What retirement does USPS have?
Find out what retirement USPS has, and the various types of retirement benefits that USPS workers may be eligible to receive.
Thousands of workers spend their entire careers working for the United States Postal Services (USPS). As a government entity, USPS provides various forms of retirement benefits to its employees. The retirement benefits that retired USPS workers receive depend on their retirement plan and how long they worked for the USPS.
USPS workers may be covered under the Civil Service Retirement System (CSRS) or Federal Employment Retirement System, depending on when they joined the federal service. Typically, CSRS pays higher benefits than FERS, but covered workers are not eligible for Social Security benefits. On the other hand, FERS-eligible workers receive a basic annuity, Social Security, and Thrift Savings Plan.
Which retirement benefits do UPSC workers receive?
If you have worked in USPS long enough, you will be eligible to receive various retirement benefits. Typically, federal workers who were hired before January 1, 1984, are covered under the Civil Service Retirement System. Workers hired prior to 1983 were allowed to switch over to FERS retirement to get the full benefits under the new system.
FERS retirement covers federal workers, including USPS workers, who were hired on or after January 1, 1984. FERS offers a lifetime basic annuity, Thrift Savings Plan, and Social Security benefits. However, the amount of benefits a worker receives varies depending on the number of years they worked and their earnings history.
Civil Service Retirement System (CSRS)
USPS workers who were before January 1, 1984, are covered under the Civil Service Retirement System. CSRS is a defined retirement plan that pays retirement, disability, survivor, and disability benefits to federal workers. This retirement plan allows workers to share in the cost of future annuities by contributing 7% to 8% of their salary to the retirement system.
Although CSRS pays higher benefits than FERS, eligible workers do not qualify for Social Security benefits and Thrift Savings Plan. CSRS retirees receive retirement benefits based on how long they worked, and their average salary during any three consecutive years of service. Typically, a retired worker earns 1.5% to 3.5% of the average of their highest-paying three years of service. However, CSRS limits the maximum allowable yearly annuity to 80% of the high-3 average, which applies to workers who have put in at least 40 years of service.
Federal Employees Retirement System (FERS)
USPS workers who were hired on or after January 1, 1984, are covered under the Federal Employees Retirement System. FERS was established to replace CSRS, and it provides additional coverage that was not available in the prior plan. FERS uses the high-3 average, meaning it pays 1% to 1.1% of the average of your highest paycheck over three consecutive years.
Eligible USPS workers get access to a defined benefit similar to CSRS and a defined contribution plan through TSP. TSP was introduced to match 401(k) that is available to private-sector workers, and it allows employees to contribute a percentage of their earnings to the plan and still receive matching contributions from their agency.
FERS retirees are also eligible for Social Security retirement benefits, disability benefits, and survivor benefits for their family members. The amount of Social Security benefits a worker receives depends on the number of years they worked and their earnings history.
Thrift Savings Plan (TSP)
USPS workers who are enrolled in FERS are eligible to participate in the Thrift Savings Plan. TSP is a retirement plan similar to 401(k), and it is provided to federal employees, including USPS workers.
TSP is a tax-deferred retirement plan that allows participants to make tax-deferred contributions to the plan, and only pay taxes when they make a withdrawal. Participants may also get access to a Roth TSP account, which allows them to make after-tax contributions to the plan, and make qualified tax-free withdrawals in retirement.
USPS also makes employer contributions to each eligible employee's TSP account. The agency contributes an amount equal to 1% of your basic pay, which is known as the agency contribution. Secondly, the agency will match employee contributions dollar-for-dollar up to 3%, and the next 2% will be matched at 50% on the dollar.
If you contribute up to 5% of your pay, USPS will match an additional 5% of your pay, bringing the total contributions to 10%. If you contribute more than 5% of your pay to TSP, you won't receive matching contributions on the additional contributions. If you stop making employee contributions to your TSP account, the employer's match will stop; however, you will continue receiving the 1% agency contributions.
Social Security benefits
Under FERS, USPS workers pay into the Social Security system during their working years and become eligible for Social Security benefits when they retire. They may also be eligible for disability benefits in case of a disability, while surviving family members of a deceased worker may be eligible for survivor benefits.
Once a USPS worker retires, Social Security calculates benefits based on the worker's average indexed monthly earnings (AIME), which considers the highest 35 years of earnings. Social Security uses AIME to determine the worker's Primary Insurance Amount (PIA), which is the amount of benefits the worker is entitled to receive at the Full Retirement Age (FRA). As of January 2023, the average Social Security benefit is $1,828.30.
Voluntary Early Retirement Authority
USPS occasionally offers a voluntary layoff program through the Voluntary Early Retirement Authority (VERA) to reduce extra workforce. If a USPS worker opts to retire under this program, they will be allowed to access their retirement funds earlier than normal. However, a worker must meet certain conditions to be eligible for the voluntary retirement program.
One of the requirements a worker must meet is that they must be employed by USPS for at least 31 days before the VERA notice. The worker must be age 50 or older with at least 20 years of government employment, or any age and 25 years of government employment. The worker must have completed at least 5 years of civilian government service. Finally, if the worker is terminated, the removal must not be due to poor performance or misconduct.
USPS will calculate the retirement benefits a worker is due to receive based on whether they are on the CSRS or FERS plan. Workers who retire under VERA will receive benefits starting from the first month following retirement.