Reg Jones Expert's View

Last time I wrote about various kinds of employment that weren’t covered by either CSRS or FERS—that is, no contributions toward retirement were taken from your pay during that time—but which might actually be considered creditable service for retirement calculation purposes. I also mentioned that you might have to make a deposit to the retirement system to get credit for it. This time I’ll explain the rules covering deposits.

Those rules depend on when you worked in such a position and which retirement system you are in. If you are a CSRS employee, you’ll get credit for that time in determining your length of service for purposes of eligibility to retire, regardless of when it occurred. However, if that service was performed on or after October 1, 1982, you’ll have to make a deposit to have it used in the computation of your annuity. On the other hand, if it occurred before October 1, 1982, you have a choice. You can either make the deposit to get credit for that time in your annuity computation or have your annuity reduced by 10 percent of the amount you owe, including accrued interest.

If you are a FERS employee, and the service was performed before January 1, 1989, you’ll have to make a deposit for that time to have it credited toward your length of service and used in your annuity computation. On the other hand, if that service was performed on or after January 1, 1989, it isn’t creditable for any purpose, and you can’t make a deposit to get credit for it.

Depending on how many years of service are involved, not making a deposit could make a big dent in your retirement annuity. Just remember, every year of creditable CSRS service over 10 is worth 2 percent of your final annuity; under FERS, all years are worth 1 percent. For example, if you had 30 years of creditable service and your high-3 was $90,000, your base annuity would be $33,750. If you didn’t make a deposit for five of those years, your base annuity would only be $27,750. That a loss of $6,000 a year.

To find out whether making a deposit would be in your interest, go to your personnel office and ask one of the benefits officers to run the numbers for you. They have software programs that can estimate what your annuity would be with and without that service, and how much the deposit would be.