Key Takeaways
- Your ‘high three’ average salary remains the foundation for calculating federal retirement benefits under FERS or CSRS.
- Recent federal rule updates in 2026 clarify eligible earnings and the repeal of the Windfall Elimination Provision for federal employees.
Did you know that your ‘high three’ average salary can substantially affect your lifetime federal retirement benefits? Understanding how it’s calculated is crucial for every federal employee planning for retirement under FERS or CSRS. This overview breaks down what the high three is, how it’s determined for 2026, and why it matters for your pension and federal benefits.
What Is the High Three Salary?
Origin and Purpose in Federal Benefits
The concept of the “high three” was established to determine a fair and representative income basis for federal retirement benefits. It ensures that your pension reflects your most financially significant years, rather than your lowest or even single highest salary year. The high three method calculates your average base salary over the consecutive 36 months where your pay was highest, forming the starting point for most retirement benefit computations.
Who Uses the High Three Calculation?
Both the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) use the high three approach in their benefit formulas. Nearly all federal employees who retire under these systems rely on this calculation, regardless of their pay grade, title, or agency. The method is applied consistently to ensure equitable and transparent pension determinations across federal service.
How Is the High Three Calculated in 2026?
Definition of Creditable Service
To begin, your high three calculation uses periods of creditable service — that is, employment time recognized for retirement purposes. This includes most permanent, full-time, and certain part-time federal positions. Breaks in service, unpaid leave, or time not covered by retirement contributions typically do not count. Only months where you receive a full salary credited toward retirement are considered for your high three average.
Included and Excluded Pay Types
Your high three is based specifically on your basic pay. This means regular salary and locality pay adjustments are included, but certain additional earnings are not. Overtime pay, bonuses, travel allowances, and cash awards are excluded, no matter how much they increased your take-home pay. For 2026, these distinctions remain unchanged — only income elements recognized as “basic pay” by the Office of Personnel Management (OPM) will factor into your high three average.
Why Does the High Three Matter?
Impact on FERS and CSRS Pensions
Because your initial retirement annuity amount under FERS or CSRS is a direct function of your high three average salary, even small differences in what is counted can have a meaningful long-term impact. A higher high three can translate into larger annual and monthly pension payments throughout your retirement. The fairness of the system is in ensuring only recognized and regular compensation is used in the calculation, not windfalls or extraordinary pay events.
Effect on Other Federal Benefits
In addition to your pension, your high three salary can affect other benefit calculations, such as survivor annuities and the cost of certain insurance options. Some agencies or programs may use your high three or a variant for eligibility or contribution levels, including aspects of the Thrift Savings Plan (TSP) if you reach certain thresholds. Always refer to your official benefit guides for program-specific details.
Which Earnings Count Toward High Three?
Basic Pay vs. Overtime
The distinction between basic pay and other earnings is fundamental. For most federal employees, basic pay includes salary, locality pay, and special law enforcement pay, but excludes overtime. Even if overtime represents a significant portion of your income, it does not increase the high three calculation. This holds true regardless of pay system or bargaining unit.
Temporary Promotions and Detail Assignments
Temporary promotions and detail assignments complicate the high three calculation, but can work to your advantage. If you serve in a temporarily higher-paid position and the pay during that period increases your highest consecutive 36-month average, those months are included in the calculation. This allows some flexibility, but it must be consecutive months, not a collection of peak periods scattered across a career.
How Does Retirement Timing Affect High Three?
Annual Leave and Unused Sick Leave
When you retire, your unused annual leave is typically paid out in a lump sum and does not count toward your high three average salary. However, unused sick leave may increase your total creditable service time, which can impact the annuity calculation but not the salary average used for the high three itself. It’s important to understand these distinctions when planning the timing of your separation from service.
Considerations for Late-Career Changes
Moving to a lower or higher paying role near the end of your career can influence your high three. Your highest-paid 36 consecutive months, wherever they fall, are what the OPM uses. If you had a higher salary earlier and move to a lower-paying position before retiring, your high three may still be based on those earlier years. This sometimes provides room for flexibility in career planning.
Common Questions About High Three Calculations
What If I Took Unpaid Leave?
Periods of unpaid leave generally do not count toward your high three calculation. Only months with a full basic pay are credited for the average. If you had unpaid leave during what would otherwise be your highest earning years, those months may lower your overall average for this purpose.
How Are Part-Time Years Counted?
Part-time service is included in the high three calculation, but the actual pay rate for the part-time schedule is used. This means your average will reflect the salary you earned, not the full-time equivalent rate. The OPM applies specific formulas to ensure this is fair and proportionate to your work schedule.
What Changed in 2026 Federal Rules?
Recent Updates Affecting High Three Calculations
For 2026, the core mechanics of the high three calculation remain consistent with prior years. However, federal regulations have clarified definitions around eligible pay types, and some agencies have updated their internal pay codes for clarity. These updates simplify the process for employees and HR teams, aiming for even more reliable and predictable outcomes in retirement benefit calculations.
Windfall Elimination Provision Status in 2026
Effective since 2025, the Windfall Elimination Provision (WEP) has been repealed for all FERS employees and no longer affects federal retirement or Social Security benefits. This means that your Social Security and federal annuity are calculated independently, with no WEP penalty for those whose employment history included both federal covered and non-covered Social Security work.
Key Considerations for Federal Employees
Reviewing Your Earnings Record
Verifying your official earnings record is crucial for an accurate high three calculation. Errors or omissions in personnel records can affect your retirement benefit starting point. Always compare your records with official government salary documents and work with your agency’s human resources office to resolve discrepancies well before you plan to retire.
Understanding Official Guidance
The Office of Personnel Management and agency retirement counselors are your primary sources for rules about the high three calculation. Guidance documents are updated regularly, especially when regulations change. Rely on official OPM resources and publications to be sure you’re applying the 2026 rules precisely as intended.
