Over the last few months, I have spoken with dozens of special provision federal employees who were frustrated with how little information was out there about their benefits and retirement.
Afterall, the special provision retirement rules differ from the normal system in 5 big ways.
The FERS positions that are normally covered under the special provisions are the following:
Air Traffic Controllers
Firefighters
Law Enforcement Officers
Capitol Police
Supreme Court Police
Nuclear Materials Couriers
Big Difference #1-When You Can Retire
One of the biggest differences between the regular FERS and special provision FERS is when you are eligible to retire with an immediate annuity/retirement.
Regular FERS have to reach one of the following age and years of service combinations:
Source: https://www.opm.gov/retirement-services/fers-information/eligibility/
Note: MRA stands for Minimum Retirement Age and is based on the year you were born. As the chart says, regular FERS can retire at their MRA with 10 years of service but their pension will be reduced for every year they retire before age 62.
For most retiring soon, their MRA will be between age 56 and 57.
Now, as Special Provision FERS, you are eligible for an immediate retirement if you reach one of the following age and years of service combinations:
Age | Years of Service |
50 | 20 |
Any Age | 25 |
As you can see, under the special provisions there are opportunities to retire with a full retirement much sooner than other FERS.
This may be very attractive for those that would like to start a new career or just retire early.
Big Difference #2-How Your Pension is Calculated
Not only can a special provision FERS retire early, they also get a bigger pension from the first 20 years of work.
For FERS, the pension calculation looks like this:
Source: https://hawsfederaladvisors.com/your-fers-retirement-pension-calculator/
The big difference between regular FERS and special provision FERS is the multiplier.
Regular FERS have a multiplier of 1% or 1.1% if they retire at 62 with at least 20 years of service.
Special provision FERS will have a multiplier of 1.7% for the first 20 years of service and 1% for every year after that.
Example:
To see the impact that this difference can make, let’s run through an example.
Let’s say our regular FERS, George, and our Firefighter FERS, Frank, both worked 25 years and both retired at age 57. They both had a high three salaries of $100,000.
George’s gross annual pension would be:
$100,000 x 25 x 1%
= $25,000
Note: George’s pension would also be reduced as well because a regular FERS needs to have 30 years to retire with an unreduced pension at their MRA and in this example George only had 25.
Frank’s gross annual pension would be:
$100,000 x 20 x 1.7% + $100,000 x 5 x 1%
= $34,000 + $5,000
= $39,000
As you can see, Frank’s pension is almost double George’s simply because his multiplier is much higher.
Big Difference #3: TSP at 50 (Or Earlier)
When regular FERS retire early, they can access their TSP as early as 55 without an early-withdrawal penalty. This is 4 and ½ years earlier than IRAs which make you wait until 59 and ½ to withdraw without a penalty.
But for special provision FERS, they can access their TSPs as early as age 50 if they retire in the year they turn 50 or older.
Since special provision FERS tend to retire much earlier than regular FERS, this can be a huge benefit.
Update: Because of recent changes, future Special Provisions retirees will be able to access their TSP’s before age 50 assuming they are eligible for a full retirement. For example, if someone retires with 25 years at age 45 then they’d be able to have immediate access to their TSP with the normal 10% early-withdrawal penalty.
Big Difference #4: COLA’s Before Age 62
COLA’s or cost of living adjustments are annual increases that retirees get on their pensions to help offset the effects of inflation every year.
When regular FERS retire before age 62 their pensions don’t get any COLA’s until they turn 62.
This means that if a regular FERS retires at age 57 (their MRA) their pension will not increase until age 62.
Special provision FERS have the huge benefit of receiving COLA’s no matter what age they retire. This means that if a law enforcement officer retires at 45, he will receive a COLA to his pension all the way up to age 62 and beyond.
This can make a huge difference in maintaining a standard of living despite rising prices.
Big Difference #5: FERS Special Supplement Earnings Test
Many have heard that if you make too much money while receiving Social Security benefits, your Social Security benefits may be decreased.
What is less known however, is that the same could happen to your FERS special supplement (also called the FERS Supplement) if you make over certain limits.
In a nutshell, if you make too much money from a job or business while receiving the FERS supplement then your FERS supplement can be reduced down to zero. This is called an earnings test.
However, Special Provision retirees aren’t subject to the earnings test on their supplement until they hit their MRA.
This means that special provision employees can make as much money as they’d like between the time they retire from federal service and when they hit their MRA.
For example, let’s say a special provision employee retired at age 45. His FERS supplement would not be reduced no matter how much he made until his MRA.
From his MRA to age 62, it would be subject to the earnings test just like regular FERS.
Final Thoughts
Being a special provision FERS has a lot of benefits which can make planning for retirement much easier.
The most important thing is to understand what you have to be able to get the most out of them.
