Government Retirement Plans: FERS, CSRS, TSP, and Social Security

Government retirement plans combine a defined benefit pension, a tax-advantaged savings account, and (for most workers) Social Security to produce retirement income for federal, state, and local public employees. At the federal level, nearly everyone hired since January 1987 is covered by the three-part Federal Employees Retirement System; a smaller group hired before 1984 remains under the older Civil Service Retirement System. State and local workers participate in their own state-run pension funds and often a 457(b) deferred compensation plan. What you receive, what you contribute, and when you can retire depend on which system you’re in, when you were hired, and whether your job involves hazardous duty.

Federal Employees Retirement System

Congress created FERS in 1986, and virtually all federal civilian employees hired since January 1, 1987, are covered by it.¹ The system has three tiers: the Basic Benefit Plan (the pension), Social Security, and the Thrift Savings Plan. Each provides a separate income stream in retirement.

The Pension Formula

The FERS pension is a defined benefit, meaning your monthly payment comes from a formula rather than an account balance. It starts with your “high-3” average salary, which is the highest average basic pay you earned during any three consecutive years of service. That figure is multiplied by 1% for each year of creditable service. If you retire at age 62 or later with at least 20 years of service, the multiplier rises to 1.1% per year.² Someone retiring at 62 with 30 years of service and a high-3 of $90,000 would receive $29,700 per year.

You vest in the pension after five years of creditable civilian service.³ Employee contributions depend on hire date: 0.8% of basic pay for those hired before 2013, 3.1% for those hired in 2013, and 4.4% for those hired in 2014 or later.⁴ Law enforcement officers, firefighters, and air traffic controllers pay different rates and face mandatory retirement ages tied to the physical demands of their work.

Minimum Retirement Age

FERS uses a Minimum Retirement Age that varies by birth year:³

Born before 1948: MRA is 55
Born 1948–1952: MRA rises in two-month steps from 55 and 2 months to 55 and 10 months
Born 1953–1964: MRA is 56
Born 1965–1969: MRA rises in two-month steps from 56 and 2 months to 56 and 10 months
Born 1970 or later: MRA is 57

You can retire with an unreduced pension at your MRA with 30 years of service, or at age 60 with 20 years. Retiring at your MRA with only 10 to 29 years of service triggers a 5% reduction for each year you’re under 62, unless you have at least 20 years and wait until 60.³

The Special Retirement Supplement

Retire before 62 on an unreduced annuity and FERS pays a supplement that approximates the Social Security benefit you earned during federal service. OPM estimates your full-career (40-year) Social Security benefit at age 62, then prorates by the share of that career spent under FERS.⁵ Thirty years of FERS service with an estimated full-career benefit of $1,500 would produce a supplement of roughly $1,125 per month. It stops the month you turn 62 or become entitled to Social Security, whichever comes first.

Sick Leave and COLAs

Unused sick leave at retirement converts into additional service credit. For anyone separating on or after January 1, 2014, 100% of accumulated sick leave hours count toward the annuity, with 2,087 hours equaling one year.⁶ Sick leave won’t get you across an eligibility threshold, but it does raise the pension amount.

FERS pensions receive annual cost-of-living adjustments, but they’re capped when prices rise sharply. If inflation runs between 2% and 3%, FERS retirees get a flat 2%. If inflation exceeds 3%, the COLA equals inflation minus one percentage point.⁷ The January 2026 FERS COLA is 2.0%, compared with 2.8% for CSRS retirees who receive the full inflation figure.

Civil Service Retirement System

Federal employees hired before January 1, 1984, are generally covered by CSRS, a stand-alone defined benefit pension under 5 U.S.C. Chapter 83.⁸ The active CSRS workforce shrinks each year, but the pension itself is meaningfully more generous than FERS.

The annuity uses the high-3 average multiplied by a sliding scale: 1.5% for the first five years of service, 1.75% for the next five, and 2% for every year beyond ten.⁹ Thirty years of service replaces about 56% of the high-3 through the pension alone.

