The FERS Supplement Earnings Test, Worked

The FERS annuity supplement is the one federal retirement payment an ordinary job can take away. It bridges the gap between an immediate retirement and age 62, it is paid by OPM out of the retirement fund, and 5 U.S.C. § 8421a reduces it by the same earnings test Social Security applies to early retirees: $1 withheld for every $2 of earnings above an annual exempt amount, which is $24,480 for 2026.

People generally know that sentence. What they have usually not worked out is where it ends — the earnings figure at which the supplement reaches zero — and it is reached much sooner than the arithmetic feels like it should.

Where the supplement runs out

Take a retiree with 30 years of FERS service and a Social Security estimate of $1,800 a month at 62. The supplement is that estimate times years of service over 40, so:

• Supplement: $1,800 × 30 ÷ 40 = $1,350 a month, $16,200 a year.
• Earning $40,000: $15,520 over the exempt amount, so $7,760 is withheld across the year — $646.67 a month, leaving $703.33.
• Earning $56,880: the supplement is gone entirely.

That last figure is the one worth carrying around. It is not a high salary. A retiree who takes a routine full-time job in the private sector, or goes back as a contractor, will pass it without noticing — and the $16,200 they were counting on stops. Between the exempt amount and that point, every dollar earned costs 50 cents of supplement, so the effective return on the work is half what the payslip says.

What counts, and what does not

The test looks at earned income only: wages and net self-employment earnings. Everything else in a retiree’s finances is invisible to it.

• Counts: salary, wages, bonuses tied to work performed, and net earnings from self-employment.
• Does not count: your FERS annuity itself, TSP withdrawals, IRA distributions, investment income, rental income, or a spouse’s earnings.

And the reduction reaches the supplement only. It never touches the basic annuity underneath, however large the earnings are — the worst case is a supplement of zero, not a reduced pension.

The timing is the part that catches people

The test is applied a year in arrears. OPM asks about the previous year’s earnings on an annual survey, and the reduction that results is applied to the payments of the following July through June. So a retiree who works a well-paid year does not see the effect until months after that job has been reported — and if the job has ended by then, the withholding still happens, because it is settling last year’s earnings.

Two consequences follow. Your first partial year of retirement is generally not tested on the salary you earned while still working, because the test applies to a year in which you were an annuitant. And a single high-earning year can reduce a supplement long after the circumstances that produced it are over.

Who is exempt, and who never had one

Special-provision retirees — law enforcement officers, firefighters, air traffic controllers and the other 6c categories — receive the supplement from retirement, and § 8421a does not apply the earnings test to them until they reach their minimum retirement age. That exemption is genuinely valuable: it is the only case where a federal retiree can work freely and keep the whole supplement.

Several retirements carry no supplement at all, and no amount of not working creates one: MRA+10, a deferred annuity, a disability retirement, and retiring at 62 or later (where there is nothing left to bridge). A VERA or discontinued-service retirement does carry one, but it does not start until the retiree reaches their MRA.

What to do with this

If post-retirement work is part of the plan, price the supplement against it before the retirement date rather than after. The question is not whether working reduces the supplement — it will — but whether the job clears the whole of what it costs. Between the exempt amount and the zero point, every $2 earned gives back $1.

And remember what ends it regardless: the supplement stops the month before your 62nd birthday, claimed or not, and it carries no cost-of-living adjustment along the way.

Sources

• 5 U.S.C. § 8421 — entitlement to the annuity supplement and its computation. Text of § 8421
• 5 U.S.C. § 8421a — the reduction on account of earnings, which adopts the Social Security earnings test of 42 U.S.C. § 403(f) by reference. Text of § 8421a
• SSA — Retirement Earnings Test exempt amounts, re-announced every October. SSA exempt amounts
• OPM CSRS/FERS Handbook, Chapter 51 — Retiree Annuity Supplement. Chapter 51 (PDF)

Figures computed with lib/fers-supplement.js, and the exempt amount is interpolated from the same constant the calculator uses, so this page cannot quote a stale threshold after an annual review. OPM computes its own Social Security estimate rather than using the one on your SSA statement, so treat every supplement figure — ours included — as an approximation of what OPM will produce.

This guide is informational only. It is not financial, tax, or legal advice, and FedAnnuity is not affiliated with OPM or the U.S. government. Retirement rules turn on the specific facts of a career, and only your agency and OPM can give you a binding figure.

Last reviewed: August 2026 · Against 5 U.S.C. §§ 8421 and 8421a, and SSA's published exempt amounts.