The federal government’s Office of Personal and Management oversees the benefits of all postal workers. Employees in the system prior to January 1, 1984 are part of the Civil Service Retirement System while those with careers that began after that date are part of the Federal Employees Retirement System. Each system handles retirement benefits slightly differently.
Vesting and Eligibility
Anyone who works for the U.S. Postal Service must be a full-time employee and be vested with at least 5 years of service before retirement benefits kick in. Employees hired prior to January 1, 1984, were given the choice of staying with CSRS or transferring to the FERS system.
The retirement benefit is based on your highest average pay during any three consecutive years of service, which OPM calls the "high-3 average salary." These often are the last three years of service, but can apply to earlier years if your pay was higher during that time. The benefit only is calculated on your basic wage and not on any bonuses or overtime earned. Retirement benefits are calculated as follows for FERS retirees:
- Under 62: 1 percent of high-3 average salary for each service year
- At 62 with 20 years of service: 1 percent of high-3 average salary for each service year
- At 62 with more than 20 years: 1.1 percent of high-3 average salary for each service year
Those who retire under FERS also have Social Security taxes withdrawn, and as such are eligible to receive their FERS retirement and Social Security. The FERS plan consists of three components:
- Social Security Benefit
- Basic Plan Benefit
- Thrift-Savings Plan Benefits
The largest portion of the FERS retirement benefit is the Social Security allotment, which is calculated based on the contributions and your annual salary over your career. You are required to pay your Social Security taxes throughout your FERS career and a small basic plan contribution. Additionally, the USPS contributes 1 percent of your salary each pay period to the thrift-savings plan. You also are able to make tax-free contributions to this plan from your paycheck; the government matches a percentage of that amount. If you leave USPS employment and withdraw the money from the Basic Plan, you will not be entitled to monthly retirement disbursements.
CSRS Social Security Benefits
If you retired under the CSRS plan, your Social Security benefit can be reduced under the IRS Windfall Elimination Provision. This provision applies if you reached retirement age after 1985. Employees under CSRS did not have Social Security taxes deducted from their paychecks, and the government did not contribute on their behalf.
The formula varies based on the amount of your monthly earnings. For example, if you made $3,000 a month and had enough contributions to quality for Social Security, you could receive a benefit equal to 48 percent of that amount, or $1,439 per month. The higher your monthly wage, the lower percentage of the benefit amount received.
Joint CSRS and FERS Retirees
If you have contributions under both systems, the FERS component is calculated as per the information listed previously, while the CSRS component is calculated based on:
- First 5 years = 1.5 percent of the high-3 average salary for each service year
- Second 5 years = 1.75 percent of the high-3 average salary for each service year
- All years over 10 years = 2 percent of the high-3 average salary for each service year
The amount of time you spent in the CSRS program may affect your Social Security benefit -- which is calculated on a case-by-case basis -- since no Social Security was withdrawn from your pay or matched by your employer while under the CSRS system.
Benefit Tracking and Direct Deposit
By creating a user identity on the government's site, you can track the information in your account along with your benefits. The OPM requires you to sign up for direct deposit, so that your retirement benefits are paid directly to your bank account -- either checking or savings. You can access your retirement account online after signing up; this allows you to make changes to your account as needed, change the amount of taxes withdrawn and more.
FERS retirees are also eligible to participate in a healthcare plan -- the Federal Employees Health Benefits or FEHB at the same prices as federal employees, as long as you were continuously enrolled in the program at the time of your retirement. FERS employees also have disability benefits that can replace a portion of their income if they are disabled for a long period. This benefit is available to full-time employees after 18 months of service.