A redeposit can be made in installments but must be made before the final adjudication of an annuity. Image: Billion Photos/Shutterstock.com
By: Reg JonesIf you are leave the government, withdraw your retirement contributions, and then return to work for the government, your eventual retirement annuity will not include credit for that earlier period unless you return that money with interest.
Should you pay back that money or not, and if you do, how would that be done?
If you don’t pay it back, you’ll still get credit for that time for retirement eligibility purposes (as well as for determining your high-3, if applicable). However, the time covered by that refund would not be used in the computation of your annuity.
Say for example that you worked for the government for three years, left and took a refund, and then returned and worked another 27 years. If you didn’t repay it, only the latter 27-year period would count toward your annuity.
Calculating the impact on your annuity is fairly straightforward. Under CSRS, each year of service beyond the initial 10 is worth 2 percent of your high-3 salary annually. Under FERS, it’s 1 percent for all years of service—unless you retire at age 62 or older with at least 20 years of service, in which case it’s 1.1 percent.
To find out how much you would owe to recapture that time, go to www.opm.gov/forms/standard-forms and click on Standard Form 2803, Application to Make Deposit or Redeposit (CSRS) or Standard Form 3108, Application to Make Service Credit Payment (FERS). Complete the form and send it to OPM (instructions are on the form).
A redeposit can be made in installments but must be made before the final adjudication of an annuity. (Note: Survivors of employees who die in service also can make a redeposit before the final adjudication of their survivor annuity in order to capture service credit in that calculation.)
There is a limited exception allowing for repaying the money in the form of an annuity reduction rather than as a redeposit. Here are the rules:
CSRS and CSRS Offset
If you got a CSRS refund for a period of service that ended before October 1, 1990, instead of paying a redeposit you have the option of allowing your annuity to be reduced (an “actuarial reduction”) based on your age and the amount of the redeposit you owe, including interest.
FERS
A big caveat here: If you left government service before October 28, 2009, withdrew your retirement contributions, and later returned to work for the government, you can’t make a redeposit to get credit for that time. Only those who left and returned on or after that date can do that.
On the other hand, regardless of when you left government service, if you had worked under CSRS, took a refund of those retirement contributions and later returned to work under FERS, you can make a redeposit.
How that redeposit service is treated will depend on the amount of time you were covered by CSRS. If you had fewer than five years of CSRS service, you would have to make a redeposit, plus interest, for the time to be creditable. If you had five or more years under CSRS that refunded service will be treated in the same way as for a CSRS or CSRS Offset employee described above, including the option to take an actuarial reduction rather than make a redeposit to recapture that time.
Actuarial Reductions
I’ve mentioned actuarial reductions, kind of a wonky term. Actuarial reductions are reductions to your annuity based on economic assumptions and demographic factors, such as life expectancy. For these purposes they are determined by the Board of Actuaries of the Civil Service Retirement System. The factors for CSRS are at https://www.govinfo.gov/content/pkg/FR-2023-04-14/pdf/2023-07877.pdf and those for FERS at https://www.govinfo.gov/content/pkg/FR-2023-04-14/pdf/2023-07878.pdf.
Former head of retirement and insurance policy at the Office of Personnel Management, and longtime FEDweek contributor, Reg Jones is known throughout the federal workforce community as an authority on pay and benefits.
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