Civil Service Retirement System (CSRS) & Federal Employees Retirement System (FERS)

FERS—Employees first hired after December 31, 1983, are automatically covered under FERS and Social Security. These employees are eligible to participate fully in the Thrift Savings Plan, since the TSP is primarily designed to complement the coverage of FERS and Social Security.

CSRS—Generally, employees hired before 1984 are members of CSRS unless they elected coverage under FERS during one of the open seasons authorized for making such choices in 1987 and 1998.

CSRS-Offset—This option is available to employees who were originally hired before 1984 and covered by CSRS, but who left federal service and were rehired after 1983. Upon rehire, they are eligible to reenter CSRS if they have at least five years of eligible service credit under CSRS. However, if such an employee returns after having been outside federal employment for more than one year, that employee also becomes covered by Social Security. At retirement, the benefits of a CSRS Offset employee are coordinated so that the value of the worker’s Social Security benefits (i.e., those earned through federal service performed after 1983 while covered by both CSRS and Social Security) are subtracted from the individual’s CSRS benefits. (The formulas for accomplishing this reduction generally work to an employee’s advantage and only seldom to anyone’s disadvantage.)

Returning employees eligible for reentry into CSRS, either with or without Social Security coverage, may choose coverage under FERS; such an election must be made during the first six months after rehire. Employees without five years of creditable service under CSRS are automatically enrolled in FERS with their previous service credited under that program. Employees either automatically enrolled or who elect FERS are not subject to the offset.

CSRS—The Civil Service Retirement System currently is a comprehensive system of entitlements that provides covered federal workers with a full range of pension benefits and wage insurance protections. In addition to annuities for workers who meet age and service criteria for voluntary retirement, annuities are paid to workers whose jobs are terminated after they have reached certain specified levels of age and/or service. Benefits also are provided to workers who become unable to perform in their positions because of a disabling condition, and to dependents of deceased workers and retirees who meet certain conditions. Benefits are adjusted annually for inflation.

Workers who leave federal employment with at least five years of creditable service and who were covered by CSRS for at least one year within the two-year period before separation retain rights to deferred benefits, beginning at age 62. However, the computation of CSRS benefit payments received at age 62 is based on the amount of service and salary base attained by the employee at the point of separation. Most workers who leave service before attaining eligibility for immediate benefits exercise their right to withdraw their contributions to the system, thereby waiving their rights to deferred benefits. Subsequently, if they take another government job or otherwise reenter federal service, they generally may recapture that service credit by repaying the amount they withdrew, plus interest.

One effect of CSRS’s basic design has been to encourage the retention of workers who have not reached eligibility for immediate benefits, while encouraging employees to retire once they have achieved such eligibility. Studies have shown that in comparison to private-sector workers with similar salaries and service, CSRS participants have substantially less protection if they leave service before becoming eligible for benefits, and substantially more in terms of lifetime benefits (about one-third more, on average) if they retire shortly after becoming eligible. Disabled workers and survivors may be better or worse off under CSRS than their private-sector counterparts, depending on a number of factors.

FERS—Most federal civilian workers first hired after 1983 are automatically covered by the Federal Employees Retirement System. FERS was created as a result of Congress’ decision to expand Social Security coverage to federal employment, beginning in 1984. Eventually, all federal workers will be covered by FERS, although CSRS will continue to be the government pension system for workers who retained rights to such coverage because they were employed before 1984. (According to current actuarial estimates, the CSRS system will end in the year 2070, when all beneficiaries and their survivors will have died.)

When Congress decided to include all new federal workers in Social Security, it addressed problems with the federal retirement program that could be corrected only during the design of a new system. Congressional studies had shown that disability and survivor benefits were often better for those covered by a combination of Social Security and private pensions. They had also revealed that two categories of CSRS-covered workers were at a special disadvantage when compared to their private sector counterparts: workers who left federal employment before becoming eligible for immediate benefits, and workers who retired at ages later than the average retirement age (around 61-62). Finally, virtually all CSRS benefits were shown to be more advantageous to workers at higher grades than they were to lower-wage federal employees, a direct contradiction to Congressional retirement policies for other workers.

In designing FERS, Congress continued the practice of providing salary insurance for a full range of events that a worker might encounter during a normal career. Benefits are provided for normal retirement and for circumstances that might occur earlier, such as involuntary retirement because of a reduction-in-force (RIF), disability, or benefits for survivors in cases of the death of a worker or retiree.

Except for totally and permanently disabled workers (whose benefits are generally better under FERS and Social Security than they would be if covered by CSRS), FERS benefits are added to Social Security, thereby preserving that program’s objective of enhancing benefits for workers with relatively lower salaries over the course of their careers (see below). In FERS, workers who leave before eligibility for immediate benefits can begin to draw benefits at earlier ages than can workers under CSRS, thereby more closely linking their retirement benefits to the salaries they had at the point of separation.

In addition, the combination of FERS, Social Security, and the Thrift Savings Plan makes it possible for employees who work beyond the “typical” retirement age to lessen the impact on their lifetime benefits of continued employment.

CSRS-Offset—Federal and postal employees separated from service for at least one year are automatically covered by Social Security if they resume federal or postal employment after 1983. However, those workers whose prior employment spanned at least five years of creditable service under CSRS have the right to reenter that retirement system upon reemployment. To eliminate the overlap between CSRS and Social Security, Congress created a special category of coverage called CSRS-Offset. Under this approach employees contribute the same amount as they would have if they had been covered by CSRS alone. The money is divided between Social Security and CSRS. The Social Security trust fund receives the same percentage amount as is contributed for everyone else covered by that program (6.2 percent up to the Social Security taxable maximum). The civil service retirement fund receives the rest (.8 percent, except for those special category employees who pay more for coverage). When an employee’s wages exceed the taxable maximum, Social Security deductions cease and CSRS deductions increase to the full CSRS rate for the remainder of the calendar year.

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