Does this sound familiar? I served on active duty in the armed forces, so that will increase my civil service annuity.
This is another aspect of federal employment benefits where fiction sometimes trumps fact. As is the case with so many things in life, it depends. Let me explain.
Every employee who retired no later than September 30, 1982 was covered by CSRS. If they had served on active duty in the armed forces, they didn’t have to make a deposit to the retirement system. They automatically got credit for that time when determining their length of civilian service (and in calculating their Social Security benefit, if they had enough work quarters under that system to qualify for one).
Things changed beginning on October 1, 1982. From that point forward CSRS employees were faced with a decision: should they make a deposit to get credit for their active duty service or not.
If they didn’t make a deposit for that service, retired before age 62, and weren’t eligible for a Social Security benefit at age 62, it wouldn’t have any effect on their annuity. The same is true if they retired at or after reaching age 62 and weren’t eligible for a Social Security benefit on the day they retired.
However, if they were eligible for a Social Security benefit at either of those points in time, they would still get credit for their active duty service in determining years of service. However, those years would be subtracted and their annuities recomputed without them. For CSRS retirees, that’s no small reduction. It’s 2 percent for every year of active duty service (1/6th of 1 percent per month).
As for FERS employees, the case is black and white. If you want to get credit for any period of active duty service, you have to make a deposit. If you don’t make a deposit, you won’t get any credit for that time and your annuity will be computed without it.
While the reduction isn’t as large as that for CSRS retirees who don’t make a deposit, it isn’t chicken feed. It’s 1/12th of 1 percent for most FERS retirees; higher still for those who retire at age 62 or later and have at least 20 years of service.
Note: If you are a CSRS employee, the amount of the deposit equals 7 percent of your basic military pay, except for service performed in 1999 (7.25 percent) and 2000 (7.40 percent). For FERS employees it’s 3 percent, except for service performed during 1999 (3.25 percent) and 2000 3.40 percent).
If you make the deposit within one day short of two years after being hired by the government, no interest will be charged. If you make a deposit after that, interest will be charged. The longer you wait to make a deposit, the more you will owe.
Read more on Military Service Credit for Federal Retirement at ask.FEDweek.com