In this week’s question of the week, I was asked,
“I have some co-workers that were talking about a “Bridge” payment but I was unable to find out what it was. Can you tell me?”
The term bridge payment is simply another term for what is known as the:
- FERS Special Supplement
- Retirement Special Supplement
- Annuity Special Supplement
- Special Supplement
All the Special Supplement is, is a payment that supplements your income in between the time you retire and when you become eligible for Social Security Benefits.
When Can I Qualify?
Now, you can’t just receive a special supplement at any time.
You have to retire in a certain time period, you have to be a FERS employee (CSRS don’t receive Social Security,) and it is essentially based on when you reach your MRA (Minimum Retirement Age.) Your personal MRA will not be the same as everyone else’s because it’s based on the year you’re born.
Here’s a chart to help determine your MRA:
Along with reaching your MRA, you must also have 30 years of service. However, if you have only 20 years of service, you can retire beginning at age 60.
So, if you meet the requirements of reaching your MRA and have 30 years of service or have 20 years of service and are 60 or older, you can request the Special Supplement.
What Does the Special Supplement Give Me?
Now this is really what you’re wanting to know.
What exactly can I expect to receive from filing for the Special Supplement? And this is a question you NEED to be asking. You NEED to know what to expect in retirement so you can decide whether you can actually afford to retire. I meet with WAY too many federal employees who are unaware of what they’re going to be living off in retirement AND they’ve already set a retirement date.
For them, it’s not as big of an issue because they’re coming to me for help. But, if you’re in this boat then you either need to figure it out on your own or find somebody who can help you.
So, to put it simply, the Special Retirement Supplement/Bridge Payment will provide you with a supplemental income until you are eligible to file for Social Security benefits, which is currently age 62.
Why Do FERS Employees Receive a Special Supplement?
There are three parts to a FERS Employee’s retirement; pension, Thrift Savings Plan, and Social Security.
Therefore, since Social Security is a large part of FERS retirement, the Special Supplement is a sweet bonus for those who are able to retire early. It’s like a nice pat on the back as you’re led out the back door to run into the sunset a free man (although that bonus was technically paid for by you and other taxpayers.)
It must be said that the Special Retirement Supplement is a part of your retirement package. So, if you’re able, it could very well behoove you to take advantage of the supplement, but continue reading to make sure you understand all that’s involved, especially the earnings test.
Now, one common misconception is that the Special Supplement is actually paid out by Social Security. In reality, it’s actually paid out by the Office of Personnel Management (OPM) and receiving the Special Supplement does not reduce what you would draw from Social Security or force you to file for Social Security at age 62.
How is the Special Supplement Calculated?
It must be understood that the Special Supplement is calculated solely based upon civilian employment UNDER the FERS system (bought back military time is NOT included in the SRS.) What this means is for you federal employees who earned Social Security credits working at a different job outside of the federal government will not have that calculated into the Special Supplement. Because of this, your Special Supplement and Social Security benefits at age 62 could vary.
Now the calculation which is spelled out in the CSRS and FERS Handbook produced by OPM and was summarized by Robert Benson of FedBens can be found below:
- Record all basic FERS salaries where the employee was on the payroll for the entire year, being careful not to exceed the Social Security maximum for each individual year.
- For each salary prior to 2016, increase the amount by an index. The index is the Average Total Wages for 2016 divided by the Average Total Wages for the individual year.
- Delete the five lowest salaries, then add the remaining.
- Divide the total remaining by (12 * number of years) – this is the AIME or Average Indexed Monthly Earnings.
- Apply the three-tier Social Security formula to the AIME, to get the PIA, or Primary Insurance Amount.
- Depending on employee’s age at retirement, multiply the PIA by 75%, or less.
- Divide the result by 40 and then multiply by the number of years of FERS service, rounded.
This is a bit of a complex calculation, but it is the CORRECT calculation. If you would like a sample calculation please contact Robert Benson at email@example.com.
Should you want an easier calculation that is an estimate, you can follow this simplified example:
- FERS employee
- MRA is age 57
- Retire at 57 with 30 years of federal service
- Their monthly age 62 Social Security benefit is expected to be $1,500 (going to SSA.gov can help determine this amount.)
- In computing the Special Supplement, the 30 years of FERS service are divided by 40 (the number of years that Social Security considers being a full career), and the resulting fraction (3/4 or 75%) is multiplied by the age 62 Social Security benefit to give the amount of the Special Supplement. In this simplified example, the Special Supplement would be $1,125. Now, if the employee were retiring with only 20 years of service, the fraction would be reduced to ½ or 50% and the Special Supplement would be $750 per month.
Important Information to Be Aware of
When you first started reading this article, you probably thought it would be pretty straight forward. BUT as you can see, as with many federal employee benefits, there’s more to it than meets the eye.
The first little bit o’ info you need to know is that the same earnings test that applies to Social Security benefits applies to the Special Supplement.
For 2016, you may earn up to $15,720 before the earnings limit begins. Once it begins, for every $2 in earned income above $15,720, $1 will be deducted from the Special Supplement. For instance, if you earn $16,000 your special supplement will be reduced by $140. This test, however, only applies to earned income, excluding pensions, dividends, etc.
It must also be noted that the Special Supplement does not include a COLA adjustment.
Special Supplement Exceptions
- Should you decide to take an early out, you will not be entitled to the Special Supplement until the MRA is reached.
- Should you retire under MRA+10, disability, or deferred retirement, you are not eligible for Special Supplement.
- Special category employees such as law enforcement and firefighters may receive the Special Supplement at the time they retire, regardless of whether they’re younger than their MRA. They’re also not subject to the earnings limits until they reach their MRA, a GREAT benefit, and in my opinion deservedly so.
The Special Supplement is a great benefit. This being said, it may not be around forever.
If a person retires early to draw the special supplement, it means they’re no longer paying into Social Security and as such is probably something not looked at favorably by the SSA. Most likely, however, the Government would simply grandfather everybody in and it would only apply to new employees.
Have you taken advantage of the Special Supplement? Anything you can share that wasn’t mentioned in the article?