FERS Supplement Earnings Test: Avoid Losing $1 for Every $2 in 2026

The short answer: The FERS supplement earnings test can reduce your Special Retirement Supplement when earned income passes the annual limit. Social Security set that limit at $24,480 for 2026. OPM generally reduces the supplement by $1 for every $2 above the limit, and it ends at age 62.

What is the FERS supplement earnings test?

The FERS supplement earnings test is an annual income check that can lower the Special Retirement Supplement. This benefit is sometimes called the Special Retirement Supplement (SRS) or the FERS annuity supplement. The Office of Personnel Management generally pays it to certain FERS employees who retire before age 62. It helps approximate the Social Security benefit they have not yet started receiving.

The supplement stands in for an early Social Security benefit. So OPM applies an earnings test that mirrors the Social Security earnings test for people under full retirement age. As a result, working a paid job in retirement can shrink the supplement. It does not touch your underlying FERS pension.

• The 2026 exempt amount is $24,480 for people under full retirement age. This figure comes from the Social Security Administration’s earnings test page.
• Earnings above the limit reduce the supplement by $1 for every $2 over the threshold, per OPM’s FERS Annuity Supplement Survey FAQ.
• The supplement is paid only until age 62, when it stops regardless of your earnings. This is described in OPM’s CSRS and FERS Handbook, Chapter 51.
• Only earned income counts — wages and self-employment net earnings. Pensions, Social Security, TSP withdrawals, interest, and dividends generally do not, according to OPM.
• Your FERS pension itself is not affected by the earnings test, only the supplement portion, per OPM guidance.

How does the FERS supplement earnings test reduce the supplement?

The FERS supplement earnings test reduces the supplement by $1 for every $2 of earned income above the annual exempt amount. OPM describes this $1-for-$2 formula in its FERS Annuity Supplement Survey FAQ. It tracks the same withholding ratio the Social Security Administration uses for beneficiaries below full retirement age.

The exempt amount changes each year. For 2026, the Social Security Administration lists an annual exempt amount of $24,480 for people under full retirement age. The SSA notes that it withholds “$1 in benefits for every $2 of earnings in excess of the lower exempt amount.” OPM applies that same logic to the FERS supplement.

What counts as earnings under the test?

Only earned income counts toward the FERS supplement earnings test. OPM explains that earned income generally includes salary, wages, overtime, bonuses, and severance pay. For the self-employed, it covers net earnings after business expenses.

Several common retirement income sources are generally excluded. According to OPM’s FAQ, money reported on IRS Form 1099 is not treated as earned income. That category covers your FERS annuity, other pensions, Social Security benefits, and military retired pay. It also covers withdrawals from TSP or 401(k) plans, interest and dividends, and most rents and royalties. OPM states plainly that “TSP disbursements do not count as earnings.” That is why investment-based income often sits outside the test.

When does the reduction actually take effect?

The reduction is generally applied the year after the earnings occur, not in real time. OPM’s annuitant information pamphlet explains the timing. Your “monthly annuity supplement in the second calendar year is then reduced by 1/12 of the excess earnings,” based on the earnings you report.

This timing is why retirees receive an annual FERS Annuity Supplement Survey asking about the prior year’s income. OPM uses the reported figure to calculate any reduction. It then spreads that reduction across the following year’s monthly payments. Because of this lag, a year of higher earnings may not show up as a smaller supplement until months later.

How is the FERS supplement earnings test calculated? A worked example

The math behind the FERS supplement earnings test is usually a two-step calculation. First, find the earnings above the limit. Then divide that figure by two. Consider a hypothetical retiree, under age 62, receiving a monthly supplement.

Suppose this retiree earns $40,480 in wages during 2026. The exempt amount that year is $24,480. So the excess is $40,480 minus $24,480, or $16,000. The earnings test reduces the supplement by $1 for every $2 of that excess. That works out to $16,000 divided by 2, or $8,000 for the year. OPM would generally spread that $8,000 reduction across the following year’s payments. Each monthly supplement would drop by roughly 1/12 of the total, or about $667 a month.

Suppose the same retiree had instead earned $24,000 — below the $24,480 limit. The FERS supplement earnings test would generally produce no reduction at all. The figures above involve wages rather than 1099 income. A retiree drawing the same dollar amount from a TSP account rather than a paycheck would typically not trigger any reduction. TSP withdrawals are not counted as earnings.

Does the supplement ever end on its own?

Yes. The Special Retirement Supplement is designed to bridge the gap until Social Security eligibility. So it ends at age 62 regardless of earnings. OPM’s handbook describes the supplement as “a benefit paid until age 62 to certain FERS employees who retire before age 62.” A related OPM FAQ notes that the supplement stops “at the end of the month prior to you turning age 62.” This holds even if you choose to delay claiming Social Security.

As of 2026, the supplement remains in place. Proposals during 2025 budget debates discussed eliminating it for future retirees. The benefit was preserved, so the rules described here generally reflect the current framework.

FAQ: FERS supplement earnings test

What is the 2026 earnings limit for the FERS supplement?

The Social Security Administration set the 2026 annual exempt amount at $24,480 for people under full retirement age. OPM applies this same figure to the FERS supplement earnings test. Earnings above that amount can trigger a reduction.

Does TSP income count toward the earnings test?

Generally no. OPM states that TSP disbursements do not count as earnings. Money reported on a 1099 — including pensions, Social Security, interest, and dividends — is typically excluded as well. The test usually focuses on wages and self-employment net earnings.

Will the earnings test reduce my FERS pension too?

No. OPM is clear that the earnings test affects only the supplement portion of your payment. Working in retirement generally does not reduce your underlying FERS annuity. Other rules can apply in specific reemployment situations.

How quickly does the reduction happen?

The reduction generally takes effect the year after you earn the income. OPM gathers prior-year earnings through the annual FERS Annuity Supplement Survey. It then reduces the next year’s monthly supplement by about 1/12 of the calculated amount.

Does the supplement come back if my earnings drop?

It can. OPM recalculates the test each year. A year with lower earnings may mean little or no reduction the following year. OPM also describes a process for retirees under 62 to request reinstatement of a reduced supplement. They do so by submitting tax documentation.

Why does the FERS supplement earnings test mirror Social Security’s rules?

The supplement is meant to approximate an early Social Security benefit. So OPM applies an earnings test that parallels the Social Security earnings test for people under full retirement age. In 2026, that includes the same $24,480 exempt amount and the same $1-for-$2 reduction.

Understanding the FERS supplement earnings test is often easier with someone walking through your specific numbers. Fed Pilot, a woman-owned small business, offers free federal retirement benefits education workshops. These are built for employees planning to retire before age 62. You can also explore our guide to the FERS Special Retirement Supplement, our overview of when FERS retirees might claim Social Security, and our explainer on the MRA+10 retirement reduction. Together, these show how the pieces fit. Register for a free Fed Pilot workshop to learn more about how the supplement and its earnings test may apply to your retirement plans.