High-3 Average Salary: What Is It and How Is It Calculated?
All retiring federal employees -- those covered by the Civil Service Retirement System (CSRS), CSRS-Offset, the Federal Employees Retirement System (FERS), or a combination of CSRS and FERS ("trans" FERS employees) will receive a CSRS and/or FERS annuity that is computed based on their length of federal service and their high-three average salaries. This column discusses what the high-three average salary is and how it is computed.
The high-three average salary is the largest annual rate resulting from averaging an employee's basic pay in effect over any period of three consecutive years of creditable civilian service, with each rate weighted by the length of time it was in effect. Each year's an employee's basic pay is shown on the employee's SF 50 (Notice of Personnel Action). The three-year period in which the average pay is computed
starts and ends on the dates that produce the highest average pay. Note that the period need not start on the first day of the month or the date of a pay change.
To determine the beginning date of the three year period, follow these steps:
Step 1. If the employee's retirement date is something other than the last date of the month, add one to the day of the month. If the employee retires on the last day of the month, use that day.
Step 2. Subtract three years, zero months and zero days from the retirement date in Step 1 (year-month-day).
Note: In computing retirement benefits, the Office of Personnel Management (OPM) uses a 30 day per month / 12 months per year calendar or a 360 day a year calendar.Source: www.myfederalretirement.com