The FERS deduction is the mandatory payroll withholding that funds your Federal Employees Retirement System pension, and the rate is either 0.8%, 3.1%, or 4.4% of your basic pay depending on when you were first hired into federal service. Once your rate is set by your hire date, it stays the same for your entire career, regardless of promotions or raises. The deduction covers only the defined benefit annuity piece of FERS, not Social Security and not the Thrift Savings Plan, which are withheld separately.
The Three Rates and Who Pays Each
Congress has created three contribution tiers for the FERS Basic Benefit Plan. Your tier is locked in by the date you first entered a FERS-covered position.
- 0.8% — Original FERS. You pay this rate if you were in a FERS-covered position on December 31, 2012, or if you had at least five years of creditable civilian service by that date.
- 3.1% — FERS-RAE (Revised Annuity Employees). You pay this rate if you were first covered between January 1, 2013, and December 31, 2013. Congress created this tier through the Middle Class Tax Relief and Job Creation Act of 2012.
- 4.4% — FERS-FRAE (Further Revised Annuity Employees). You pay this rate if you were first covered on or after January 1, 2014. The Bipartisan Budget Act of 2013 raised the rate again for new hires.
The statute defines a “revised annuity employee” as someone who, on December 31, 2012, was not in a covered position and had fewer than five years of creditable civilian service. The FRAE tier uses the same test with a December 31, 2013, cutoff.1Office of the Law Revision Counsel. 5 USC 8401 Definitions Someone who left federal service after accumulating five or more years and later returned after 2013 generally keeps the 0.8% rate.
One wrinkle: if you took a refund of your FERS contributions when you left, that wipes out your creditable service. If the refund drops you below the five-year threshold, you can be reclassified into a higher-contribution tier when you come back. That’s a reason to think carefully before cashing out.
What Basic Pay Includes
The deduction is calculated against your basic pay. For most General Schedule employees, basic pay means your base salary plus locality pay. It does not include overtime, bonuses, holiday premium pay, military pay, or workers’ compensation supplements.2U.S. Office of Personnel Management. Basic Pay Your agency HR office can confirm which line items on your pay stub count if you’re unsure.
Part-time employees pay the same percentage. The dollar amount is just smaller because the basic pay is lower.
Higher Rates for Special Category Employees
Law enforcement officers, firefighters, and air traffic controllers pay an extra 0.5% on top of the standard rate for their hire-date tier. They qualify for enhanced retirement benefits, including earlier mandatory retirement and a more generous annuity formula for their first 20 years, which is why Congress asks them to contribute more.
- Original FERS special category (pre-2013): 1.3% of basic pay
- FERS-RAE special category (2013): 3.6% of basic pay
- FERS-FRAE special category (2014 or later): 4.9% of basic pay
An air traffic controller hired after December 31, 2013, for example, contributes 4.9% of basic pay.3Federal Aviation Administration. Benefits Members of Congress sit in their own category. A Member first covered under FERS after 2013 pays 10.6% of basic pay, minus the Social Security tax equivalent.4Federal Register. Retirement: Members of Congress and Congressional Employees
The Deduction Is Taken After Tax
FERS contributions come out of money you’ve already paid income tax on. That’s different from traditional TSP contributions, which reduce your taxable income in the year they’re made. The deduction is not pre-tax, so your W-2 wages are not reduced by the amount withheld for FERS.
The eventual upside is on the back end. When you start collecting your annuity in retirement, the portion of each payment that represents the return of your own contributions comes back tax-free.
What the Deduction Buys You
The money funds a defined benefit pension: a guaranteed monthly payment for life once you retire and meet the eligibility rules. The annuity is calculated from three inputs — your high-three average salary, your years of creditable service, and a multiplier set by law.
Your high-three is the average of your basic pay during the 36 consecutive months when your pay was highest, which for most people lines up with the last three years before retirement.5U.S. Office of Personnel Management. Computation Unused sick leave converts into additional service time at retirement: every 2,087 hours gives you credit for one more year.
The multiplier is 1% per year of creditable service in most cases. It rises to 1.1% per year if you retire at age 62 or older with at least 20 years of service. On a $90,000 high-three with 25 years of service, that 0.1% bump adds roughly $2,250 a year to your annuity for life. Special category employees use a different formula: 1.7% per year for the first 20 years, then 1% for each year beyond 20.6Office of the Law Revision Counsel. 5 USC 8415 Computation of Basic Annuity
Paying the deduction does not by itself guarantee you’ll ever collect. You need at least five years of creditable civilian service to be vested. With fewer than five years, you can’t claim a deferred annuity, though you can get your contributions back.
Other Retirement Deductions on the Same Pay Stub
The FERS Basic Benefit deduction is only one of the retirement-related withholdings on your check. Two others fund the remaining pieces of your retirement package and are entirely separate from the FERS percentage.
FERS employees pay Social Security (FICA) taxes like most other workers, and those taxes fund your future Social Security benefit, not your federal pension.7Social Security Administration. Social Security Benefits for Federal Workers8Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates New FERS employees are also auto-enrolled in the Thrift Savings Plan at 5% of basic pay, which you can change or cancel.9Thrift Savings Plan (TSP). Implementation of 5% Automatic Enrollment Percentage for Thrift Savings Plan Participants The 5% default is set there because that’s the contribution rate that captures the full agency match: an automatic 1% of basic pay deposited by your agency regardless, plus a dollar-for-dollar match on your first 3% and 50 cents on the dollar for the next 2%.10Thrift Savings Plan (TSP). Contribution Types Dropping below 5% leaves agency matching money on the table.
Getting Your Contributions Back If You Leave
If you separate from federal employment before you qualify for a retirement benefit, you can request a refund of everything you paid into the FERS Basic Benefit Plan. If your total creditable service exceeds one year, OPM adds interest at the rate earned by government securities.11Office of Personnel Management. FERS Refund Fact Sheet
The cost of taking the refund is real. It erases your creditable service for the period the refund covers. If you later return to federal employment, you lose credit for all of those years toward your eventual annuity, and you can be moved into a higher contribution tier on rehire.12eCFR. Part 842 Federal Employees Retirement System – Basic Annuity If you’re already vested with five or more years and there’s any chance you might come back to government work, leaving your contributions in place and claiming a deferred annuity later is usually the better move.