Posted on Sunday, 15th November 2009 by Linda Sherman
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(Reviewed and Updated 2/17/2023) If you are a current federal employee with prior military service, you should consider making a deposit for your military service. There are two reasons why making a military deposit may be beneficial:
- You could retire sooner, or
- Your can increase your retirement annuity.
By making this deposit, your years of military service are included in your civilian retirement computation, just as if you performed that service under your current retirement system. Unless you are receiving a military retirement, making a military deposit is usually a great deal, often paying for itself within a year or two of retirement.
Retire Sooner
A military deposit may allow you to retire from your civilian position earlier than with your civilian service alone. If you reach your Minimum Retirement Age (MRA) before you attain the required years of service, this may be your ticket to retire earlier than anticipated. For example, if you began your federal civilian career at age 28 as a FERS employee and, you were born in 1955, your MRA is 56, but you will not attain 30 years of federal civilian service until you reach age 58.
If you made a deposit for your four years of active-duty military service, you could retire at the MRA of 56 – two years earlier than if you did not make the deposit. (Note: If you are covered under the Special Retirement provisions for Law Enforcement Officers, Firefighters, Air Traffic Controllers, and Military Reserve Technicians the military service cannot be credited towards the 20 years of special retirement coverage for retirement eligibility but will be used in computing your annuity.)
Increased Annuity
Making a military deposit will increase your federal retirement annuity. By making the deposit, you are purchasing a guaranteed monthly annuity payable when you retire. The annuity is paid directly to you in the form of monthly payments for the rest of your life (and your spouse’s life if you elect a spousal annuity). The military deposit is fully refundable if you change your mind and want a refund of the deposit.
To determine if this deposit is advantageous to you, simply compare the total military deposit amount to the increase in retirement income. Then determine how long before the increase in your retirement annuity will pay for the military deposit amount.
For example, let’s say you have four years of military service and five years of federal service as a FERS employee.
- High-three Salary: You don’t know what your high-three salary will be when you retire, but you decide to use your current salary of $60,000 as your high-three salary.
- Military Deposit Amount: Your payroll or HR office determines your military deposit amount will be $2,600 for four years of military service.
- Computation: If you are a FERS employee, your retirement annuity is increased 1% for each additional year of service. So the computation is:
4 years of additional service x 1% per year x $60,000 = $2400 yearly increase in retirement income attributable directly to the one-time military deposit. That is a $200 per month increase in your annuity payable for your entire life.
Conclusion: In this example, it took just one year and one month of retirement income attributable to the military service to equal the entire military deposit amount. This is the break even point. The higher annuity income continues for as long as you live, and will be also used to compute a spousal annuity if applicable. If you plan to spend more than 13 months receiving this annuity, the deposit is beneficial.
If you are a CSRS employee the military deposit amount is higher, but the return is also higher:
X years of military service x 2% per year x high 3 salary = annual annuity increase.
This calculation does not include the time value of money considerations. For those analytical types, TVM calculations would be appropriate, for everyone else, let’s keep it simple since this is normally such a short period of time.
Retired Military
Making the military deposit is not for everyone. If you are retired military and are receiving full military retirement pay, it is usually not advantageous to make a military deposit, because you must waive your military retired pay for the service period to be included in the civilian retirement annuity. Usually the full military retirement is of greater value than the civilian retirement annuity. Use the computation method above to determine if making the deposit would be beneficial or consult with your HR/Benefit Specialist.
Military Disability Retirement & Reserve Retirement
You must waive your military retired pay in order to receive credit for military service in a civilian annuity, unless your military retirement is based on:
- A service-connected disability incurred in combat with an enemy of the US;
- On account of a service-connected disability caused by an instrumentality of war and incurred in the line of duty during a period of war; or
- Under provisions of 10 U.S.C. 12731-12739 (retired members of the reserves).
A deposit is still required for the active duty military service to be credited in your civilian retirement annuity.
Creditable Military Service: As a general rule, military service in the Armed Forces of the United States is creditable for retirement purposes if it was active service terminated under honorable conditions, and performed prior to your separation from civilian service for retirement. If you are in the FERS retirement system or your civilian service began after October 1, 1982 a deposit is required to receive credit for the service.
