their understanding of those benefits and how they fit into their retirement planning.
For example, in one OPM publication, just 45% of surveyed employees agreed that they understood how their retirement annuity payments would be calculated. As for benefits programs available in retirement, 53% of employees were neutral or negative on their familiarity with them. In another case, just 43% said that they knew whom to contact about their questions about retirement.
The need for federal benefits information is clear. As a U.S. Government employee, you are entitled to benefits education under Title 5 of the U.S. Code and various OPM guidelines. Please feel free to contact us to request your free, personalized federal benefits analysis and retirement planning report.
Studies show that employee performance, well-being, and financial literacy are interconnected. Here is an overview of different federal benefits available to you as a federal employee. Let us know if you have any questions with which we can be of assistance.
What Retirement Benefits Do Federal Employees Have?
Depending on when they began their government service and other conditions, federal employees are generally covered by two systems: the Federal Employees’ Retirement System (FERS) or the Civil Service Retirement System (CSRS).
Some employees may have unique benefits coverage if they had any breaks in their federal service or other certain circumstances. This applies to federal employees who are classified as CSRS Offset (or in other words, covered by CSRS as well as Social Security), for example.
Federal Employees’ Retirement System (FERS) Basics
The FERS system is dominant today. It covers well over ninety percent of all U.S. Government employees. FERS replaced CSRS on January 1st, 1987.
Nowadays, most federal employees who came into service on or after January 1st, 1987 fall under this retirement system. Between January 1st, 1984 and December 31st, 1986, certain retirement rules applied to federal employees depending on their length of non-military experience, which affected their retirement system coverage.
As part of the FERS system, federal employees have benefits in three different areas:
- Thrift Savings Plan account (TSP)
- FERS basic annuity
- Social Security benefits
Income payments from the basic annuity and Social Security are given to retirees in fixed-dollar amounts. As for the TSP, the amount of account contributions, and the quality of money-management practices for the account over time, will determine how much in retirement savings that someone has in their TSP.
Civil Service Retirement System (CSRS) Basics
The CSRS system was begun on August 1, 1920. Federal employees who came into service before January 1, 1984 and fulfill other conditions are covered by it. Most U.S. Government employees don’t fall into this system, but rather are covered by FERS.
As a part of CSRS, federal employees are entitled to a basic annuity. This retirement annuity is based on their years of service, age, the timing of when they retire, and other factors. A range of 7%-8% of their base pay may be contributed toward the CSRS system, and in turn, their employing agency gives a contribution match.
Those under CSRS also have the option to contribute their pay toward a voluntary contribution account, or even the TSP Voluntary Contribution Plan. Some CSRS employees do this in order to increase their retirement benefits. Up to 10% of their base pay may be contributed in this way. However, they don’t receive a government match on their contributions.
Social Security Benefits and How They Are Involved
The retirement system which you fall under will determine whether Social Security benefits are part of your retirement benefits.
Generally speaking, FERS retired employees will receive Social Security benefits. If they are eligible, FERS employees may also receive a supplemental benefit, commonly referred to as the FERS supplement, before they reach age 62.
CSRS retired employees may receive benefits if they worked for 40 quarters and with 10 years in the private sector. That being said, the Windfall Elimination Provision, or WEP, may apply to their benefits.
What if you, as a CSRS covered retiree, do have WEP apply to you? Then a modified formula will be used to calculate your earned Social Security benefits. However, this formula won’t be part of the calculation of survivor benefits upon death.
There may be unique considerations for retirees under CSRS with active military time and who are eligible for Social Security benefits. Weigh your options with caution should this apply to you. The wrong decision could mean reductions in your CSRS annuity benefit.
One of our knowledgeable benefits counselors can help you envision how different situations might apply to your Social Security payments. Contact us for a complimentary benefits analysis and retirement outlook report.
Federal Employees’ Group Life Insurance (FEGLI)
The Federal Employees’ Group Life Insurance Program (FEGLI) first ‘arrived on the scene’ on August 29, 1954. It is one of the longest-lasting benefits programs for federal employees. As a result, most federal employees are eligible for coverage in this program.
Should they fulfill certain criteria, federal retirees may continue their life insurance coverage by FEGLI into their retirements. Family members of federal retirees and employees may have coverage options, so you can ask your benefits counselor for guidance in this area, if that might be of interest.
FEGLI gives you group term life insurance coverage, meaning that your life insurance policy won’t accumulate cash value or paid-up value.
More on FEGLI Coverage Options
FEGLI coverage comes with Basic life insurance. Basic insurance provides coverage for someone for their annual pay rate, rounded up to the nearest whole $1,000 plus $2,000. From there, three forms of Optional insurance are purchasable.
The three options for Optional insurance provide additional life coverage. This coverage is based on whole-number sums and multiples of your annual rate of pay, as well as on the person being covered.
It’s good for federal employees to pay attention to their life insurance coverage, as premiums go up over time. That can be the case particularly as they prepare to retire.
Want Guidance with Your Federal Benefits?
We covered a lot of ground, but this is only a starting point for federal employee benefits information. It’s good to take scope of your personal situation and see how your benefits will fit into your overall retirement financial picture.
If you would like guidance in navigating your benefits options, understanding your current financial progress, and making choices that will help you make the most of your hard-earned benefits, Federal Employee Benefits USA can assist you.
Contact us or request your free, personalized federal benefits analysis and retirement report today.