Actuarial reductions are one of the mysteries of the retirement system. They are only used in certain cases, the most common of which is when dealing with employees who got a refund of their CSRS retirement contributions for a period of service that ended before October 1, 1990. If you are one of them, you don’t have to pay the redeposit if you don’t want to. It’s up to you. You’ll credit for that service in your annuity computation (unless you retire on disability), but your annuity will be reduced actuarially based on your age and the amount of the redeposit you owe, including interest.
Actuarial reductions are based on economic assumptions and demographic factors, such as life expectancy. They are determined by the Board of Actuaries of the Civil Service Retirement System (which covers both CSRS and FERS).
They are expressed as “present value factors”