Excluded from base pay, and, thus, from being used in determining high-3 are bonuses, allowances, holiday, military pay, and overtime. Image: Pressmaster/Shutterstock.com
By: FEDweek StaffIf you’re planning to retire, however near or far ahead that day may be, you’ll need to understand your “high-3,” which is one of the factors used to determine the amount of your annuity when you retire—the other two being your length of creditable service and a multiplier (which is different for CSRS and FERS).
A high-3 is the average of your highest rates of basic pay over any three consecutive years of creditable civilian service, with each pay rate weighted by the length of time it was received. That three-year period starts and ends on the dates that produce the highest average pay.
For most federal employees, those highest three years of basic pay will be based on the 78 bi-weekly pay periods immediately before the day you retire. If that’s the case for you, just subtract three years from the date you plan to retire. If it isn’t, you’ll have to backtrack to find the numbers you need.
“Base salary” is the dollar amount you earn from which retirement deductions are taken, as described above. That is the base rate of pay is the one fixed by applicable law or regulations for your position. For general schedule employees, it also includes such things as:
• locality pay;
• within grade increases;
• special pay rates established for recruiting and retention purposes; and
• certain kinds of premium pay, largely affecting firefighters and law enforcement officers.
For wage system employees, base pay includes environmental differential pay.
Excluded from base pay, and, thus, from being used in determining high-3 are:
• bonuses, allowances, holiday, military pay, and overtime;
• foreign post differentials;
• non-foreign area allowances and differentials; and
• payment for credit hours earned under a compressed work schedule.
Note: The high-3 is based on basic pay before any deductions, such as those for a flexible spending account or Thrift Savings Plan investments, are taken out.
For most employees, it’s your salary, which includes locality pay if applicable. For some employees, it will also include such things as night and/or environmental differentials and premium pay.
However, basic pay doesn’t include such things as bonuses, cash awards, holiday pay, travel pay outside the regular tour of duty, or lump-sum payments covering unused hours of annual leave.
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See also
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
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