What is the Federal Employee Retirement System (FERS)?

A tri-part plan that provides civilian employees of the Federal government retirement benefits, the Federal Employee Retirement System (FERS) consists of a core Basic Benefits Plan, a Thrift Savings Plan and Social Security benefits. Enacted by Congress in 1986 the Federal Employee Retirement System went into effect in 1987 and was intended to replace the Civil Service Retirement System.

FERS allows employees to make use of annuity-based retirement benefits once they reach their minimum retirement age. The Basic Benefit Plan is a defined benefit plan, also known as a pension plan. Each year the employee works for the Federal government they accrue a portion of their future retirement benefit, based upon their earnings. The longer an individual works for the government, the larger the benefit will be upon retirement.

The Thrift Savings Plan is similar to a savings account but the employer makes the contributions, not the employee. 1% of the employee’s base pay is put directly into the TSP account. Employees can also make contributions to increase their retirement fund, and the employer will match those contributions up to a point. When funds are withdrawn upon retirement there is no tax implication.

Social Security is a social insurance plan that offers several financial benefits. These include disability payments and retirement disbursements. In the case of a retiree’s death this benefit may be paid out to a spouse or children.

If the Federal employee changes positions they can carry their Social Security and Thrift Plan benefits with them to the next job. The Basic Benefit Plan only continues if the new job is in the government sector.

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