But what would a federal regulation be without an exception? Here is information about additional rules and regulations that may be applicable to you and your service:
- Military service which interrupts your civilian service (called to active duty)
- Military service performed before 1957 is creditable without deposit
- CSRS retirement with civilian service performed before 10/1/82 (Catch 62)
- Military time buyback, forms and additional resources
What else you need to know:
- The deposit must be paid in full while you are a federal employee and cannot be paid after you separate from federal service. Otherwise it will not be creditable for retirement purposes.
- Retirement Eligibility for CSRS and FERS requires that you must have at least five years of creditable civilian service and be covered under the CSRS or FERS retirement system on the date of retirement. Therefore, you cannot be a civilian employee for just one year and pay back your four years of military service to equal five years for retirement eligibility. You must have at least five years of civilian service for civilian retirement eligibility.
- Your Service Computation Date (SCD) can be confusing. There are at least four different SCD dates used by HR. The SCD that appears on your Notification of Personnel Action, SF-52 is your Leave SCD. You do not have to make a deposit for your military service to be included for leave accrual purposes. This date is different than your Retirement SCD, which only includes the military service if there is proof the deposit was paid in full.
- Plan ahead because making the deposit requires several steps that take time. The steps include requesting information from your military payroll office and your civilian payroll office. Start the process well before your anticipated retirement date. For more information review How to make a military deposit.
- The amount of the deposit is determined by the amount of your military base pay, your civilian retirement system, and how long you have been a federal employee. The military income amount does not include housing allowances, combat pay or similar extra pay. The deposit amount is 3% of military base pay for FERS employees and 7% of military base pay for CSRS employees. You may make the deposit at any time you are a federal employee. The deposit can be made in one single payment, multiple payments, or through payroll deductions, normally for as little as $25-$50.
- The interest rate is variable computed and added to your deposit amount on a calendar basis. There is a two-year interest free period that begins on your date of hire. However, since the interest is added on an annual basis, if the deposit amount is paid in full prior to three years of your hire date the deposit is interest free. This calculator should help you in computing the interest due: Computing your military deposit amount.
- Keep all information about the military deposit until retirement. When the deposit is complete, you should receive a letter from your payroll office indicating the deposit is made in full. Payroll does not normally provide this document to your HR office. You should give a copy of the letter to your HR office to be included in your Official Personnel Folder and keep a copy for yourself to provide with your retirement documents when you retire.
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- Retirement Planning for Federal Employees & Annuitants
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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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Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE | Comments (127)
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May 29th, 2011 at 5:51 pm
Elmer,
You may want to consider making a military deposit, especially since your VA disability will likely reduce your military retirement pay, but has not affect on the civilian annuity. If you made the military deposit, you would have to waive your military retirement pay, but not the VA disability pay.
Simply ask for a retirement estimate from your agency with and without the the military time added to your CSRS/FERS retirement annuity. Add your military retirement annuity to the “without deposit” estimate and compare which annuity total gives you the greatest benefit. If the total annuity is more with making the military deposit, request your total military earning to investigate the amount of the deposit.
Linda
June 6th, 2011 at 5:08 am
Linda I started the Postal Service in Feb. 1978. I also receive a military disability retirement of 40% which is $800.00 per month. Would it be beneficial to me to buy back ther military time or stay as is. I want to retire ASAP.
June 30th, 2011 at 4:45 am
Hello Linda: I retired after 15 years of service in 1996 under a program called TERA or TARP I believe. I receive full military benefits but only 75% of the monthly pension I would have received if I had stayed 20 years. Because of that reduction, buying my military time back makes sense if it means only forfeiting my monthly pension. My question is do I also forfeit the other military retirement benefits (i.e. free healthcare at military facilities or TRICARE Prime)?
July 9th, 2011 at 2:08 pm
Donald,
It may be beneficial to make a military deposit. I cannot tell from the informaion provided. It will not affect the disability payments you receive from the VA. However, if you are under the CSRS retirement system and will not be eligible for a Social Security annuity, then it may not be beneficial to make the deposit. I recommend requesting 2 retirement estimates – one with the deposit and one without so that you can see how much your annuity will increase by making the deposit. Make sure you look at how the annuity changes at age 62 if you are under CSRS.
