Helping Federal Employees and Annuitants Understand Their Benefits
Military Deposits Increase Retirement Annuities
Federal employees are able to buy back their military time and have the option of making military deposits for creditable military service to increase their annuity. The rules are different for CSRS and FERS employees and you should understand the impact on your annuity. FERS employees must make a military deposit to receive credit for military years served when you retire.
Approximately 33% of all Federal employees are veterans.
I was in the CSRS retirement program and bought back my active military time when I discovered that my CSRS retirement annuity would decease at age 62 if I didn't. If you are a CSRS employee and have, or anticipate having at least 40 quarters, 10 years, of social security payments at age 62, you too should consider paying back your military time. Otherwise your annuity will decrease. In my case, my total military deposit was about $650 and I was able to pay it back at $25 a pay. Military pay was meager when I was in the Air Force, my pay started at $97 a month in 1969.
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Clarification: If you make a military deposit, there is no effect on your other military benefits such as medical benefits, base access, commissary, or VA benefits, including any disability payments from the VA. It only affects (active duty) retired military pay; you cannot receive 2 separate retirements (military and civilian) for the exact same period of service. Reserve or national guard members under Title 32 can collect both a federal civil service retirement and a reserve or national guard retirement.
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When you make a military deposit your military service time will be added to your federal service when calculating your retirement annuity. It does not count towards the minimum time needed for retirement. In other words, if you hire into the federal service at age 58, your must work at least 5 years to age 63 to be eligible to collect an annuity - not counting military buyback time. Review FERS retirement eligibility requirements first. In the situation mentioned above, if you purchased back 4 years of military time you would be able to retire at age 63 with 9 years towards retirement. Instead of receiving an annuity calculated at 5 % of your average high three salary at age 63 after working 5 years it would increase to 9% of your high three average salary.
If you served on active duty and will be eligible at age 62 to collect Social Security, your CSRS annuity will be reduced by the number of years that you served unless you buy back that time. For example, if you serviced in the armed services for 4 years, when you reach age 62 your CSRS annuity will be reduced by 8%. You can buy back your military time to avoid this reduction and collect your entire annuity and whatever Social Security benefits that you are entitled to.
If your active duty military service is prior to December 31, 1956, you receive full credit for your military service in determining both your retirement eligibility and your annuity computation, without making a deposit for the service.
If your military service is after January 1, 1957, credit for the military service depends on the date on which you were first employed as a federal civilian employee:
For CSRS employees, the military deposit equals 7% of military base pay, plus interest. There is a 2-year interest-free grace period on all military deposits. After the 2-year grace period interest is accrued and compounded annually. The interest rate is an annual variable rate. The first possible interest accrual date is 10-1-1986.
Military deposits must be paid in full before the employee separates from federal service. (Deposits for civilian service must be paid before final adjudication.)
If you have already paid it, and your only proof is an LES (Leave and Earnings Statement), cancelled check or other documentation that seems unofficial, submit what you have with the retirement. DFAS for awhile did not send out letters confirming the deposit was complete. Sometimes there was only an annotation on the LES stating deposit complete or balance owed $0. If you made the deposit, you need to indicate on your retirement paperwork that you made the deposit. It should be OK. The pay records are likely accurate. If you are waiting to be billed by DFAS and have already retired, it is usually too late to make that deposit.
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It is beneficial for FERS workers to buy back their post 1957 military service time. FERS retirees with Post 1/1/57 military service will not get credit or annuity computation without making a deposit using SF Form 3108. If a deposit is made, the employee will receive credit towards his/her annuity computation.
If your active duty military service is prior to December 31, 1956, you receive full credit for your military service in determining both your retirement eligibility and your annuity computation, without making a deposit for the service.
If your military service is after January 1, 1957, you must make a deposit to receive credit for the military service. Unless you are retired military, it is usually beneficial for FERS employees to make a military deposit. If eligible for an annuity and the deposit is made, the employee will receive full credit for the military service towards FERS retirement eligibility and the annuity computation.
For FERS employees, the military deposit equals 3% of military base pay, plus the applicable interest. There is a 2-year interest-free grace period on all military deposits. After the 2-year grace period interest is accrued and compounded annually. The interest rate is an annual variable rate. The first possible interest accrual date is 10-1-1986.
Contact your agency Human Resource department and arrange to pay back your military time. Complete either a SF-3108 or a SF-2803. You can make payments through payroll deduction or pay a lump sum if you desire.
An easy way to determine if it makes sense to make your military deposit is to obtain retirement estimates with and without the military service. However, if you are a new federal employee retirement estimates may be difficult to obtain. Large personnel centers are often too busy to calculate projections. Luckily, the retirement calculation for a FERS employee is simple enough:
If you are approaching retirement, and you bought back your military time, confirm that your payroll statement of earnings and leave lists that payback amount on your biweekly statements. Some federal employees have problems with confirming payback when retiring and it is important to keep all records of your payback and check with your personnel office to insure this information is in your OPF or eOPF prior to retiring. One site visitor wrote to us stating that he bought back his eight years of active duty military time for retirement purposes from approximately 2001 through 2007. Unfortunately there is nothing showing in his personal records indicating that he either started the payments or completed them.
His records did not contain the "DG-66" form "Record of military buy back paid in full." Everyone he contacted was unable to help. The only proof he had of buyback is a few pay-stubs (leave and earning statements) dating back to 2007 showing the deduction. Unfortunately the only dates available on-line through the employee express website go back as far as 2007.
Suggestion: Many agencies are converting their hard copy OPFs to electronic versions and I recommend that when this happens each employee, prior to retirement, should review their eOPF for accuracy and to ensure key information is included.
This is a common problem, but usually straightened out with some persistence and information after contacting the correct person. Generally, military deposit payments are made directly to your payroll office (by-passing your HR department). Normally the only way military deposit information is placed in the Official Personnel Folder (OPF) is if the employee has a copy and asks for it to be placed in the OPF. The OPF and e-OPF are HR things... so I don't think you are talking to the correct person yet.
Do you have a separate payroll office? Perhaps DFAS or NFC? Find out the contact for your current payroll office and ask them if they can verify your military deposit. What about the letter that says how much you owe - Any POC? Sometimes that letter is in the OPF and will have contact information on it. If you are still having problems locating the correct person... Ask who you would contact if you were overpaid. When you retire, the retirement paperwork goes from HR to the payroll office, then to OPM. Most deposits are correctly verified by payroll at retirement, even if the document is not in the OPF. If it were my retirement, I would want the confirmation letter/form, so I think you are doing the right thing. Ask the benefits unit where they send the retirements before reaching OPM and if they can give you a POC.
National Guard Service is rarely creditable for a civilian retirement. The criteria is below:
National Guard service, even if performed for a federally recognized unit, is not creditable unless it meets the qualifications listed above.