The Civil Service Retirement System (CSRS) is a defined benefit, contributory retirement program. Federal employees share in the cost of the annuities that fund the system. When they retire, they receive monthly income based on a set formula.
CSRS was replaced by the Federal Employees Retirement System (FERS) for employees who entered covered service on or after January 1, 1987. Even so, CSRS still applies to many long-time federal workers. Because federal retirement programs work differently from Social Security and many private-sector plans, it helps to understand how CSRS works.
Options for Paying Into the CSRS
Federal employees who began their service prior to January 1, 1987 are eligible for CSRS retirement benefits.
Covered employees contribute between 7%-8% of their pay to the CSRS, and they generally are exempt from paying Social Security taxes, although they are required to pay Medicare tax, according to the U.S. Office of Personnel Management (OPM).1 The agency employing workers who are covered by the CSRS then matches the employee's contributions.
In addition to the standard contributions, you may increase your retirement income in two ways.
1. Voluntary Contribution Account (VCA)
You may contribute up to 10% of your basic pay to a voluntary contribution account (VCA).
- Contributions are made after taxes.
- Total contributions cannot exceed 10% of the total basic pay you earned during all CSRS-covered service.
- You can contribute through payroll deductions, periodic deposits, or a lump-sum payment as you approach retirement.
These additional contributions can increase the amount of income you receive in retirement.
2. Thrift Savings Plan (TSP)
You may also contribute part of your pay to the Thrift Savings Plan (TSP).
- Contributions are made with pretax income.
- The account grows on a tax-deferred basis.
- CSRS employees do not receive an employer match on TSP contributions.
The TSP can serve as another source of retirement income alongside your CSRS annuity.
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How the CSRS Benefits Are Calculated
The amount of your monthly benefit is calculated based on two factors:
- Your length of service
- The average salary of your three highest-paid consecutive years, known as your “high-3”
Bonuses and overtime pay are not included in the high-3 calculation, according to OPM.2
In most cases, the longer you work, the higher your salary becomes. This can increase your high-3 average and your annuity benefits. You must have at least five years of service to qualify for a CSRS annuity.
CSRS Benefit Formula
Your benefit is calculated using a percentage of your high-3 salary:
| Years of Service | Benefit Formula |
|---|---|
| First 5 years | 1.5% of high-3 for each year |
| Years 6–10 | 1.75% of high-3 for each year |
| Over 10 years | 2% of high-3 for each year over 10 |
For example:
- If you have 5 years of service, you receive 1.5% of your high-3 salary for each of those five years.
- If you have 10 years of service, you receive 1.5% for the first five years and 1.75% for the next five years.
- If you have more than 10 years, you receive 1.5% for the first five years, 1.75% for the next five, and 2% for each year after year 10.
If you retire before age 55, your benefit is reduced by one-sixth of 1% for each month you are under age 55.
Receiving Your CSRS Benefits
If you retire from your CSRS-covered employment after age 62, you are eligible to receive your annuity benefits within 30 days of your retirement.
There are also other situations where you may receive benefits.
Deferred Retirement
If you leave federal service before meeting the age and service requirements for an immediate benefit, you may qualify for deferred retirement.
To be eligible, you must:
- Have at least five years of creditable service
- Meet the age requirement, which is generally age 62
In some cases, the age requirement may be lower if you have more years of service.3
Involuntary Separation
If you are separated due to a reorganization or reduction in force, you may be able to retire as early as age 50, depending on your years of service. If you are under age 55, your benefit will be reduced.
Disability Retirement
If you must retire due to a disability and have at least five years of service, you may qualify for disability retirement benefits under CSRS.
Conclusion
Since employees who are covered by the Civil Service Retirement System are generally not eligible for Social Security, it's important to know exactly what to expect from your CSRS benefits. Understanding how to calculate your benefit, and the effect of a VCA and TSP, can help you start planning.
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Sources
- CSRS Information. https://www.opm.gov/retirement-center/csrs-information/.
- Computation. https://www.opm.gov/retirement-center/csrs-information/computation/.
- Eligibility. https://www.opm.gov/retirement-center/csrs-information/eligibility/.
