The SRS earnings test

The SRS earnings test reduces your supplement when you earn more than an annual limit. OPM cuts the Special Retirement Supplement by $1 for every $2 you earn above the limit. The test only applies before age 62, which is when the supplement ends anyway.

The limit is the same annual exempt amount the Social Security earnings test uses. It changes every year, so we don’t list the figure here; see our assumptions for the current value. If you earn at or below the limit, your supplement is untouched.

Picture a retiree named Marcus, already past his Minimum Retirement Age. If he earns an example $10,000 over the limit in a year, OPM reduces his annual supplement by half of that overage, or $5,000. (Figures are illustrative; see our assumptions.)

One reassurance up front: the earnings test only touches the supplement, never your basic FERS pension. OPM applies the reduction to the supplement alone, so your monthly pension check stays the same no matter how much you earn.

Only earned income counts: wages from a job and net self-employment income. Money you don’t work for, like your pension or TSP withdrawals, never counts, and that distinction decides whether a post-retirement job affects your supplement.

The statute is narrower than it first sounds. Earnings are wages for services performed in the year, plus net self-employment earnings, minus any self-employment loss. The words "performed in the year" matter, and they’re why your lump-sum leave payout is treated differently from your salary.

Passive income is the other half of the rule. Your FERS pension, the supplement itself, TSP and IRA withdrawals, rental income, and investment gains don’t count. In simple terms, you can draw heavily on the TSP and still keep the full supplement, because none of that is earned income.

• Counts: wages, salary, overtime, and bonuses for work you perform during the year.
• Counts: net self-employment income, meaning profit after business expenses.
• Does not count: your FERS pension and the supplement itself.
• Does not count: TSP and IRA withdrawals, rental income, and investment gains.
• Does not count: your lump-sum annual leave payout, since you earned that leave in earlier years.

The reduction runs a year behind your earnings. You report last year's income, and OPM applies any cut the following summer, so a job this year doesn’t change your supplement until next year.

OPM mails the Annuity Supplement Earnings Report, form RI 92-22, in April and May each year. It goes to non-disability retirees who are between their MRA and age 62, and on it you report your earned income from the prior calendar year.

By law, any reduction takes effect on July 1 of the year after the earnings year. The reduced amount then runs for twelve months, until the next report resets it. If your earnings drop back under the limit, the supplement returns to full.

You’ll see it a month later than you might expect. OPM pays each month's annuity on the first business day of the following month. Thus a reduction that takes effect July 1 first appears in the payment you receive on August 1.

Your first year is treated gently. Since the earnings test only counts income you earn after you retire, the large federal salary you earned before retiring doesn’t reduce your supplement.

The test applies only to post-retirement earnings. So in the calendar year you retire, your pre-retirement pay is ignored for this purpose, and a high final salary doesn’t trigger a reduction.

Timing protects the first year further. Because any reduction doesn’t begin until July 1 of the following year, your supplement is paid in full through your entire retirement year. The earliest a cut can appear is the summer after your first year of post-retirement earnings.

One exemption belongs to a specific retirement authority, covered in the exemptions section below: a special-provision retiree who retires before their MRA also has earnings before the MRA disregarded. That protection follows the authority, not the job. For everyone, the takeaway is simple: earnings before you retire never count, and the first possible reduction is more than a year away.

Retirees who leave under the special provisions are exempt from the earnings test until they reach their MRA. Law enforcement officers, firefighters, and air traffic controllers retire early, so they can work freely for years (five, in the firefighter example below) before the test begins.

These employees face mandatory early retirement, often in their early fifties. Their earnings test doesn’t apply until they reach their Minimum Retirement Age, and until then they can earn any amount and keep the full supplement. The exemption belongs to the special-provision retirement itself. A covered officer who instead separates under VERA or a DSR gets the supplement at MRA and faces the test from the start.

Take a firefighter who retires at 52. Her supplement starts right away, and the earnings test stays off until her MRA; from her MRA to 62, the standard $1-for-$2 reduction applies like anyone else.

Military reserve technicians share this exemption. Standard FERS retirees under MRA+30 or age 60 with 20 years get no early exemption, because they’re already at or past their MRA when they retire. For them, the test can apply from their first full year out.

The earnings test rewards knowing the limit, since part-time work under it costs you nothing. Earnings well above it can shrink or erase the supplement, but only until 62, when the supplement ends and your Social Security decision takes over.

Many retirees keep a part-time job under the limit on purpose. Because only earned income counts, you can also draw from the TSP without any reduction, so the lever you control is wages, not your overall income.

High earnings are a different calculation. On the other hand, enough wages can reduce the supplement to zero for a year, though your pension keeps coming. Some retirees who plan to work full time treat the supplement as temporary and lean on it less.

Your supplement is one moving part in a larger plan. To see how your pension, your TSP, and Social Security fit together, run your free readiness score. Your expected post-retirement earnings, entered on the Retirement step, reduce the SRS everywhere it’s shown. The What-If Scenarios tool on the Pro plan draws the SRS years so you can see the effect before you commit.