Learn about retirement eligibility and computation when it comes to Part-Time Service
Ed Zurndorfer-
There are employees covered by the Federal Employees Retirement System (FERS) who at some point during their federal service may have worked less than full-time. In the first of two FEDZONE columns discussing how part-time service affects FERS retirement benefits, this column discusses the effect of part-time service on FERS retirement eligibility and annuity computation.
It is important to first define what part-time service is. Part-time service is defined as:
• any actual service performed on a less than full-time basis by an individual whose appointment describes a regularly scheduled tour of duty; and
• any period of time credited during nonpay status under CSRS that follows a period of part-time service without any intervening period of actual service.
Note the following: (1) this definition is not limited to part-time career employment because it includes part-time temporary employment as well; (2) part-time service does not include intermittent or “when actually employed (WAE)” service. That is less than full-time service under an appointment that does not specify a preschedule regular tour of duty; and (3) in determining eligibility for retirement, part-time service is creditable to the same extent as full-time service.
•Full-time service is any actual service in which the employee is scheduled to work the number of hours and days required by the administrative workweek for his or her grade or class. That is, 40 hours per week, or 80 hours per pay period.
• Temporary service is service under an appointment limited to one year or less exclusive of intermittent service.
• The tour of duty is the assigned number of hours and days during an administrative workweek. That is, 20 hours/week, or 40 hours/week, etc..
Effect of Part-Time Service on FERS Retirement Eligibility
A FERS employee who has some part-time service, either as a permanent employee or as a temporary employee (in which the employee made a full deposit for his or her temporary time) is getting full credit for retirement eligibility purposes. In other words, the employee does not have to work any longer in order to make up for the reduced number of hours worked compared to a full-time equivalent. The following examples illustrate:
Example 1. Jonathan, age 57 during 2021, entered federal service in 1992 under FERS as a full-time employee. During the years 2011-2014, Jonathan worked half-time (40 hours a period). Jonathan intends to retire in 2022 at age 58, past his full retirement age of 56, with 30 years of FERS service. He does not have to work an additional two years in order to “make-up”, for the four years Jonathan was working half time.
Example 2. Cathy was a temporary employee during the years 1986-1987. She was working 30 hours a week or 60 hours a pay period (“3/4 time”). Cathy became a permanent employee in 1988 and immediately made a full deposit for her two years of temporary service. Cathy is getting full credit for FERS retirement eligibility for the two years of temporary service she made a deposit for, even though she worked ¾ time during those two years.
Effect of Part-time Service on FERS Annuity Computation
The FERS proration factor is used to compute FERS annuities that include credit for part-time service. The factor reflects the difference between full-time and part-time service for the entire period of covered FERS service. This includes military service and temporary service credited under FERS in which full deposits were made. The proration factor is computed as follows:
Proration Factor = Actual Hours Worked During All Creditable FERS Service
DIVIDED BY
Total Full-Time Hours Possible During All Creditable FERS Service
Computation of a FERS Annuity that Incudes Part-time Service
The following procedure is used to compute a FERS annuity in which the FERS annuitant had some part-time service while a FERS employee:
Step 1. Determine the employee’s total length of FERS service
Step 2. Compute the FERS Proration Factor. This is done by first computing the total number of hours the employee worked for all periods of civilian (including temporary service in which a full deposit was made) and military service creditable under FERS in which a full military deposit was made. This amount is then divided by the total full-time equivalent hours to obtain the FERS proration factor. Note that a full-time FERS employee works 2087 hours per leave year.
Step 3. Compute the high-3 average salary for the FERS basic annuity by using any period of three consecutive years of the employee’s service that will produce the highest average. Only full-time service rates of salary are used in computing the average. In other words, “deemed” full-time salary rates are used. That is, the salary (SF-50 salary), the employee would have received if the federal service would have been full-time service.
Note that using deemed full-time rates to compute only the FERS basic annuity.
Prorate the employee’s salary according to the part-time tour of duty in determining the following: (1) FERS annuity supplement; (2) the final salary (or high-3 average salary) portion of the Basic Employee Death Benefit (BEDB); and (3) the disability benefit based on either 60 percent or 40 percent of the high-3 average salary.
The following example illustrates the computation of a FERS annuity for an employee who retired on Dec. 31, 2020 and who worked 40 hours pay period (1/2 time) during the last three years of their federal service.
Matt, age 57, retired from federal service on Dec. 31, 2020 with 31 years, 0 months and 19 days of federal service. During the last three years of federal service ending on the day Matt retired, Matt was working half-time (40 hours per pay period, 1,043 hours per year). The other 28 years and 22 days Matt worked full-time (2,087 hours per year). His high-3 average salary based on full-time service is $78,500. Matt had 8 months and 11 days of unused sick leave added to his service time for FERS annuity computation purposes.
Matt’s computed starting FERS gross annuity is calculated as follows:
Step 1. Length of service, including unused sick leave:
| Years | Months | Days | |
| 31 | 0(+1) | 19 | |
| Add: Unused sick leave | +0 | 8 | 11 |
| Total length of service (used for FERS computation purposes) | 31 | 9 | 0 |
Step 2. Compute the FERS Proration Factor
Matt’s total Length of Service: 31 years and 19 days
Total number of hours worked: 31 years x 2,087 hours/year + 110 hours (19 days)
= 64,807 hours (Full-time equivalent number of hours)
Matt’s actual number of ours worked: 28 years, 0 months and 19 days (full-time)
= [28 years x 2,087 hours/year +110 hours (19 days)] (full-time) + 3 years x 1,043 hours/year (half-time) = 61,675 hours
Matt’s FERS Proration Factor = 61,675 hours/64,807 hours = 0.9517
Step 3. Matt’s high-three average salary = $78,500, computed based on full-time service
Step 4. Computation of Matt’s starting FERS gross annuity, based on 31 years and 9 months of full-time service and unused sick leave of 8 months and 11 days.
= 31.75 years times (1 percent/year of service) times $78,500 equals $24,924
Step 5. Multiply computed starting FERS gross annuity based on full-time service by FERS Proration Factor (step 2).
$24,924 times 0.9517 equals $23,719
Matt’s adjusted starting FERS gross annuity of $23,719 is based on his 28 years and 19 days of full-time service (2087 hours per year of service) and on his 3 years of half-time service (1,043 hours per year of service).
Note: If Matt’s FERS annuity supplement is computed to be $11,000, then with the FERS proration factor of 0.9517, his recomputed FERS annuity supplement will be:
$11,000 times 0.9517 equals $10,468/year (FERS annuity supplement ceases when Matt becomes age 62)
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
