FERS Transfer Handbook: Examples

The following examples represent projected annual retirement benefits that several hypothetical employees might receive by remaining under CSRS or transferring to FERS. In reviewing these examples, note that the benefits projections are based on certain assumptions about future salary increases, investment returns, and other factors that directly affect your final level of benefits. The economic scenario used in these examples is based on assumptions of 3.5% inflation, 7.5% investment return and 3.5% salary growth. These assumptions are quite conservative because they are projections made over a period that would represent much of an employee's career. However, actual experience may vary. For example, the compound return for the C Fund from 1988 through 1997 was 17.5%, and the compound annual inflation rate for the period was under 4%. Thus, the TSP account of an employee who invested heavily in the C Fund during this period would have become a much more valuable part of his or her benefits package than the assumptions used in the examples would indicate.

All benefits are shown in 1996 dollars. Annual benefits have been rounded to the nearest hundred dollars and may not total exactly due to rounding. Because the examples involve projections into the future, the benefit amounts shown should not be taken as estimated benefits. Instead, the amounts should be taken as indicators of which plan may provide the better monetary benefits. You will also see, as you read through the examples, that several of our make-believe employees' decisions turned on other factors such as getting the portability of Social Security coverage or being able to retire earlier.

The decrease in FERS and Thrift Savings Plan benefits that appears by age 75 reflects the fact that FERS benefits do not receive full cost-of-living adjustments and that the TSP option selected provides level payments that are not adjusted for inflation. The TSP does offer an option for an annuity that increases by a specific percentage each year. In that case, the annuity will start at a lower value but the value will not decline as rapidly as a fixed annuity.

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Example 1. Bernice

Bernice began her Federal career as a GS 2, Step 1. During the FERS open season in 1987, she chose to stay in CSRS. She recently had a 3-month break in service when the military base where she worked closed.

Bernice is a GS 7, Step 10. She has more than 20 years of CSRS service, a Thrift Savings Plan balance of $5200, and essentially no Social Security-covered earnings. She currently is saving 5% of pay in the Thrift and plans to continue to do so whether she stays in CSRS or transfers.

Bernice plans to retire from Federal service in 2012 when she is age 60. She will have 38.6 years of service. She expects to be a GS 9 at retirement. Bernice looks forward to having time for volunteer work when she retires. If Bernice transfers to FERS and retires at age 60, she will receive the annuity supplement until age 62 when Social Security benefits begin. Since Bernice does not have 30 years of substantial earnings under Social Security, her benefit will be computed under the lower Windfall Elimination Provision. The projection shows Bernice's total future benefits to be very similar under both retirement plans.

Bernice expects that her husband will be transferred to a job in another State in the next year or so. Since she doesn't know how readily she will be able to get another Federal job in that location, she decides to transfer to FERS because it is a more flexible package. She can add to her Social Security benefit no matter whether she remains in Federal service or moves to the private sector. If she doesn't stay in Federal service, she can start receiving FERS benefits at her minimum retirement age, but under CSRS, she would have to wait until age 62.

	Future Employee Contribution	Annual Retirement Benefits
		Year:2012 Age: 60	2014 62	2027 75
Staying in CSRS
Pension	43,300	26,000	26,000	26,000
Social Security	0	0	0	0
Thrift Plan	30,900	4,100	3,800	2,500
Bal. $52,500
Total	74,200	30,100	29,800	28,400
Joining FERS
Pension - CSRS	0	13,700	13,700	13,700
Pension - FERS	4,900	5,700	5,400	4,700
Supple or Soc Sec	38,300	4,200	4,900	4,900
Thrift Plan	30,900	7,500	7,000	4,500
Bal. $95,400
Total	74,200	31,200	30,900	27,800

Example 2. Sam

Sam began his civilian career as a GS 5, Step 1. He resigned after 10 years. After a break of more than 1 year, he returned to Federal service as a CSRS Offset employee. During his 6-month opportunity to transfer to FERS, Sam was very busy with work and family obligations, so he never even finished reading the transfer information his agency provided. After another 5 years of service, he now has had another break in service, so he has another opportunity to transfer to FERS.

Sam currently is a GS 11, step 3. Based on his prior service, his Thrift balance is $7,500. He is contributing 5% and plans to continue at that percentage. He has 6 years of military service and has paid his military deposit. He has a total of 10 years of Social Security coverage before he came under the CSRS Offset coverage. Sam expects to retire as a GS 12.