Linda
July 9th, 2011 at 2:18 pm
Larry,
I have never worked in military personnel and cannot be certain of your rights to those benefits. I do not think you forfeit your other benefits, but you need to verify with those granting the benefits. There is usually a Tricare insurance advisor at each VA facility and a commissary officer at each DoD facility. Please verify with them or your military personnel office.
-Linda
August 29th, 2011 at 4:41 pm
I work for the Postal Service and will be eligible to retire in a couple of years. I was in the Army National Guard and am being given credit toward my RCD for the 3 months I was in Basic Training and AIT in 1975. Is this correct? I can’t find anything that addresses being given credit for that type of active duty while a member of the National Guard. I am a CSRS offset and my career federal employment began in January 1978.Thanks for your help, you are a font of valuable information!
I have a final question – what does the DD214 need to show as the authority for someone who was in the Active Guard and Reserve (AGR) for them to be able to buy back their service so that it is creditable toward their CSRS or FERS retirement?
September 2nd, 2011 at 12:05 am
I am about four years from retirement from the Corp of Engineers I retired with 22 years of service in the military and have a 10% VA disability. I have not made a military deposit because the job I have is not a high paying job. I don’t know if I should make that military deposit or not – can you draw both retirements the military one and the federal one? Just wondering haven’t found anyone who could answer this question for me. I am 58 years old right now.
September 7th, 2011 at 11:19 am
Good Morning.
I hope you can help me with my. I listed my service in chronological order:
Oct 1976 – Aug 1992 – Active Duty Air Force
Aug 1992 – Mar 1995 – Air Force Traditional Reservists (No other source of income)
Mar 1995 – Sept 2005 – Air Reserve Technician
Sept 2005 – Oct 2005 – Civil Service and Traditional Reservist
Oct 2005 – Mar 2006 – Civil Service
Mar 2006 – Present – VA Federal Employee
After I was hired as an Air Reserve Technician (ART), I bought back my military time to be counted towards my service computation date for leave purposes and FERS retirement. During the time period Mar 1995 – Sept 2005, I gained over a total of 7,300 active duty points, which made me eligible for an active duty retirement. I didn’t take the active duty retirement, rather, in Oct 2005, I elected to take an Air Force Reserve retirement, based on my accumulated reserve points. I didn’t have any breaks in Federal Service from Mar 1995 to present.
Now, at a pre-retirement seminar, I’m being told that my military buy back time doesn’t count since I’m drawing a military retirement. I retired as an Air Force Reservists while employed as a Civil Service. Any help would be appreciated.
John
September 7th, 2011 at 3:22 pm
Linda
Like your previous writers, I work for the federal government as a civilian (covered, law enforcement) and the Army Reserve. I am eligible to retire in 4 years for my civilian position and 5 years for the military.
When I was commisssioned as a 2LT, I was on active duty for approximately 3 months; Officer Basic Course. Since then, I have been a drilling reservist.
Is it worth buying back the 3 months of military service? Or, is this too little of service time to buy back?
Thank you for your forthcoming response!
September 20th, 2011 at 3:41 pm
Linda:
Since my previous questions are still waiting to be answered, I thought I’d ask a couple more, or at least clarify my previous ones. Can someone who was AGR under Title 32 prior to August 1990 buy their time back if they are now a Federal Employee? Also, since USERRA was enacted, am I allowed to buy back my Army National Guard two-week annual training periods that I performed prior to my January 1978 start of CSRS employment? My Federal employment history is as follows: May 1974 to September 1975 FICA service (part Intermittent and part Full Time) with the Dept of Agriculture, October 1977 FICA with the Department of Defense until January 1978 when I became full-time with DoD as a CSRS, until July 1990. November 1997 with the USPS CSRS Offset until present. I was in the National Guard from May 1975 until July 1990. In a nutshell, under USERRA, will I get credit for my NG annual training for the years 1976, 1977 and 1978, and do I need to make a deposit to get that credit? Thank you!
September 22nd, 2011 at 8:22 pm
Stephen J,
It is true OPM currently only requests verification of Social Security eligibility once – at age 62! The creditability of your military service for CSRS will depend on when you were first hired:
1. If you were first employed before October 1, 1982, you can either:
a. Make a 7 percent deposit for post-1956 military service, thereby avoiding a reduction in your annuity at age 62, or
b. Not make the deposit and have your annuity reduced at age 62 if you are then eligible for Social Security benefits.
