FERS not a better deal than CSRS

Recent preliminary guidance from the Office of Personnel Management urges federal employees covered by the Civil Service Retirement System (CSRS) to decide whether to switch to 'the more flexible' Federal Employees Retirement System (FERS). I am not certain I agree with OPM's characterization of FE

Recent preliminary guidance from the Office of Personnel Management urges federal employees covered by the Civil Service Retirement System (CSRS) to decide whether to switch to "the more flexible" Federal Employees Retirement System (FERS). I am not certain I agree with OPM's characterization of FERS' greater flexibility, and I certainly disapprove of the apparent bias in OPM's description.

OPM's guidance at times reads like an ad for FERS. "If you transfer, your past CSRS service and all future FERS service will be added together to determine when you can retire," it said. "Instead of the CSRS retirement rules, you will follow the more flexible FERS rules."

OPM said you can retire on full benefits under FERS if you attain "at least the minimum retirement age (55 to 57) with 30 years or more of combined service; or are at least age 60 with 20 years or more of combined service; or are at least age 62 with five years or more of combined service." So far, I do not see any enhanced flexibility; the same set of rules applies to CSRS employees. Where's the beef?

Maybe the value is added when you decide to retire with reduced benefits. OPM said that if you switch to FERS, you can retire with reduced benefits if you attain at least the minimum retirement age (55 to 57) with 10 years or more of combined service. For example, if you have 12 years of CSRS service when you transfer to FERS, and you work eight more years, your total service is 20 years. You can retire with full benefits at age 60 or with reduced benefits at your minimum retirement age.

"In addition, transferees do not have to work under FERS for any minimum amount of time," according to the OPM guidance. "If you retire early, you will receive reduced combined CSRS and FERS benefits. The reduction will be 5 percent for each year you are under age 62 when you retire. However, there is no reduction if you are 60 when you retire and you have at least 20 years of service. You also can keep your federal health and life insurance coverage as a retiree if you met participation requirements as an employee."

Frankly, I am surprised that OPM is hawking FERS so blatantly. Yes, you can retire under FERS at age 55 with just 10 years of service, but you lose 5 percent of your pension for each year you are under the age of 62. So retiring at age 55 would result in a 35 percent reduction. And the annuity computation will only credit you with 10 years of service, which guarantees that your benefit will be quite small. Does that sound like a good deal to you?

Also, a key source of income for FERS retirees is the value of their Thrift Savings Plan.

In contrast, the formula used by the government to calculate retirement benefits for CSRS participants only considers years of service, average earnings and retirement age. The stock market can plunge by 1,000 points, and CSRS retirees will still get their full benefit.

That is not the case with FERS. If you have made substantial contributions to the FERS TSP and invested in the C Fund, your retirement benefits are highly dependent on how the stock market performs.

Would I want the major portion of my retirement income to depend on how the stock market performs? Absolutely not.

FERS does guarantee a specific benefit when you retire, but it is much smaller than the benefit guaranteed by CSRS. The only way you can come out ahead with FERS is if you contribute as much as is permitted into the TSP and your investments appreciate substantially.

Also with CSRS, the government guarantees your retirement benefit and promises annual cost-of-living increases that are tied to the consumer price index. With FERS, the guaranteed portion of your pension is not tied to the consumer price index; instead, you get 1 percent less.

OPM is performing a major disservice to federal employees by camouflaging this difference between the two plans. If you have been enrolled in CSRS for years, you are getting a good deal. Why switch?

OPM is supposed to look after the interests of federal employees. To this observer, it sure looks as if OPM has dropped the ball.

Bureaucratus is a retired federal employee who contributes regularly to Federal Computer Week.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.