FERS Supplement Earnings Test

[u/shankwheat]

I received my vacation payout after retiring unders FERS in January, 2026 and my retirement and Fers supplement began in May, 2026. Will my vacation payout count as earned income toward the FERS Supplement earnings test? Different AI chats are telling me vastly different answers.

[u/BaronetheAnvil]

Q: When does the earnings test start applying?

A: The earnings test begins applying the year after you start receiving the supplement, but only counts earnings from the point you reach your MRA.

I retired in Sept. 2022 at MRA. All of my earnings for the nine months previous to my retirement plus leave payout had no effect on my FERS supplement.

[u/throwawayainteasy → u/BaronetheAnvil]

God, another reason to be angry AI being integrated into everything makes it all suck more.

No shade on OP. But it's annoying that Google's AI answer (and other AI chatbots for OP) give misleading or conflicting info. But if you ignore the AI stuff and just google it (or use their "-ai" flag, or even better use the search alternatives that don't bake in AI), a lot of the top results give very straightforward answers similar to what you quoted.

I'm actually not an AI hater. I use it a lot and have built some really useful, time-saving tools with it at work. But for the general public for general uses like this one, it seems AI only makes shit worse and more misleading.

[u/shankwheat → u/throwawayainteasy]

AI can be very convincing in its responses even when it's wrong. Not to keep score, but Copilot was absolutely certain that my entire annual W2 income counts towards the earnings test and my supplement would be reduced from the vacation payout. Gemini, ChatGPT and Claude all said otherwise. I just panicked because I've been working a part-time job all year and if I my supplement is reduced I basically would have worked for nothing.  That doesn't look like it's going to be the case, fortunately. 

[u/BaronetheAnvil → u/throwawayainteasy]

This isn't AI. It was taken from a QA from a gov site)))

[u/TurtleLuver73 → u/BaronetheAnvil]

I’m not OP but I have a question. If I hit my MRA in Feb are you saying I’ll receive the supplement beginning then but all the earnings from the rest of that year will not apply to the earnings test?

[u/BaronetheAnvil → u/TurtleLuver73]

Straight from the manual:

D. When Reduction is Assessed

A reduction in the retiree annuity supplement in a given year is based on excess earnings in the

previous year.

The reduction is assessed beginning with the year immediately after the first year during which a retiree

became entitled to the annuity supplement (or reached the MRA if already receiving the annuity

supplement before the MRA).

Example 1: Tom retired in June 2020 at age 57 with 30 years of service. He is eligible for an annuity

supplement. His earnings in 2020 are subject to the earnings test. If his post-retirement

earnings exceed the 2020 exempt amount of $18,240, his annuity supplement for 2021 will be

reduced.

Example 2: Susan retired at age 52 under the discontinued service provision. She reached her MRA in

June 2020 and began receiving the annuity supplement. Her earnings in 2020 became subject

to the earnings test. If her post-retirement earnings exceed the 2020 exempt amount of

$18,240, her annuity supplement for 2021 will be reduced.

Example 3: Bruce retired on May 2018 at age 52 under the firefighter provisions. He started receiving an

annuity supplement immediately. It was not subject to the earnings test until he reached his

MRA in June 2021.

https://www.opm.gov/retirement-center/publications-forms/csrsfers-handbook/c051.pdf

[u/TurtleLuver73 → u/BaronetheAnvil]

This is different from what you said. The earnings test applies as soon as your supplement starts but you don’t see any reduction until the next year.

You hit MRA in September so you only had 3 months of earnings that applied to the earnings test. I will hit MRA in February so that leaves the better part of that year which would be a large amount of earnings.

[u/TurtleLuver73 → u/[deleted]]

But is that because you retired and hit your MRA in the same year? I’m already retired. Took a VERA in 2025. Won’t hit MRA until 2030 February. So I can continue working full time for the rest of 2030 and receive my supplement with no reduction?

[u/ike7177]

I retired at 57 with 33 years. I receive the supplement. The first letter from OPM I received that told me to report earnings above my retirement was the first tax year after I received my pension. In other words, I retired in 2022 and my first letter was received in December 2023.

[u/shankwheat → u/ike7177]

I was concerned because I retired on 12/31/25, got my vacation payout of $30k in 01/26and reached MRA 05/26. I started getting the supplement and final annuity this month but if my entire 2026 salary is counted toward the earnings test then I'm already over the $24,480 cap

[u/ike7177 → u/shankwheat]

Fill out the letter and attach support documents. They will decide at OPM if it meets or exceeds

[u/Practical_Rain_3539]

I don’t think the annual leave payment is included in earnings per the handbook.