Expert's View

Another of the benefits flowing from Public Law 111-84 is that FERS employees who left government, took a refund of their retirement contributions, and later come back to work for the government, can redeposit the money, and get credit for that time in determining their years of service and in their annuity computation. That provision of law was effective immediately after it was signed by the President on October 28.

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Now for the first time since FERS became law in 1987 you have parity with your fellow CSRS employees who took a refund and later returned to work for the government. However, to get that credit both of you have to not only redeposit what you took out but also pay interest that has accrued. Since 1985, interest has been based on market rates. Depending on how long it’s been since you received your refund, the dollars needed to square your account with Uncle Sugar may have grown considerably.

As an example, here are the interest rates for the last 10 years: 2001, 6.375%; 2002, 5.5%; 2003, 5.0%; 2004, 3.875%; 2005, 4.375%; 2006, 4.125%; 2007, 4.875%; 2008, 4.75%; 2009, 3.875; 2010, 3.125%.

Interest rates are compounded annually, so it doesn’t take a lot of time for the interest to mount up. Fortunately, most FERS employees contribute substantially less for their annuity benefit than do their CSRS counterparts – 0.08 percent vs. 7.0 percent — so the effect is not as dramatic.

What will you get for your money if you make a redeposit? Well, you’ll get an increase of 1 percentage point in your annuity for every year (that’s 1/12 percent per month) unless you retire at age 62 or later with at least 20 years of service; then the multiplier will be increased to 1.1 percent.

While OPM works up the needed guidance and revises the application form, you have two choices. If you are retiring soon, OPM will let you know what you owe and allow you to make the redeposit before they finish processing your retirement application. If you feel you can’t wait to get the paperwork moving, you can fill out a copy of Standard Form 3107, Application for Immediate Retirement, which you can either get from your personnel office or download from www.opm.gov, click on Forms. The address to send it to is on the form.

Once you have that information, you’ll be in a better position to decide if making the redeposit makes good financial sense.