How Federal Pensions Work: FERS, CSRS, and TSP

Federal pensions work through a monthly annuity paid for life, calculated from your highest three years of salary and your years of creditable service, under one of two systems: the older Civil Service Retirement System (CSRS) for employees hired before 1984, and the Federal Employees Retirement System (FERS) for everyone hired since. CSRS pays a larger pension on its own. FERS pays a smaller basic annuity but pairs it with Social Security and a Thrift Savings Plan account, so the three pieces together are meant to add up to a comparable retirement.

Which System Covers You

Your hire date almost always decides this. Employees who entered federal service before January 1, 1984, are generally covered by CSRS, established under 5 U.S.C. Chapter 83.¹ CSRS is a standalone defined-benefit pension; employees covered by it do not pay into Social Security through their federal job and generally do not earn Social Security benefits from that employment.

Employees hired on or after January 1, 1984, are covered by FERS, codified in 5 U.S.C. Chapter 84.² FERS combines three pieces: a basic annuity paid by the government, Social Security benefits earned through payroll taxes, and the Thrift Savings Plan, a tax-advantaged retirement account similar to a 401(k).

A narrow hybrid category called CSRS Offset covers workers who left federal service under CSRS, returned after 1983 following a break of more than 365 days, and had at least five years of prior CSRS-covered service.³ Their contributions and eventual pension are adjusted because they now also pay into Social Security.

What You Contribute From Each Paycheck

Both systems take a percentage of your basic pay every pay period. CSRS employees contribute 7%, 7.5%, or 8% depending on their category of employment.⁴

FERS rates are lower but depend on when you were hired, because Congress raised the employee share twice:

Original FERS, hired before 2013: 0.8% of basic pay.
FERS-RAE, hired in 2013: 3.1% of basic pay, adding 2.3% under the Middle Class Tax Relief and Jobs Creation Act of 2012.
FERS-FRAE, hired in 2014 or later: 4.4% of basic pay, adding another 1.3% under the Bipartisan Budget Act of 2013.⁵

All FERS employees also pay the standard 6.2% Social Security tax on earnings up to the annual wage base. Newer hires pay much more from each paycheck than early FERS employees, even though all three tiers receive the same annuity formula at retirement.

How Your Monthly Annuity Is Calculated

The formula for both systems starts with the “high-3” average salary: the average of your highest basic pay over any 36 consecutive months of federal employment. For most people that is the final three years before retirement, but the window can fall earlier if your pay dropped later in your career.⁶

The FERS Formula

Your FERS annuity equals 1% of your high-3 for each year of creditable service. Retire at 62 or later with at least 20 years of service and the multiplier rises to 1.1% per year.⁶ That extra tenth of a percent is why 62 with 20 years is often treated as a sweet spot.

An employee retiring at 62 with 25 years and a $95,000 high-3 receives 1.1% × $95,000 × 25 = $26,125 a year, about $2,177 a month before taxes and deductions.

The CSRS Formula

CSRS uses a tiered formula that rewards long careers:

1.5% of the high-3 for each of the first 5 years.
1.75% for each of the next 5 years.
2% for every year beyond 10.⁷

A 30-year CSRS retiree with a $95,000 high-3 receives 56.25% of that salary, or $53,437.50 a year. That is substantially more than the FERS basic annuity alone, which is why CSRS employees are outside Social Security and receive no TSP matching.

Law Enforcement, Firefighters, and Air Traffic Controllers

These employees get a higher FERS multiplier: 1.7% of the high-3 for the first 20 years of covered service, then 1% for each additional year.⁸ They can also retire earlier: age 50 with 20 years, or any age with 25 years.

Sick Leave and Part-Time Work

Unused sick leave at retirement adds to your creditable service in the annuity computation under both systems. It does not help you meet eligibility thresholds, but it inflates the years-and-months figure the formula multiplies.⁹ Roughly 2,000 hours of unused sick leave translates to about a year of added service.

Part-time service is prorated. The formula first computes the annuity as if you had worked full-time, then multiplies by a proration factor equal to your actual hours divided by the hours you could have worked full-time during those same periods. The proration applies to the whole annuity, not only the part-time years.

When You Can Retire

Whether your annuity starts immediately, gets reduced, or is deferred depends on hitting the right combination of age and years.

