Federal Government Policy and Business

Q&A for federal workers: Annuity calculation

The Washington Post: Question: How much will the pay raise increase my “high-three” if I retire soon?

Answer: Salaries of most federal employees in the Washington area have increased by about 2.3 percent, but the boost to your retirement benefits might not be as much as you are hoping.

Federal retiree annuities are based on high-three average salary and service time (the two main systems use a different multiplier for the latter). However, the high-three figure is not based on your pay rate in your highest-paid calendar years. It is the average of your salary in your highest-paid 36 consecutive months — to be exact, the highest-paid 78 consecutive biweekly pay periods.

That figure includes locality pay but not such add-ons as overtime, bonuses or recruitment or retention incentives. Basically, if retirement contributions were not taken out of a form of compensation, it doesn’t count in the retirement calculation.

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