Federal Employee Benefits Basics: FERS Pension, Social Security, TSP, Health Insurance, and More

The Federal Employee Retirement System (FERS) provides a comprehensive benefits package for federal employees, including health insurance, the Federal Employees Group Life Insurance (FEGLI), and the Thrift Savings Plan (TSP). As a federal employee, you can expect to receive various retirement benefits, including a pension and Social Security, which are integral parts of the retirement plan. Under FERS, your retirement benefits are calculated based on your years of service, basic pay, and contributions made during your employment. 

Calculating Your FERS Benefit Plan for Federal Retirement and Eligibility

The Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) are the two primary retirement plans for federal employees. FERS is the more modern system, providing a retirement benefit that consists of three parts: a basic benefit plan sometimes called an annuity, Social Security, and the Thrift Savings Plan (TSP). Employees covered by FERS are eligible for retirement benefits based on their years of service and contributions to the retirement plan.

Estimate your federal retirement benefit with our FERS Calculator. 

History of the Pension Benefit, Annuity for the Federal Government’s Civilian Service Workforce 

Started in 1920, CSRS is an older retirement system that primarily benefits federal workers hired before 1984. It offers a pension based on the employee’s highest three years of basic pay and years of creditable service. While CSRS employees do not pay into Social Security, they can receive survivor benefits and can still participate in the TSP, but do not receive the matching contributions from the federal government. Both retirement systems are administered by the Office of Personnel Management (OPM), which oversees eligibility requirements, retirement dates, and the calculation of benefits. Accrued unused sick leave and additional service credit can enhance retirement benefits under both systems.

FERS Retirement Planning for Military and Civilian Employees and Types of Retirement

At PlanWell, we provide retirement planning services for both civilian and military employees of the federal government for those covered by the Federal Employees Retirement System (FERS). We help with income management and investment strategies to provide a comprehensive retirement plan that includes your basic pension, Social Security, and the TSP component. Federal employees can start planning for retirement early by understanding their eligibility and the types of retirement plans available. The first step to begin your retirement journey is to attend a free online seminar for federal retirement and learn about your benefits package. 

Learn about retirement types, early retirement options, and eligibility with the free FERS handbook (PDF).

Federal Employee Retirement System: Thrift Savings Plan Investment Strategy and Income Management to Retire Confidently

Although CSRS employees can make voluntary contributions, the Thrift Savings Plan (TSP) is mostly designed for federal employees covered under FERS. For traditional TSP accounts, contributions are tax-deferred, meaning that the money deposited in the account is not taxed until it is withdrawn, allowing for cumulative growth over time. With a Roth TSP account, taxes are paid before contributing but none are due if making a qualified withdrawal. 

Estimate your retirement income with the TSP Calculator! 

TSP Planner for In-Service Worker: Investment Strategy and Maximizing Contributions

A financial planner that specializes in federal benefits can help active employees with investment strategy and ensuring they get the full match by contributing each pay period. If the annual contribution limit cannot be met due to an employee’s financial circumstances, at least contributing enough to get the full match is advisable for a successful retirement from government service. As a federal employee, managing your Thrift Savings Plan (TSP) money is important to make informed decisions. Whether you are aiming for early retirement upon reaching the minimum retirement age or looking to retire at age 62 or older, having a financial planner you can trust to help effectively manage your TSP account can significantly affect your financial future as a retiree. Be sure to keep track of your contributions and review your retirement plan regularly to ensure you are on track to receive the benefits you deserve.

Schedule a free meeting with a Fed-Expert. 

TSP Withdrawals and Income Management for FERS Retirement

Administered by the Federal Retirement Thrift Investment Board (FRTIB), the TSP allows federal employees to make in-service withdrawals under certain conditions, such as your age and the type of withdrawal. At the age of 59.5, active feds can take a distribution tax-free with no penalty or transfer some or all TSP money into an outside IRA. Planning for retirement involves understanding the types of withdrawals available, including hardship withdrawals and loans. Employees can also continue to make contributions to their TSP accounts while still working, thereby accruing additional benefits for their future retirement. Managing TSP income in retirement is essential for those covered by FERS. As you approach your retirement date, consider transferring your TSP account to a privately managed IRA. This move can provide more investment options and potentially better growth, especially since contributions to your TSP account are tax-deferred. Before you start to receive retirement benefits, evaluate how your TSP balance integrates with other types of retirement income, such as Social Security and the FERS pension . By planning early before leaving federal service, you can enhance your financial stability and ensure a comfortable retirement.

Other FERS Benefits: Leave, Social Security, Health Plans, and Life Insurance 

Along with some discounts for government workers, employment with the government also provides a comprehensive benefit package that includes social security, health insurance through the Federal Employees Health Benefits Program (FEHB), and life insurance options under the Federal Employees Group Life Insurance (FEGLI). Employees covered by FERS also have access to family leave, annual leave, and sick leave benefits. 

Sick Leave, Annual Leave, and Family Medical Leave 

Federal employees are entitled to various types of leave, including sick leave, annual leave, and Family and Medical Leave Act (FMLA) leave, which play essential roles in their overall benefit plan.

• Sick leave allows employees to take time off when they are ill or need to care for a family member. Accrual of sick leave over time can boost one’s pension amount, and there is no limit to the amount that can be accumulated. (Try our Sick Leave Conversion Tool)
• Annual leave is another important type of leave for federal employees. It is accrued based on years of service and is intended for vacation or personal use. The amount of annual leave an employee can earn depends on their length of service, with employees accumulating more hours as they reach certain milestones. Only 240 hours of unused annual leave can be carried over from year to year, but employees can also receive a payout for any unused leave upon retirement as a lump-sum payment.
• The Family and Medical Leave Act (FMLA) provides federal employees with the right to take unpaid, job-protected leave for specific family and medical reasons. Eligible employees can take up to 12 weeks of leave in a 12-month period without losing their health insurance benefits. 

FERS Basic Benefit and Social Security 

Employees covered by FERS can access a pension, a retirement benefit that combines the basic benefit plan with Social Security and a Thrift Savings Plan (TSP). Federal employees can also receive a special retirement supplement if they retire before they can claim Social Security benefits, which helps bridge the gap until Social Security withdrawal benefits begin at either age 62, full retirement age, or age 70.

FEHB and FEGLI Options: Insurance for Federal Workforce

The Office of Personnel Management (OPM) administers both the Federal Employees Health Benefits Program (FEHB) and the Federal Employees Group Life Insurance (FEGLI) program. These benefits offer essential health and life insurance coverage for eligible federal employees and their families, further supporting their overall retirement strategy. As federal employees approach their retirement date, understanding these benefits is vital for a secure financial future. Without a waiver of the 5 year rule, federal retirees can only keep FEHB if they had it for at least five years continuously before retiring.