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Author: Admin | 2025-04-27
All federal employees – those covered by the Civil Service Retirement System (CSRS and CSRS Offset employees), the Federal Employees Retirement System (FERS) or a combination of CSRS and FERS – “Trans” FERS employees) – upon retiring from federal service will receive either a CSRS annuity, a FERS annuity, or with some employees (“Trans” FERS employees) a combination of both annuities. The annuities are computed by OPM’s Retirement Processing office on behalf of retiring federal employees.To calculate the annuity, OPM needs to determine the retiring employee’s:(1) Length of service and(2) High-three average salary.In spite of legislation before Congress over the last 30 years to change the high-three average salary to the high-five average salary, noting has been passed into law.This column explains what the high-three average salary is, what it is composed of, and how it is computed.AdvertisementWhat is the High-3 Average Salary?The high-three average salary is defined as a retiring employee’s highest basic pay averaged over any three consecutive years in federal service. For retiring federal employees who most often earn their highest salaries at the end of their service with the federal government, this three-year period is the three-year period ending on the year, month and day the employee retires. However, pay from an earlier three-year consecutive period may have been higher.The pay/salary that OPM uses in the computation of the high-three average salary is the pay/salary for which CSRS or FERS retirement contributions are deducted.For CSRS employees. These contributions are equal to 7 percent of an employee’s salary each pay period and contributed to the CSRS Retirement and Disability Fund.For most FERS employees, the contributions are equal to 0.8 percent of an employee’s salary deducted each pay-period and contributed to the FERS Retirement and Disability Fund.Types of Pay Included in High-Three Average SalaryFor employees who are in the General Schedule (GS) pay system, the following types of pay are included with respect to calculations of the high-three average salary:(1) Regular pay;(2) locality-based pay;(3) environmental differential pay:(4) premium pay for standby pay;(5) law enforcement availability pay;(6) nigh differential pay for Federal Wage System (Blue-Collar) employees only; and(7) special pay rate for recruiting and retention purposes.Types of Pay Not Included in High-Three Average SalaryThe following types of pay are not included in the calculation of the high-three average salary:(1) Lump-sum payment for accrued and accumulated annual leave;(2) bonuses and overtime, holiday pay, Sunday premium pay and military pay;(3) General
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