The determination of an employee’s highest average basic pay earned during any three consecutive years of creditable service is a critical component in the calculation of federal retirement benefits. This ‘high-3’ average salary serves as the foundation upon which annuity payments are based. For example, if a federal employee’s highest earnings occurred between 2020 and 2022, with annual salaries of $80,000, $82,000, and $84,000 respectively, the high-3 would be the average of these figures: ($80,000 + $82,000 + $84,000) / 3 = $82,000.
Accurately establishing this average is of paramount importance as it directly impacts the amount of retirement income received throughout the retiree’s life. The larger the ‘high-3’ figure, the larger the annuity payment will generally be. Historical adjustments to federal retirement systems have often centered around modifications to the factors used in conjunction with this average salary, underscoring its central role in the federal benefits structure.
