Key Takeaways:
- The FERS high-3 average is based on your highest-paid three consecutive years of service, not just your last three years.
- Understanding OPM rules and proper documentation is essential for an accurate high-3 calculation and federal retirement planning.
FERS Retirement High Three Calculation: Myths vs Facts on High-3 Averages
Federal retirement planning often sparks confusion, especially when it comes to the “high-3” average under the Federal Employees Retirement System (FERS). Many federal employees hear conflicting advice or myths on what really counts toward this calculation. Understanding the facts, official processes, and OPM guidance is essential to ensure you receive an accurate retirement benefit.
What Is the FERS High-3 Average?
Definition of the High-3 Calculation
The FERS high-3 average is the highest average basic pay you earn during any three consecutive years of creditable federal service. According to the Office of Personnel Management (OPM), it does not need to be the final three years of your career—just the highest-paid, consecutive 36 months.
Which Earnings Count Toward High-3
High-3 is calculated using your basic pay. This includes your base salary plus any locality pay or shift differentials but excludes overtime, bonuses, allowances, and certain other forms of additional pay. Only earnings directly included in your basic rate of pay established under federal regulation can be counted.
Where to Find Your High-3 Records
You can locate your official earnings history from your Human Resources office or your agency’s personnel system. Your Standard Form 50 (SF-50), pay stubs, and official final notices are essential. OPM will use these records to determine your high-3 when processing your retirement application.
Why Does the High-3 Matter for Retirement?
Role in Annuity Calculations
The high-3 average is a cornerstone for computing your basic FERS annuity. OPM multiplies your high-3 average by your years of creditable service and the applicable annuity formula (often 1% or 1.1% for most employees, as reflected in official OPM guides).
Impact on Monthly Retirement Income
A higher high-3 means a greater annuity in retirement. Because it forms the basis of most benefit calculations, understanding your high-3 helps you forecast your post-retirement monthly income under FERS.
Other Benefits Affected by High-3
Your high-3 average may influence other benefits, such as survivor annuity amounts for spouses or former spouses. Some unused sick leave calculations also use the high-3 average. It does not, however, affect Social Security or Thrift Savings Plan (TSP) distributions.
Common Myths About High-3 Calculation
Myth: Only the Last Three Years Count
It’s commonly—but mistakenly—believed that your high-3 always means the final three years before retirement. In reality, high-3 refers to any three consecutive years throughout your career, not just the end period. This distinction can be particularly significant if earlier years included temporary promotions or special assignments with higher pay.
Myth: Annual Leave Payouts Are Included
Payments for unused annual leave are not considered part of basic pay for high-3 purposes. Only earnings that are part of your basic salary count; lump-sum leave payouts are specifically excluded by OPM.
Myth: High-3 Always Equals Highest Grade
While it is typical for the high-3 to occur during your highest grade, it’s not a guarantee. If you temporarily held a high grade but had intermittent breaks or periods in a lower grade, your average might be lower than you expect. Consistency and consecutiveness of earnings are what count.
What Are the Facts About High-3 Averages?
How OPM Defines High-3 Periods
OPM regulations state the high-3 is the highest average basic pay over any three consecutive years of service. This means any stretch of 36 months where your basic earnings were at their peak, regardless of when that occurs in your federal career.
Inclusions and Exclusions in Earnings
High-3 includes base pay, locality pay, and shift differentials if these are part of your basic pay. It does not include overtime, bonuses, severance pay, or one-time awards. The full details are specified in OPM’s official guidance.
Verification and Correction Processes
When you retire, OPM will verify your pay using your agency records. If you suspect a miscalculation, you have the right to request a review and provide documentation supporting your claim, as explained in later sections.
How Is Your High-3 Average Calculated?
Step-by-Step High-3 Calculation Method
- Identify the 36 consecutive months of highest basic pay.
- Add all basic pay received during that period.
- Divide the total by 3 to find the annualized high-3 average. This average is used in the FERS annuity formula, along with your years of creditable service.
Examples with Official OPM Formula
Suppose your highest-paid consecutive period was from September 2021 to August 2024. Add up each year’s basic pay (including locality and shift differentials if eligible), then divide by 3. OPM publishes the official formula: High-3 Average = Total Basic Pay for 36 Months / 3.
Key Documentation to Review
Always review your SF-50s, year-end pay statements, and any official OPM correspondence. These documents ensure each year’s pay is counted correctly. Retaining your own records can help resolve questions and reduce processing delays.
Can You Change or Challenge a High-3 Calculation?
Official OPM Correction Procedures
If you notice an error in your high-3 calculation or if an exclusion appears incorrect, OPM provides a process for requesting a review. Submit a written request, along with your evidence, to OPM’s Retirement Operations Center or as guided in your agency’s retirement packet.
Common Causes for Recalculation
Errors may arise from missing documentation, incorrect classification of basic pay elements, or misapplied service dates. Changes in personnel systems or incomplete record transfers can also cause discrepancies.
What Supporting Evidence Is Required?
Prepare copies of your SF-50, pay stubs, written agency statements, and any other relevant pay documentation. OPM reviews these to confirm or correct the original calculation.
Frequently Asked Questions on High-3
Which Positions or Earnings Are Included?
All federal civilian positions covered under FERS count, as do certain special category positions (such as law enforcement or air traffic controllers). Only basic pay defined by OPM is included—allowances, bonuses, and overtime are not.
How Does Leave Without Pay Affect High-3?
Short periods of leave without pay (LWOP), up to six months per calendar year, do not reduce your total creditable service or the high-3 calculation. Longer periods may require prorating, depending on OPM rules in effect at your time of retirement.
What If You Have a Break in Federal Service?
A break in service doesn’t eliminate your prior high-3 period. Your total federal basic pay records will be reviewed, and the highest consecutive 36-month period, regardless of break timing, will be used.
