The Special Retirement Supplement is a bridge given to FERS employees who retire before the age of 62 when they become eligible for Social Security. This money is provided by the federal government automatically at retirement and is used as supplemental monthly income. To qualify you must have completed at least 30 years of service with your Minimum Retirement Age or with at least 20 years of service at age 60. Minimum Retirement Age is based on the year that you were born (see chart).
Calculating your Special Retirement Supplement
Let’s take a look at how the federal government calculates your Special Retirement Supplement using a standardized formula. You will need to know what your Social Security benefit will be when you turn 62. Then you take your years of pure FERS service (military time not included with or without a deposit) and divide by 40. This will provide you with your monthly Special Retirement Supplement. Note, SRS does not receive any cost-of-living adjustments. Typically this is not a major burden since SRS expires when you turn 62.
SRS Calculation Example
Consider the following example of a FERS employee calculating her SRS benefit. Janet wanted to retire from her Centers for Disease Control (CDC) position at age 56 following 25 years of FERS service. She also served five years in the military prior to her FERS employment, and while she paid the deposit for these five years of military time and will receive annuity credit and retirement eligibility, it will not count for her FERS Special Retirement Supplement. When Janet turns 62, she will be eligible for $1,200 per month in Social Security benefits. Based on this information, Janet would be eligible for a FERS SRS benefit of $750 per month, or $9,000 annually ($1,200 X [25/40] = $750 per month).
For those who retire early, the Special Retirement Supplement can be an important supplement. However, if you retire under the MRA+10 provision you are ineligible for SRS. You have to retire with a normal full annuity to be eligible for this benefit. Because your SRS benefit will expire at age 62, you should speak with a financial professional about the optimal time to start drawing Social Security. If you delay drawing Social Security past the age of 62, you could later receive larger Social Security benefits, but you may have to draw on assets to cover your income needs during that period.
SRS Earnings Test Rules
While the FERS SRS benefit does not affect your Social Security, the benefit does not follow the same earnings-test rules that apply to Social Security. That means that earning income in retirement beyond a certain threshold can decrease your SRS benefit. Note, special provisions employees are exempt from the earnings test until they have reached their minimum retirement age.
The earnings test states that for every $2 you earn over the limit, $1 will be withheld from your SRS benefit. The earnings limit for 2019 is $17,640. The limit is typically adjusted for inflation annually. Not all earnings count against your SRS benefit—only those earnings generated from a wage Generally, the only income that counts is that for which you would receive a W-2, certain 1099s, or similar IRA forms for reporting earned income. Your FERS annuity, withdrawals from tax-deferred savings (TSP, IRA, etc.), and even investment income do not apply toward the SRS benefit-earnings limit. Your SRS will always be federally taxed; however, it may not be taxed on a state level. See your CPA for further details.