Last week I wrote about the age and service requirements needed to retire. This time I want review the most common kinds of service that are considered creditable for retirement purposes.
As a rule, creditable service means service in which your pay is subject to CSRS or FERS retirement deductions. However, creditable service may also include:
• non-deduction service, where no retirement deductions were taken from your salary;
• refunded service, if you left government, took a refund of your retirement contributions, and later returned to work for the government;
• service under another federal government retirement system; and
• active duty service in the armed forces of the United States.
Whether such service will be creditable depends on three things: which retirement system you are in; when the service occurred; and whether a deposit or redeposit will be required to get that credit. First, I’ll focus on periods of civilian service.
Both CSRS and FERS employees can redeposit the money that was refunded to them when they left, and get credit for their prior service. However, when the refund occurred determines what you need to do. If it occurred before March 1, 1991, you can either redeposit the money, plus accrued interest or have your annuity actuarially reduced based on how much you owe and your age when you retire. If it occurred after February 28, 1991, you’ll have to redeposit the money, plus interest, to get any credit for that time.
Are you covered by CSRS and were once employed by the federal government in a position where no retirement deductions were taken out of your pay? Did that service occur on or after October 1, 1982? If so, you’ll have to make a deposit to the retirement system to get any credit for that time. On the other hand, if such a period of employment occurred before that date, you’ll get credit for the time in determining your years of service; however, if you don’t make a deposit, your annuity will be reduced by 10 percent of the amount you owe.
If you are covered by FERS, any such periods of employment occurring before January 1, 1989, are only creditable if you make a deposit for that time. Non-deduction service occurring on or after that date isn’t creditable for any purpose.
Other Retirement Systems
If you worked under another federal retirement system, you may be able to get credit for that time. However, if it is creditable, you’ll have to get a refund of the contributions you made to that retirement system and transfer them to your current retirement system.
Both deposits and redeposits will have interest added to the original amount you owe. And that interest will be compounded annually. From 1948 through 1984 that rate was 3 percent. Since then interest rates have been variable, and have ranged between a high of 13 percent in 1985 to a low of 1.625 in 2013 and 2014.
Next week, I’ll explain what is considered to be creditable military service and what you’d need to do to get credit for it.