CRPC Military and Government Retirement Benefits — Questions and Answers
Question 1: Which of the following correctly identifies the three components of the Federal Employees Retirement System (FERS)?
- Social Security, FERS Basic Annuity, and Thrift Savings Plan (Correct answer)
- CSRS Annuity, Social Security, and Federal Health Benefits
- FERS Basic Annuity, Military Service Credit, and Social Security
- Thrift Savings Plan, CSRS Offset, and Federal Health Benefits
Correct answer: Social Security, FERS Basic Annuity, and Thrift Savings Plan
FERS rests on three pillars: (1) Social Security benefits, (2) the FERS Basic Annuity (a defined benefit calculated as 1% × high-3 average salary × years of service), and (3) the Thrift Savings Plan (a defined contribution plan). Together these form the 'three-legged stool' deliberately designed to replace the older CSRS single-pension model.
Question 2: The standard FERS Basic Annuity formula for a federal employee retiring before age 62 is:
- 2.0% × high-3 average salary × years of service
- 1.5% × final salary × years of service
- 1.0% × high-3 average salary × years of service (Correct answer)
- 1.7% × high-5 average salary × years of service
Correct answer: 1.0% × high-3 average salary × years of service
The standard FERS formula is 1.0% of the employee's high-3 average salary multiplied by years of creditable service. Employees who retire at age 62 or older with at least 20 years of service receive a slightly enhanced 1.1% multiplier. FERS multipliers are intentionally modest because the plan is designed to work in conjunction with Social Security and the TSP.
Question 3: A federal employee covered entirely by CSRS (Civil Service Retirement System) who also earned Social Security credits from a private-sector job will likely see their Social Security benefit reduced by which provision?
- Windfall Elimination Provision (WEP) (Correct answer)
- Government Pension Offset (GPO)
- Deemed Filing Rule
- Substantial Gainful Activity (SGA) Limit
Correct answer: Windfall Elimination Provision (WEP)
The Windfall Elimination Provision (WEP) reduces the Social Security benefit formula for workers who receive a pension from non-Social-Security-covered employment (such as CSRS) but also earned Social Security credits elsewhere. The standard formula overstates the benefit for such workers by treating them as low-lifetime earners; WEP corrects for this. GPO, by contrast, applies when a government pension affects spousal or survivor Social Security benefits.
Question 4: Under the military Blended Retirement System (BRS), government TSP matching contributions vest after:
- Immediately upon enrollment
- 2 years of service (Correct answer)
- 4 years of service
- 6 years of service
Correct answer: 2 years of service
Under BRS the Department of Defense automatically contributes 1% of basic pay to the TSP starting on day one (vests after two years), and matches service member contributions up to an additional 4% — all matching contributions vest after two years of service. The BRS was designed to provide a meaningful benefit even to service members who leave before completing 20 years, unlike the legacy High-3 pension that requires 20 years to receive any benefit.
Question 5: The military Survivor Benefit Plan (SBP) is BEST described as:
- A lump-sum life insurance policy paid to a beneficiary upon the retiree's death
- A government-subsidized annuity that provides eligible survivors up to 55% of the retiree's pension (Correct answer)
- A VA disability compensation paid to surviving dependents of disabled veterans
- A TSP beneficiary designation that transfers account balances to a surviving spouse
Correct answer: A government-subsidized annuity that provides eligible survivors up to 55% of the retiree's pension
SBP is a government-subsidized annuity continuation program, not life insurance. Military retirees may elect SBP coverage so that an eligible beneficiary (typically a spouse) continues to receive up to 55% of the retiree's pension after the retiree's death. Premiums are paid from the retiree's pension and are partially tax-deductible. The government subsidizes roughly 45% of the actuarial cost.
Question 6: Which statement about the Thrift Savings Plan (TSP) is CORRECT?
- TSP is available only to active-duty military, not federal civilian employees
- TSP participants may invest in individual stocks and corporate bonds directly
- TSP does not offer a Roth contribution option
- TSP offers both traditional (pre-tax) and Roth (after-tax) contribution options within the same defined contribution framework (Correct answer)
Correct answer: TSP offers both traditional (pre-tax) and Roth (after-tax) contribution options within the same defined contribution framework
The TSP is available to both federal civilian employees and military service members and offers both traditional (pre-tax) and Roth (after-tax) contribution options. Unlike most private-sector 401(k) plans, TSP does not allow individual stock selection — participants choose from a limited menu of diversified index funds and Lifecycle (L) funds. The TSP is known for having among the lowest administrative expense ratios of any retirement plan.
CRPC Military and Government Retirement Benefits
Which of the following correctly identifies the three components of the Federal Employees Retirement System (FERS)?