2. If you were first hired by the Federal Government on or after October 1, 1982, you must make the deposit or receive no credit at all for military service, including eligibility to retire.
Thanks for the great question, Linda
September 22nd, 2011 at 9:10 pm
Randy,
You cannot draw both retirement payments. If you are retired from the military, you must elect to waive your military retirement and mack a deposit for the military service for that time to be creditable in the civilian retirement.
Two common exceptions: This rule on waiving the military retirement does not apply to reservist retirements or military disability retirement payments.
I hope this helps,
Linda
September 22nd, 2011 at 9:21 pm
Charles,
I recommend requesting a retirement estimate with and without the deposit to make that determination. Although the increase may not be huge, the deposit is likely not much either.
Example: For a FERS retirement 3 months of additional service means .25% increase in the annuity. For a high three salary of $70,000, that would be an extra $175 in your pocket each year of retirement.
Most military deposit pay for themselves in 1-2 years, so you might only owe $200-$300 for an increased lifetime annuity.
Linda
September 22nd, 2011 at 9:31 pm
Nyleen,
OPM states that the civilian HR offices are not to interpret military records. To be creditable the DD-214 must clearly show that the military service is active duty under title 10. National Guard Service is rarely creditable for a civilian retirement. The criteria is below:
National Guard Service may be creditable only if it was performed:
• Under a “call” by the President;
• Pursuant to “orders” issued under authority of section 233(d) of the Armed Forces Reserve Act of 1952; or
• Pursuant to “orders” issued under authority of a provision of title 10 of the U.S. Code.
National Guard service, even if performed for a federally recognized unit, is not creditable unless it meets the qualifications listed above.
I hope this helps,
Linda
September 22nd, 2011 at 9:41 pm
John Lasota,
It sounds like they are confusing a “military retirement” and a “reserve retirement” which is very common. Here is what OPM says on this (Reference: http://www.opm.gov/retire/pubs/handbook/C022.pdf)
Generally, an employee must waive military retired pay in order to receive credit for military service in the computation of the CSRS annuity, unless he or she is:
1. Retiring from civilian service after September 30, 1982, and has military service that was not used in the computation of military retired pay (see section 22A4.1-1); or
2. Receiving military retired pay awarded:
• On account of a service-connected disability incurred in combat with an enemy of the United States;
•On account of a service-connected disability caused by an instrumentality of war and incurred in the line of duty during a period of war; or
• Under provisions of 10 U.S.C. 12731-12739 (retired pay under Chapter 1223 for members of the reserves).
September 22nd, 2011 at 9:43 pm
Beth,
Generally if an employee hasn’t paid their military deposit, they can submit the deposit paperwork and the check with their retirement paperwork. The deposit is paid to the finance office before being submitted to OPM. This counts as being paid before the employee separates. 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, 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 a little 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.
September 24th, 2011 at 9:01 am
Nyleen,
It took some time to find, but I located the original OPM USERRA guidance on National Guard Service for you. According to this guidance, the service you mentioned may be creditable if your FICA service is creditable for your retirement (verify with your agency) and the Guard service meets all the other requirements below. A deposit is required.
Here is what is says:
The rules for crediting National Guard service (other than when ordered to active duty in the service of the United States) are that the service MUST meet ALL of the following conditions:
1. It must interrupt civilian service creditable under CSRS or FERS, as appropriate.
2. It must be followed by reemployment in accordance with chapter 43 of title 38 that occurs on or after August 1, 1990.
3. It must be full-time (and not inactive duty).
4. It must be performed by a member of the Army National Guard of the United States or the Air National Guard of the United States in the member’s status as a member of the National Guard of a State or territory, the Commonwealth of Puerto Rico, or the District of Columbia.
5. It must be under one of the enumerated sections.
6. The individual must be entitled to pay from the U.S. (or have waived pay from the U.S.) for the service.
Service in the National Guard (except when ordered to active duty in the service of the United States) IS NOT CREDITABLE IF ANY OF THE REQUIREMENTS ARE NOT MET. For example, such service which precedes Federal employment is not creditable. Similarly, if such service meets all of the requirements except that it is not followed by reemployment in accordance with chapter 43 of title 38 that occurs on or after August 1, 1990, it is not creditable, even if it is followed by reemployment by the Government
http://www.opm.gov/retire/pubs/bals/1995/95-101.pdf
October 8th, 2011 at 9:57 am
Stephanie,
There are four different SCDs. They may be the same or different depending on your service history. When you make a deposit, the only SCD that should change is your SCD for Retirement.
