FERS and Buying Back Service

Last week I wrote about a provision in HR-1256, the Family Smoking Prevention and Tobacco Control Act, that would allow retiring FERS employees to get credit for their unused sick leave. As noted then, there is a similar provision in HR-1804, which also has passed the House. This time, I’ll write about another provision contained in those two bills.

As it stands now, a FERS employee who leaves government and takes a refund of his retirement contributions won’t any get credit for that time if he later comes back to work for the government.

The rule governing CSRS employees is completely different. A CSRS employee who leaves government, takes a refund of his retirement contributions and later comes back to work for the government, can redeposit the amount he received (plus accumulated interest) and get full credit for that time in determining his eligibility to retire and in his annuity computation.

Because the amount that FERS and CSRS employee contribute to the retirement system is radically different (usually 0.8 of base salary percent vs. 7 percent; FERS employees contribute the other 6.2 percent into Social Security), there is less incentive for a FERS employee to ask for a refund unless he is absolutely sure that he won’t be returning to work for the government. And any FERS employee who has at least five years of service when he separates has an incentive for leaving it there. At age 62 he can apply for a deferred annuity. If he has at least 20 years, he can apply at age 60.

Still, the number of FERS employees who have left, taken a refund, and then returned to work for the government has grown over time. And those who took a refund have felt the sting when they returned. For retirement purposes, it’s as if they had never worked for the government before.

Whether this provision will become law remains to be seen. There is no similar provision in the Senate tobacco bill, which has yet to be passed by that house of Congress. If it were to pass the Senate, any differences between the two bills would have to be worked out by the conferees from both houses. And there is no companion bill in the Senate to match HR-1804.