The longest-serving feds are covered by the Civil Service Retirement System. Those hired in 1984 or later are covered by the Federal Employees Retirement System. In between are those covered by CSRS Offset, a hybrid that combines CSRS and Social Security.
To be covered by CSRS Offset, you have to have been a CSRS employee for at least five years before 1984, left government and returned after a break in service. If you returned in 1984 or later after a break of a year or more, you would have been automatically covered by CSRS and Social Security, with the option of transferring to FERS. If you elected to stay in CSRS Offset, your retirement contributions were divided between CSRS and Social Security. For most employees, 6.2 percent goes to Social Security and 0.8 percent to CSRS. For special-category employees, such as law enforcement officers and firefighters, 6.2 percent goes to Social Security and 1.3 percent to CSRS.
If you are like most CSRS Offset employees, your annuity will be calculated the same way it is for regular CSRS employees. It is the sum of three multiplication products: 1.5 percent of your high-three — the average of your highest three years of salary — times your first five years of service; plus 1.75 percent of your high-three times all service between five and 10 years; plus 2 percent of your high-three times all years and full months of service over 10 years.
If you are a special category employee, your annuity will be calculated using a different formula. An enhanced multiplier will be used for 20 years of covered service and the standard formula for any other service.
The sum of the CSRS calculation is an estimate of your basic retirement annuity before deductions are taken for such things as a survivor annuity, insurance premiums, and federal taxes. The closer you are to retirement, the more accurate this estimate will be.
If you are a CSRS Offset retiree under age 62, everything works the same as it would for a regular CSRS retiree. However, because you are eligible for a Social Security benefit at age 62, the Office of Personnel Management will reduce, or offset, your CSRS benefit to account for the Social Security benefit you earned as a CSRS Offset employee. That reduction won’t affect any additional Social Security benefit you are entitled to because of non-CSRS Offset employment.
If you retire at age 62 or later, the reduction will be made at retirement. However, if you retire before age 62, as you approach that birthday OPM will contact the Social Security Administration and ask for an entitlement determination. SSA will send OPM two benefit computations — one for all Social Security-covered earnings, the other without earnings attributable to CSRS Offset service.
OPM will use this data to calculate a reduction, which is the lesser of: the difference between the Social Security monthly benefit amount with and without CSRS Offset service, or the Social Security monthly benefit amount, with federal earnings, multiplied by a fraction, where the numerator is the employee’s total CSRS Offset service rounded to the nearest whole number of years and where the denominator is 40.
Under the first calculation, if you had three years and eight months of CSRS Offset service and were entitled to $600 a month, but only $550 with the CSRS Offset service removed, the monthly reduction would be $50.
Under the second calculation, you’d multiply that $600 by four years — your years of service rounded up to the nearest whole number. That would amount to $2,400. Then you’d divide that by 40 and end up with a $60 reduction.
Since the offset must be the lesser of the two computations, the reduction would be $50. Future cost-of-living allowances would be applied to the amount remaining after the reduction, in this case $550.
If you retire from CSRS Offset and are under age 62, you should apply for your Social Security benefit ahead of time. Failure to apply could give you a financial jolt. If you do nothing, your CSRS annuity would drop and you’d have to wait until Social Security processed your case and put you on its rolls.