Last week I wrote about the requirements you need to meet in order to retire. One of those elements was age, the other service. This time I want talk about some of the more common kinds of service that are considered creditable for retirement purposes.
For most of you, creditable service just means service in which your pay is subject to CSRS or FERS retirement deductions. But for others, creditable service may also include, for example:
* 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 periods of service will, in fact, be creditable depends on three things: which retirement system you are in; when the period of service occurred, and whether a deposit or redeposit will be required to get that credit. In this article I’ll deal with periods of civilian service.
If you are a CSRS-covered employee who was once employed by the federal government in a position where no retirement deductions were taken out of your salary and that service occurred on or after October 1, 1982, you’ll have to make a deposit to the retirement system to get any credit for that time. If you were employed before that date, you’ll get credit for the time in determining your years of service but, unless you make a deposit, your annuity will be reduced by 10 percent of the amount you owe, including accrued interest.
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. Unfortunately, under current law periods of non-deduction service occurring on or after that date aren’t creditable for any purpose.
As the result of last year’s change in the law, CSRS and FERS employees are now on the same footing when it comes to redeposits. Before that, if you were a FERS employee who took a refund of your retirement contributions, you were barred from redepositing that money to get credit for that time once you returned to government employment. Now you can.
However, for both CSRS and FERS employees, it’s when the refund occurred that controls 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 on or after that date, you’ll have to redeposit the money, plus interest, to get any credit for that time.
Other Retirement Systems
If you worked under another federal retirement system, you may be able to get credit for that time. As a rule, you will have to get a refund of the contributions you made to that retirement system and transfer them to your current retirement system, either CSRS or FERS. Interest would be charged only between the date on which you took the refund and the date you deposited it in your CSRS or FERS account.
As noted above, 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 a flat 3 percent. Since then interest rates have been variable, and have ranged between a high of 13 percent in 1985 to a low of 3.125 in 2010.
While I’ve touched on the major sources of creditable service, there are many others that affect a smaller number of employees. Although it hasn’t been updated for over 10 years, the best place to find out if any of your prior service is creditable is still the Creditable Civilian Service chapter in OPM’s CSRS and FERS Handbook for Personnel and Payroll Offices, especially Appendix B. You’ll find it at http://opm.gov/retire/pubs/handbook/C020.pdf.
Next week, I’ll talk about what is considered to be creditable military service and what you need to do to get credit for it.