FEDweek

Time to Make a Deposit?

If you are either a CSRS employee or a FERS employee who will have a CSRS component in your annuity, listen up. If you were once employed by the federal government or the District of Columbia in a position that wasn’t covered by the Civil Service Retirement System (CSRS), that service may be creditable for retirement purposes.

The rules for getting credit for that service depend on when you worked in such a position. If it was before October 1, 1982, the time you spent there would automatically be counted when computing your length of service. However, how that service would be used in your annuity computation would depend on whether you made a deposit for that time. If you did, you would be entitled to a full annuity. If you didn’t, your annuity would be reduced by one-tenth of the amount you would have paid to the Civil Service Retirement and Disability Fund if the service been covered by CSRS. For example, if you would have contributed $2,400 to the fund for that time period, including interest, your annuity would be reduced by $240 per year or $20 a month.

On the other hand, if you worked in such a position after September 30, 1982, you’ll still get credit for the time in computing your length of service. However, you must make a deposit before that service can be used in your annuity computation. If you don’t, your annuity will be calculated without those years of service.

Depending on how many years are involved, not making a deposit could make a big dent in your retirement annuity. Just remember, every year of creditable CSRS service over 10 is worth 2 percent of your final annuity. For example, if you had 30 years of creditable service and your high-3 was $60,000, your base annuity would be $33,750. If you didn’t make a deposit for five of those years, your base annuity would only be $27,750. That a loss of $6,000. Not chump change!

To find out whether making a deposit would be to your financial advantage, go to your personnel office and ask one of the benefits officers to run the numbers for you. They have software programs that can estimate what your annuity would be with and without that service, and how much the deposit would be.

You’ll notice that nothing has been said about employees covered solely by FERS. That’s because under FERS rules, periods of non-deduction service performed after December 31, 1988, can’t be credited for any purpose.