During the first month of writing for FederalRetirement.net, I received a few questions on military buyback. I am surprised at the number of folks who either waited until right before their retirement or realized after they retired that they missed an opportunity to increase their annuities by paying their military service credit deposit. In general, the benefit of paying your military service credit deposit increases the number of years of civilian government service which increases your annuity. Paying it sooner versus later saves you money since you pay less interest. The topic of Credit for Military Service is very complex but I will explain some of the basics.
What is Credit for Military Service? Typically, military service in the Army, Navy, Air Force, Marine Corps, Coast Guard and Commissioned Corps of the Public Health Service/National Oceanic and Atmospheric Administration of the United States is creditable for retirement purposes if it was active service, which ended under honorable conditions, and performed prior to your separation from civilian service for retirement. A reservist who has been called for active duty and/or active duty training may also receive credit. (NOTE: when you perform annual active duty training service during which you are on military leave with pay from a civilian position, the period is credited as civilian, not military, service.) The credit is for military service performed on or after January 1, 1957 (also referred to as Post-56).
Should I buy back my military service? One question that often comes up is “Should I buy back my military service?” It depends. If your active military service is not already being used towards a military retirement, chances are that buying back your military service will benefit your federal retirement. It will increase the number of years of service used for your annuity calculation thereby increasing your annuity. Buying back military service is optional.
How much will it cost me to buy back my military service? If you are a FERS employee, the military deposit is 3% of the basic pay earned during the post-1956 military service. If you are a CSRS employee, the military deposit is generally 7% except for the earnings from 1999 and 2000, when the deduction rates were 7.25% and 7.4% respectively. If you transferred to FERS and have a CSRS component, you continue to be under the CSRS military deposit rules for service performed before the transfer.
Is Interest Due On The Military Deposit? It depends. If you pay your military deposit within two (2) years once you are hired, you will not owe interest. After that point, you will pay interest per year on the military deposit you owe. (Please note: Interest is charged at variable market rates. See OPM’s retirement site for the rates. )
How Long Do I Have To Pay The Military Deposit? The sooner you pay the deposit the less interest you will have to pay. Sometimes, the interest that has accrued is 2 to 3 times more than the deposit owed. If you delay making the military deposit until you separate for retirement, the deposit must be made, in full, to your employing agency before OPM completes adjudication of the annuity.
How Do I Pay The Military Deposit?
Step 1. Complete the RI 20-97 , Estimated Earnings during Military Service, for each branch of the military you served and mail it to the appropriate military finance center with a copy of all DD Forms 214.
Step 2. Upon receipt of the estimated military earnings, complete the SF 3108  , Application to Make Service Credit Payment (for FERS) or SF 2803 , Application to Make Service Credit Payment (for CSRS). Provide the application with the RI 20-97 and all DD form(s) 214 to the HR office of your employing agency.
Step 3. Your HR office will review your package for accuracy, calculate an estimate of the amount of military deposit, applicable interest due and send you instructions for making payments. You can make a lump sum payment or partial payments.
Step 4. Once your deposit has been paid in full, you will receive proof of payment from your human resources office. Your SF 50 will be updated to reflect a change in your Retirement Service Computation Date (SCD). Remember to keep copies of all documents pertaining to your military deposit payment.
Although each agency has HR personnel who specialize in retirement benefits, I understand from some of you that those individuals are not always knowledgeable of the military buyback process. If you do not get answers to your questions, don’t despair. Continue to ask your agency’s HR retirement benefits professionals for help. In addition, there are retirement sites such as FederalRetirement.net and OPM.gov that provide useful information on this topic. You should also take a federal pre-retirement seminar at least five years before retiring to ensure that you take advantage of the military service credit deposit if it applies to you.
Additional information on credit for military service  and detailed information on creditable service  is available on FederalRetirement.net. Also refer to Chapter 23- OPM Service Credit Payments for Post-1956 Military Service  and Chapter 22- Creditable Military Service .
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The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and financial information are subject to change. To ensure the accuracy of this information, contact relevant parties and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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