The list of pay elements that are included in the FERS high-3 calculation is shorter than most federal employees assume. The list of pay elements that are excluded is longer. The exclusions can quietly shrink a federal annuity by thousands of dollars per year for life, and most employees never audit the distinction until the annuity estimate arrives.

Here is the practical list, with the categories that hurt the most.

What the statute and OPM regulations actually say.

The definition of basic pay for high-3 purposes appears in 5 U.S.C. § 8331(3) (for CSRS) and § 8401(11) (for FERS), with implementing regulations in 5 CFR Part 831 and 5 CFR Part 842. The two definitions are not identical, and OPM’s interpretation has produced decades of case law. The list below reflects the most common federal employee situations. Special-category employees (law enforcement, fire fighters, air traffic controllers, senior political appointees) may have different rules.

The most consequential exclusions.

These are the pay categories that most often surprise employees and that have the largest effect on the high-3:

  • Overtime pay. Both FLSA-covered overtime and administratively uncontrollable overtime are excluded. A GS-11 step 5 employee earning $90,000 in base salary but working 400 hours of overtime per year at time-and-a-half may earn $120,000 in total. The high-3 is based on the $90,000. The $30,000 in overtime is real income, but it does not contribute to the pension.
  • Performance awards and bonuses. One-time performance bonuses, spot awards, Presidential Rank Awards, and most other cash awards are excluded. A $10,000 performance award does not show up in the high-3 calculation.
  • Travel and relocation allowances. Per diem, mileage, lodging, and the various travel and relocation entitlements under the Joint Travel Regulations are excluded. Federal employees who travel heavily have higher total compensation than their high-3 reflects.
  • Cost-of-living allowances for foreign stations. Post allowances and cost-of-living adjustments for employees stationed abroad are generally excluded. Foreign-service employees often have a high-3 that is meaningfully smaller than their final-year total compensation.
  • Most premium pay categories. Availability pay for law enforcement officers is excluded from the high-3 (though separate retirement system rules apply). Night differential, Sunday pay, and holiday premium pay are excluded. Hazard pay and environmental differential pay are excluded.
  • Lump-sum annual leave payments. The lump-sum payment for unused annual leave at retirement is not basic pay and is not included in the high-3 calculation. It is paid separately.
  • Most allowances. Uniform allowances, commuting subsidies, transit benefits, and most other cash allowances are excluded.

What is included.

For contrast, the pay categories that are included in the high-3:

  • Regular salary at your grade and step on the General Schedule or equivalent pay system.
  • Locality pay (the geographic adjustment that most GS employees receive).
  • Special rate adjustments for specific occupations or geographic locations.
  • Within-grade and step increases, once effective.
  • Retained payunder 5 U.S.C. § 3594 or similar provisions (for employees whose positions are downgraded but whose pay is protected).
  • Non-foreign cost-of-living allowances (generally the non-foreign COLA paid in specific circumstances).
  • Basic pay for specific special-category employees (law enforcement officers, firefighters, air traffic controllers, members of Congress, and others under separate statutory definitions).

Why this matters in practice.

The exclusions interact with career choices in ways that aren’t always obvious. Three examples:

  • The overtime-heavy employee.A federal employee who has worked significant overtime throughout their career may have total compensation substantially higher than their high-3. Their pension is calculated on the smaller number. The trade-off — higher current income, lower pension — is real, and it’s worth acknowledging.
  • The promotion-and-relocation employee. A federal employee who takes a promotion and a relocation in the final 36 months may see a meaningful increase in their high-3 (because locality pay and the new grade are both included). The same employee who refuses the move may see their pension calculated on a smaller number.
  • The foreign-stationed employee. Foreign service allowances are excluded from the high-3 but included in total compensation. An employee returning from a long foreign tour may have a high-3 that is much smaller than their final-year total compensation, and the gap shows up as a smaller pension.

How to verify the high-3 calculation.

The most reliable way to confirm the high-3 is to request a retirement estimate from OPM (or your agency’s HR office, depending on the agency’s process) well before your planned retirement date. The estimate will show the high-3 calculation in the line items, including which pay elements were included and which were excluded.

If a pay element you expected to be included is excluded, you have the right to dispute the calculation through your agency and ultimately through OPM’s appeals process. The disputes are usually fact-specific, and they benefit from detailed earnings records and contemporaneous documentation.