A couple of weeks ago, I wrote an article about some of the big retirement differences that FERS special provisions employees need to know. But in efforts to keep that article relatively short, I wasn’t able to cover everything.
Here are some more major differences for FERS special provision employees.
But first, the FERS positions that are 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: TSP at 50
When regular FERS retire early, they can access their TSP as early as 55. This is 4 and ½ years earlier than IRAs at 59 and ½.
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.
Big Difference #2: COLA’s Before Age 62
COLA’s or cost of living adjustments are annual increases that retirees see to 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 flat line 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 #3: FERS Special Supplement Earnings Test
Many have heard that if you make too much money while receiving Social Security benefits, your Social Security benefits will decrease. What is less known however, is that the same thing happens to your FERS special supplement if you make over certain limits.
In a nutshell, if you make too much money, your FERS supplement can be reduced down to zero. This is called an earnings test.
To be eligible for the supplement, FERS need to retire with an immediate retirement before the age of 62. Since most FERS can’t retire before their minimum retirement age (age 55-57 and based on birthday) with an immediate retirement, most FERS only have the supplement for a max of 7 years (age 55-62).
Since special provision FERs are able to retire earlier than their MRA (minimum retirement age), they are able to receive the supplement for many more years.
The biggest difference however is that special provisions employees 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 like regular FERS.
Conclusion
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.
