The Retiree Annuity Supplement For Foreign Service And Civil Service | FedSmith.com (2024)

The Retiree Annuity Supplement, Special Retirement Supplement, FERS Supplement, Social Security Supplement…there seem to be endless names for, “the supplement”. I’m going to call it the Retiree Annuity Supplement (RAS), simply because that’s what it’s called in Chapter 51 of the Office of Personnel Management (OPM) FERS Handbook. Definition: the paycheck federal employees get for life when they retire is technically called an “annuity”, but to avoid confusing it with a TSP annuity or a private insurance product, I’m going to call it a pension.

A special note for Foreign Service (FS) employees: for you, the rules for your RAS are the exact same as they are for Civil Service (CS) Special Category Employees (SCEs), which include law enforcement, firefighters, and air traffic controllers. The FS annuity supplement is outlined in 22 U.S. Code § 4071d(c).

What is the Retiree Annuity Supplement (RAS)?

An additional sum of money paid with your pension, intended to bridge the gap until Social Security age. Your supplement will not come in a separate check.

Who Gets It, and When?

If you retire with an immediate unreduced pension and you’re under age 62, you’re eligible for the RAS. The RAS stops at the end of the month prior to you turning age 62, regardless of your choice to start Social Security (SS) or not. You can choose to start Social Security anytime between age 62-70.

Eligible retirement combinations that receive the RAS include:

• MRA (age 57 if born in 1970 or later) + 30-years of service
• Age 60 + 20-years of service
• Age 50 + 20-years of service (Special Category Employees (SCE), Foreign Service, and some others)
• 25-years of service + any age for SCE (1811 FS Special Agents but not 2501 FS Special Agents)

The RAS is not paid under a deferred, postponed, disability, or MRA + 10 retirement. If you retire before your MRA through involuntary retirement, or voluntary retirement due to a Reduction in Force (RIF) or major reorganization, you can get the RAS, but it’ll only start once you reach your MRA.

Members of Congress retiring at age 50 + 20-years of service or any age + 25-years of service must also wait until MRA to start receiving their RAS.

What’s it Worth?

In order to estimate how much your RAS will be: (1) Take your whole years of creditable service, (2) divide that number by 40, and then (3) multiply that number by your age 62 Social Security benefit.

You can get your age 62 estimated SS benefit any time by creating a “My Social Security” account on SSA.gov. Do not count military time or your sick leave balance when adding up whole years of service, just creditable civilian service.

Here’s an example – Let’s say you have 25 years of service and your estimated SS benefit at age 62 is $2,500. Your RAS will be around $1,562. How did we get that? 25 years of service / 40 = .625. Your age 62 SS benefit of $2,500 (x) .625 = $1,562.

Taxes

The RAS is fully taxable as ordinary income on the federal level (the same tax brackets that apply to your W2 income). The RAS may be taxable in your state, but this will depend on how your state taxes federal pensions and retirement income.

Taxation of the RAS sometimes gets confused because people often refer to the RAS as the “Social Security Supplement”. The RAS is not taxed like Social Security and is not administered by the Social Security Administration.

RAS Reduction Due to “Excess Earnings”

Once you hit your MRA, your RAS can be reduced or even completely eliminated depending on your earned income above the Social Security exempt amount, which for 2024 is $22,320. For every $2 you earn, the RAS is reduced by $1. This earnings test applies to everyone who reaches MRA, regardless of whether you’re Foreign Service or Civil Service. This reduction is only for your RAS, not your pension.

Earned income is the key here. Earnings from an employer (W2, 1099) and net self-employment income are what we’re talking about. If you’re confused on what counts, ask yourself, do you have to pay payroll tax or self-employment tax on the money.

What doesn’t count? Your pension, TSP & IRA distributions, lump-sum annual leave payout, spousal income, dividends, interest, capital gains, passive rental income, gifts, inheritance, alimony, and some others listed on OPM Form RI 92-22 (Civil Service) and DS-5026 (Foreign Service).

Be sure to only include income earned after you hit your MRA. 5 U.S. Code § 8421a states, “Any earnings attributable to a period before attaining the applicable retirement age under section 8412(h) shall not be considered in determining the excess earnings.”

A caveat for Air Traffic Controllers: certain ATC instructors who are under contract with the FAA can earn income from their post-retirement instructor job that will not count towards the earnings test.

Reduction Example – Foreign Service & Civil Service SCE

In 2022, Bob retired at age 52 from the Foreign Service (or Civil Service SCE) with a RAS of $1,500/month ($18,000/year).

