For decades, your FERS retirement annuity has been calculated using the High-3 formula: the average of your three highest consecutive years of basic pay, multiplied by 1% (or 1.1% if you retire at 62 or older) multiplied by your total years of service.
Congress is now proposing to change that to a High-5 calculation. That single change could permanently reduce your monthly retirement check by $500 to $1,000 or more every year for the rest of your life.
How the Current High-3 Formula Works
The FERS annuity formula is straightforward:
Annual Annuity = 1% x High-3 Average Salary x Years of Service
Example: A GS-12 employee with a High-3 average of $85,000 and 25 years of service receives an annuity of $21,250 per year, or about $1,770 per month.
What Changes Under High-5
Under the proposed High-5 formula, OPM would average your five highest consecutive years of basic pay instead of three. Because most federal employees receive annual pay increases, your two additional years pulled into the average will almost always be lower-earning years, which drags your average salary down.
Using the same example above, if that employee’s salary grew from $78,000 to $85,000 over five years, their High-5 average might be $81,500 instead of $85,000. That $3,500 difference reduces their annual annuity by $875 per year, or $17,500 over a 20-year retirement.
When Would This Take Effect?
The proposed effective date currently in the legislation is January 1, 2028. Federal employees who retire before that date under the current eligibility rules would lock in the High-3 calculation permanently.
This is a proposed change. It is not yet law. But planning now, before it passes, is far more effective than reacting after.
FERS Retirement Eligibility Quick Reference
- MRA + 30 years of service: Full immediate annuity, no reduction
- Age 60 + 20 years of service: Full immediate annuity
- Age 62 + 5 years of service: Full immediate annuity (at 1.1% multiplier)
- MRA + 10 years of service: Reduced immediate annuity (5% per year under 62)
What You Should Do Now
First, know your numbers. Request a retirement estimate from your HR office or calculate it yourself using your current High-3 and projected years of service. Then model what a High-5 would look like using a slightly lower average.
Second, know your eligibility date. If you are within a few years of a full retirement milestone, the proposed change may factor into your timing decision.
Third, follow updates. This legislation is moving through Congress. Subscribing to Federal Benefits Resource ensures you get plain-English updates as they happen, not after the deadline has passed.
Educational content only. Not personal retirement, financial, or legal advice. Consult your agency HR office or OPM for decisions specific to your situation.
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