Expert's View

Parris Island, South Carolina - March 2019: New recruits at Parris Island boot camp. Image: Christopher Forker/Shutterstock.com

Reg Jones

In earlier articles this series I explained how your annuity will be calculated when you retire and the role that creditable service plays in that calculation.

Something I didn’t address then because it needs a separate treatment (it is that complex) is how service in the military can be used to increase your years of service and allow you to retire earlier – and with a bigger annuity – than if you were simply relying on your time spent as a FERS or CSRS employee.

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Who can get credit?
You can get credit for time spent in the armed forces of the United States if it was 1) active service terminated under honorable conditions, and 2) was performed before you retire from your civilian job. The term “armed forces” includes the Army, Navy, Air Force, Marine Corps and Coast Guard, as well as the service academies. It also covers service in the Regular or Reserve Corps of the Public Health Service and as a commissioned officer of the National Oceanic and Atmospheric Administration.

General rules for getting credit
Basically, you can get credit for any period of active duty service – excluding weekend drills – by making a deposit to the Civil Service Retirement and Disability Fund (CSRDF). That deposit will amount to a percentage of the basic pay you received while on active duty. No interest will be charged if the deposit is made within two years after the date you first became an employee. After that interest will be charged.

If you are a reservist, making a deposit will have no effect on your entitlement to reserve retired pay. On the other hand, if you are receiving military retired pay, you generally can’t continue to receive that benefit and get credit for that service in your civilian annuity at the same time.

The exceptions are that if you were awarded military retired pay for a service-connected disability incurred in combat with an enemy of the United States or that was caused by an instrumentality of war and incurred in combat in the line of duty during a period of war. If you do not fall under one of those exceptions you can either keep your military retired pay and have your FERS or CSRS annuity computed solely on your civilian service, or waive the military retired pay and make a deposit to the CSRDF to capture credit for your service toward a FERS or CSRS annuity.

No interest will be charged if the deposit is made within two years after the date you first became an employee. After that interest will be charged.

Specific rules for getting credit
If you are a FERS employee with post-1956 military service, the only way you can get credit for that time will be to make a deposit to the CSRDF. In general, the deposit is 3 percent of your base pay while on active duty, plus interest.

CSRS employees with post-1956 military service fall into two categories: those who were first hired after October 1, 1982 and those hired before that date. If you were hired after October 1, 1982 you are treated the same as FERS employees, except that you will have to make a larger deposit. In general, you must pay 7 percent deposit (plus interest) to have that service credited for civilian retirement purposes.

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If you are a CSRS employee hired before October 1, 1982, you have two choices. You can either make the 7 percent deposit for any post-1956 military service or decide not to make it. The consequence of not paying the deposit is simple. If you become eligible for Social Security at age 62, those years of non-deposit service will be subtracted and your CSRS annuity will be reduced. That will not only affect you, but it will also affect your survivor, who will have his or her annuity recomputed based on your reduced annuity.

If you have any post-1956 military service, have not yet made a deposit, and are thinking about doing so, you should check with your personnel office. The benefits specialists there can show you what your annuity would be (and your survivor’s annuity, if any) with and without that service being included.

Next week we’ll conclude this series by examining the rules governing survivor benefits.

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Planning Ahead – CSRS Retirement

Planning Ahead: FERS Retirement

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