CSRS Retirement
Civil Service Retirement System (CSRS)
Civilian employees of the U.S. federal government hired before January 1, 1984, qualify for the federal Civil Service Retirement System (CSRS). The position(s) held must be classified as a CSRS “covered” position.
If so, CSRS retirement contributions are automatically withheld at a rate of 7% for regular employees and 7.5% for Special Provision employees (i.e., Law Enforcement Officers, Firefighters, and Air Traffic Controllers). Specific CSRS eligibility is determined by the employee’s age and years of creditable service. All CSRS contributions are made after taxes.
The amount of income the CSRS beneficiary receives in retirement is determined by time-length of creditable service and the “High-3 Average Salary.”
What is High 3 Average Salary?
An employee’s High-3 Average Salary is the highest average basic salary the employee earned during any three consecutive years of service. For most employees, the final three years on the job will be the highest-paid. However, since this won’t be the case for all employees, the High-3 Average Salary might be calculated based on an earlier three-year period in the employee’s career.
It’s important to note that the High-3 Average does not include salary earned through overtime, bonuses, or any other payment beyond basic salary. Also, if the employee’s total service was less than three years overall, the average salary is simply calculated based on all creditable work periods.
Social Security
The vast majority of CSRS employees ARE NOT eligible for Social
Security. However, CSRS employees DO NOT pay into the Social Security
system throughout the course of their careers.
FERS employees, however, pay the standard 5.3% of their salary into the
Social Security system with each paycheck. During retirement, these
employees also receive a standard social security benefit.
What other factors also influence the CSRS retirement benefit?
Retirement option
The retirement option chosen can affect the benefit amount. For example, choosing a single life annuity (which pays a benefit for the rest of the retiree’s life only) will result in a higher benefit than choosing a survivor annuity (which pays a benefit for the rest of the retiree’s life and provides a reduced benefit to a surviving spouse after the retiree’s death).
Age at retirement
The age at which an individual retires can also affect the benefit amount. Generally, the earlier an individual retires, the lower the benefit will be. This is because the benefit is intended to provide the same level of income over the retiree’s lifetime, and retiring earlier means that the benefit will need to be paid out over a longer period of time.
Deposit or redeposit
If an individual has previously withdrawn contributions from the retirement fund, they may be required to make a deposit or redeposit in order to receive full retirement benefits. The amount of the deposit or redeposit will depend on the amount of time the individual was in covered employment and the number of contributions that were withdrawn.
Disability retirement
If an individual is approved for disability retirement, their benefit amount may be higher than it would be for a regular retirement. This is because the disability benefit is intended to replace a higher percentage of an individual’s pre-disability salary.
