FERS Election Fact Sheet

Civil Service Retirement System (CSRS) Offset Employees Transferring to the Federal Employees Retirement System (FERS)

An employee with a substantial amount of CSRS Offset service may be seriously disadvantaged by electing to transfer to FERS. If you are covered by CSRS Offset, and you transfer to FERS, your Offset service becomes subject to the less generous FERS rules. Your Offset service will be computed under the FERS rules of 1% of your high-3 average salary for each year, instead of 2% for each year of service beyond 10, without a corresponding opportunity to receive Government matching funds on Thrift Savings Plan (TSP) contributions for that period. (People over age 62 with more than 20 years of service at retirement get 1.1% of the high-3 average salary for each year of FERS credited service.)

In addition, if you have less than 5 years of non-Offset civilian service, all of your CSRS time will become FERS service. Your entire annuity will be computed under FERS rules, but you will still not receive any corresponding Government matching funds on your TSP account for your service prior to transferring to FERS. You can request a refund of the extra money you paid for your non-Offset CSRS service and receive it plus interest.

To understand why these rules are as they are, you need to go back to the Social Security Reform Act of 1983. That legislation required that new Federal employees who were first hired after 1983 have Social Security coverage. It also required that former Federal employees with prior CSRS-covered service who returned to Federal service after a break of 365 days or more have Social Security coverage as well. The Social Security reforms also established interim CSRS rules to coordinate Social Security and CSRS benefits for employees so affected. The Congressional intent was that additional legislation would soon establish a permanent new retirement system and that everyone hired after 1983 would be covered by it.

However, when the original FERS Act of 1986 was passed to create the permanent new retirement system for new employees, the Congress also allowed employees who were under the interim provisions, but who also were vested under CSRS, to remain in what is now called CSRS Offset coverage. In addition, the Congress gave all employees who were vested under regular and interim CSRS coverage an opportunity to join FERS during the 1987 open season, or after a break in service of 4 days or more.

The section of the law that created the rules for how prior service would be treated upon transfer to FERS specifically provides that CSRS Offset and CSRS Interim service become subject to FERS rules when an employee elects FERS. There is no indication in the legislative history that multiple opportunities to elect FERS were contemplated, either through an employee's work history or through an open season other than the original one under the FERS Act.

Each person who has an opportunity to elect FERS should carefully weigh all of the pros and cons associated with each system, based on his or her own individual circumstances. Rarely, if ever, will every aspect of one system be better for an individual than every corresponding aspect of the other system. Although transferring to FERS presents some serious disadvantages to employees with substantial amounts of CSRS Offset service, there may be other considerations in your personal circumstances that override this concern.