The trade-off is higher employee contributions and no Social Security on federal earnings. CSRS employees contribute 7%, 7.5%, or 8% of pay depending on employment category and generally don’t pay Social Security retirement tax on their federal salary, though they still pay Medicare tax.¹⁰ CSRS employees may contribute to the TSP but receive no agency contributions or matching. Their pensions receive the full CPI-based COLA each year without the FERS caps.⁷

The Thrift Savings Plan

The TSP is the federal government’s equivalent of a private-sector 401(k), governed by 5 U.S.C. §§ 8431–8440.¹¹ New hires are automatically enrolled at a 5% contribution rate.¹²

Agency Contributions and Match

FERS employees get an automatic 1% agency contribution whether they contribute or not. The agency then matches the first 3% of pay dollar-for-dollar and the next 2% at 50 cents on the dollar. Contribute at least 5% and the total agency contribution reaches 5%.¹³ Contributing less than 5% leaves free money on the table. CSRS employees can participate but receive no matching.

2026 Contribution Limits

For 2026, elective deferrals to the TSP are capped at $24,500 across traditional and Roth contributions combined. Participants 50 or older can add an $8,000 catch-up. Under SECURE 2.0, participants who are 60, 61, 62, or 63 can make a larger catch-up of $11,250 instead of $8,000.¹⁴ That four-year window is worth planning around.

Fund Choices

The TSP offers five individual index funds:

G Fund: short-term U.S. Treasury securities, the lowest-risk option
F Fund: U.S. investment-grade bonds
C Fund: large-cap U.S. stocks tracking the S&P 500
S Fund: small and mid-cap U.S. companies
I Fund: international stocks

Lifecycle (L) Funds blend the five and gradually shift toward more conservative allocations as a target date approaches. Eleven L Funds are currently offered, from L Income for those already withdrawing to L 2075 for the youngest workers. Contributions can be traditional pre-tax or Roth after-tax, and balances are portable if you leave government service.

Social Security After the Fairness Act

The relationship between government pensions and Social Security shifted on January 5, 2025, when the Social Security Fairness Act became law and repealed the Windfall Elimination Provision and the Government Pension Offset.¹⁵ The WEP had cut Social Security retirement benefits for people who earned a pension from work not covered by Social Security taxes, which mainly affected CSRS employees and some state and local workers. The GPO had cut spousal and survivor Social Security benefits for people receiving their own non-covered government pension. Both are gone for monthly benefits payable after December 2023, and affected beneficiaries may receive retroactive payments back to January 2024.¹⁶ SSA has said processing all adjustments will take more than a year.

All FERS employees pay full Social Security taxes and earn credits like private-sector workers. Some state and local police, fire, and other public safety departments still operate outside Social Security. Section 218 of the Social Security Act lets states voluntarily extend coverage to public employees, but police and firefighters were historically excluded, and many departments remain outside the system.¹⁷ With WEP and GPO repealed, workers who split careers between covered and non-covered employment no longer face those reductions.

State and Local Government Plans

Public employees outside the federal system generally participate in state-administered pension funds, often called Public Employees Retirement Systems, established by state statute. Many state and local employers also offer 457(b) deferred compensation plans authorized by Section 457 of the Internal Revenue Code.¹⁸

How State Pensions Work

Most state systems use a defined benefit formula built on years of service, a multiplier, and an average salary figure. The specifics vary widely. Some states use multipliers of 2% or higher per year; others have moved to hybrid models that pair a smaller pension with an individual investment account. Vesting typically runs from five to ten years, with many states requiring seven or more before general employees and teachers earn any pension at all. Employee contributions are usually mandatory and deducted as a percentage of gross pay. Public safety positions frequently have their own early retirement provisions, allowing police officers and firefighters to retire with full benefits after 20 to 25 years, sometimes as early as age 50.

The 457(b) Advantage

The governmental 457(b) has one feature that makes it especially useful: withdrawals after separation from service are not subject to the 10% early withdrawal penalty at any age. Only regular income tax applies. That matters for anyone who leaves government service before 59½. The 2026 contribution limit is $24,500, the same as the TSP and 401(k) plans.¹⁴ The 457(b) limit is separate from the 401(k)/403(b) limit, so employees with access to both plans can defer significantly more in total.

Pension Forfeiture

Most states have laws that allow partial or complete forfeiture of pension benefits when a public employee is convicted of a felony connected to their official duties. The triggers and consequences vary. Some states mandate full forfeiture, returning only the employee’s own contributions. Others reduce benefits by a fixed amount or a multiple of the economic damage caused. A handful of states have no forfeiture statute at all. A job-related conviction can eliminate a pension outright in the wrong jurisdiction.