Sam had planned to remain in Federal service until age 62. However, his brother is urging him to leave in 2002 when Sam will be age 58 so that they can go into business together. At that point, Sam would have 27 years of service - not enough for a benefit under CSRS, but more than enough for a FERS MRA+10 benefit.

Sam's dilemma is whether to stick with his original plans to retire at age 62 under CSRS or to transfer to FERS so he can retire earlier and fulfill a longtime dream of going into business with his brother.

Sam is really sorry that he did not pay attention to his earlier opportunity to transfer to FERS. Since CSRS Offset service comes under FERS rules upon transfer, if Sam transfers to FERS now, when he retires, his 5 years of Offset service will be worth 5% of his high-3 average salary rather than the 10% that it is worth under CSRS rules. In addition, he will have lost the opportunity for the agency 1% and matching TSP contributions during his Offset service.

	Future Employee Contribution	Annual Retirement Benefits
		Year:2002 Age:58	2006 62	2019 75
Staying in CSRS
Pension	2,300	0	16,500	16,500
Social Security	18,100	0	7,200	7,200
Thrift Plan	14,600	0	2,400	1,500
Bal. $25,900
Total	35,000	0	26,100	25,200
Joining FERS
Pension - CSRS	0	9,000	9,000	9,000
Pension - FERS	2,300	4,000	3,500	3,100
Supple or Soc Sec	18,100	0	7,200	7,200
Thrift Plan	14,600	3,200	2,700	1,800
Bal. $42,400
Total	35,000	16,200	22,400	21,800

Example 3. Frank

Frank began his Federal career as a GS 5, Step 1. During the FERS open season in 1987, he chose to stay in CSRS. He recently had a 6-month break in service when he was unable to transfer with his function when it moved to another location. Since his break in service was less than 365 days, he remains under CSRS coverage rather than coming under CSRS Offset.

Frank is a GS 13, Step 3. He has 18 years of CSRS service. He also has 22 years of Social Security credits from his private sector employment. He recently began participating in the Thrift Savings Plan, with a current balance of $1000. Frank saves 3% of pay in the Thrift Plan but would consider increasing the savings to 5% if he changes to FERS to take advantage of the agency matching.

Frank plans to retire from Federal Service in 2004 when he is age 62. He will have 24.3 years of Federal service. He expects to be a GS 13 at retirement. Frank plans on a life of leisure after retirement, traveling around the country. Since Frank has many years of Social Security credits from previous employment, transferring to FERS would allow him to add enough to his existing credits to avoid the reduction for the Windfall Elimination Provision.

	Future Employee Contribution	Annual Retirement Benefits
		Year:2004 Age:62	2017 75
Staying in CSRS
Pension	35,300	27,400	27,400
Social Security	0	5,700	5,700
Thrift Plan	15,100	1,700	1,100
Bal. $18,200
Total	50,400	34,900	34,300
Joining FERS
Pension - CSRS	0	17,500	17,500
Pension - FERS	4,000	5,000	4,400
Supple or Soc Sec	31,200	10,300	10,300
Thrift Plan	25,200	5,500	3,500
Bal. $57,800
Total	60,400	38,300	35,700

Example 4. Reba

Reba began her Federal career as a GS 4, Step 1. She left Federal service after working for 5 years under CSRS to raise her family. During her absence from Federal service, she worked part-time in the private sector while her children were in school. She has 12.5 years of Social Security credits from this employment.

Reba has returned to Federal service now that her children are grown. She is a GS 6, Step 4 and is under the CSRS Offset with an opportunity to transfer to FERS. She currently is saving 3% of pay in the Thrift Plan with a balance of $1000 and plans to continue to do so whether she stays in CSRS Offset or transfers to FERS.

Reba plans to retire from Federal service in 2003 when she is age 62. She will have 12.6 years of service. She expects to be a GS 7 at retirement. Reba looks forward to having time for her grandchildren when she retires. If Reba transfers to FERS and retires at age 62, will receive a benefit equal to 35% of her final salary, whereas CSRS would provide a benefit of 29%. This is because Social Security replaces a higher portion of the earnings of someone in the lower income level.

