[Excerpt] Federal employees participate in one of two retirement systems. The Civil Service Retirement System (CSRS) was established in 1920 and covers only employees hired before 1984. Participants in the CSRS do not pay Social Security payroll taxes and they do not earn Social Security benefits. For a worker retiring after 30 years of federal service, a CSRS annuity will be equal to 56.25% of the average of his or her highest three consecutive years of basic pay.
Because the Social Security trust funds needed additional cash contributions to remain solvent, the Social Security Amendments of 1983 (P.L. 98-21) required federal employees hired after 1983 to participate in Social Security. To coordinate federal pension benefits with Social Security, Congress directed the development of a new retirement system for federal employees hired after 1983. The result was the Federal Employees’ Retirement System (FERS) Act of 1986 (P.L. 99- 335).
The FERS consists of three elements:
• Social Security,
• the FERS basic retirement annuity and the FERS supplement, and
• the Thrift Savings Plan (TSP).
All federal employees initially hired into federal employment on or after January 1, 1984, are enrolled in the FERS, as are employees who voluntarily switched from CSRS to FERS during “open seasons” held in 1987 and 1998. Of 2,751,000 federal civilian and Postal Service employees enrolled in these federal retirement plans as of September 30, 2013, 2,477,000 (90%) were participating in the FERS and 274,000 (10%) were under the CSRS.