Federal Employee Retirement Explained: FERS & CSRS

1.19.23: Audio automatically transcribed by Sonix

1.19.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Val Majewski:
Welcome back to the Federal Retirement Show. I'm your host Val Majewski with American Benefits Exchange. Appreciate you joining me today on this episode we're going to be talking about a recent situation that came up with the federal employee client of mine. But if you are a CSRS employee, you may be CSRS offset, or you may be a combination of CSRs and Fers. Now, what do each of those things mean? What division are you in? What are your retirement components look like? How did you end up in this situation? We're going to talk about that today. Uh, number one, uh, if you have not seen the show before, go back, go to Federal Retirement Show. Com look at all the other episodes that we've had, all the other topics that we've covered. That's what this show is all about, is to provide you, the federal employee, with as much information as possible so you can be as educated as possible to make the best decisions, both now and as you progress through your working career. But let's dive into today's topic. And we're going to be talking about CSRs, that pension system, but specifically offset and those that are both CSRs and Fers. So how did you end up in this situation if you're a CSRS employee, how did you end up in the situation that you're in, if you're either offset or if you have both components of CSRs and Fers? Well, first of all, if you're a CSRs at all, you were hired prior to 1984, right? That is the older system, civil service retirement system.

Val Majewski:
You were hired prior to 1984 and you're now CSRs. Well, something happened right in in a lot of cases, you get hired as a CSRS employee. And let's say you worked at least five years. If five years of credible service as a CSRS and you left, you went and got a different job somewhere, you took another position in the private sector. Whatever it is you left service and you came back. You got rehired. Now. If you got rehired after being away for less than one year, chances are you went back just as a regular CSRS employee. No problem. You're in the same system, but if you had at least a year off, at least a year break from when you left CSRs and got rehired, you have more than a year. Then you're going to be in a choice. You're going to have a choice presented to you. You're either going to go back into CSRs, which then you'll become a CSRS offset, or the next thing we'll talk about is if you got convinced and they told you to join Fers or you wanted to join Fers, you could have gotten rehired, gotten back and joined the first system, and you'd have a combination of CSRs and Fers.

Val Majewski:
But if you wanted to go back into CSRs, you would then become an offset. So once again, hired prior to 1984, you're a CSRS employee. You work at least five years, then you leave. Let's say you had a gap of at least one year and you got rehired. You came back. You're now going to either be a CSRS offset. If you choose to go back to CSRs or have now a first component, you'll have both a CSRs and a Fers component. You'll start now in the first system. We're going to talk first about CSRS offset okay. And what does this mean. What does the offset mean. How does this work. Well, just first of all, if you're a CSRS offset you are still in the CSRS system. What is that? I'd encourage you to go back and watch our episode on CSRs so you can learn all about retirement eligibility requirements, calculation for your pension, all of the things pertaining to the CSRS system. But for the sake of time today, I'm going to assume you've already learned all of this stuff, and I'm just going to make some general comments and and hope that you've already educated yourself and gone back and reviewed our previous episodes so you know more about that system. But let's say you're a CSRS offset. You came back to service. You wanted to go back into CSRs. So what does this mean? This means you are now covered by Social Security.

Val Majewski:
So regular CSRS employees, no Social security. You are relying on one check in retirement. That one check is your retirement annuity, your CSRS pension, because all of your contributions towards any retirement system went to the CSRS system. You put 7% as a regular CSRS employee, seven whole percent went out of your paycheck each pay period and went towards that retirement system when you retired. That is the sole check that you are dependent on just that retirement annuity. There's no Social Security unless you worked outside the government. And before 1984, when CSRs existed, there was no TSP. It didn't exist yet. So you're relying on that one paycheck in retirement, the CSRS pension. Well, now, if you get rehired and you go back into CSRs and you're an offset, well, you're now covered by Social Security, which means not seven whole percent is going towards your pension system, a fraction is going towards your pension system, and 6.2% is going to Social Security. The calculation for your pension and the retirement requirements for CSRS offset are the same for as or as CSRS. So your pension calculation is still the same, and the requirements for retirement are still the same as they are for regular CSRs. But where your money's going to come from in retirement is going to be a little different. So if your CSRs offset and you retire, you're going to get both a CSRS pension and a Social Security component.