	Future Employee Contribution	Annual Retirement Benefits
		Year:2003 Age:62	2016 75
Staying in CSRS
Pension	1,600	4,800	4,800
Social Security	12,700	3,800	3,800
Thrift Plan	6,200	800	500
Bal. $8,400
Total	20,500	9,400	9,100
Joining FERS
Pension - CSRS	0	0	0
Pension - FERS	1,600	3,400	3,000
Supple or Soc Sec	12,700	5,400	5,400
Thrift Plan	6,200	1,600	1,000
Bal. $17,900
Total	20,500	10,500	9,500

Example 5. Irene

Irene began her Federal career as a GS 4, Step 1. She had a break in service at the time of the open season in 1987 to spend time with her newborn son. When she returned to Federal service in 1988, she was covered by CSRS Offset having had 13 years of prior CSRS service and a break in service of more than 365 days. She chose to remain under CSRS Offset. She recently had a 2-month break in service when her agency experienced a reduction in force.

Irene is a GS 13, Step 6. She has nearly 23 years of service, of which more than 7 are under CSRS Offset. She currently is enrolling in the Thrift Savings Plan and will save 3% of pay if she stays in CSRS but would consider saving 5% if she transfers to FERS.

Irene wants to retire as soon as she can to go back to school and finish her degree to start her own business. She expects to be a GS 14 at retirement. Since she was born in 1954, under FERS, the earliest she can retire with full benefits is age 56. Under CSRS, she can retire at age 55 with projected benefits of $47,700. As an Offset person, she is accumulating Social Security credits to add to the 10 years Social Security coverage she currently has. If she were to transfer to FERS now, when she retires, her 7 plus years of Offset service will be worth 7% of her high-3 average salary rather than the 14% that it is worth under CSRS rules because Offset service is treated as FERS service when an Offset person transfers to FERS. In addition, she will have lost the opportunity for the agency 1% and matching TSP contributions during her Offset service.

	Future Employee Contribution	Annual Retirement Benefits
		Year:2010 Age:56	2016 62	2029 75
Staying in CSRS
Pension	15,900	48,500	43,000*	43,000
Social Security	54,700	0	10,000	10,000
Thrift Plan	30,300	3,200	2,600	1,600
Bal. $39,700
Total	100,800	51,600	55,500	54,600
Joining FERS
Pension - CSRS	0	15,700	15,700	15,700
Pension - FERS	8,100	16,300	13,300	11,700
Supple or Soc Sec	54,700	6,600	10,000	10,000
Thrift Plan	50,400	10,500	8,600	5,500
Bal. $132,300
Total	113,100	49,100	47,500	42,900

*CSRS benefit offset because of entitlement to Social Security benefits.

Example 6. Susie

Susie began her Federal service as a GS 5, Step 1. During the FERS open season in 1987, she chose to stay in CSRS. She recently had a short break in service.

Susie currently is a GS 11, Step 1. She has 24 years of CSRS service, a Thrift Savings Plan balance of $10,000, and only 5 years of private sector employment covered by Social Security. She is saving 5% of pay in the Thrift Plan and plans to continue to do so whether she stays in CSRS or transfers to FERS.

Susie plans to retire from Federal service in 2012 when she is age 60. She will have 38 years of service. She expects to be a GS 13 at retirement.

The projections show Susie's total future benefits to be very similar under CSRS and FERS. However, her husband is a highly paid private sector employee who will be entitled to maximum Social Security benefits. Since Susie plans to work for more than 5 years, she would be exempt from the Government Pension Offset if she transfers to FERS. Before she makes a decision about transferring, she should find out if the Social Security spousal benefit would be greater than her own benefit based on her employment.

	Future Employee Contribution	Annual Retirement Benefits
		Year:2010 Age:60	2014 62	2027 75
Staying in CSRS
Pension	60,400	44,000	44,000	44,000
Social Security	0	0	0	0
Thrift Plan	43,100	6,600	6,200	4,000
Bal. $76,50000
Total	103,500	50,600	50,200	47,900
Joining FERS
Pension - CSRS	0	24,400	24,400	24,400
Pension - FERS	6,900	9.800	9,100	8,000
Supple or Soc Sec	53,300	4,400	6,200	6,200
Thrift Plan	43,100	11,700	10,900	7,000
Bal. $134,700
Total	103,400	50,300	50,700	45,700

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