FERS High-5 Provision Removed from Proposed Spending Bill. Calculate Your High-3 Salary for Federal Retirement

Recent changes have been made to the appropriations bill for fiscal year 2026 and one big adjustment is great news for federal employees planning their retirement. The proposed change from a high three salary to a high 5 has been scrapped. In our last update about federal employee benefits cuts the idea was still being considered, but wouldn’t go into effect until 2028. If you were worried about the potential change, you can now estimate your federal pension again with confidence. 

Updates to Appropriations Bill Dismiss High 3 Change, Keep Elimination of Special Retirement Supplement (SRS)

The biggest concerns among the federal workforce at the onset of the considered changes to their benefits was that the retirement calculation change, along with the elimination of the FERS supplement, would go into effect immediately. Those fears were alleviated when it was announced that the adjustments wouldn’t be effective until January 1, 2028. Now, although the SRS is still on the chopping block, the highest basic pay averaged for the retirement annuity will continue to use the 3 consecutive years where they earn their highest pay and not switch to using 5 years. 

FERS Calculation for Federal Retirement Benefits will Remain with High 3 Salary

For retired feds with an immediate unreduced pension, the high three salary is the highest average of pay received in 36 consecutive months, which is usually the last 3 years of a federal career. Federal retirement applications will continue to use a 3-year average when processing the FERS pension benefit. At least in the lates Congressional spending bill, the change from 3 consecutive years of federal pay to 5 years has been removed. CSRS (Civil Service Retirement System) calculations will also be untouched. Plan your federal retirement, use the high three calculator on the federal retirement calculator page to determine your high 3 salary to estimate your federal pension income. After you know what your federal pension benefit amount is, meet with a fed-expert financial advisor to ensure you are getting the most out of your federal benefits. Click here to learn what makes PlanWell financial different from other advisory firms. 

Eliminating the FERS Supplement to Social Security

Social Security retirement benefits are a significant source of retirement income for federal workers under FERS. The supplement is designed to fill the gap until retirees become eligible for Social Security at age 62, specifically special provisions employees. While still not affecting anyone who retires before 2028, some ambiguity in the proposed legislation’s language has created confusion about whether the supplement will be eliminated for all FERS retirees or just those not retiring under special provisions. The supplement will still be paid to those “entitled” to it before 2028 under the current bill but it is unclear whose entitlement to the SRS is being referred to here. 

Try our Free FERS Supplement Calculator and estimate your benefit. 

Understanding the High-3 Salary in Federal Retirement Calculations

The high-3 salary is a critical component in the calculation of federal retirement benefits under the FERS. It refers to the highest basic pay earned during any 3 consecutive years of federal service. This average salary is used to calculate your FERS pension, making it a pivotal factor in determining your retirement income. Your high-3 salary affects your pension by serving as the foundation for the FERS annuity calculation. The Office of Personnel Management (OPM) uses this average salary to determine the monthly pension you will receive. The higher your high-3 salary, the greater your retirement benefits will be. Therefore, maximizing your basic pay during your last three years of service can significantly enhance your retirement income.

Calculate Your High Three Salary for FERS

To calculate your high-3 salary, you need to identify the three consecutive years where your basic pay was the highest. Start by reviewing your federal service records to pinpoint these years. Then, add the basic pay you earned during each of these years and divide the total by three to find your average salary. This figure represents your high-3 salary, which will be used to calculate your FERS pension.

Using a High-3 Calculator for Accuracy

For accuracy, many federal employees use a high-3 calculator. These tools are designed to simplify the calculation process by allowing you to input your salary for each year of service. The calculator then computes your high-3 average salary, ensuring that you have an accurate figure to use in your retirement planning. Utilizing a high-3 calculator can help avoid errors and provide peace of mind as you prepare for retirement. To find the High-3 salary calculator, go to the FERS Calculator page and scroll down. 

Common Mistakes in High-3 Calculations

Common mistakes in high-3 calculations include overlooking changes in locality pay, miscalculating the basic pay, and failing to account for part-time service adjustments. It’s essential to ensure that all components of your salary are considered and that you use the correct figures for each year. Double-checking your calculations and consulting with a retirement specialist can help prevent these errors and ensure that your high-3 salary is accurately determined.

How Does the High-3 Salary Affect FERS Pension Calculation?

With a FERS disability retirement, if you’ve worked for less than 36 months, your “high-3 salary” for FERS disability retirement is determined by averaging your basic pay over all your creditable federal service. Instead of using the highest pay during their last three consecutive years, the calculation considers the full period of your federal employment.

Integrating High-3 with FERS Pension Formula

The FERS pension formula integrates the high-3 salary to determine the annuity amount. The formula typically involves multiplying your high-3 average salary by a percentage based on your years of service. This calculation provides the annual pension amount you will receive. Understanding this integration is vital for estimating your retirement income and ensuring that you have sufficient funds for your post-retirement life.

Examples of High-3 Impact on Pension Benefits

Consider a federal employee with a high-3 salary of $80,000 and 30 years of service. Using the FERS pension formula, their annual pension would be significantly higher than an employee with a high-3 salary of $70,000 and 20 years of service. These examples illustrate how variations in the high-3 salary and years of service can lead to substantial differences in retirement benefits, highlighting the importance of maximizing your high-3 salary.

Strategies to Maximize Your High-3 Salary

To maximize your high-3 salary, consider strategies such as seeking promotions, negotiating salary increases, and taking advantage of locality pay adjustments. Additionally, planning your retirement date to coincide with the end of your highest earning years can enhance your high-3 salary. These strategies can help increase your pension benefits and provide a more comfortable retirement.

Types of Pay: FERS Basic Pay and Locality Pay

Basic pay and locality pay are significant factors influencing your high-3 salary. Basic pay is the fixed salary you receive, while locality pay is an additional amount based on the geographic area where you work. Both components are included in the high-3 calculation, so any increases in locality pay can boost your average salary and, consequently, your FERS pension. If you live in an area with high locality pay, this can be huge factor when planning your retirement.