The Federal Employees Retirement System (FERS) is a three-tiered retirement plan for federal employees that was established in 1986. It combines elements of a defined benefit plan, a defined contribution plan, and Social Security to provide a comprehensive retirement benefit.
The three tiers of FERS are:
1. Social Security: As a federal employee, you are covered by Social Security, just like any other worker in the United States. Your Social Security benefits are based on your earnings and the length of your work history.
2. FERS Basic Benefit Plan: This is a defined benefit plan that provides a retirement annuity based on your years of service and your high-3 average salary (the average of your highest three years of earnings). The annuity is calculated using a formula that takes into account your years of service and your high-3 average salary.
3. Thrift Savings Plan (TSP): This is a defined contribution plan that allows you to save for retirement with pre-tax or after-tax dollars. You can choose to invest your contributions in a variety of funds, including a government securities fund, common and small-cap stock index funds, and a fixed income fund.
In addition to these three tiers, FERS also provides other benefits such as health insurance, life insurance, and disability coverage. It's important to understand how each component of FERS works to maximize your retirement benefits.