Val Majewski:
Now where does the offset come in? They're going to calculate your pension, and they're going to see how much of your benefit is going to come from Social Security. And your pension will be reduced or offset based on the amount of Social Security you're receiving. So the total between the two should remain. The same should. But part of it, your pension is going to be offset or reduced based on the amount of Social Security you're receiving. So CSRs, traditional employees, one paycheck CSRS system, new offset CSRS employees are going to get it from two different places. The total should still be the same, but they're going to get it from two different places Social Security and the CSRS pension. Now, what if you decided to not go back into the CSRS system, and when you got rehired or when Fers came out, you decided to transfer over to the Fers system? How does this work? Well, again, you've got time set up as a CSRS employee. And. Now you are operating or working as a Firs employee. They're going to be covered by Social Security and your money. Your deposits are now going into the first system. Previous deposits were in CSRS. You'll have access to TSP 5% matching in TSP. All the benefits that a regular Fers employee gets.

Val Majewski:
But you've got two different components when it comes to retirement. So when you do retire. You're going to now have a calculation from two different places. You've got your deposits that were still stuck in CSRs, right? All that money that you set aside in the CSRS system during your time as a CSRS employee is going to generate some kind of calculation, some kind of pension check from the CSRS component. Then they're also going to calculate your first component. Your first component is going to consist of the at times the amount of time you spent as a Fers employee. Now the good news is the high three that you have is going to count for both. So they don't retroactively say well, or go back and say well your high three during your CSRs time is only this. So your CSRS component is based on a lesser high three or your high three from your earlier time. They're going to use the high three from both in both calculations. Again, you can go back to the CSRS video or episode that we had and see how CSRS is calculated. You can go to the first video that we have, the episode we have on Fers retirement, and see how the first pension is calculated. If you're not already familiar, but you're going to have two different components. Now that that could be good. It could be bad depending on what you're looking at it.

Val Majewski:
I know I've talked to a lot of CSRS employees and again, this is not my opinion. This is just what I've gathered. Talking to federal employees just like yourself is people that decided to stay in CSRs are very happy that they did. So okay, I can't I can't say about those that have switched to first, but I just know that those who were CSRs, who left, who had the option to go as an offset or go into first, they are very happy that they stayed in CSRS, because the calculation means they can get up to 80% of their high three if they work up to 42 years. So they're very happy to know that they can get up to 80% of their high three. And Fers employees generally have to rely on TSP and Social Security to get them up to a higher percentage. So CSRS employees that were sticking in as an offset or sticking in that system generally extremely happy that they did. So. It does not mean you can still, uh, not be happy with fers. There's just another component, and that's TSP that you're going to have to contribute to and learn to maximize so that you can get yourself up to that retirement income that's similar to those in Fers or CSRs that don't really have to do any additional, you know, guesswork, right? They don't have to do any additional retirement saving because their check their, their, their main income source is coming from one place instead of three different places.

Val Majewski:
So remember, if your CSRs, previous or prior CSRs and you became an offset or your CSRs and you are now fers, you're going to have slightly different components when it comes to your retirement makeup, right? Instead of it being traditional CSRs and having one pension check, if you're an offset, you're going to have two CSRs and Social Security. If your CSRs and Fers, you're still going to have two, but you're going to have another one. You're going to have the CSRs component, the first component, and Social Security and the the ability to participate in TSP and get up to 5% matching things like that. But it's important to know where you stand. It's important to take a look at the entire situation and make sure you're completely educated on everything pertaining to your situation. How do you do that? Do you know all this? Well, first of all, watching our episodes and the the information that we provide, hopefully that's a good starting point. But we don't specifically talk about your situation. So if you fall into these categories and you want to take a deeper dive into your situation, into your retirement scenario, into your benefits, into the calculations, reach out to us. Go to Federal Retirement Show.com. There's a form on there.

Val Majewski:
You fill that out, we'll be in touch. If it's not me personally, it's one of our reps nationwide. And we'll do a full retirement benefits analysis for you and your unique situation because everybody's different and everybody has different goals. So if you fall into one of these categories or any of the categories out there, reach out to us. We'd love to review all of your benefits with you. Provide a couple different reports for you so you can see everything in plain English, black and white, you know all the numbers. You know what to expect. You can see if you're on the right track or not. Oh, and as an added bonus for doing the report and going through the benefits review, we will send you a complimentary copy of the book I wrote on federal benefits and retirement called There's No Excuse. We can send that to you in either a hard copy or digital copy. That's up to you. So I hope you enjoyed today's episode. I hope you enjoyed our talk today about CSRs offset, and how it compares to those that have both CSRs and Fers components. If you have additional questions, as I mentioned, go to our website, fill out the form. We'll be happy to get in touch. Thank you again for taking the time out of your schedule, and look forward to seeing you on a future episode.

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