Retirement Benefits for General Schedule (GS) Employees
After leaving the military, many Veterans transfer to what are known as General Schedule (GS) jobs. These are professional, technical, administrative, and clerical positions within the U.S. government. There are about 1.5 million people in GS jobs right now.
There are many benefits to landing a GS job. In this article, we’re focusing on the retirement benefits GS employees are entitled to receive.
The Federal Employee Retirement System
The Federal Employee Retirement System (FERS) is the retirement plan that covers all GS employees. Keep in mind that retired military personnel or workers at the state or local level are not entitled to the benefits under FERS.
Employees who are covered by FERS receive retirement benefits from three sources:
1. The Basic Benefit Plan
The basic benefit plan is a pension that pays the retiree a set amount of money each month.
The amount received under the Basic Benefit Plan is based on what is known as the High 3 Average. The High 3 refers to the three consecutive years that the worker earned the highest salary.
For most workers, this is the last three years of employment. However, if you made a higher base salary in the middle of your career than your final years, then High 3 would be calculated from your mid-career earnings.
The government considers your base salary only when determining the Basic Benefit Plan. Bonuses, overtime, and any additional payments are excluded.
Once the government determines what your High 3 is, it then adds a 1% multiplier to that number. If you are age 62 with 20 or more years of service upon retirement, then the government will use a slightly higher multiplier.
Here’s the formula used to determine your Basic Benefit amount:
Your High 3 Average x Years of Employment x Multiplier = Annual Amount
Let’s assume you’re retiring at age 60 after 18 years of service. If you made $72,000, $75,000, and $78,000 in the last three years before you retire, then your High 3 Average would be $75,000.
Therefore, the calculation to determine your Basic Benefit would look like this:
$75,000 x 18 x .01 = $13,500 annually
$13,500 / 12 = $1,125 monthly
That might not seem like much money but remember this is just one part of your retirement package.
2. Social Security
GS employees are entitled to receive Social Security Benefits on top of the Basic Benefit described above.
Keep in mind that if you worked for the government before 1983, then you didn’t pay into the Social Security System. This is because the Civil Service Retirement System (CSRS) provided retirement benefits for federal workers at that time. In 1983, FERS replaced CSRC and GS employees started contributing to the Social Security System just like private-sector employees. We understand that caveat may not impact too many of our readers, but thought it was important for you to be aware of the fact.
Here’s more information about how the government determines your Social Security payment.
3. Thrift Savings Plan
Finally, you have the Thrift Savings Plan (TSP).
Think of a TSP like a 401(k) plan. Each month, 1% of your pay is automatically deposited into your TSP account. You may elect to increase those contributions. The government will match your additional contributions up to 5% of your base annual salary.
For example, if you make $60,000 per year and contribute 5% of your salary, then $6,000 per year will be added to your TSP. $3,000 will come from your paycheck, and another $3,000 will be added by the government.
Most experts agree that you should contribute at least 5% to your TSP so you can take advantage of the full government match.
Just like a 401(k), the money you contribute to your TSP is tax-deferred and invested into your choice of funds. It’s difficult to pin down exactly how much you’ll have by the time you retire. The amount you have upon retirement will be determined by how much you contribute and how your funds perform over time.
Here’s a basic example: Let’s say you made $40,000 per year and contributed 5% of your earnings to your TSP. Assuming an average 6% return over 30 years, you’d have about $330,000 by the time you retire. You’d get monthly withdrawals from that pool of cash until it ran out.
There’s no doubt that as a GS employee, the TSP will provide the bulk of your retirement savings. Choosing to invest at least 5% of your salary is well worth it.
Currently, you can contribute a maximum of $22,500 annually from your paycheck into your TSP account. However, those limits change annually so be sure to check with a financial advisor or your human resources representative if you have questions.
Types of Retirement for GS Employees
There are different categories of retirement for GS employees.
- Disability retirement: If you’ve worked for at least 18 months and meet the requirements for disability, then you would be entitled to receive retirement benefits.
- Early retirement: As a federal employee born after 1969, you’re entitled to retire with full benefits at age 57. You’re also entitled to get full benefits if you’re forced to leave your position due to a reduction in staff or loss of job not due to performance issues.
- Voluntary retirement: This is the traditional retirement we usually think of. You work until your mid-to-late 60s and retire with full benefits.
How Do GS Workers Receive Benefits?
Once you are 60 to 90 days away from your desired retirement date, fill out and submit Standard Form 3107 to the Office of Personnel Management (OPM).
After the form is processed, you’ll be contacted by the necessary agencies to ensure you receive all the benefits you are entitled to upon retirement.
The Bottom Line on Retirement Benefits for GS Employees
GS employees are eligible for FERS, which means they receive benefits from three separate plans. FERS is widely considered to be one of the best retirement programs available, especially when compared to the private sector where pensions are disappearing.
If you’re looking for a job that provides solid retirement benefits, then getting a GS job might be the right move for you. You’ll need a professional federal resume that clearly shows that you have the required experience, qualifications, and eligibility requirements for the position.