Maybe it’s the fact that annual pay adjustment have been frozen or that some members of Congress want to continue that freeze and even want to change the high-3 to a high-5. In that unsettled and negative environment, readers have been reexamining their options, especially those either close to having the age and service needed to retire or are already there.
Among the things they want to know is how to get credit for any active duty service they have performed in determining their length of service and in the computation of their annuities. This being the government, it won’t surprise you to learn that the answer depends on a lot of variables: what the service was and when the service was performed, if you are receiving military retired pay, when you first went to work for the federal government, and which retirement system you are in. Who said that it was going to be easy?
In this column, I’ll explain what is considered to be active duty service and how the rules differ for CSRS and FERS employees.
What is active duty?
It’s defined as honorable service in the Army, Navy, Air Force, Marine Corps, Coast Guard and, after June 30, 1960, the Commissioned Corps of the Public Health Service and, after June 30, 1961, in the Commissioned Corps of the National Oceanic and Atmospheric Administration. It also includes military service as a midshipman at the U.S. Naval Academy or as a cadet at the U.S. Military Academy, U.S. Air Force Academy or the U.S. Coast Guard Academy. Further, it includes service when you are called to active duty or training duty as a member of the Naval or Marine Corps Reserve Officers Training Corps or the Army Reserve Officer Training Corps. Finally, service in the Army National Guard or Air National Guard may be creditable if certain conditions are met.
If you were first employed by the federal government before October 1, 1982, you have a choice. You can either make the deposit or not. Here’s the danger in deciding not to do that. If you retire before age 62 and are eligible for a Social Security benefit at age 62, those years of active duty service for which you got credit will be eliminated and you annuity recomputed without them. If you retire at age 62 or later and are eligible for a Social security benefit at that time, the reduction will occur on the day you retire. For some of you, this would be no small thing, since every year of service that’s eliminated would result in a 2 percent drop in your annuity.
If you were first employed on or after October 1, 1982, you don’t have a choice. You won’t receive any credit for your active duty service unless you make a deposit.
Like CSRS employees hired on or after October 1, 1982, FERS employees don’t have a choice. They have to make a deposit to get credit for their active duty service.
If you are a FERS employee with a CSRS component in your annuity, the CSRS portion will be controlled by CSRS rules.
Next week, I’ll explain the cost of making a deposit to get credit for your active duty time and the rules for making a deposit.