FERS

Immediate, unreduced FERS annuities are available at:

Age 62 with 5 years of service.
Age 60 with 20 years.
Your Minimum Retirement Age (MRA) with 30 years.¹⁰

The MRA is 55 for employees born before 1948 and rises gradually to 57 for those born in 1970 or later.¹⁰

The MRA+10 option lets you retire at your MRA with at least 10 years but fewer than 30. The cost is a permanent 5% reduction for every year you are under 62 at retirement.¹⁰ For someone leaving at 57 that is a 25% cut for life. You can avoid the reduction by postponing the annuity’s start until 62, but you receive nothing during the gap.

CSRS

CSRS pays an immediate, unreduced annuity at:

Age 62 with 5 years.
Age 60 with 20 years.
Age 55 with 30 years.¹¹

Early retirement is available at 50 with 20 years, or at any age with 25 years, with a reduction if you are under 55.

Deferred vs. Postponed Retirement

If you leave federal service before meeting the age requirement but have enough years, you may qualify for a deferred or postponed annuity, and the two are not the same. With a deferred retirement, you separate before your MRA and start collecting later (typically at 62 with five years of FERS service), but you cannot carry federal health or life insurance into retirement. With a postponed retirement, you have already met your MRA and service requirements at separation and simply choose to delay payments. Postponed retirees can reinstate their health and life insurance when the annuity begins, provided they were enrolled for at least five years before separating.

The FERS Annuity Supplement

FERS employees who retire before 62 on an immediate, unreduced annuity may receive a special supplement that approximates the Social Security benefit earned during federal service. It is paid on top of the basic annuity and continues until the earlier of age 62 or the date you first become eligible for Social Security.¹²

You need at least one full calendar year of FERS service and must retire under a qualifying pathway: MRA with 30 years, age 60 with 20 years, or under the special provisions for law enforcement, firefighters, and air traffic controllers.¹³ MRA+10, deferred, and disability retirees are not eligible.

The supplement is subject to an earnings test that mirrors Social Security’s. Earn more than the exempt amount and the supplement drops by $1 for every $2 you earn above the threshold.¹⁴ Your basic annuity itself is never reduced by outside earnings.

The Thrift Savings Plan

The TSP is the third piece of FERS and the place where your own choices matter most. Every FERS employee receives an automatic agency contribution of 1% of basic pay each pay period, regardless of whether you contribute anything. On top of that, the agency matches what you put in, up to 5% of pay:

Dollar for dollar on the first 3% you contribute.
50 cents on the dollar on the next 2%.¹⁵

Contribute 5% and the government adds 5% (1% automatic plus 4% matched). Contribute less and you walk away from money that was yours for the taking.

For 2026, the elective deferral limit is $24,500. Employees 50 and older can add $8,000 in catch-up contributions, and a higher catch-up of $11,250 applies to employees aged 60 through 63 under the SECURE 2.0 Act.¹⁶ CSRS employees may contribute to the TSP but receive no matching or automatic contributions.

Cost-of-Living Adjustments

Federal annuities are adjusted for inflation each year, but the two systems handle it differently. CSRS retirees receive the full Consumer Price Index increase. FERS retirees get a reduced version:

CPI of 2% or less: FERS COLA equals the CPI.
CPI above 2% and up to 3%: FERS COLA is capped at 2%.
CPI above 3%: FERS COLA is the CPI minus 1 percentage point.¹⁷

Over a long retirement, this “diet COLA” erodes purchasing power. For 2026, CSRS retirees received a 2.8% COLA and FERS retirees received 2.0%.

Timing matters too. FERS retirees who leave before 62 under a regular (non-special-provision) retirement generally do not begin receiving COLAs until they turn 62.¹⁸ Disability retirees, survivor annuitants, and special-provision retirees are exceptions. CSRS retirees receive COLAs immediately regardless of retirement age.

Survivor Benefits

At retirement you decide whether to provide a survivor annuity for your spouse. Electing one reduces your own monthly check for life but guarantees your spouse continues receiving income after your death.

Under FERS, a full survivor annuity pays the surviving spouse 50% of your unreduced annuity; a partial pays 25%. Under CSRS, the maximum survivor annuity is 55% of the unreduced annuity, and any amount up to that maximum can be elected.¹⁹

If you are married at retirement, the law presumes you will elect the full survivor benefit unless your spouse gives written consent to waive or reduce it. The election is irreversible once your annuity begins. A spouse who signs away the survivor annuity cannot change course later, even after the retiree dies.²⁰

Carrying Health and Life Insurance Into Retirement

You can keep your Federal Employees Health Benefits (FEHB) coverage in retirement, but only if you retire on an immediate annuity and were continuously enrolled in an FEHB plan for the five years of service immediately before retirement. Employees with fewer than five total years of federal service must have been enrolled for their entire period of service since first becoming eligible.²¹ The five-year rule catches employees who dropped FEHB at some point, often to join a spouse’s plan, and did not return in time.

