Expert's View

Last week I pointed out the most common types of civilian employment that are creditable for retirement purposes. This week I want to focus on military service that can be combined with your civilian service.

Post-1956 military service – not retired military
If you are a CSRS employee who was first employed before October 1, 1982, you have two choices. You can either make a deposit for any period of active duty service or decide not to make it. If you retire before age 62, are eligible for a Social Security benefit at age 62, and don’t make a deposit to get credit for that service, it will be eliminated and your annuity recomputed without it. If you retire after reaching age 62 and are eligible for a Social Security benefit at that time, the reduction will occur on the day you retire. If you are a CSRS employee who was first hired after September 30, 1982, you’ll have to make a deposit to get credit for that time.

The amount of the deposit equals 7 percent of your basic military pay (not including any allowances or differentials) for any active duty service before January 1, 1999. The deposit for service during 1999 is 7.25 percent, during 2000, 7.4 percent, and after December 31, 2000, it’s back to 7 percent.

If you are a FERS employee, you don’t have a choice. To get credit for any period of active duty, you’ll have to make a deposit for that time. The deposit equals 3 percent of your basic military pay prior to January 1, 1999. In 1999 it’s 3.25, in 2000, 3.40 percent and after December 31, 2000, it’s back to 3 percent.

Post-1956 military service – retired military
If you are retired from active duty in the armed forces, as a rule you’ll have to do two things to get credit for your active duty service. First, make a deposit for that time under the rules and deposit requirements spelled out above. Second, when you retire from your civilian job, you’ll generally have to waive your military retired pay.

There are two exceptions to the requirement that you give up your military retired pay. You won’t have to do that if it was:
• awarded based on a disability incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war; or
• granted under the provisions of Chapter 67 of Title 10 of the U.S. Code. In other words, if you retired from a reserve component of the armed forces.

Since the formula used to compute your annuity is determined in part by your Basic pay, next week I’ll explain what’s included in Basic pay, and what isn’t.