How part-time work affects your FERS pension

If you’ve spent any of your federal employment as a part-time worker, you may be wondering if your retirement will be impacted. The good news is that, while it may reduce your pension payments, part time workers get many of the same retirement benefits as full-time employees.  

You can still retire on schedule

If you work part-time or have worked part-time under the Federal Employees’ Retirement System, that time still counts toward your retirement eligibility. You don't need to tack on extra years just because you worked fewer hours. For clarification, according to the Office of Personnel Management, part-time work is 16 to 32 hours a week or 32 to 64 hours biweekly on or after April 8, 1979. 

For instance, if 30 years of service are required for retirement, or an individual intends to retire at age 60 with 20 years of service, part-time employment is included toward these milestones, provided the time is accurately credited under FERS. Therefore, part-time work does not postpone retirement eligibility.

How the proration factor impacts your pension

While part-time years count for eligibility, FERS uses something called a "proration factor" that shrinks your pension to reflect the hours you worked.

So, if you worked half-time for three years out of a 30-year career, you didn't put in as many total hours as someone who worked full-time for all 30 years. FERS accounts for this.

Here’s how the calculation works: 

Your actual hours worked divided by the hours you would have worked full-time equals your proration factor.

If you worked full-time your entire career, your factor is 1.0 (no reduction). But if some years were part-time, your factor drops below 1.0, and your pension gets cut accordingly.

Example: Let's say you worked mostly full-time but spent three years at half-time. Your proration factor might be 0.95 (95%). That means your pension gets reduced by about 5%. It’s not a large number, but it’s still worth noting.

Your salary calculation stays the same

Another piece of good news is that your "high-3" salary calculation (the average of your three highest-paid years) uses your full-time salary, not what you earned part-time.

So, if you made $80,000 full-time but only earned $40,000 working half-time, FERS still uses the $80,000 figure for your pension calculation.

However, it’s important to note that after they calculate your pension using that full-time salary, they still apply the proration factor. So, you get credit for the full salary, but then the final number gets reduced based on your actual hours worked.

What about other benefits?

FERS supplement: If you retire before 62 and get the FERS supplement (the bridge payment until Social Security kicks in), it also gets reduced by your proration factor.

Survivor benefits: The rules don't change, but since your base pension is smaller due to proration, any survivor annuity will also be calculated from that smaller amount.

Health insurance: Your retirement health benefits aren't affected by part-time work. The government's contribution to your premiums stays the same.

Thrift Savings Plan: The 1% automatic contribution and matching funds continue to apply; however, because part-time pay is lower, overall contributions may also be lower in dollar amount.

Should you go part-time? Questions to ask yourself

Now that you understand how past part-time work impacted your finances, let’s review some questions to consider if you’re debating whether to go part-time in the future. Though it can be great for work-life balance, it's worth crunching the numbers first:

How much will you lose? Calculate retirement estimates for both scenarios. Many employees are surprised by the actual difference.

What's your sick leave situation? Part-time employees earn less sick leave, which could mean less credit when you retire (unused sick leave adds to your service time).

Can you afford the trade-off? Only you can decide if the lifestyle benefits outweigh the financial costs.

Before you make the switch to part-time work, talk to a qualified financial professional who can run the actual calculations. Your agency's benefits counselor or a financial planner who specializes in federal employees can show you exactly how part-time work would affect your specific situation. Do not underestimate how a 2% or 10% pension cut can affect your retirement over time. 

The key is to understand exactly what that cost will be for your situation. For some people, the trade-off is worth it. For others, it might make more sense to stick with full-time work until retirement. Either way, make sure you're making an informed decision. Your future self will appreciate you doing the homework now.

Neil Cain and Austin Costello are certified financial planners with Capital Financial Planners. If you have questions about how part-time work impacts your pension, register for a complimentary checkup. For topics covered in even greater depth, see our YouTube page.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.