Linda
October 8th, 2011 at 10:03 am
Tommy – By making a military deposit you should be able to receive credit for retirement under FERS.
Linda
November 11th, 2011 at 6:01 pm
Bryan,
I am not aware of any waiver of military deposits for any reason. Check with the person providing the briefing. I would love to know more if a civilian agency is somehow doing this, but I have not seen it discussed on OPM or the the sites discussing Combated Related Special Compensation.
Linda
November 11th, 2011 at 6:09 pm
Mike – As long as you retire as a reservist, the active duty time can be creditable for both the civilian and the reservist retirement. You will be eligible to make a deposit for the 1980-1985 time under the normal military deposit rules and the additional 3 years since 2003 under USERRA rules. For more information see the information at: http://federalretirement.net/militarybuyback.htm
Linda
November 11th, 2011 at 6:15 pm
Jim,
You will be credited the 359 days if you can obtain the earnings and the appropriate certification from the Army Reserve Army National Guard that these active duty days were actually performed under title 10. If a DD-214 was not issued it can be difficult to obtain this certification.
Good Luck,
Linda
January 5th, 2012 at 1:53 pm
i HAVE 10 MONTHS 26 DAYS ACTIVE SERVICE IN 1968. wOULD IT BE WORTH MY CLAIMING THAT TIME FOR FERS.
March 18th, 2012 at 6:20 am
Shauana,
There is no affect to your disability compensation from the VA. The reference to refer to is the CSRS and FERS Handbook, Chapter 22 on military service credit.
Thanks for the question and enjoy your retirement.
Linda
March 18th, 2012 at 6:31 am
Diana,
Military deposits are almost always beneficial. You should find out the amount of the military deposit, then determine how much this service increases your annuity by either asking for a retirement estimate from your agency or using the retirement formula available at http://www.federalretirement.net/fers_annuity.htm. The deposit increases your retirement annuity permanently. Usually a military deposit pays for itself in about 15-18 months. For example, a $1000 deposit may increase a FERS annuity by $600 – $700 per year. In this case if the retiree planed to live in retirement for over 1 1/2 years the deposit would be beneficial.
Linda
March 18th, 2012 at 6:59 am
Rick,
The earliest you can retire with the LEO retirement calculation is when you have 20 years of covered service under the LEO retirement. Assuming you began your LEO service on 12/1/2007, then you would be eligible on 12/1/2027.
The Age and Service for Law Enforcement Officer or Firefighter:
50 with 20 years of service under the special retirement system
Any Age with 25 years of service under the special retirement system
However, you are also eligible to retire under the regular retirement system when reach the minimum retirement age (MRA). In your case that is when you are age 56. This is called an MRA + 10 retirement. It is a reduced annuity and would not credit your LEO service using the special retirement calculation. Assuming your retirement SCD is correct (it doesn’t look correct), you could also retire under the regular retirement system with an unreduced, non-LEO annuity with 30 years of service in 2023.
So you have three eligibility options: 2018, 2023 and 2027. Staying until 2027 will increase your annuity substantially.
Linda
June 18th, 2012 at 8:24 am
Linda,
I am retired military 20 years, I was thinking about doing the buy back but for what i am reading in your article and your replies through here it seems like it wouldnt’ be beneficial for me to do so. I would have to pay 3% on a 475,000 pay…my question is, i will soon start to receive my disability pay from the VA (which i don’t know how that works but anyway) so let’s say for example my total monthly retirement pay now is 1500 a month and let’s just say that 1000 of that will now be coming from the VA for disability, according to what i am reading i will still receive the 1000 from VA, and i am just giving up the 500 from my military ret. if i decide to do buy back, but does that mean that i still would need to pay the 3% based on the 400 plus? Do you think in this case it is still not beneficial to buy back? And one last question…buy back will not give me 20 years of “leave time” correct? Meaning, they will not apply that 20 years for leave purposes correct, only the time spent in a war or approved camapaign? Thanks for reading each of our questioins and replying!!!