Survivor and Disability Protections

If a FERS employee dies while still working, the surviving spouse receives a lump-sum Basic Employee Death Benefit equal to 50% of final salary (or high-3, whichever is higher) plus a fixed dollar amount that adjusts periodically. For deaths occurring after December 1, 2025, that fixed amount is $43,800.53.¹⁹ For retirees, the maximum FERS survivor annuity gives the surviving spouse 50% of the retiree’s unreduced pension, and electing it reduces the retiree’s monthly annuity. CSRS survivor annuities can reach 55% of the unreduced annuity.²⁰ In both systems the survivor election is made at retirement and is generally irrevocable.

FERS disability retirement requires only 18 months of creditable civilian service, well below the five years needed for a regular pension.²¹ You must have a medical condition that prevents useful and efficient service in your current position, and your agency must confirm that it cannot reassign you to a vacant position at the same grade and pay.

Health and Life Insurance in Retirement

One of the most valuable federal retirement benefits is carrying Federal Employees Health Benefits coverage into retirement. To do so, you must retire on an immediate annuity and have been continuously enrolled in FEHB for the five years of service immediately before retirement.²² If you’ve been federal for fewer than five years, you must have been enrolled since your first opportunity. Meet the requirement and you keep the same plan options and premiums as active employees, with the government continuing to pay its share.²³

Federal Employees’ Group Life Insurance coverage can generally continue into retirement, though premiums rise because the government share ends. If coverage terminates involuntarily, there’s a limited window to convert to an individual policy without a medical exam.²⁴

Taxes and Early Withdrawal Rules

Federal pension payments under both FERS and CSRS are subject to federal income tax. State tax treatment varies, with some states fully exempting government retirement income and others taxing it like any other earnings. TSP withdrawals from traditional balances are taxed as ordinary income, and qualified Roth distributions come out tax-free.

Withdrawing from the TSP before age 59½ generally triggers a 10% early withdrawal penalty on top of regular income tax. The most important exception for government workers: separate from federal service during or after the year you turn 55 and TSP distributions are penalty-free. Federal law enforcement officers, firefighters, customs and border protection officers, corrections officers, and air traffic controllers get an even lower threshold of age 50.²⁵

Required minimum distributions from the TSP must begin by April 1 of the year after you turn 73 under SECURE 2.0. That age rises to 75 starting in 2033.²⁶ Governmental 457(b) plans avoid the 10% penalty on post-separation withdrawals at any age, which makes them especially useful for early retirees bridging income before 59½.

1
U.S. Office of Personnel Management. FERS Information
2
U.S. Office of Personnel Management. FERS Information – Computation
3
U.S. Office of Personnel Management. Eligibility
4
Congressional Budget Office. Increase Federal Civilian Employees’ Contributions to the Federal Employees Retirement System
5
U.S. Office of Personnel Management. Information for FERS Annuitants
6
U.S. Office of Personnel Management. Fact Sheet – Sick Leave General Information
7
Library of Congress. Cost-of-Living Adjustments for Federal Civil Service Annuities
8
United States Office of Personnel Management. CSRS Offset Retirement
9
U.S. Office of Personnel Management. Computation
10
U.S. Office of Personnel Management. CSRS Information
11
Office of the Law Revision Counsel. 5 USC Chapter 84 – Federal Employees Retirement System
12
Thrift Savings Plan. Implementation of 5% Automatic Enrollment Percentage for Thrift Savings Plan
13
Thrift Savings Plan. Contribution Types
14
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
15
Social Security Administration. Social Security Fairness Act – Windfall Elimination Provision and Government Pension Offset Update
16
Library of Congress. The Social Security Fairness Act of 2023
17
Social Security Administration. Introduction to State and Local Coverage
18
Internal Revenue Service. IRC Section 457(b) Eligible Deferred Compensation Plan – Written Plan Requirements
19
U.S. Office of Personnel Management. Survivors
20
U.S. Office of Personnel Management. How Is the Amount of My Benefits as a Surviving Spouse Determined
21
U.S. Office of Personnel Management. Chapter 60 – Disability Retirement
22
U.S. Office of Personnel Management. Health
23
U.S. Office of Personnel Management. Thinking About Retiring
24
U.S. Office of Personnel Management. What Is a Conversion Policy – Who Is Eligible to Convert Their FEGLI Life Insurance Benefit
25
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
26
Thrift Savings Plan. SECURE 2.0 and the TSP