Basic Federal Employees Group Life Insurance (FEGLI) can continue into retirement and becomes free after age 65.²² The election you make at retirement about how quickly your basic coverage reduces is permanent.

How Annuity Payments Are Taxed

Federal pension payments are subject to federal income tax, but a small portion of each check is tax-free because it represents a return of the after-tax contributions you made during your career. Most federal retirees use the IRS Simplified Method: divide your total employee contributions by the number of anticipated monthly payments from the IRS table for your age at retirement, and the result is the amount you can exclude from income each month.²³

Once you have recovered your full cost, every dollar of each later payment is taxable. IRS Publication 721 has worksheets tailored to CSRS and FERS.²⁴ State treatment varies: some states exempt federal pension income, others tax it fully.

Buying Back Military Service

Military service before civilian federal employment can be credited toward your civilian pension if you make a deposit. FERS employees pay 3% of the military basic pay earned during that service; CSRS employees pay 7%. Only base salary counts, not housing allowances, food stipends, or special duty pay.

Interest is waived for roughly three years after your first day of FERS-covered employment, then compounds annually. The deposit must be completed before you retire; there is no way to pay it out of your annuity later. The payoff can be large: four years of bought-back military time effectively adds four years to the service multiplier, worth an extra $3,600 a year for life to a FERS employee with a $90,000 high-3.

Filing Your Retirement Application

CSRS employees file Standard Form 2801. FERS employees file Standard Form 3107.²⁵ Both forms come from your agency’s HR office or OPM.²⁶ Include a marriage certificate if you are electing a survivor annuity, military service records if you are claiming credit for active duty, and your direct deposit information.²⁷

Your agency’s HR office reviews the package and forwards it to OPM, which assigns you a seven-digit Civil Service Annuity (CSA) number for future correspondence.²⁸ Full adjudication typically takes three to five months.²⁹ During the wait, OPM issues interim payments at a portion of your estimated annuity so you are not without income, and once the review is done your regular monthly annuity begins at its final amount.³⁰

1
Office of the Law Revision Counsel. 5 USC Chapter 83 – Retirement
2
Office of the Law Revision Counsel. 5 USC Chapter 84 – Federal Employees Retirement System
3
Social Security Administration. Government Pension Offset
4
U.S. Office of Personnel Management. CSRS Information
5
Federal Register. Federal Employees Retirement System Normal Cost Percentages
6
U.S. Office of Personnel Management. FERS Information – Computation
7
U.S. Office of Personnel Management. CSRS Information – Computation
8
Office of the Law Revision Counsel. 5 USC 8415 – Computation of Basic Annuity
9
U.S. Office of Personnel Management. Creditable Service
10
U.S. Office of Personnel Management. Eligibility
11
U.S. Office of Personnel Management. Eligibility
12
Office of the Law Revision Counsel. 5 USC 8421 – Annuity Supplement
13
U.S. Office of Personnel Management. Chapter 51 – Retiree Annuity Supplement
14
U.S. Office of Personnel Management. Information for FERS Annuitants
15
The Thrift Savings Plan (TSP). Contribution Types
16
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026
17
U.S. Office of Personnel Management. How Is the Cost-of-Living Adjustment (COLA) Determined
18
U.S. Office of Personnel Management. Cost-of-Living Adjustments
19
U.S. Office of Personnel Management. Survivor Benefits
20
Office of the Law Revision Counsel. 5 USC 8442 – Rights of a Widow or Widower
21
U.S. Office of Personnel Management. Health Insurance FAQs
22
U.S. Office of Personnel Management. Continuation of Coverage After Retirement
23
Internal Revenue Service. Publication 575 – Pension and Annuity Income
24
Internal Revenue Service. Tax Guide to U.S. Civil Service Retirement Benefits
25
U.S. Office of Personnel Management. Standard Form 3107 – Application for Immediate Retirement Federal Employees Retirement System
26
U.S. Office of Personnel Management. Application for Immediate Retirement Civil Service Retirement System
27
U.S. Office of Personnel Management. Applying for Federal Retirement Benefits Guidance for Federal Employees
28
U.S. Office of Personnel Management. Has My Retirement Form/Application Been Received and Processed
29
U.S. Office of Personnel Management. OPM Retirement Quick Guide
30
U.S. Office of Personnel Management. Retirement Processing Times