Are you a federal employee looking forward to your retirement plan? The Federal Employee Retirement System might interest you. It is a retirement plan for all federal employees that can make your after-retirement life sorted.
In 1986, Congress came up with the idea of FERS, which became effective in 1987, so, technically, all employees hired after 1983 are covered in the FERS retirement system. However, the eligibility for FERS is based on your age and years of service. And employees willing to avail of FERS benefits have to contribute some amount from their salary. Know who contributes what in FERS from the below points-:
Who contributes what to the FERS system?
The whole FERS system has remained the same since its inception in 1987; however, the amount of contribution has changed several times due to changes in federal law. It would be best to remain updated with the changes so that you can find ways to reap the most benefits from the FERS plans.
Employee hired before January 1, 2013: As per the new rules, employees who served for five years in federal service contribute 0.8% of their salary to FERS.
Employees hired between January 1, 2013, to December 31, 2013 :
The revised version of the contribution states that employees hired in the 2013 calendar have to contribute 3.1% of their salary to the FERS system.
Employees hired on or after January 1, 2014:
Earlier the contribution rate for employees hired in 2014 was between 0.8% to 3.3%. Now, they have to contribute 4.4%.
Benefits of the FERS retirement system
A federal employee receives benefits from three sources-:
- Thrift Saving benefit
TSP is a retirement benefit plan only for federal employees. This is the tax-deferred retirement saving, and investment plan, an individual receiving benefit under tsp is the same as that of a private corporation.
- Basic benefit plan
This benefit plan requires you to contribute a part of your pay that you will receive as a benefit with an added advantage in the future.
- Social security benefit
You can retire comfortably under the social security benefit plan; however, you will receive benefits after age 62. If you retire earlier than this age, FERS’ special retirement can bridge the money gap. Let's say you retire at age 57, but your social security benefits start at 62; you can receive benefits from FERS special retirement supplement for five years.
The Bottom Line
Hopefully, the above points can help you understand the contribution system in FERS. If any doubt remains, clear it at the federal employee retirement newsletter.
