The Civil Service Retirement System (CSRS) is funded in part by federal employees who contribute seven per cent of their pay towards their annuity. Though referred to as an annuity, the CSRS is technically a pension since it is paid out by the employer (in this case, the federal government). Though individuals contribute seven per cent of each paycheck to the retirement fund, the amount received in retirement is not dependent on the amount an individual contributes to the retirement fund; it is based on other factors such as years in service and amount of salary earned while employed by the federal government. Though calculating the pension may seem complicated, it's actually quite straightforward.
Calculate your High 3 Salary. The High 3 Salary is the highest average basic pay that was earned during three consecutive years of federal employment. The High 3 Salary only includes the basic pay and does not include COLA (Cost of Living Allowance), bonuses and overtime. For those at least five years away from retirement, it's not possible to get a completely accurate figure for the High 3 Salary, since most likely those years have not happened yet. However, to get a ballpark figure for the High 3 Salary simply look at the three consecutive years with the highest salaries and make note of the basic pay for the year in the middle.
Calculate the Years of Creditable Service. The Years of Creditable Service is based on the Retirement Service Computation Date (RSCD). An estimated RSCD can be found on a Personal Statement of Benefits, but an easier place to start is with the Service Computation Date (SCD) which can be found on any SF50 form. From there, add the number of years, months and days from the Service Computation Date until the anticipated retirement date.
Determine your Pension Multiplier. The Pension Multiplier is 1.5 per cent for each of the first five years of service, 1.75 per cent for each of the next five years and 2 per cent for each of the years after that.
Do the math. This is where it gets a little tricky. The CSRS pension is calculated by multiplying the High 3 Salary times 1.5% for the first five years of service, plus the High 3 Salary times 1.75 for the next five years of service, plus the High 3 Salary times 2% for each year of service after the first ten years.
For example, if the High 3 Salary was £29,250 and the years of service was 25, the formula for figuring the pension would be:
$45,000 x 5 years x 1.5% = £2,193 $45,000 x 5 years x 1.75 = £2,552 $45,000 x 15 years x 2% = £8,775
$3,375 + £2,552 + £8,775 = an annual pension of £13,521 or £1,126.70 per month.
80 per cent of the High 3 Salary is the maximum pension amount. The CSRS Pension may be less for those who choose survivor benefits. The CSRS Pension is reduced for those who retire before the age of 55.
Tips and warnings
- 80 per cent of the High 3 Salary is the maximum pension amount.
- The CSRS Pension may be less for those who choose survivor benefits.
- The CSRS Pension is reduced for those who retire before the age of 55.