FERS Supplement Earnings Limit 2026: The $24,480 Threshold and How the Reduction Works

The 2026 Number: $24,480

The FERS Special Retirement Supplement earnings limit for 2026 is $24,480. This is the annual exempt amount, indexed to the same Cost-of-Living Adjustment that drives Social Security's retirement earnings test. For comparison, the 2025 limit was $23,400 — a $1,080 increase.

If your post-retirement earned income stays at or below $24,480, OPM leaves your supplement untouched. Go above it, and OPM reduces the supplement by $1 for every $2 of excess earnings. The earnings-based reduction is capped at the total annual value of the supplement, so the test does not reduce your underlying FERS annuity.

How the Reduction Math Works

The formula is simple, but the timing catches people off guard.

Annual Reduction = (Earned Income − $24,480) ÷ 2

Let's walk through three scenarios for a retiree whose monthly supplement is $1,400 ($16,800 annually):

Scenario 1: Earning $20,000 in wages. Below the limit. No reduction. Full $1,400/month continues.

Scenario 2: Earning $30,000 in wages. Excess earnings: $5,520. Annual reduction: $2,760. Monthly reduction: $230. New monthly supplement: $1,170.

Scenario 3: Earning $50,000 in wages. Excess earnings: $25,520. Annual reduction: $12,760. But the annual supplement is only $16,800, so the reduction is capped there. The supplement drops to $337/month ($16,800 − $12,760 = $4,040 ÷ 12).

Scenario 4: Earning $58,080 or more. At this point, the $1-for-$2 reduction exceeds the full annual supplement. The supplement is reduced to $0 for the adjustment year. You don't owe anything beyond the supplement itself.

The Timing Lag Is the Part Most People Miss

The earnings test doesn't work in real time. OPM doesn't monitor your paycheck or reduce your supplement the month you exceed the limit. Instead, the entire process runs on a retrospective annual cycle:

1. You earn wages during 2026
2. In spring 2027, OPM mails you Form RI 92-22 (the Annuity Supplement Earnings Survey)
3. You report your 2026 earnings and return the form by May 15, 2027
4. OPM calculates the reduction and applies it effective July 1, 2027
5. Your first reduced check arrives August 1, 2027

This means you'll receive full supplement payments throughout the calendar year you actually earned the excess income. The reduction hits the following year. For retirees planning a short-term consulting engagement or a one-year contract, this lag creates a planning opportunity — but also a risk if you don't set aside funds for the reduction year.

What Counts as "Earned Income"

The earnings test applies to active earned income only. OPM follows the same definition the Social Security Administration uses:

Counts toward the limit:

• W-2 wages and salary from any employer
• Overtime pay and bonuses
• Net self-employment earnings (gross revenue minus business expenses)
• Severance pay received after separation
• Deferred compensation earned before retirement but paid afterward
• Gross salary from federal reemployment (before any dual-compensation offset)

Does NOT count:

• Your FERS basic annuity
• The supplement itself
• TSP withdrawals (any type — partial, installment, or full)
• IRA distributions
• Military retired pay
• Rental income
• Interest, dividends, and capital gains
• Investment returns of any kind
• Social Security benefits
• Veterans' benefits
• Workers' compensation
• Lump-sum annual leave payout from your final federal paycheck
• Unemployment benefits

The lump-sum leave payout exemption is particularly important. When you separate, your agency pays out your accumulated annual leave in one check. That payment can be substantial — 30+ days of leave at a GS-14 or GS-15 salary — but it's excluded from the earnings test because it was earned before retirement.

The Year-of-MRA Rule

If you retire before reaching your Minimum Retirement Age (as VERA or DSR retirees do), earnings in the calendar year you reach your MRA get special treatment. Only wages earned after the month you reach MRA count toward the earnings test. If your MRA is 57 and you turn 57 in June 2026, only wages from July through December count for the 2026 test.

For special category employees (LEOs, firefighters, ATCs), the entire earnings test is waived until they reach their standard MRA. A retired law enforcement officer who separated at 50 can earn unlimited income until age 56 or 57 without any supplement reduction.

What Happens If You Earn Nothing

If your post-retirement income consists entirely of passive sources — FERS annuity, TSP withdrawals, rental properties, investment portfolios — the earnings test never triggers. You receive the full supplement every month until age 62.

This is why some retirees structure their post-retirement income around passive and retirement sources during the supplement years, then shift to active consulting or employment after the supplement terminates at 62 (or after Social Security begins).

Tracking Limits Year Over Year

The earnings limit adjusts annually based on the national average wage index. Recent progression:

• 2024: $22,320
• 2025: $23,400
• 2026: $24,480

The 2027 limit will be announced separately; check the current SSA amount before planning around it.

The FERS Special Retirement Supplement Guide includes an earnings test calculator that lets you plug in your expected post-retirement income and see exactly how much your supplement would be reduced — along with the annual reporting timeline and reinstatement process if your earnings later drop below the limit.

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