From 2022-2027, Bob receives his $18,000 RAS annually and works a post-retirement job. The salary for this job doesn’t matter since he hasn’t reached MRA. Bob’s RAS remains $18,000 for each year since it does not get a Cost-of-Living-Adjustment (COLA) and isn’t subject to the earnings test.

February 28, 2027, is Bob’s 57^th birthday (MRA). His annual salary in 2027 is $48,000. For the rest of the year after hitting MRA, Bob’s earned income totaled $40,000 ($4,000 per month (x) 10 months (March to December) = $40,000).

Bob receives his full RAS of $18,000 in 2027, but it will be reduced in 2028 because he has reached MRA and has earned income over the SS exempt amount. This is where the process differs slightly between FS and CS.

Foreign Service

January 2028 – Bob submits form DS-5026 (FSPS Annuity Supplement Report) reporting the $40,000 he earned after reaching his MRA. The DS-5026 needs to be submitted in the beginning of January (the 2024 due date was January 8^th). If the form is not received by Department of State HR, the RAS will be suspended.

Based on Bob’s earned income, his supplement will be reduced starting February 1, 2028. If Bob was forgetful and didn’t submit the DS-5026, he would notice his February pension check was much smaller. At this point, he could contact DOS HR, submit his DS-5026, and get his RAS reinstated. In our scenario above, his reinstated RAS would be at a reduced amount.

Civil Service

April/May 2028 – Bob receives Form RI 92-22 (Annuity Supplement Earnings Report) from OPM. OPM states, “All applicable annuitants should receive the mailing by the end of May each year.” Bob sends in the form to OPM reporting the $40,000 of earned income that he received last year after hitting his MRA. Starting with his August 1, 2028 pension check, Bob’s supplement will be reduced.

Here is the math for figuring out Bob’s reduction, using the 2024 exempt amount since we don’t know what it will be in 2028. This method is the same for FS and CS.

• Step #1: Bob’s earned income after hitting his MRA (3/1/27 – 12/31/27) was $40,000
• Step #2: $40,000 of earned income minus the exempt amount ($22,320) = $17,680 over the limit
• Step #3: The reduction to the RAS is $1 for every $2 earned over the limit. Therefore, Bob’s RAS will be reduced by $8,840 ($17,680 over the limit divided by 2).
• Step #4: The original RAS of $18,000 is reduced by $8,840 for a new RAS payment of $9,160/year. Bob’s monthly RAS went from $1,500 to $763. If Bob’s post-retirement earned income is reduced, his RAS can be adjusted upwards and even fully restored to $18,000 if he dips below the exempt amount.

Retiree Annuity Supplement – Reduction Due to Excess Earnings

Applies to Foreign Service and Civil Service After Mandatory Retirement Age (MRA)

Spousal Supplement

If you die and your spouse is under age 60, the spousal supplement is a benefit that is intended to act as an income bridge until they can begin Social Security survivor benefits at age 60. The spousal supplement (not the survivor annuity) will end at age 60, regardless of whether they start receiving SS survivor benefits.

In order to get the spousal supplement, your surviving spouse must be: (1) under age 60, (2) receiving a survivor annuity, (3) eligible for Social Security survivor benefits at age 60, which is based on your Social Security record, and (4) they must not be eligible for Social Security parent benefits or disability benefits. The deceased must have had five years of creditable civilian service with at least 1-year of creditable service under FERS.

How much is the spousal supplement? It’s a little more confusing than calculating your estimated RAS. Their supplement is the lesser of either:

1. The hypothetical CSRS (old retirement system) survivor annuity (–) FERS survivor annuity. This is calculated using your years of service up until your death and calculated as if you were covered by CSRS.
2. The hypothetical Social Security survivor benefit payable at age 60.

Two interesting provisions of a spousal supplement that differ from a regular RAS: there is no earnings test for the spousal supplement, and the spousal supplement is increased by FERS COLAs.

More information on the RAS can be found in Chapter 51 of the OPM CSRS/FERS Handbook.

Tyler Weerden, CFE is a financial planner and owner ofLayered Financial, a Registered Investment Advisory firm in Arlington, Virginia. In addition to being a financial planner, he is a full-time federal agent with 15 years of law enforcement experience on the local, state, and federal level. He is also a Certified Fraud Examiner (CFE) and has experience with local, state, and federal pension systems, 457(b) Deferred Compensation, TSP, IRAs, HSAs, and invests in rental real estate.